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TMI Blog2021 (11) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... Bankruptcy Code, 2016 (in short 'I&B Code') seeking direction against the Resolution Professional to receive the Resolution Plan they proposed to submit and to place the same before the Committee of Creditors for their consideration under Section 30 of the Code. 2. The original status of the parties in the company petition represents them in these Appeals for the sake of convenience. 3. The learned Adjudicating Authority had rejected the Application by making an observation that; "both sides present. It is reported by the RP that the resolution plan/EOI received from the applicant is rejected by COC today, i.e. on 21 January 2019 at 2:30 PM. In view of this, this Application is dismissed as infructuous." 4. On the same day, the learned Adjudicating Authority heard the argument on Miscellaneous Application No 1599 of 2019 filed under Section 33 (2) of the Insolvency and Bankruptcy Code, 2016 for the liquidation of the Corporate Debtor and reserved it for Order. This Application has been allowed by separate Order passed on 22 February 2019, and an Order was passed to Liquidate the Corporate Debtor, which is under challenge in CA No. 486 of 2019. The decision of both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, the initial 180 days' period under Section 12 of the I&B Code expired on 21 January 2019. However, despite that period not being close to over, the Corporate Debtor Committee of Creditors chose to liquidate it. 5.7 The Appellants submit that the Application filed u/s 33(2) of the Code was filed before the expiry of the Corporate Insolvency Resolution Process period. The Appellants also submit that the Resolution Professional and the Committee of Creditors were acting in haste by choosing to opt for the liquidation of the Corporate Debtor rather than give it a chance for Resolution. 5.8 The Resolution Professional filed an Application being Miscellaneous Application No. 1599 of 2018 before the Adjudicating Authority seeking liquidation of the Corporate Debtor, which was listed on 07 January 2019. 5.9 The Appellants submit that they appeared before the Ld. Adjudicating Authority on 07 January 2019, when the Application filed by the Resolution Professional seeking liquidation of the Corporate Debtor was taken out, the Resolution Professional vehemently opposed the request of the Appellants for a chance to submit a Resolution Plan and stated that the Appellants are, in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pass over of the matter and, when the matter was again called out, it was informed to the Ld. Adjudicating Authority that the COC, i.e. the Respondent No 2 and 3 had rejected the EOI of the Appellants and produced two e-mails received by the RP from Respondent No 2 and 3. The E-mail received from Respondent No 2 was dated 21 January 2019 and was sent at 01.35 PM. The E-mail received from Respondent No 3 was dated 21 January 2019 and was sent at time 12.48 PM. The Appellants submits that the said E-mails were sent by Respondent No 2 and 3 hurriedly after the matter was passed over. 5.16 Thereafter the Order about the liquidation of the Corporate Debtor was passed by the Ld. Adjudicating Authority on 22 February 2019. 5.17 It is further emphasised that the object of the Insolvency and Bankruptcy Code, 2016, is for the maximisation of the asset value of a Corporate Debtor. This Hon'ble Tribunal has also held that the object of the Corporate Insolvency Resolution Process is to seek a resolution of the Corporate Debtor and not for recovery of money. It is argued that allowing to terminate the Corporate Insolvency Resolution Process of the Corporate Debtor and passing the Order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointed as the RP. 6.4 During the 2nd Meeting of the COC held on 26 September 2018, the criteria for the invitation of Expression of Interest (hereinafter referred to as EOI) and eligibility for the prospective Resolution Applicant were finalised by the CoC. Accordingly, the RP had published 'Form G' on 28 September 2018. Therefore, the last date for submission of EOI was fixed as 15 October 2018. 6.5 In response to the same, the RP had received an initial response requesting further details about the Corporate Debtor for submission of their EOI from the following: a) Vyas Advisor through Mr Yogesh Gupta b) Innovative Enterprises and Innovative Construventure Pvt. Ltd. (Appellant) through Mr Balasaheb Shinde c) Innovative Enterprises and Innovative Construventure Pvt. Ltd. (Appellant) through Mr Nandkumar Patil d) M/s Jainco projects through Mr Sumit e) M/s. Ashprit Trading through Mr Ghanshyam Chourasia. f) Vishwa Developers through Mr Chetan Kadam Company Appeal (AT) (Insolvency) No. 470 & 486 of 2019 11 of 36 g) The RP accordingly had provided the required details to these persons. However, till the last date of submission, i.e. 15 October 2018, no EOI w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ium II: Innovativ0065 Trading & Innovative Construventure Pvt Ltd. iii. Jainco Projects India Limited. 6.12 For Consortium I and Consortium II: i) Each evaluation matrix criteria was evaluated in detail in respect of EOI submitted by these two persons. It was observed that these persons did not submit certain documents requested by the RP. Also, in the declaration / Affidavit submitted by these two persons regarding compliance with Section 29A, it was stated that the Corporate Applicant is an MSME; hence, certain clauses of Section 29A are not applicable. ii) Therefore, the RP sent an e-mail to both these persons to submit the supporting documents stating that "the Corporate Applicant is registered under provisions of MSME" and further the pending documents. iii) However, no reply was received till the date of the COC Meeting. The RP also sent an e-mail to the erstwhile Directors of the Corporate Applicant requesting them to confirm the status of the Corporate Applicant as MSME. iv) Mr Malay Biswas, erstwhile Director of the Corporate Applicant, confirmed by telephone that the Corporate Applicant is not registered under MSME. v) Further, the RP also questioned these tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Information Memorandum and details about the company under CIRP. VII. The RP then informed Jainco that the RP had not yet shortlisted the Jainco as a Potential Resolution Applicant. Since Jainco does not meet specific eligibility criteria, the CoC would like to offer an opportunity to Jainco before deciding on shortlisting or otherwise. VIII. The RP further informed Jainco that the (Information Memorandum in short 'IM', etc., will be shared once the Jainco is shortlisted as PRA and requested the representative to remain present accordingly in the next CoC meeting. IX. In response, the RP received an e-mail from Jainco seeking information about the required information/documents. The RP had informed Jainco that support was required to show the availability of committed funds as also reasons for the drastic fall in turnover of Jainco. X. In reply to the above e-mail, the RP had received following e-mail from Jainco: "Please find hereunder our revert on your observations: 1.(i) Fund raising capacity. Minimum Committed funds ("Committed Funds") available for investment/ deployment in Indian companies or Indian assets of INR 5 crores (Rupees Five crores) during pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process. XV. Since no eligible Potential Resolution Applicant had submitted the EOI, the CoC Members decided that the RP should not issue the provisional list and do other compliances about this process. XVI. In the 6th CoC Meeting held on 06 December 2018, the CoC Members then discussed the further course of action since there was no eligible potential Resolution Applicant. The CoC members observed that a sufficient number of extensions were granted for the submission of documents. However, despite the same, the interested persons have failed to provide a complete set of documents. Further, even Jainco did not avail of the opportunity granted by the CoC to remain present in person. 7 The issues that arise for our consideration in these appeals are as under; a) Can the committee of creditors reject the opportunity to submit the Resolution plan merely based on the contents of EoI, which was only a gist of the resolution plan? b) Whether the Committee of Creditors can reject the EoI summarily without the formal Meeting of CoC? c) Whether the Application filed by applicant/appellant of being numbered as MA 114 of 2019 in CA for 470 of 2019 filed U/S 60(5) of the Insolvency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, it is necessary to go through the statutory provisions about the powers of the Committee of Creditors, which also provides the stage at which the resolution plan may be accepted. 25. Duties of Resolution professional.- (1) It shall be the duty of the Resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor. (2) For the purposes of sub-section (1), the Resolution professional shall undertake the following actions, namely- (a) take immediate custody and control of all the assets of the corporate debtor, including the business records of the corporate debtor; (b) represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial or arbitration proceedings; (c) raise interim finances subject to the approval of the committee of creditors under Section 28; (d) appoint accountants, legal or other professionals in the manner as specified by Board; (e) maintain an updated list of claims; (f) convene and attend all meetings of the committee of creditors; (g) prepare the information me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on professional shall submit the information memorandum in electronic form to each member of the committee within two weeks of his appointment, but not later than fifty-fourth day from the insolvency commencement date, whichever is earlier.] (2) The information memorandum shall contain the following details of the corporate debtor- [(a) assets and liabilities with such description, as on the insolvency commencement date, as are generally necessary for ascertaining their values. Explanation-"Description" includes the details such as date of acquisition, cost of acquisition, remaining useful life, identification number, depreciation charged, book value, and any other relevant details.] (b) the latest annual financial statements; (c) audited financial statements of the corporate debtor for the last two financial years and provisional financial statements for the current financial year made up to a date not earlier than fourteen days from the date of the Application; (d) a list of creditors containing the names of creditors, the amounts claimed by them, the amount of their claims admitted and the security interest, if any, in respect of such claims; (e) particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... site, if any, designated by the Board for the purpose; and (iv) in any other manner as may be decided by the committee. (3) The Form G in the Schedule shall- (a) state where the detailed invitation for expression of interest can be downloaded or obtained from, as the case may be; and (b) provide the last date for submission of expression of interest which shall not be less than fifteen days from the date of issue of detailed invitation. (4) The detailed invitation referred to in sub-regulation (3) shall- (a) specify the criteria for prospective resolution applicants, as approved by the committee in accordance with clause (h) of sub-section (2) of Section 25; (b) state the ineligibility norms under Section 29-A to the extent applicable for prospective resolution applicants; (c) provide such basic information about the corporate debtor as may be required by a prospective resolution applicant for expression of interest; and (d) not require payment of any fee or any non-refundable deposit for submission of expression of interest. [(4-A) Any modification in the invitation for expression of interest may be made in the manner as the initial invitation for express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the prospective resolution applicant for conducting due diligence under sub-regulation (8). (10) The Resolution professional shall issue a provisional list of eligible prospective resolution applicants within ten days of the last date for submission of expression of interest to the committee and to all prospective resolution applicants who submitted the expression of interest. (11) Any objection to inclusion or exclusion of a prospective resolution applicant in the provisional list referred to in sub-regulation (10) may be made with supporting documents within five days from the date of issue of the provisional list. (12) On considering the objections received under sub-regulation (11), the Resolution professional shall issue the final list of prospective resolution applicants within ten days of the last date for receipt of objections, to the committee.] [36-B. Request for resolution plans..- (1) The Resolution professional shall issue the information memorandum, evaluation matrix and a request for resolution plans, within five days of the date of issue of the provisional list under sub-regulation (10) of Regulation 36-A to- (a) every prospective resolution applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier request are not satisfactory, subject to the condition that the request is made to all prospective resolution applicants in the final list: Provided that provisions of sub-regulation (3) shall not apply for submission of resolution plans under this sub-regulation.] 8.5 Based on the above statutory provisions, it is clear that the explanation attached to Sub-section (2), of Section 33, of the Insolvency and Bankruptcy Code, empowers the Committee of Creditors to decide to liquidate the Corporate Debtor, any time after its constitution under sub-section (1) of Section 21 and before the confirmation of Resolution Plan, including at any time before the preparation of the Information Memorandum. 8.6 Therefore, it cannot be said that the Committee of Creditors has taken steps in haste and was premature, as there was still a possibility for the Resolution of the Corporate Debtor. 8.7 The learned Counsel for the Appellant argued that the Corporate Insolvency Resolution Process of the Corporate Debtor commenced on 25 July 2080. Thus, the initial 180 days set out under Section 12 of the IBC expired on 24 January 2019. However, even when the CIRP period was not close to over, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to take any decision, but merely to ensure that the resolution plans submitted are complete in all respects before they are placed before the Committee of Creditors, who may or may not approve it. The fact that the Resolution Professional is also to confirm that a resolution plan does not contravene any of the provisions of law for the time being in force, including Section 29-A of the Code, only means that his prima facie opinion is to be given to the Committee of Creditors that a law has or has not been contravened. Section 30(2)(e) does not empower the Resolution Professional to "decide" whether the resolution plan does or does not contravene the provisions of law. Regulation 36-A of the CIRP Regulations specifically provides as follows: "36-A. (8) The Resolution professional shall conduct due diligence based on the material on record in order to satisfy that the prospective resolution applicant complies with- (a) the provisions of clause (h) of sub-section (2) of Section 25; (b) the applicable provisions of Section 29-A, and (c) other requirements, as specified in the invitation for expression of interest. (9) The Resolution professional may seek any clarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is receiveable to the corporate debtor from two partnership/proprietors firms, i.e. M/s Innovative Enterprises and Innovative Trading Company. They were interested persons for submitting the expression of interest (EOI). These are group entities of the Appellants. Thus the RP had prayed before the Adjudicating Authority to direct the debtors to make the payment. The learned Adjudicating Authority has recorded the said fact in its Order dated 07 January 2019. The learned Adjudicating Authority has stated in the Order that the consortium's plan will be considered provided the consortium pays off the dues of the Corporate Debtor. 8.11 On perusal of the Minutes of the COC, it appears that the RP called the COC Meeting on 15 January 2019 wherein the Expression of Interest (EOI) as submitted by the Appellant was placed before the COC members along with the evaluation by the RP After discussion, it was decided by the COC members that the Appellant's do not fulfil the eligibility criteria. Therefore, the COC has reiterated its decision to put the Corporate Debtor into liquidation. However, the COC has rejected the expression of interest submitted by the Appellant's and has not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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