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TMI Blog2019 (9) TMI 1618X X X X Extracts X X X X X X X X Extracts X X X X ..... th intrinsic value of CD. 2. It is argued by the Applicant herein that there is much difference in the value of the assets shown in audited balance sheets of the Corporate Debtor (for FY 2015-16, 16-17, 17-18) in the two valuations that have taken place during the CIRP process. It is also pointed out by the Applicant that the tangible assets have been valued much lower when compared to the value shown in the last audited balance sheet of the Corporate Debtor. 3. It is further pointed out that the intangible assets which was valued at Rs. 241.63 Crores (Gross Block) and Rs. 205.65 Crores (Net Block) as on 31.03.2018 in the latest audited balance sheets and other valuation reports, is valued Zero/Nil in both CIRP valuations. Also, under the heading Plant & Machinery the valuation difference is more than 200 Crores and under intangible assets Rs. 205.65 Crores value of assets were shown as NIL. 4. Counsel representing the Applicant emphatically argued that both the Resolution plans by ARCIL and Omkara miserably failed in the CIR process to maximize the assets of the Corporate Debtor, which would in turn balance the interest of all the stakeholders and thus would be an act in conson ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly Rs. 124 Crores, which was never objected to by any members of the CoC during the CIRP period. It is also argued that the current resolution plan is already and improved from earlier wherein it was paying Rs. 200 Crores to now wherein it is paying Rs. 250 Crores. It is also denied that the Plan differentiates between Financial & operational Creditor since wherein according to the Resolution Professional, the Financial Creditor has taken an average of 88% haircut wherein they receive 111 Crores against their total claim of 1073 Crore. On the other side the Operational Creditor have only taken a haircut of 54%, wherein workmen are being paid 5 Crore against their claim of 11 Crores. 9. After having heard the counsels at length we are of the view that Objections raised by the Corporation bank hold merit and weight. We have reached to this conclusion due to the following reasons: a) The successful Resolution Plan proposes 80 Crores towards sale of 'Balva' business undertaking to INTAS, however, in accordance with the valuation report dated 02.01.2016 the 'Balva' unit was valued upto Rs. 486.86 Crores, which is more than six time the value being offered as per the Resolution Plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enable or a reasonable ground for the members of the CoC to push through the Resolution Plan for a pittance value. My conscience did not permit me to approve the Resolution Plan, after having heard the matter at length even though the CoC members have vehemently argued that their Commercial Prudence or Wisdom cannot be questioned in view of the judgment by the Hon'ble Apex Court in the case of K. Sashidhar vs Indian Overseas Bank & Ors. Yes, we completely bow down to the reasoning and logic given in the judgement by the Hon'ble court. But in a situation like in the present case wherein the circumstances point out a possible collusion or nexus between the parties what compels my mind is to look at judgement by the Hon'ble Supreme Court in S.P Chengalvaraya Naidu vs Jagannath wherein the Apex Court has ruled that "Fraud avoids all judicial acts, ecclesiastical or temporal". Therefore, fraud vitiates everything is the basic principle. When there is an apprehension of fraud and collusion of parties, as an adjudicating authority, if I don't make an attempt to save the ship before it is sunk, I am not happy and it cannot be felt I have done my duty. In the best possible manner. Furthermo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case: a. The CIRP process was ordered against the Corporate Debtor, Unimark Remedies Ltd. on a Petition filed by ICICI Bank Ltd. under Section 7 of the Code by an order of this Bench dated 03.04.2018, the CIRP period expired on 30.09.2018 and subsequently extended up to 03.01.2019. The CoC invited prospective Resolution Applicants to submit expression of interest on or before 24.09.2018, which was extended till 31.10.2018. Two Resolution Plans (one by ARCIL consortium and another by Periwinkle Star Advisers Ltd.) were received by CoC before the dead line of 31.10.2018. The CoC refused to consider the Resolution Plan submitted by one M/s. Omkara Asset Reconstruction Pvt. Ltd. on 11.12.2018, since the plan was submitted after the due date. The said Omkara Asset Reconstruction Co. filed MA. 1529/2018 for a direction to the CoC to consider their Resolution Plan and the said MA was allowed by this Bench with a direction to the CoC to consider the Resolution Plan submitted by Omkara Asset Reconstruction Co. The CoC in the meeting held on 26.12.2018 approved the Resolution Plan submitted by ARCL consortium and the Resolution Plan submitted by Omkara Asset Reconstruction Pvt. Ltd. was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank 3.25 3.25 14 Jammu & Kashmir Bank 2.80 2.80 15 HSBC (Hong Kong) 2.48 2.48 16 HSBC (India) 1.53 1.53 17 DBS 1.00 1.00 Total 100 72.25 27.75 7. The main issue raised by the applicant herein is that the valuers appointed by the Resolution Professionals in the CIRP process has not valued the properties of the Company properly and more particularly the intangible assets of the Company is valued at zero Rupees wherein the latest balance sheet (2017-18) of the Corporate Debtor shows a value of Rs. 205.65 Crores for intangible assets and tangible Assets of the Company were valued at Rs. 141 Crores by first valuer and at Rs. 116.50 Crores by the second valuer, wherein the latest balance sheet shows a figure of Rs. 325.36Crores, thus the valuation is miserably low and hence fresh valuation has to be undertaken. 8. It is pertinent to note the Regulation 27 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulations, 2016 (herein after called "Regulation") that provides as below: "The Resolution Professional shall within (seven days of his appointment, but not later ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reports received from the valuers but there was no query or objection from the side of the Applicant about the valuation, until the approval of the Resolution Plan, even though two senior officers of the Applicant had participated in the above said CoC meetings. The Resolution Plan was taken up for consideration in the CoC meeting held on 26.12.2018 only and there was no complaint about the valuation till the approval of Resolution Plan by the CoC. The Applicant whose voting right is 7.69% in the CoC, one of the dissenting Financial Creditor, have come up with this plea saying that they are a minority Financial Creditor and their view on the valuation shall prevail over the commercial wisdom of CoC, and a fresh valuation has to be ordered, which in my considered view, if done, will tantamount to restarting the whole CIRP once again. This is wholly unknown to the Code and it will undoubtedly set a bad precedent as well. 14.The contention of the applicant that the valuation works were awarded to CIRP valuers much earlier whereas they have come out with their reports at the last hour without providing enough time to CoC Members to cross check the correctness of the evaluations, canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... air manner at every stage with the mischievous intentions. The entire CoC members have been misguided and put into constant pressure to prefer a plan which is not at all in their welfare and interest. The CoC members are all Financial Creditors devoid of any technical knowledge with regard to the functioning of the pharmaceutical companies and hence requested the RP in the CoC meeting held of 01.11.2018 to approach the technical advisor that whether the warning letters issued to CD will deteriorate the values of 'ANDAS' and reduce the intrinsic value of the CD. But for the reasons best known to the RP, he had not come back with the said details. If the said information would have been supplied by the RP to the CoC members on time, the CoC members would have realized that the intrinsic value of the CD is very much higher and they would not have ultimately voted in favour of the First RA. Things would have transpired entirely in a different manner in the vent the CoC members have been knowing at the appropriate time that the intrinsic value of the CD is much more than that have been shown in the CIRP valuations. The valuation works were awarded to the CIRP valuers much earlier wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany which was being merged. The Court's obligation is to be satisfied that valuation was in accordance with law and it was carried out by an independent body. The High Court appears to be correct in its approach that this test was satisfied as even though the Chartered Accountant who performed this function was a director of TOMCO but he did so as a member of renowned firm of chartered accountants. His determination was further got checked and approved by two other independent bodies at the instance of shareholders of TOMCO by the High Court and it has been found that the determination did not suffer from any infirmity. The company court, therefore, did not commit any error in refusing to interfere with it. May be as argued by the learned counsel for the petitioner that if some other method would have been adopted probably the determination of valuation could have been a bit more in favour of the shareholders. But since admittedly more than 95% of the shareholders who are the best judge of their interest and are better conversant with market trend agreed to the valuation determined it could not be interfered by courts as, 'certainly, it is not part of the judicial process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be conducted and suggesting a new method which is totally against the Provisions of the Code cannot be appreciated. It is irrelevant to discuss whether a creditor will get more or less in liquidation, at the stage of Resolution, since an argument can never be based on a hypothetical situation. The moot point is whether the resolution plan is in accordance with the provisions of the Code. If it is so, then it is the commercial wisdom of CoC, whether to approve a plan or not as held by the Hon'ble Apex Court in the case of Swiss Ribbons (p) ltd v. Union of India & Ors (2019) 4 SCC 17. The Hon'ble NCLAT in the case of Binani Industries Limited Vs Bank of Baroda and Anr (2018 SCC online NCLAT 457) while discussing about the Resolution Plan held that: "It is not an auction; it is not a recovery, which is an individual effort by the creditor to recover the dues through a process that had debtor and creditor on opposite sides; and it is not liquidation. The object is mere to get resolution brought about, so that the Company do not default on dues." 24. The Applicant contented that the Resolution Plans have not maximised the assets of the Corporate Debtor and thus does not render justi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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