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TMI Blog2020 (5) TMI 707X X X X Extracts X X X X X X X X Extracts X X X X ..... val Resolution Plan by CoC is in breach of proviso to Section 31(4) of the Code or not - HELD THAT:- In the cases of combination, the Adjudicating Authority is mandated to examine as to whether approval is obtained from CCI or not, if not approved, it will not be approved by the Adjudicating Authority. Moreover, in the proviso, it is not said that if approval of CCI is not obtained before CoC approved the plans; the plan approved by the CoC would amount to nullity. Above all, it is not that plans are without approval of CCI, the difference is -approvals are ex-post facto approvals, not ex-ante approvals. If this difference makes any difference to the rights of anybody, then these approvals shall be put to test as to whether post facto approval caused any grievance to any of the stakeholders. It is not the case that by virtue of this post facto approval, Jatia group rights are affected - CCI approval is in no way connected to the commercials CoC examines, since CCI is the Regulatory authority to avoid unhealthy competition in the market, CCI approval is mandatory to the approval of the plan, so that this infraction would not become hindrance if the plan is approved by CCI after CoC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ode. With regard to other objections, such as some financial creditors arising discussions in the CoC meeting with regard to the approval of the resolution plans, it is to be seen as to whether the Financial Creditors who raised queries in the meetings have voted in favor of the plan or against the plan and whether the approval is with requisite majority or not. If the approval is given with requisite majority, the discussions taken place in the meeting cannot invalidate the plans duly approved by the CoC. There are no merit in the objections raised by Noble - the Resolution Plan approved by the CoC of Metallics and the Resolution Plan approved by the CoC of Value Steels are hereby approved. - MISCELLANEOUS APPLICATION NO. 1750 OF 2019 IN CP 2054 (MB) OF 2018 AND MISCELLANEOUS APPLICATION NO. 1751 OF 2019 IN CP 1830 (MB) OF 2018 - - - Dated:- 6-5-2020 - BANSI LAL BHAT, J. (ACTG. CHAIRPERSON), ANANT BIJAY SINGH, J. (MEMBER (J)) AND DR. ASHOK KUMAR MISHRA, MEMBER (T) For the Appellant : Fatema Kachwalla, Gautam Ankhad, Advocates, Ahsan Allana, Sr. Advocate i/b J. Sagar Associates, Rohan Rajadhyaksha, Suharsh Sinha, Dhiraj Kumar Totala, Shyam Kapadia, Vividh Tandon, Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disposal u/s 31 of the Code citing the reason if MA/1750/2019 in CP/2054/2018 and MA/1751/2019 in CP/1830/2017 were not disposed of before 30.04.2020, the performance guarantee of ₹ 250Crore given by this Resolution Applicant would expire on 30.04.2020. 5. Against these applications seeking urgent hearing, Noble Counsel has raised an objection saying that since NCLT itself notified in a Notice dated 22.03.2020 stating that hearing on Resolution Plans would not be considered as urgent hearing, Applications pending for hearing u/s 31 of the Code should not be taken up for hearing. 6. As to this objection, I am of the view that when money that is likely to come to the public institutions such as Banks is stuck due to pending approval of the Resolution Plans owing to COVID-19 crisis, at the same time, when Banks are under obligation to keep supplying money to the citizens of the country stuck in lockdown, if the Banks, in this critical situation, are restrained from realizing its dues from the sources available, it could further cripple the business of banking. 7. When Circular was issued by the NCLT, this difficulty was not visualized, therefore the notification given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Debtor or Uttam Value Steel Limited), the SPV (formed on the Closing Date) along with the incoming shareholders shall subscribe to ten lakh equity shares of the Corporate Debtor at a face value of ₹ 10 for an aggregate amount of₹ 1Crore. 12. On and from the Closing Date, all existing Directors of the Corporate Debtor shall be deemed to have resigned and vacated their office and the Board of Directors of the Corporate Debtor shall be reconstituted by the Successful Resolution Applicant. 13. It is submitted that since the Resolution Plan was approved prior to the amendment dated August 16, 2019 in Section 30(2)(b) of the Insolvency and Bankruptcy Code, 2016 (the Code ) related to financial creditors who do not vote in favor of the resolution plan and such amendment being applicable to the Resolution Plan by virtue of Explanation 2(i) to Section 30(2)(b) of the Code, it is hereby confirmed that the payment being made to the financial creditors who have not voted in favor of the Resolution Plan which is more than the amount payable to such creditors in accordance with sub-section(1) of section 53 in the event of a liquidation of the Corporate Debtor. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliefs and concessions sought by the Applicant, this Bench has approved the concessions to the extent mentioned below: (i) On permission for appointment of an Observer, this Bench hereby observes that the Applicant would appoint an Observer for its assessment but whereas the observations made by such Observer shall not repudiate either the value of the company or any of the assessments made in valuing this company. (ii) With regard to approvals and permissions which are necessary for the operations of the company, the company shall obtain necessary approvals required under the law for the time being in force within a period of one year from the date of approval of the Resolution Plan u/s 31 of the Code. (iii) No investigations shall be initiated against the actions or proceedings in relation to any non compliance of law in force prior to initiation of CIRP. (iv) With regard to such non compliance, if the Resolution Applicant is required to take any further approvals; it shall be permitted to take such approvals within one year from the date of approval of this Resolution Plan. (v) As to various Income Tax issues and other tax issues, the Corporate Debtor is ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Wardha, since the said Inox is not a party before this Bench, this Adjudicating Authority cannot give any mandatory directions to Inox with regard to the contract between the Corporate Debtor and the Inox. But it is made clear that this Resolution Applicant/Corporate Debtor is not liable to pay any liability which is not admitted as claim against the Corporate Debtor. (xii) It is obvious that the Corporate Debtor is not liable for non compliance, default and breach until before initiation of CIRP in relation to the contractual arrangements with the counter parties including the Government Authorities. (xiii) As to the proceedings, investigations, enquiries initiated against the company before initiation of CIRP, they shall be unconditionally abated without any liability against the Corporate Debtor. (xiv) Whatever approvals taken for the functioning of the Corporate Debtor before initiation of CIRP, they shall continue unless this company subsequently violates such approvals. (xv) The relevant Government Authorities in relation to tax dues shall waive any tax or interest to the period before initiation of CIRP and shall not initiate any penal proceedings for non f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the CoC was done as done in the case of Metallics, instead of repeating as to how Carval emerged as a Successful Resolution Applicant on approval of the Resolution Plan by the CoC on 21.04.2019; by holding that this plan was approved by the CoC as per procedure, I hereby straight away reflect the values and the provisions made by the Resolution Applicant, which are as follows: 20. The summary of payments to be made by the Successful Resolution Applicant under the Resolution Plan is as under: 21. As in the case of Metallics, the Applicant issued a Certificate dated 21.04.2019 certifying the compliance u/s 29A of the Code, and the RP has also issued Compliance Report dated 21.04.2019 in relation to the resolution plan submitted by the Resolution Applicant. It has also been further stated that this plan would be implemented through a Special Purpose Vehicle incorporated for this purpose. Subsequent thereto, the Corporate Debtor will undertake capital reduction, whereby all the equity shareholders and the preference shares of the Corporate Debtor shall stand cancelled without any pay out. The face value of the equity shares shall be transferred to the capital reserve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Successful Resolution Applicant intends to retain all employees and supplement that with certain key managerial personnel. 27. The implementation of the Resolution Plan is subject to certain conditions as set out in Part D - Item 1 of the Resolution Plan. One of the material conditions of the Resolution Plan is that the Resolution Plan submitted by the Successful Resolution Applicant for Uttam Galva Metallics Limited to be approved by its committee of creditors and the control of Uttam Galva Metallics Limited be transferred to the Successful Resolution Applicant. It is submitted that the said condition on inter-linkage with Uttam Galva Metallics Limited has been approved by the committee of creditors of the Corporate Debtor. 28. The Successful Resolution Applicant in its Resolution Plan has sought certain reliefs and concessions from the Adjudicating Authority as sought in Metallics. It is submitted that the implementation of the Resolution Plan is not subject to the grant of the said reliefs and concessions by the Adjudicating Authority. Even if the reliefs and concessions as sought are not granted, the Successful Resolution Applicants will implement the Resolution Plan as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditional offer will become an issue when a person made conditional order assails the decision of an offeree in rejecting its conditional offer. Whenever any open offer or a conditional offer is made and if the same is accepted by the offeree, the defence of the conditional offer will not be available either to the offerer or to the offeree. In this case, looking at the interdependence of these two companies, any person having commercials sense will ask for approval of plans in both the companies, so that he could run business effectively. Since this proposal being already approved by the CoC, no other condition is left to be performed by the CoC, now these plans cannot therefore be construed as plans with some uncertainty owing to the condition mentioned above. When any condition is mentioned in the plan and that condition is required to be fulfilled by the stakeholders after approval of the plan by the CoC, and accomplishment of the provisions of the plan is contingent upon some future actions after approval, then there could be a situation of uncertainty in future in fulfilling of the provisions of the plans, but here in this situation, since interlinking already been approved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , IA pp. 381-82), (Rao Shiv Bahadur Singh Anr. vs. State of Vindhya Pradesh and again in Deep Chand vs. State of Rajasthan), (State of U.P. vs. Singhara Singh and the rule laid down in Nazir Ahmad's case was again upheld), (Arun Kumar and Ors. vs. Union of India and Ors.), (Arcelormittal India Pvt. Ltd. vs. Abhijit Guhathakurta, Resolution Professional of EPC Constructions India Ltd. Ors.) 39. In all these citations, the ratio set out is when a particular procedure is set out in the statutory provision to be followed; it should be done in that particular manner and failure to do so shall result in nullity. 40. If an action is part of cluster of actions, and such action is only accompanying action to main action, it cannot be blindly said that failing to comply with that mandate will tantamount to nullity of all other actions without looking into the consequences of noncompliance of such accompanying action. 41. In this case, the Resolution Applicant shall obtain CCI approval prior to the approval of the plans by the CoC, it is no doubt correct in the event CCI has rejected the approval sought, then it is obvious that approval given to the resolution plan by the CoC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the Regulatory authority to avoid unhealthy competition in the market, CCI approval is mandatory to the approval of the plan, so that this infraction would not become hindrance if the plan is approved by CCI after CoC has approved. Here plans were approved by CCI. 46. As to stakeholders of the company are concerned, it cannot become grievance of them, because approval or non approval will not change the payment obligation mentioned in the plans. 47. In view of the same, I hereby hold that there is no merit in the argument placed by Jatia Group counsel. III. Discrimination against Operational Creditor. 48. Another grievance of Jatia Group is, though the claim against the Corporate Debtor is ₹ 423Crore, now by virtue of these Resolution Plans, since they are getting only 0.19% of its claim, their realization from this plan is inequitable to the proportion coming to the share of the Financial Creditors. 49. As against this point, the CoC counsel submits that the point to be tested is, as to whether Jatia Group as an Operational Creditor is deprived of getting their share as set out u/s 53 of the Code or not. 50. In this case, the Operational Creditor does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided by the CoC. Unless it is pointed out that the CoC examination is vitiated by fraud, the Adjudicating Authority is not expected to interfere with the decision of the CoC. 56. In view of the same, I have not found any merit in the argument of Jatia Group saying it is inequitably treated. IV. Deliberate suppression of vital facts. 57. The allegation of Jatia Group is, CoC misrepresented that Mr. Johannes Sittard is a director of Nithiya Capital Resources Advisors LLP (NITHIYA) an entity of the Consortium of the Resolution Applicant, despite the fact Mr. Johannes Sittard has resigned as a director from Nithiya with effect 01.04.2018. 58. To say that it is material suppression, this Applicant ought to have filed supportings reflecting the absence of Mr. Johannes Sittard will make huge difference in fulfilling the objects of the resolution. No such evidence is placed. 59. By looking at the suppression a fact or failure to place a fact, whenever any fact is not reflected or overstated, it has to be tested as to whether such act will amount to material suppression causing difference to the rights of the parties. If it makes difference, it amounts material suppression ..... X X X X Extracts X X X X X X X X Extracts X X X X
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