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TMI Blog2022 (1) TMI 721X X X X Extracts X X X X X X X X Extracts X X X X ..... 401 Crore - The issue was why we are going on endlessly with the same firm as IBC is a time bound programme. No other members informed RP of any of its comments. Similarly, the RP received proposal from employee trust which are unregistered on the date of application and he could not verify the sources of funding authenticity etc. It is observed that the RP has forwarded the proposal of employee trust to the members of the CoC as directed by the Adjudicating Authority. No response was received from any members of the CoC - IBBI (Liquidation Process) Regulations 2016 vide Chapter VI Regulation 32 provides the sale of the CD as a going concern. Regulation 33 of the same Regulation also provides the methodology to sale. All this provides going concern sale. It is very much clear there is no viable plan for the consideration of the CoC and CIRP period has expired long back - All this suggests for that the Adjudicating Authority has no options but to pass order of Liquidation on completion of Insolvency Period and accordingly, the Adjudicating Authority has passed the liquidation order. There are no infirmity in the impugned order to set it aside. However, the RP is directed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plications i.e CA No. 73 of 2020 and IA No160 of 2020 both filed by the Resolution Applicant after the completion of CIRP period i.e. more than 700 days directly to the Adjudicating Authority was need to be filed before the Appropriate Authority i.e. Resolution Professional to be put before the CoC and this Adjudicating Authority is not empowered to allow the applicant to file the plan before this Tribunal after the expiry of the such a long period of ending of CIRP. Further in CA No. 73 of 2020, it is also found that it is being filed by one of the Members of the Suspended Directors i.e., Mr. R.C. Garg, who was the CFO of the Company at the time when the application for insolvency was admitted which can also be reflected in the data of Ministry of Corporate Affairs of the corporate Debtor, thus being disqualified under Sec 29(A) of the Code. Thus, this Adjudicating Authority does not find any merit in the arguments raised by the Applicants for allowing the applications and accordingly CA No. 73/2020 as well as IA No. 160 of 2020 is rejected and accordingly disposed of. 16. Further, with regard to the Liquidation application i.e. CA 215/2019, this Tribunal finds that the ex-ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blic announcement stating that the Corporate Debtor is in liquidation, in terms of Regulation 12 of IBBI (Liquidation Process) Regulations, 2016. 21. The registry is directed to communicate the order to ROC Kanpur and to Insolvency and Bankruptcy Board of India. 22. The order of moratorium passed under Section 14 of IBC, 2016 cease to have its effect and a fresh moratorium under Section 33 (5) of IBC shall commence. 23. The Liquidator is directed to proceed with the process of liquidation in the manner laid down and in accordance with the Code and Regulations. 24. The liquidator shall file progress report of every three months. 25. With the aforesaid observation, the CA No. 215/2019 is allowed and accordingly stands disposed of. 4. Company Appeal (AT) (Ins) No. 832 of 2020 Submissions of the Appellant:- a. It is submitted by the learned counsel for the Appellant that the Appellant is a Promoter and Shareholder of the Corporate Debtor (CD) with a shareholding of 2.66%. The Appellant is also a member of the suspended Board of Directors of the CD as well as part of the Committee of Creditors (CoC) on account of being a Managing Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 578.27 Total 1128.67 c. It is also stated that the willful inaction on the part of RP is manifest against the fact that it failed to seek exclusion of the following periods of time:- Sl No. Particulars From To Total no. of days 1. Period of litigation initiated by SREI 07.08.2019 03.02.2020 181 2. Period of litigation when the employees resolution plan was pending with the Respondent No.-RP (including the Covid-19 period) 06.02.2020 19.082020 196 (Note : Lockdown period ought to be excluded) d. It is also stated that the Application filed u/s 7 of the Code against the CD, was admitted by the Adjudicating Authority on 25.07.2018. Thereafter, the RP received several EOI s from potential RAs but no Resolution Plan was furnished within the allotted time. Because of this, the last date for submission of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges to draw pension from it. In the circumstances, the motive of the RP is gravely impugned with malafides and, therefore, the RP should not be allowed to control the reigns of the CD as a Liquidator. g. It is also stated that the impugned order suffers from the vice of the coram non judice and is therefore, illegal. The impugned order is without jurisdiction since it has been passed by a bench of the Adjudicating Authority comprising of a single member and therefore in the teeth of Section 419(3) of the Companies Act, 2013. The Hon ble Supreme Court in Sonu Cargo Movers Vs. UOI (WP(C) No.722/2019) categorically directed that the NCLT constitute a two-member bench including a Judicial and a Technical member for hearing. On the basis, even this Appellate Tribunal has asked the Adjudicating Authority in Indison Agro Vs. Registrar Anr. CA(AT) (Ins) No. 726-727 of 2020 to constitute a two-member bench in compliance with the directions of the Hon ble Apex Court. h. It is also stated that the Application for liquidation filed by the RP is unauthorized and ex facie illegal. In this regard, it is submitted that the RP failed to seek a resolution from the CoC to the effect that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alance of power between the creditors and debtor, and protect the rights of all creditors. The professional will ensure the reduction of asymmetry of information between creditors and debtor in the resolution process. j. This Appellate Tribunal in Tata Consultancy Services Ltd. Vs. Vishal Ghisulal Jain , CA(AT) No. 237 of 2020, has reiterated that it is both the primal objective of the Code as well as the solemn duty of the RP to keep the CD as a going concern. k. The Hon ble Supreme Court in Arcellor Mittal India Pvt. Ltd. Vs. Satish Kumar Gupta (2019) 2 SCC 1 has succinctly identified the intention of the Code while drawing analogies with the consequence of the chopper falling in a corporate death and observed as follows: It is also true that the time taken by a Tribunal should not set at naught the time limits within which the corporate insolvency resolution process must take place. However, we cannot forget that the consequence of the chopper falling is corporate death. The only reasonable construction of the Code is the balance to be maintained between timely completion of the corporate insolvency resolution process, and the corporate debtor otherwise being put i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the last date and therefore, the RP requested the CoC to extend the Resolution Plan submission date. The same was agreed upon the 7th CoC meeting held on 31.01.2019 and accordingly, the last date for submission of Resolution Plan was extended till 02.03.2019. b. It is stated that on 19.02.2019, the RP received an email from SREI Multiple Asset Investment Trust Vision India Fund (SREI) attaching therewith an EOI for submitting Resolution Plan for CD. In the meeting of the CoC held on 08.03.2019, the resolution process advisor informed the CoC members that an EOI was received from SREI on 19.02.2019 which was rejected by the RP on account of submission beyond the stipulated deadline which had expired on 19.12.2018. It was proposed in the said meeting that since there were no other Resolution Plan received as on 02.03.2019, the CoC may consider accepting EOI of SREI and condoning the delay in submission off the said EOI. Under the circumstances, the members of the CoC agreed that the last date of submission of the Resolution Plan be extended till 25.03.2019. c. It is submitted that the CoC in this meeting held on 06.09.2018 had requested the then IRP to file an Application be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew offer and CIRP period of 270 days was already over. Constraint to file the Application under Section 33(1) of the Code for Liquidation of the CD, the RP did the same on 29.07.2019. SREI even gone to the Adjudicating Authority through CA No.214 of 2019 in CP(IB) No. 223 /ALD/2018 for calling the meeting of CoC and considering their revised offer and the Adjudicating Authority dismissed the said application through an elaborate order that the standalone commercial offer cannot be considered as the Resolution Plan requires to have certain mandatory content as per CIRP Regulations. Thereafter, there was nothing to be persuaded except a Resolution Plan on behalf of the employees of the CD moved by the CFO of the CD on 06.02.2020. The Resolution Plan was proposed by a trust and were directly approached to the Adjudicating Authority and even that plan under the directions of the Adjudicating Authority were provided to the CoC for the purpose of their information. However, no positive response was received to the CoC in this regard. As also the employed trust was not inexistence on the date of filing of the Resolution Plan, the source of funding from such purported trust could not be ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f interest within the time specified in the invitation under clause (b) of sub-regulation (3). (6) The expression of interest received after the time specified in the invitation under clause (b) of sub-regulation (3) shall be rejected. (10) the resolution professional shall issue a provisional list of eligible prospective resolution applicants within ten days of the last date of submission of expression of interest to the committee and to all prospective resolution applicants who submitted the EOI. (12) On considering the objections received under sub-regulation (11), the RP shall issue the final list of prospective resolution applicants within ten days of the last date of receipt of objections to the committee. 36B Request for resolution plans- (1) The RP 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 36A.. (7) The RP may, within the approval of the committee re-issue request for resolution plans, if the resolution plans received in response to an earlier request are not satisfactory, subject to the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interest of a secured creditor, and such other requirements as may be specified by the Board: Provided also that nothing in the second proviso shall be construed as extension of period for the purposes of the proviso to sub-section (3) of section 12, and the corporate insolvency resolution process shall be completed within the period specified in that sub-section. d. It is evident from the above provisions that before a resolution plan can be submitted, a prospective resolution applicant will have to qualify the criteria laid down in the invitation for EOI and the RP can only call for submission or resolution plans from the prospective resolution applicants who have qualified such criteria. All RA(s) are required to submit their Resolution Plans pursuant to publication of the invitation of EOI within the last date specified therein as per the provisions of the Code. e. The CIRP cannot be permitted to continue indefinitely. Admittedly, the CIRP period of the Corporate Debtor expired on 09.05.2019. Since there was no Resolution Plan approved by the CoC in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.11.2019. However, it is only subsequent to the filing of the aforesaid application, the Code (Amendment) Act 2019 came into force with effect from 06.08.2019. Therefore, the amendment brought to Section 12 of the Code, in not applicable in the instant case. g. The Liquidation Application has been filed and directions have been passed by the Adjudicating Authority under Section 33(1) of the Code which does not contemplate any prior approval of CoC. The Liquidation Application was filed by the RP in term of Section 33(1) of the Code. Admittedly, there has been no objection by any of the CoC members to the Liquidation application. The Liquidation Application was thereafter duly adjudicated and approved by the Adjudicating Authority after due consideration in terms of Section 33 (1) of the Code, 2016 Section 33(1) provides that: 33. Where the Adjudicating Authority, - (a) before the expiry of the insolvency resolution process period or the maximum period permitted for completion of the corporate insolvency resolution process under section 12 or the fast track corporate insolvency resolution process under section 56, as the case may be, does not receive a resolution plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of SBI Vs. M/s. Metenere Ltd (Civil Appeal No. 2570 of 2020) has held that merely because the RP was in service of SBI and getting a pension from it, he was not disentitled to be the RP. As a matter of fact, SBI had voted in favor of SREI s Resolution Plan. However, SBI only has a 26% voting share in the CoC and the Resolution Plan was rejected by 71% majority of the CoC. Therefore, contrary to the Appellant s stand, SBI had in fact supported resolution to the CD, however the same could not sail through because of dissent of remaining CoC members. Thus the Appellant s contentions in respect of the same are strongly denied and the Appellant is called to strict proof thereof. k. It is stated that this Appellate Tribunal during the course of hearing on 06.11.2020 had asked the parties to examine its judgment in CA(AT) (Ins) No. 515 of 2020 ( Panna pragati ), and analyse if the same was applicable in the present matter. In this regard, it is submitted that the judgment of this Tribunal in Panna Pragati is wholly inapplicable to the present matter. In Panna Pragati, the Appellants were excluded from consideration of their Resolution Plan primarily on the ground of impendin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i variants include Vanaspati ghee variant. Its rice variants include steamed, par-boiled and white rice. The Registered office of the CD is located in Varanasi. The CD gradually set up and its manufacturing facilities at 5 different locations in India. The CIRP process was admitted against the CD vide an order dated 25.07.2018 passed by the Adjudicating Authority. c. It is stated that the RP was an employee of the SBI, which has the largest share/voting percentage in the CoC i.e. 26%. The R! is acting at the behest of SBI and to secure the best interest of such financial creditor at the cost of the process. It is submitted that as a consequent of the R1 long association with a Financial Creditor, the said Respondent has failed to act fairly and has consequently resulted in vitiating the entire CIRP of the CD and the consequent impugned order is a nullity. On 03.02.2020, when the application of SREI was dismissed by the Adjudicating Authority, the workers and the employees came to know that no resolution plan is approved and the CD might go for liquidation. The Appellants as earlier discussed this with other employees of the CD reached a consensus and decided to file a resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority on 06.02.2020 i.e. within 3 days of direction passed in the order dated 03.02.2020. However, the plan never placed before the CoC, no document or record of the same on record. The Adjudicating Authority vide order dated 14.02.2020 observed the plan will be submitted to RP within 24 hours and put for consideration on 20.02.2020. The Application of the Appellant was listed before the Adjudicating Authority on 06.07.2020 and was considered. It was proposed the plan be submitted before CoC which confirmed higher value of plan than proposed liquidation value, matter again listed on 13.07.2020 and again listed on 17.07.2020, suddenly the liquidation order is passed in haste and hurry without confirming the fact that there was no resolution by CoC for liquidation and its only IRP application without CoC approval. The RP always interested in liquidation as he has more gain and profit in liquidation and commission on sale of assets as per Regulation 4. g. It is also stated that the Adjudicating Authority erred in holding that one of the Appellant, who was the CFO was disqualified u/s 29A to submit a resolution plan. A CFO is a key managerial person (as defined und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2019) 9 SCC 725 Civil Appeal No. 9402-9405 of 2018 ArcelorMittal India Pvt, Ltd. Vs. Satish Kumar Gupta Ors. i. The Judgment of this Tribunal in CA(AT) (Ins) No. 606 of 2019 Hammond Power Solutions Pvt. Ltd. Vs. Mr. Sanjit Kumar Nayak Ors., wherein the Hon ble Tribunal has set aside the impugned order and remit the matter back to the Adjudicating Authority with a direction to send back the Resolution Plan to the CoC to resubmit the plan after satisfying the parameters as laid down by the Hon ble Supreme Court in the judgment in the matter of Essar Steel , as the decision of the CoC also does not reflect that it has taken into account the fact that the CD needs to be kept as a going concern and that there is need to maximise the value of the assets and that the interest of all the stakeholders including Operational Creditor has to be taken care of. Thus, in the light of the above submissions, the Appellant submits that the impugned order dated 19.08.2020 ought to be set aside with a direction to the CoC to consider other plans readily available with it. 8. Submission of the Respondent No.1 a. The CIRP of the CD had commenced on 25.07.2018 pursuant to an order pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived till 06.04.2019 i.e till the last date for submission of Resolution Plan. However, the RP had received a request from one of the prospective Resolution Applicants, namely, SREI, for further extension of timeline for submission of Resolution Plan by 10 days i.e. till 16.04.2019. The CoC agreed to further extend the Resolution Plan submission date till 16.04.2019. On 16.04.2019 SREI submitted its Resolution Plan in respect of the CD. However, since SREI had submitted the Earnest Money Deposit (EMD) in the form of Bank Guarantee (BG) of INR 1,00,00,000 as against an amount of INR 10,00,00,000 required as per the RFRP, the CoC granted a time of 48 hours to SREI to revert on whether they would be in a position to submit the BG amount as per the RFRP and accordingly submit the BG as per the RFRP before 23.04.2019. Thereafter, SREI submitted an additional BG of INR 4,00,00,000 towards the EMD. On the basis of the deliberations in the meeting dated 24.04.2019 of the CoC, the RP opened the Resolution Plan submitted by SREI and commenced the examination of the said Resolution Plan. The RP presented the Resolution Plan submitted by the SREI to the CoC members in the said meeting whereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted below: Section 419 of the Companies Act, 2013 Section 419: Benches of Tribunal. (1) There shall be constituted such number of Benches of the Tribunal, as may, by notification, be specified by the Central Government. (2) The Principal Bench of the Tribunal shall be at New Delhi which shall be presided over by the President of the Tribunal. (3) The powers of the Tribunal shall be exercisable by Benches consisting of two Members out of whom one shall be a Judicial Member and the other shall be a Technical Member: Provided that it shall be competent for the Members of the Tribunal authorised in this behalf to function as a Bench consisting of a single Judicial Member and exercise the powers of the Tribunal in respect of such class of cases or such matters pertaining to such class of cases, as the President may, by general or special order, specify: Provided further that if at any stage of the hearing of any such case or matter, it appears to the Member that the case or matter is of such a nature that it ought to be heard by a Bench consisting of two Members, the case or matter may be transferred by the President, or, as the case may be, referred to him for tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission of the Resolution Plan from 02.03.2019 to 25.03.2019. However, SREI submitted the Resolution Plan on 16.04.2019 which was rejected by the CoC on 07.05.2019 by approx.98% vote. SREI went on improving the proposal just by a minuscule amounts and finally CoC decided to put the resolution plan to vote on 24.07.2019. However, the Resolution Plan was rejected by the CoC by approx.71% of the vote and rejection was communicated to the SREI. On 25.07.2019, SREI further sent a standalone financial offer raising its proposal from ₹ 395 Crore to ₹ 401 Crore. The RP sent the same proposal to members of the CoC and no Member other than one raised the issue. The issue was why we are going on endlessly with the same firm as IBC is a time bound programme. No other members informed RP of any of its comments. Similarly, the RP received proposal from employee trust which are unregistered on the date of application and he could not verify the sources of funding authenticity etc. e. It is observed that the RP has forwarded the proposal of employee trust to the members of the CoC as directed by the Adjudicating Authority. No response was received from any members of the CoC. f. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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