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TMI Blog2022 (7) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... e permitted to be done indirectly. Further, the commercial wisdom of the CoC, which is reflected in its Meeting dated 05.03.2021 and 21.04.2021 is not liable to be judicially reviewed. There is no error in rejection of the proposal submitted by the Appellant claimed to be under Section 12A by the CoC, after due consideration and the Adjudicating Authority has rightly refused to interfere with the commercial decision of the CoC in I.A. No.537 of 2021 filed by the Appellants praying for setting aside the decision of the CoC rejecting their proposal. Ineligibility of the NTPC to submit the Resolution Plan - HELD THAT:- The Resolution Applicant as per the invitation of submission of Resolution Plan was by 31.12.2019 and process documents was issued on 01.10.2019, the Resolution Applicant, that is, NTPC as well as another Resolution Applicant Adani Power Limited have submitted their Resolution Plans by 30.12.2019. The ineligibility of the Resolution Applicant is sought to be questioned on the strength of Section 29A(c) and (j), Explanation (1). NPA classification - HELD THAT:- It is clear that classification of NPA of RGPPL and KLL by SBI and IDBI were on 21.05.2018. The fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of commencement of CIRP, period of one year has not elapsed, the disqualification under Section 29A(c) shall not attach to the NTPC, who was Resolution Applicant. The submission of learned Senior Counsel for the Resolution Applicant is accepted that Resolution Applicant was eligible on 30.12.2019 when it submitted the Resolution Plan. When Resolution Applicant was eligible on 30.12.2019, it continued to be eligible in entire process of the CIRP. The CoC, which is statutorily authorised to conduct the CIRP with the object of reviving the Corporate Debtor is fully competent to ask the Resolution Applicant to revise its Plan, improve its Plan and submit the revised Resolution Plan. It is found that the Resolution Applicant was eligible on 30.11.2019 when it submitted the first Resolution Plan, there are no necessity to enter into other submission raised by learned Counsel for the parties including the submission regarding applicability of the proviso to Section 29A(c). The Resolution Applicant being eligible, was entitled to submit Resolution Plan and was also entitled to revise its Plan from time to time as per the Scheme of the Code. The Plan having approved by 100% vote of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant on 03.06.2019 submitted a One Time Settlement ( OTS ) offer to the Resolution Professional, which was considered by CoC and was not found prudent and commercially viable. Resolution Professional invited Expression of Interest ( EOI ) from prospective Resolution Applicants for submission of Resolution Plan vide advertisement dated 19.08.2019. The process document was issued on 01.10.2019 to the prospective Resolution Applicants, inviting Resolution Plans. Last date for submission of Resolution Plans was 31.12.2019. (iii) An affidavit certifying its eligibility under Section 29A was submitted by NTPC on 22.10.2019. On 06.12.2019, NTPC has informed Resolution Professional that Ratnagiri Gas and Power Private Limited (hereinafter referred as the RGPPL ) and Konkan LNG Private Limited (hereinafter referred as the KLL ), which were joint ventures of NTPC, have been declared Non-profitable Asset ( NPA ). The NTPC submitted Resolution Plan on 30.12.2019. The other Resolution Applicant, that is, Adani Power Limited ( Adani ) had also submitted its Resolution Plan. (iv) The Resolution Professional in CoC meeting dated 24.01.2020 apprised the CoC about two quotations receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RGPPL pursuant to part payment of due by RGPPL One Time Settlement. (xi) The Appellant filed an I.A. No.213 of 2021 before the Adjudicating Authority seeking appropriate reliefs from the Tribunal for placing the Restructuring and Settlement Proposal made by the Appellant before the CoC for consideration. (xii) 12th CoC meeting was held on 05.03.2021. The Resolution Plan submitted by NTPC was discussed. CoC was of the view that Resolution Plan submitted on 30.11.2020 was substantially lower than the earlier offer submitted by NTPC. CoC was of the view that in order to maximize the value of the Corporate Debtor fresh EOI be issued. On the withdrawal proposal submitted under Section 12A by the Appellant, CoC was of the view that CoC does not want to pursue any withdrawal under Section 12A and it does not want to go ahead with the proposal submitted by the Promoters. (xiii) On 16.04.2021, the NTPC submitted another Resolution Plan (3rd Plan) and an affidavit dated 16.04.2021 under Section 29A, claiming that it is qualified to participate in the Resolution Plan and dues towards the lenders of KLL and RGPPL have been satisfied and lenders have provided no due certificates as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, RGPPL and KLL had already been classified as NPA and by virtue of Section 29A(c) and (j), the NTPC was disqualified. Canara Bank had classified RGPPL as NPA. The eligibility of Resolution Applicant has to be there on the date of submission of the Resolution Plan. The NTPC being disqualified on the date of submission of Resolution Plan, that is, on 30.12.2019, all subsequent process is vitiated. The Code does not contemplate submission of more than one Resolution Plan. The NTPC being not eligible on the date of submission of 1st Resolution Plan, its name ought not to have been included in the list of eligible Resolution Applicants. The Canara Bank classified RGPPL as NPA on 21.05.2018, with effect from, 01.04.2009. Similarly, Canara Bank has classified KLL as NPA with effect from 01.04.2009. Similarly, SBI and IDBI Bank had also classified both RGPPL and KLL as NPA. Even if, the claim that RGPPL and KLL entered into OTS with lenders and no due certificates were issued, the payment having not been made by NTPC, the proviso to Section 29A(c) is not attracted. The payment of all overdue amounts has to be made by person, who is to submit the Resolution Plan. The payments having not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due certificates in March 2020 and as there was no old dues in loan account of RGPPL, no due certificates were issued by the lenders of RGPPL. On the date on 16.04.2021, when 3rd Plan was submitted, which ultimately was considered and approved in its revised form by the CoC, it was fully compliant of Section 29A. By clearing all overdues by virtue of proviso to Section 29A(c), the NTPC had become eligible. The date for testing eligibility under Section 29A, is the date when the Plan is placed before the CoC for consideration. The provisions of the Code contemplate for submission of vertical Plans. The use of words Plans in Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as the CIRP Regulations ) indicate that submission of more than one plan is contemplated. Further, in accordance with Section 13, sub-section (2) of the General Clauses Act, words in singular shall include the plural and vice versa. Section 12A proposal submitted by the Appellant was duly considered by the CoC and was not accepted. The approval of the 90% of the CoC voting is necessary for passing an order under Section 12A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly considered by the CoC in its meeting dated 05.03.2021 as well as 21.04.2021 and was duly rejected. 8. We have considered the submission of learned Counsel for the parties and have perused the record. 9. We may first consider the submission of the Appellant regarding Restructuring Settlement Plan claimed to be submitted under Section 12A. 10. The Appellant submitted Restructuring/ Settlement offer on 25.01.2021 by way of letter dated 25.01.2021 to the RP, requesting him to place the proposal before the CoC. The Restructuring Settlement Plan of the Appellant is claimed to be submitted under Section 12A. We may first notice at this stage that Section 12A is a provision in Code, which permits withdrawal of Application under Section 7, 9 and 10, on an Application made by the Appellant with the approval of 90% voting share of the Committee of Creditors. Section 12A is as follows: 12A. Withdrawal of application admitted under section 7, 9 or 10. The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety per cent. voting share of the committ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s over a long period of 19 years and unsustainable portion of the debt is at negligible rate of interest and payable after 15 years over 5 yearly instalments. Having considered the commercials of NTPC offer and promoter proposal, it was noted that the offer from NTPC is better than the promoter proposal. Some of the CoC members also noted that some other accounts held by the promoters are under examination by various Govt. authorities/ commissions. The CoC counsel clarified that if the promoter plan is a resolution plan under the IBC, then it has potential section 29A issues and if it is a plan under 12A of IBC, then it is not in prescribed form and does not meet the requirements of 12A. RP counsel agreed that it is neither in the prescribed format nor routed through the lenders along with BG. In any event, CoC considered the commercials aspects of the proposal and have found it to unacceptable. CoC members also informed RP that lenders have not received any formal request from Promoters under Section 12A for withdrawal of application and moreover lenders are not keen on withdrawal from the CIRP in case the plan is offered by the Promoters to the lenders to consider under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ors. (2019) 12 SCC 150 where following has been laid down 52. As aforesaid, upon receipt of a rejected resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of the Sick Industrial Companies Act, 1985 or under other such enactment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Applicant as per the invitation of submission of Resolution Plan was by 31.12.2019 and process documents was issued on 01.10.2019, the Resolution Applicant, that is, NTPC as well as another Resolution Applicant Adani Power Limited have submitted their Resolution Plans by 30.12.2019. The ineligibility of the Resolution Applicant is sought to be questioned on the strength of Section 29A(c) and (j), Explanation (1). The relevant provisions of Section 29A are as follows: 29A. Persons not eligible to be resolution applicant. - A person shall not be eligible to submit a resolution plan, if such person, or any other person acting jointly or in concert with such person- (c) at the time of submission of the resolution plan has an account, or an account of a corporate debtor under the management or control of such person or of whom such person is a promoter, classified as non-performing asset in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulation Act, 1949 (10 of 1949) or the guidelines of a financial sector regulator issued under any other law for the time being in force, and at least a period of one year has lapsed from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpression related party shall not include a financial entity, regulated by a financial sector regulator, if it is a financial creditor of the corporate debtor and is a related party of the corporate debtor solely on account of conversion or substitution of debt into equity shares or instruments convertible into equity shares or completion of such transactions as may be prescribed, prior to the insolvency commencement date [Explanation II-For the purposes of this section, financial entity shall mean the following entities which meet such criteria or conditions as the Central Government may, in consultation with the financial sector regulator, notify in this behalf, namely:- (a) a scheduled bank; (b) any entity regulated by a foreign central bank or a securities market regulator or other financial sector regulator of a jurisdiction outside India which jurisdiction is compliant with the Financial Action Task Force Standards and is a signatory to the International Organisation of Securities Commissions Multilateral Memorandum of Understanding; (c) any investment vehicle, registered foreign institutional investor, registered foreign portfolio investor or a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide its letter dated 21st May, 2018, 20th July, 2018, 30th July, 2018 and 18th August, 2018 informed that they have downgraded RGPPL s Account from Standard Assets to NPA as per RBI Circular dated 12th February, 2018 withdrawing 5/25 scheme and that their participation/ implementation of 5/25 scheme (including conversion of debt into CRPS) is put on hold. Further, Canara Bank sought fresh resolution plan under the revised framework of RBI for resolution of stressed assets. 22. Similarly, with regard to KLL in the Financial Statement of 2018-19 with regard to NPA, following statement has been made: * The Canara bank, one of the lenders of the company (3.99% of outstanding as on 31.03.2019), has classified the company s account as Non Performing Asset (NPA) as on 31.03.2018 w.e.f. 01.04.2009 citing the reason of incomplete restructuring and as per RBI circular dated 12.02.2018. The said RBI circular has been held unconstitutional and ultra vires by Hon ble Supreme Court vide its order dated 02.04.2019. The company has been paying due interest (excluding penal interest) on loan amount w.e.f. 01.01.2016 till date. It is expected that in view of Hon ble Supreme Court Order, Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to service its own debt beyond the grace period referred to above, is unfit to be eligible to become a resolution applicant. This policy cannot be found fault with. Neither can the period of one year be found fault with, as this is a policy matter decided by RBI and which emerges from its Master Circular, as during this period, an NPA is classified as a substandard asset. The ineligibility attaches only after this one year period is over as the NPA now gets classified as a doubtful asset. 26. The statutory provision under Section 29A, sub-clause (c) is plain and clear that grace period of one year has been given and if after expiry of grace period, Resolution Applicant is unable to pay the dues and the NPA continues, the Resolution Applicant becomes ineligible. The question to be answered in the present case is as to what shall be the date of classification of NPA by Canara Bank, whether it is 21.05.2018 or 01.04.2009. From the materials on record, it is clear that classification was declared on 21.05.2018, although with effect from 01.04.2009. So, the date on which classification is declared is relevant or the date with effect from such classification is made to be effective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... psed till 27.03.2019, when CIRP commenced. Since on the date of commencement of CIRP, period of one year has not elapsed, the disqualification under Section 29A(c) shall not attach to the NTPC, who was Resolution Applicant. We, thus, accept the submission of learned Senior Counsel for the Resolution Applicant that Resolution Applicant was eligible on 30.12.2019 when it submitted the Resolution Plan. When Resolution Applicant was eligible on 30.12.2019, it continued to be eligible in entire process of the CIRP. The CoC, which is statutorily authorised to conduct the CIRP with the object of reviving the Corporate Debtor is fully competent to ask the Resolution Applicant to revise its Plan, improve its Plan and submit the revised Resolution Plan. 27. The Hon ble Supreme Court in Kalpraj Dharamshi Anr vs. Kotak Investment Advisors (2021) SCC OnLine SC 204 has held that CoC is competent to suggest modification to the prospective Resolution Applicant. Following observations has been made by the Hon ble Supreme Court in the judgment: This Court held, that what is left to the majority decision of CoC is the feasibility and viability of a resolution plan, which is required to ta ..... 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