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TMI Blog2022 (10) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... 3; and Pankaj Bhatia Shreeji Cotfab- H4 and obviously, these Resolution Plans were to be considered by the Committee of Creditors and all the three Resolution Applicants were required to be called for negotiations and for maximization of the value of the assets of the corporate debtor. Now, when the Resolution Plan of Aggarsain Spinners Limited has been rejected by this Bench, being ineligible under Section 29A(f) of the Code, then certainly to meet the ends of justice an opportunity is required to be given to the remaining three Resolution Applicants, who submitted their resolution plans simultaneously with erstwhile Successful Resolution Applicant- Aggarsain Spinners Limited. Although, it is contended by learned counsel for the respondents that if the earlier resolution plans are to be considered then it would amount to review of order dated 24.05.2022. More so, earlier resolution applicants including the present applicant do not meet the fresh eligibility criteria laid down by the Committee of Creditors. This contention of learned counsel for the respondents does not hold water because there is nothing on record that the new eligibility criteria is based upon any evaluation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication has been filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the Code ) on behalf of the Unsuccessful Resolution Applicant, namely, M/s Shreeji Cotfab Ltd. (hereinafter referred to as the applicant ), inter alia, the following reliefs:- a. Pass an order, directing the respondents to comply with the directions and intent of judgment and order dated 24.05.2022 in CA No.287/2019 and IA No.348/2021 and quash fresh Form G dated 02.06.22 and the revised eligibility criteria being contrary and in violation to the directions of this Bench in its judgment dated 24.05.2022 in CA No.287/2019 and IA No.348/2021 and stay all consequential proceedings thereto; b. Direct the Resolution Professional to invite the existing Resolution Applicants and present the existing Resolution Plans (including the Resolution Plan of the Applicant) for consideration before the Committee of Creditors as per the intent of the judgment dated 24.05.2022 in CA No.287/2019 and IA No.348/2021; and other consequential relief as deemed fit. 2. By virtue of the present application, the applicant seeks to challenge the illegal, unlawful and arbitrary co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r exploring the possibility of resolution of the corporate debtor. Accordingly, matter is referred back to the Committee of Creditors, which is ordered to be reinstated and revived to make another attempt for consideration of other resolution plans in accordance with law. Consequently, by virtue of order dated 24.05.2022 passed in IA No.348/2021 and in view of the ineligibility of the Resolution Applicant and non-compliance of Section 30 of the Code, this Tribunal vide order of even date rejected CA No.287/2019, which was filed by the Resolution Professional seeking approval of Resolution Plan of the erstwhile successful resolution applicants. The operative part of order dated 24.05.2022 passed in CA No.287/2019 reads as under:- 27. Vide separate order of even date passed by this Bench in IA No.348 of 2021, Successful Resolution Applicant is held ineligible under Section 29(A)(f) of the Code, at the time of submission of the Resolution Plan. Thus, to sum up, when Resolution Applicant is declared ineligible under Section 29A(f) of the Code, the resolution plan submitted by the Resolution Applicant could not be considered and approved by the committee of creditors under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xure A-9) to the Resolution Professional on 15.06.2022, requesting for the compliance of order dated 24.05.2022 passed by this Tribunal and requested the Resolution Professional to put up the existing plans before the Committee of Creditors and to further give the applicant an opportunity to attend the meeting of the Committee of Creditors, however, the Resolution Professional ignored the representation of the Applicant and chose to proceed with further steps envisaged under Form G. It is averred by the applicant that the applicant in its representation had categorically highlighted that the applicant was ready to match the resolution plan value equivalent to the erstwhile successful resolution applicant and agreed to negotiate it further if an opportunity to attend the meeting of the Committee of Creditors would have been granted. It has been further alleged that there in an apprehension that the Resolution Professional is proceeding hurriedly with further steps without verifying the mandatory requirements of compliance of prospective resolution applicants under Section 29A of the Code, which may then lead to the CIRP being vitiated. It is also alleged that in the judgment dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avorable orders. In the reply, it has been stated that pursuant to order dated 24.05.2022 passed in IA No.348/2021, respondent No.1/Resolution Professional convened 26th meeting of Committee of Creditors on 01.06.2022, wherein, Members of the Committee of Creditors were of the opinion that fresh valuation of the corporate debtor should be conducted so that the Committee of Creditors can make a better decision, since at the time of earlier valuations, operations of the plants were limited, which have now improved and also considerable time has also elapsed since the last valuation. Respondent No.1/Resolution Professional had also placed the agenda for republication of expression of interest for inviting resolution applicant to submit resolution plan in compliance with Section 25 (2) (h) of the Code and Regulation 36A of the CIRP Regulations. The Committee of Creditors after discussions and deliberations, approved the resolution for publication of expression of interest for inviting resolution applicants to submit the resolution plan in the matter of corporate debtor. Further it has been stated that the eligibility criteria of the prospective resolution applicants for participation i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein, it has been held that the resolution applicant has no vested right that his plan must be considered. The relevant paragraph of the judgment is reproduced as under:- 5. It is settled position of law as laid down by Hon'ble Supreme Court in MANU/SC/1123/2018 : (2019) 2 SCC 1 in case of Arcelor Mittal India Pvt. Ltd. Satish Kumar Gupta that the resolution applicant does not have any vested right that his Resolution Plan must be considered. 6. The commercial wisdom of the CoC is paramount, and it has the absolute prerogative to decide the viability and feasibility of the Resolution Plans presented before them and the same is not to be interfered even by the Adjudicating Authority. 15. The judgment passed by the Hon ble NCLAT was assailed before the Hon ble Supreme Court in Civil Appeal No.2720/2020, wherein, the Hon ble Supreme Court dismissed the appeal vide order dated 20.07.2020 and upheld the judgment passed by the Hon ble Appellate Authority. 16. In addition to above reliance has also been placed by learned counsel for respondent No.1/Resolution Professional in Company Appeal (AT) (Ins.) No.518 of 2020; Kalinga Allied Industries Ltd. Vs. Hindustan C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for respondent No.1/Resolution Professional that in view of order dated 24.05.2022 passed by this Tribunal, there is a direction to make another attempt for consideration of other resolution plans in accordance with law. Since the process in terms of Form-G dated 22.012.2018 came to an end on approval of resolution plan by Committee of Creditors in its 12th meeting, the only manner in which respondent No.1/Resolution Professional and the Committee of Creditors can make another attempt for resolution is mandatorily required to issue fresh Form-G in terms of Section 25(2) (h) of the Code read with Regulation 36A of the CIRP Regulations. Thus, in terms of the provisions of the Code and underlying Regulations, respondent No.1 being the Resolution Professional is required to issue fresh Form-G in terms of the fresh eligibility criteria as decided by the Committee of Creditors. 18. Learned counsel for respondent No.1/Resolution Professional also submits that it is settled position of law that if a statute provides something to be done in a manner, then it has to be done in that manner only. It is submitted that the procedure as required under the Code has to be followed. When there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with unclean hands as the applicant in the 9th meeting of the Committee of Creditors had withdrawn from the resolution process and the EMD of the applicant had also been returned. Thus, on return of the EMD and in the absence of EMD, there is no valid resolution plan by the applicant as per the RFRP dated 29.12.2018. Thus, since, the applicant himself withdrew from the negotiation process cannot now approach this Tribunal seeking direction of consideration of his resolution plan. Further, it has been mentioned that thereafter, at the request of the Committee of Creditors in the 10th Meeting of the Committee of Creditors, respondent No.1/Resolution Professional had called the applicant to participate in the 11th Meeting of Committee of Creditors for negotiation with its members, however, the applicant did not participate in the negotiations and did not increase the amount offered under the Resolution Plan. Thereafter, the applicant was also sent invite for participating in the e-negotiation process, however, the applicant failed to participate in the e-negotiation process. 22. The learned counsel for respondent No.1/Resolution Professional also contended that the applicant had s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution Applicant to the effect that such dues ought to be paid in full, so that the carrying on of the business of the corporate debtor does not become impossible for want of a most basic and essential element for the carrying on of such business, namely, electricity. This may, in turn, be accepted by the resolution Applicant with a consequent modification as to distribution of funds, payment being provided to a certain type of operational creditor, namely, the electricity distribution company, out of upfront payment offered by the proposed resolution Applicant which may also result in a consequent reduction of amounts payable to other financial and operational creditors. What is important is that it is the commercial wisdom of this majority of creditors which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place. 47. After adverting to the 2016 Regulations, the Court set out the jurisdiction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to all the Prospective Resolution Applicants in the final list to submit fresh/revised plans in accordance with the Code because the other resolution plans which were received earlier (i.e. three years prior) by respondent No.1/Resolution Professional were also not found satisfactory. Further, reliance has been placed on judgment dated 05.03.2020 passed by the Hon ble NCLAT in Company Appeal (AT) (Ins) No.1490 of 2019; Shrawan Kumar Agrawal Consortium versus Rituraj Steel Private Limited, wherein it has been held as under : - 14. In the instant case, the Adjudicating Authority has overturned the decision of the CoC regarding approval of the Resolution Plan despite being approved by 84.70 percent of the vote share of the CoC, on the pretext of maximisation of value of the corporate debtor. The provisions investing jurisdiction and authority in the NCLT has not made the commercial decision exercised by the CoC of not approving the resolution plan or rejecting the same, justiciable. In the circumstances as stated above, it is clear that the Adjudicating Authority cannot interfere with the commercial wisdom of CoC. The direction for rebidding for maximisation of the value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file the present application for the reason that the applicant is a unsuccessful resolution applicant and thus, it has no locus to intervene in the current CIRP of the corporate debtor as directed by this Tribunal vide order dated 24.05.2022. It has been mentioned that in terms of the directions passed in the order dated 24.05.2022, the Committee of Creditors has made another attempt for consideration of the resolution plans by inviting fresh resolution through Form-G dated 02.06.2022. Thus, the applicant had the option to participate in the new CIRP of the corporate debtor which had been initiated by virtue of order dated 24.05.2022 passed by this Bench. However, instead of participating in the fresh CIRP or not even bothering to improve his plan through participation in the e-negotiations on the last occasion, has now moved this frivolous application to derail the CIRP of the corporate debtor. Not only this, it has also been mentioned that the Committee of Creditors while exercising its commercial wisdom has found the plan of the applicant as commercially non-viable and thus, it was rejected. Thus, the Committee of Creditors cannot be forced to consider the plans that have alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ching the orders of this Tribunal. It is also stated that change of criteria has been purposely done to exclude the applicant and counterblast to the successful challenge to the illegal and motivated decisions of the Committee of Creditors. 29. Further, it has been submitted that direction of this Tribunal was to consider other Resolution Plans and Expression of Interest is a separate terminology distinctively used under Regulation 36A. It is the contention of learned counsel for the applicant that this Tribunal did not use the expression Expression of Interest but used the word Resolution Plans which in any case means that compliance of the directions had to be restricted to Regulation 36B. It is also submitted that there was no specific direction of this Tribunal for republishing of Form G and there is no provision in the Code or the Regulations to re-issue Form G in the absence of any specific order by this Tribunal. 30. We have heard learned counsel for the parties and have gone through the record. 31. Learned counsel for the parties have argued in terms of the written submissions filed by them. 32. It is contended by learned counsel for the applicant that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Resolution Professional has attached minutes of meeting dated 07.06.2022 of the Committee of Creditors (Annexure R-13 of the reply filed by respondent No.1/Resolution Professional) and in Agenda Item No.27.05, there is no discussion on the earlier eligibility criteria and the circumstances which warrants the change in the eligibility criteria. It is alleged that the sole purpose of the change in the eligibility criteria is to oust the applicant for the sole reason that it was whistle blower as a result of which the erstwhile successful resolution applicant was declared ineligible. Hence, it is submitted by learned counsel for the applicant that the instant application should be allowed and the respondents be directed to comply with the directions and intent of order dated 24.05.2022 passed by this Tribunal in CA No.287 of 2019 and IA No.348 of 2021 and quash Fresh Form G dated 02.06.2022 and the revised eligibility criteria being contrary and in violation to the directions of this Tribunal in its order dated 24.05.2022 in CA No.287 of 2019 and IA No.348 of 2021 along with all consequential proceedings thereto. 36. On the other hand, it is argued by learned counsel for respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the case in the matter of the corporate debtor. 38. Learned counsel for respondent No.1/Resolution Professional also argued that in view of judgment passed in IMR Metallurgical Resources case (supra), which was upheld by the Hon ble Supreme Court in Civil Appeal No.2720/2020 and in view of Kalinga Allied Industries case (supra), it is settled position of law that an unsuccessful resolution applicant has no vested right to seek direction that its resolution plan shall be considered. 39. It is further argued by learned counsel for respondent No.1/Resolution Professional that M/s Coloron Yarns Private Limited is one of the allied companies of M/s Longowalia Yarns Limited and Mr. Sanjay Garg (DIN:00205161) is a common director in the above mentioned companies. In addition, Mr. Pankaj Bhatia (DIN:00868978) also holds the position of a Director w.e.f. 20.08.2021 in M/s Coloron Yarns Private Limited and M/s Shreejit Cotfab Limited. As M/s Longowalia Yarns Limited has submitted their expression of interest (EOI) in terms of Form G dated 02.06.2022 of the corporate debtor, it clearly signifies that Mr. Pankaj Bhatia (being related to M/s Longowalia Yarns Limited) has accepted the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perative part of the said order, which has been upheld by the Hon ble NCLAT, vide order dated 14.09.2022 is reproduced as under:- 82. To sum up in the light of discussions foregoing and reasons assigned hereinbefore Resolution Applicant is declared ineligible under Section 29A(f) of the Code at the time of submission of the resolution plan and resolution plan submitted by Resolution Applicant stands rejected vide separate order of even date passed in CA No.287 of 2019. Consequently, to avoid the liquidation of the corporate debtor, period of Corporate Insolvency Resolution Process is extended by 90 days for exploring the possibility of resolution of the corporate debtor. Accordingly, matter is referred back to the Committee of Creditors, which is ordered to be reinstated and revived to make another attempt for consideration of other resolution plans in accordance with law. Mainly, learned counsel for the respondents have raised certain objections about the maintainability of the present application. Firstly, that the applicant has no locus standi, being an unsuccessful resolution applicant, since the applicant did not choose to file EOI before the Resolution Professional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would tantamount to review of order dated 24.05.2022 which is not permissible under law. The process adopted by the Committee of Creditors stands vindicated since it has received EOIs from 18 Prospective Resolution Applicants and has now received 9 plans/bids under the new Form G . Fifthly, there are common directors of M/s Coloron Yarns Private Limited, M/s Coloron Yarns Private Limited and the present applicant, namely, M/s Shreeji Cotfab Limited, so all of them are having common interest and M/s Coloron Yarns Private Limited is one of the Prospective Resolution Applicants. 44. Lastly, it is further by learned counsel for the respondents that on account of the ineligibility of the erstwhile Successful Resolution Applicant and initiation of the fresh process under the orders of this Tribunal, would enable the Committee of Creditors to achieve legislative intent in enactment of the Code i.e. maximization of the value of the assets. In support of this contention, the learned counsel for respondents have relied upon the judgment dated 14.11.2018 passed by the Hon ble NCLAT in Binani Industries Limited versus Bank of Baroda and Another; Company Appeal (AT) (Insolvency) No.82 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awn the resolution plan. It may be noted that in the 12th Meeting of the Committee of Creditors, held on 27.03.2019, the final list of prospective resolution applicants along with final proposed amount was tabulated as below:- Sr. No. Name of Resolution Applicant Final Amount Proposed (in crores) Rank as per Evaluation Matrix 1. Aggarsain Spinners Limited 83.76 H1 2. Navraj Mittal and Others 83.50 H2 3. M/s Shivani Trendz Private Limited 74 H3 4. Pankaj Bhatia Shreeji Cotfab 52.11 H4 This shows that the Applicant was still in the fray of Resolution Applicants irrespective of the fact that he had withdrawn its EMD of Rs.25 Lacs on 20.02.2019. Thus, estoppel would not operate against the present applicant for fresh participation in the negotiation process. 49. Similarly, the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of negotiations and fresh eligibility criteria laid down by the Committee of Creditors would not be applicable to the earlier resolution applicants, including the present applicant. 52. In these circumstances, the contention of learned counsel for the respondents that the present application is hit by Regulation 36A(10) and (11) of the Regulations is also not much convincing. There is no dispute to the fact as well as the law laid down in different cases including Binani Industries Limited (supra) passed by the Hon ble NCLAT that purpose of resolution is for maximization of value of assets of the corporate debtor. 53. In view of the above, the earlier resolution applicants including the present applicant may take part in the negotiation process before the Committee of Creditors and ultimately, Successful Resolution Applicant would be decided by the Committee of Creditor, which if found in consonance with maximization of value of the assets of the corporate debtor. In the circumstances, with due deference the authorities (supra) relied upon by learned counsel for the respondents i.e. Kallinga Allied Industries; Dhanajaya Reddy; Committee of Creditors of Essar St ..... X X X X Extracts X X X X X X X X Extracts X X X X
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