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TMI Blog2023 (1) TMI 550X X X X Extracts X X X X X X X X Extracts X X X X ..... hibition for him to be ineligible to act as a Resolution Professional, as per Section 29A of the I B Code, 2016. The well accepted principle is that, an Adjudicating Authority (Tribunal) and the Appellate Tribunal are not to displace the cementing principles of the I B Code, 2016. The inbuilt framework, provided under I B Code, 2016, is not to be tinkered and tampered with, either by the Adjudicating Authority or by an Appellate Tribunal. No wonder, all, the basic tenets of the ingredients and the aim and objective of the Code, are to be preserved and maintained, by an Adjudicating Authority, as well as by the National Company Law Tribunal. Considering the fact that the Appellant / Petitioner who was a Promoter / Shareholder, invested in the Equity Shares at Rs.10/- each of the Corporate Debtor / Company (431840 Equity Shares), he is not an Aggrieved Person, in stricto sensu under Section 61 of the I B Code, 2016, especially, in the light of Committee of Creditors, having passed a Resolution for Liquidation of the Corporate Debtor, and keeping in mind that the Adjudicating Authority, had ordered for Liquidation of the Corporate Debtor, he is not entitled to get himsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 2013, the Applicant is an aggrieved party and is entitled to file an application before this Tribunal in the event of any grievance with respect to the takeover offer of the Company. Though, there is no takeover offer yet on the table and even assuming liquidation takes place, it will be an ineffective remedy as the liquidation will be done on a piece meal basis and there will be no effective solution to a going concern. 12.3. It was further submitted by the Applicant that an appeal has been preferred by the applicant in Company Appeal (AT) (INS)/328/2020 and the same is pending for adjudication before the Hon ble NCLAT. 12.4. Heard the submissions made by the Learned Counsel for the Intervenor. Further, the CoC in its commercial wisdom, after examining the viability and feasibility of two Resolution Plan, has rejected both the Resolution Plans unanimously and decided to liquidate the Corporate Debtor. Thus, it is a settled law that the decision of the CoC cannot be called into question by this Adjudicating Authority. Further, the Hon ble NCLAT in the matter of Rakshit Dhirajlal Doshi vs IDBI Bank Limited in Company Appeal (AT) (Insolvency) No. 296 of 2022, wherein it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quity Shares of Rs.10/- each per Equity Share of the Corporate Debtor . 4. According to the Appellant, the Corporate Debtor / Company , is primarily engaged in the business of manufacturing sponge iron, billets, PMT Bars and generation of Power at Village Pappan Kuppam in Gummidipoondi, located in the State of Tamilnadu. Further, the Corporate Debtor / Respondent / Company , had sought for Term Loans and other Facilities , from Banks to a tune of Rs.1489,54,11,615/- for the Development and Expansion of Business . 5. It is represented on behalf of the Appellant / Petitioner that the Shareholders of the Corporate Debtor (including the Appellant /Applicant), had infused a Capital of Rs.99.41 Crores into the Corporate Debtor s Corpus, as opposed to the Capital Requirement of Rs.98.79 Crores, laid down in the CDR Package . Also that, due to market turmoil and high interest rates, the Corporate Debtor , could not pay the Dues and that, as agreed to the Consortium of Banks , tagging sum , was paid by the Corporate Debtor , without any Default , from 05.03.2018, the Consortium of Bankers , had agreed to a Holding-on Operations arrangement, whereby, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted , without appreciating that an Appeal in Comp App (AT) (INS.) No. 328 of 2020, assailing the initiation of Corporate Insolvency Resolution Process , is pending, before the Appellate Tribunal , the Committee of Creditors , had misused the provisions of the Code, by projecting an Application , to initiate Liquidation of the Corporate Debtor , while an Appeal , is pending before this Tribunal , and that the Committee of Creditors , took the decision, to Liquidate , arbitrarily, without considering the three Plans submitted and rejected the same, on the ground of Value . 12. At this juncture, on behalf of the Appellant it is brought to the notice of this Tribunal , that when Form I , of the Application under Section 7 of the Code, proceeds on the basis that the Default occurred, when the Account of the Corporate Debtor , was declared as Non Performing Asset on 02.01.2013, the Application itself will be barred on this reason alone. 13. Continuing further, on behalf of the Appellant, the Learned Counsel for the Appellant proceeds to point out that one month before the filing of Section 7 Application, by the State Bank of India / Financial Creditor , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, unless the context otherwise requires,- (1)-(9) (10) information memorandum means a memorandum prepared by resolution professional under sub-section (1) of Section 29; (26) resolution plan means a plan proposed by resolution applicant for insolvency resolution of the corporate debtor as a going concern in accordance with Part II; 21. Committee of creditors.-(1) The interim resolution professional shall after collation of all claims received against the corporate debtor and determination of the financial position of the corporate debtor, constitute a committee of creditors. (2) The committee of creditors shall comprise all financial creditors of the corporate debtor: Provided that a financial creditor or the authorised representative of the financial creditor referred to in sub-section (6) or sub-section (6-A) or sub-section (5) of Section 24, if it is a related party of the corporate debtor, shall not have any right of representation, participation or voting in a meeting of the committee of creditors: Provided further that the first proviso shall not apply to a financial creditor, regulated by a financial sector regulator, if it is a related par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s may be specified, other than the creditors covered under clause (a) or subsection (6), the interim resolution professional shall make an application to the Adjudicating Authority along with the list of all financial creditors, containing the name of an insolvency professional, other than the interim resolution professional, to act as their authorised representative who shall be appointed by the Adjudicating Authority prior to the first meeting of the Committee of Creditors; (c) is represented by a guardian, executor or administrator, such person shall act as authorised representative on behalf of such financial creditors, and such authorised representative under clause (a) or clause (b) or clause (c) shall attend the meetings of the Committee of Creditors, and vote on behalf of each financial creditor to the extent of his voting share. (6-B) The remuneration payable to the authorised representative- (i) under clauses (a) and (c) of sub-section (6- A), if any, shall be as per the terms of the financial debt or the relevant documentation; and (ii) under clause (b) of sub-section (6-A) shall be as specified which shall form part of the insolvency resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolution professional to represent such creditor in a meeting of the Committee of Creditors: Provided that the fees payable to such insolvency professional representing any individual creditor will be borne by such creditor. (6) Each creditor shall vote in accordance with the voting share assigned to him based on the financial debts owed to such creditor. (7) The resolution professional shall determine the voting share to be assigned to each creditor in the manner specified by the Board. (8) The meetings of the Committee of Creditors shall be conducted in such manner as may be specified. 25. Duties of resolution professional.-(1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor. (2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions, namely- (a) take immediate custody and control of all the assets of the corporate debtor, including the business records of the corporate debtor; (b) represent and act on behalf of the corporate debtor with third parties, exercise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that he is eligible under Section 29-A to the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; (b) provides for the payment of the debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under Section 53; (c) provides for the management of the affairs of the corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; (e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be specified by the Board. Explanation.- For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013 (18 of 2013) or any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Committee of Creditors to the Adjudicating Authority. 31. Approval of resolution plan.- (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the Committee of Creditors under subsection (4) of Section 30 meets the requirements as referred to in sub-section (2) of Section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan: Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation. (2) Where the Adjudicating Authority is satisfied that the resolution plan does not [conform] to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan. (3) After the order of approval under sub-section (1)- (a) the moratorium order passed by the Adjudicating Authority under Section 14 shall cease to have effect; and (b) the resolution professional shall forward all records relating to the conduct of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors of the corporate debtor. Under Section 24, all meetings of this committee are to be conducted by the resolution professional who, however, does not happen to be part of this committee. Section 24(3)(b) is important in that, the resolution professional has to give notice of each and every meeting of the Committee of Creditors, inter alia, to members of the suspended Board of Directors. Like operational creditors who may attend and participate in such meetings, provided the aggregate dues owing to them are not less than ten per cent of the total debt, both such operational creditors and erstwhile members of the Board of Directors have no vote. Section 25(2)(f) and (i) are also important in that, once the resolution professional convenes meetings of the Committee of Creditors, he is to present all resolution plans at these meetings. Under Section 30, the resolution professional shall examine each resolution plan received by him in which he must confirm, inter alia, that such plan provides for the repayment of the debts of operational creditors which shall not be less than the amount to be paid to them in the event of liquidation of the corporate debtor. This plan is then submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate debtor and prepare a resolution plan. (emphasis supplied) 16. This Tribunal , points out the Judgment of the Hon ble Supreme Court of India, in Arun Kumar Jagatramka v. Jindal Steel and Power Limited Anr., (vide Civil Appeal No. 9664 of 2019 with Writ Petition (C) No. 269 of 2020 and Civil Appeal No. 2719 of 2020 dated 15.03.2021), reported in SCC (2021) 7 SCC 474, at Spl. Pg.: 533, wherein, at Paragraph 95, it is observed as under: 95. At this juncture, it is important to remember that the explicit recognition of the schemes under Section 230 into the liquidation process under the IBC was through the judicial intervention of NCLAT in Y Shivram Prasad [Y. Shivram Prasad v. S. Dhanapal, 2019 SCC OnLine NCLAT 172]. Since the efficacy of this arrangement is not challenged before us in this case, we cannot comment on its merits. However, we do take this opportunity to offer a note of caution for the NCLT and NCLAT, functioning as the Adjudicatory Authority and Appellate Authority under the IBC respectively, from judicially interfering in the framework envisaged under the IBC. As we have noted earlier in the judgment, the IBC was introduced in order to overhaul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the sale of assets of the company in liquidation or participating in the sale of the corporate debtor as a going concern , are somehow permitted to propose a compromise or arrangement under S. 230 of the Companies Act, 2013 Hence, in the context of the statutory linkage provided by the provisions of S. 230 of the Companies Act, 2013 with Ch. III IBC, where a scheme is proposed of a company which is in liquidation under the IBC, it would be far-fetched to hold that the ineligibilities which attach under S. 35(1) (f) r/w S. 29-A IBC would not apply when S. 230 of the Companies Act, 2013 is sought to be invoked Such an interpretation would result in defeating the provisions of the IBC and must be eschewed Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 Regn. 2-B Companies Act, 2013, Ss, 230 to 232. (Paras 53 to 71) 18. Also in the decision of the Hon ble Supreme Court of India in Committee of Creditors of Amtek Auto Limited through Corporation Bank v. Dinkar T. Venkatasubramanian Ors., (vide IA No.58156 of 2020 in Civil Appeal No. 6707 of 2019 with Contempt Petition (C) 524 of 2020 in Civil Appeal No. 6707 of 2019 dated 23.02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2020 [Amtek Auto Ltd. Committee of Creditors v. Dinkar T. Venkatsubramanian, 2020 SCC Online SC 1131] was to enable DVI to re-negotiate the resolution plan after assessing the impact of the Pandemic is thus fundamentally flawed. It is flawed because this assertion is contrary to the plain terms of the record. It is flawed also because the submission is contrary to the nature of the function which is expected to be exercised by the adjudicating authority by the plain terms engrafted into the provisions of Section 31. When DVI moved its application on 12-6-2020, it asserted that the timeline of 15 days has resulted in practical difficulties for parties to enter into any meaningful discussions and negotiations . To assert that there was any scope for negotiations and discussions after the approval of the resolution plan by the CoC would be plainly contrary to the terms of the IBC. Ministry of Corporate Affairs Circular: 19. At this stage, this Tribunal , worth recalls and recollects the General Circular No. IBC / 01 / 2017, Bearing No. 30 / 14 / 2017 Insolvency, Government of India, Ministry of Corporate Affairs, New Delhi dated 25.10.2017 , issued by the Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paragraphs 4 to 7, it is observed as under: 4. Heard learned counsel for the Appellant. Admittedly, the Appellant is an Investor therefore, the Appellant cannot claim to be an aggrieved person for preferring appeal against the order dated 2nd May, 2017 passed by Adjudicating Authority whereby the application under Section 9 of the I B Code was admitted. In fact, the Appellant being an investor is entitled to file its claim before the Insolvency Resolution Professional . 5. Further, as the order dated 2nd May, 2017 is not under challenge in this appeal this Appellate Tribunal cannot express any opinion with regard to the order of admission dated 2nd May, 2017. If the said order dated 2nd May, 2017 is allowed to be challenged, the appeal will be barred by limitation under sub-section (2) of Section 61 of the I B Code . 6. In absence of any power of review or recall vested with the Adjudicating Authority, we hold that the Adjudicating Authority rightly refused to recall the order of admission dated 2nd May, 2017. 7. For the reasons aforesaid, no relief can be granted. In absence of any merit the appeal is dismissed. However, the impugned order dated 3rd Oct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Also that, in the decision of the Hon ble Supreme Court of India in Meghal Homes Pvt. Ltd. v. Shree Niwas Girni K.K. Samiti Ors., reported in (2007) 7 SCC at Page 753, wherein, it is observed and held as under: 33. The argument that Section 391 would not apply to a company which has already been ordered to be wound up, cannot be accepted in view of the language of Section 391(1) of the Act, which speaks of a company which is being wound up. If we substitute the definition in Section 390(a) of the Act, this would mean a company liable to be wound up and which is being wound up. It also does not appear to be necessary to restrict the scope of that provision considering the purpose for which it is enacted, namely, the revival of a company including a company that is liable to be wound up or is being wound up and normally, the attempt must be to ensure that rather than dissolving a company it is allowed to revive. Moreover, Section 391(1)(b) gives a right to the liquidator in the case of a company which is being wound up, to propose a compromise or arrangement with creditors and members indicating that the provision would apply even in a case where an order of winding up has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the preceding five years; (c) criminal proceedings pending, if any; (d) disqualification, if any, under Companies Act, 2013, to act as a director; (e) identification as a willful defaulter, if any, by any bank or financial institution or consortium thereof in accordance with the guidelines of the Reserve Bank of India; (f) debarment, if any, from accessing to, or trading in, securities markets under any order or directions of the Securities and Exchange Board of India,; and (g) transactions, if any, with the corporate debtor in the preceding two years. (ii) the expression connected persons means- (a) persons who are promoters or in the management or control of the resolution applicant; (b) persons who will be promoters or in management or control of the business the corporate debtor during the implementation of the resolution plan; (c) holding company, subsidiary company, associate company and related party of the persons referred to in items (a) and (b).] Glimpse of the Regulation of IBBI (Liquidation Process) Regulations, 2016: 25. It must be borne in mind by this Tribunal , that Regulation 32 of the Insolvency an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered opinion of this Tribunal . Agreement: 32. An Agreement , means that it is between a Debtor and its Creditors , to arrange the Debtor s affairs, to satisfy the Creditors . 33. If a Transaction , is entered into with a view to circumvent the Laws , in evading the Tax , a Tribunal / Court of Law , will not approve such transaction. To put it precisely, if the arrangement is unfair and inequitable, the Scheme , cannot be sanctioned. Alternate Mode of Liquidation: 34. According to Buckley J, on Companies Act 11th Edition (vide Page No. 321), A Scheme of Compromise Arrangements Amalgamations , is an alternative mode of Liquidation , which by Operational of Law , release the Company , and its Contributories , that which is contemplated or impose Scheme from Liability , further therein. Adjudicating Authority ( Tribunal ) and the Appellate Tribunal position, under the I B Code, 2016: 35. The well accepted principle is that, an Adjudicating Authority ( Tribunal ) and the Appellate Tribunal are not to displace the cementing principles of the I B Code, 2016. The inbuilt framework, provided under I B Code, 2016, is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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