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TMI Blog2023 (1) TMI 945X X X X Extracts X X X X X X X X Extracts X X X X ..... CIRP was conducted with material irregularity is not found to be correct. It is necessary to look at Section 29-A(c) according to which at the time of submission of the resolution plan, the Resolution Applicant or any other person acting jointly or in concert with the Resolution Applicant who has an account which is classified as non-performing asset, and at least a period of one year has lapsed from the date of such classification as NPA till the date of commencement of the CIRP of the Corporate Debtor is ineligible to submit a resolution plan. There is no other document or record submitted by the Appellant or any other party in support of the claim that a connected party of SRA went into insolvency resolution. All that the press note states is that the company Drake and Scull International PJSC, UAE went into Financial Reorganization Process which was accepted by the relevant authority and a Financial Reorganization Committee (FRC) to conduct the financial reorganization process was formed - It is thus clear that even if the financial reorganization process that Drake and Scull International PJSC, UAE is undergoing is taken as an insolvency resolution process, such a fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umar Jain] Member (Judicial) And [Mr. Kanthi Narahari] Member (Technical) [Dr. Alok Srivastava] Member (Technical) For the Appellant : Mr. Ashok Kriplani Mr. Iswar Mahapatra, Advocates For the Respondents : Mr. Ashish Makhija, Mr. Raghav Kapoor, Ms. Richa Singh, Mr. Rohit and Deepali Saigal, Advocates for R-1 RP. S.N. Sharma Mr. Nikhil Kohli, Mr. Gaurav Gupta, Mr. Kashank Garg and Ms. Akshaya Ganpath, Advocates for R-2 JUDGMENT This appeal is directed against the order dated 03.12.2020 by which an application filed by the Resolution Professional (in short RP ) under Section 31 of the Insolvency and Bankruptcy Code, 2016 (in short Code ) read with Regulation 39 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (in short Regulations ) seeking sanction of resolution plan, approved in the meeting of Committee of Creditors (in short CoC ) held on 13.11.2019, has been allowed, subject to comments in Para No. 35 to 39 of the impugned order regarding performance security, reliefs and concessions as provided in the plan and further directions were issued under Section 31(3) of the Code that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RBL Bank Limited 288,125,779 288,125,779 50.03% 2. Axis Bank 287,783,590 287,783,590 49.97% 3. Passavant Energy Environment India Pvt. Ltd. 267,174,815 267,174,815 0.00% 100% 6. The information memorandum prepared by the RP was shared with the CoC after receiving undertaking of maintaining confidentiality of the information memorandum in the 4th meeting of the CoC held on 12.01.2019 wherein it was resolved to appoint transaction auditors for the period ranging from 01.04.2016 to 30.10.2018. The CoC approved the eligibility criteria for inviting Expression of Interest (EOI) in its 5th meeting held on 24.01.2019 and also resolved to approve the appointment and fee of M/s K.G. Somani Co. as transaction auditor of the Corporate Debtor. The EOI was called from eligible Resolution Applicants (RAs) on 25.01.2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roposals were opened in the CoC in its 8th meeting but they were advised for removal of deficiencies in the plans and to clarify observations of process advisors about the qualification provided in Section 29-A of the Code in the subsequent meeting i.e. 9th CoC meeting which was to be held on 12.07.2019. The CoC had advised both the RAs to revise their resolution plans to their satisfaction in the subsequent meetings, namely, 10th, 11th, 12th and 13th meetings which were held on 20.07.2019, 30.10.2019, 05.11.2019 and 09.11.2019. In the 13th meeting of CoC held on 09.11.2019, the resolution plan submitted by RP was found deficient in terms of Section 30 of the Code and the financial proposal was found inferior to the RA submitted by Passavant Energy Environment GmbH . Both were given further time to submit plans but ultimately there was only one plan submitted by Passavant Energy Environment GmbH which was approved with 100% voting of the CoC in its 14th meeting held on 13.11.2019. 9. The RP submitted the resolution plan of the RA, namely, Passavant Energy Environment GmbH to the Adjudicating Authority for sanctioning of application bearing CA No. 1192 of 2019 which had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Group Companies is attached herewith as Annexure -A 10(Colly). C. Website page of Passavant Energy Environment GmbH, Germany i.e. SRA is attached herewith as Annexure-A-11 which also claims that Passavant Energy Environment is a German Based Subsidiary of Drake Scull International PJSC, which is a UAE Based, public joint stock company. (https://www.passavant-ee.com/index.php/passavant-energyenviornment- gmbh-www-passavant-ee-com-232.html) D. According to list of shareholder of CD as on 31.03.2017, Drake Scull Engineering LLC, UAE is holding 83.17% in Corporate Debtor as on 31.03.2017 and the same is attached herewith as Annexure A13. 25. Thus, that the CD and SRA are related to each other as shown in diagram below: Shareholding of CD is controlled by Drake Scull Engineering LLC, UAE (at serial no. 2 above 1) is 83.17% and Drake Scull International PJSC, UAE (at serial no. 1 above) is 16.83%. 12. It is further submitted that the averments made hereinabove have been admitted by both Respondent No. 1 and 2 in their reply. In so far as the reply of Respondent No. 1 is concerned, the averments made in para 27 and 28 of reply of Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional PJSC, UAE being a its wholly-owned subsidiary. Therefore, insofar as the constitution of CoC is concerned, the Financial Creditor Passavant Energy Environment India Pvt. Ltd. is a related party of the Corporate Debtor as both are related to Drake and Scull International PJSC, UAE which is their step-down holding company. Therefore, the presence of Passavant Energy Environment India Pvt. Ltd. in the CoC is as that of a financial creditor which is a related party. 17. Insofar as the issue of the inclusion of a representative of the Operational Creditors, who jointly hold more than 10% of the total debt is concerned, we note Section 24(3)(c) and Section 24(4) which are as follows: 24-Meeting of committee of creditors. (3) The resolution professional shall give notice of each meeting of the coc to- (c) operational creditors or their representatives if the amount of their aggregate dues is not less than ten per cent. of the debt. (4) The directors, partners and one representative of operational creditors, as referred to in sub-section (3), may attend the meetings of committee of creditors, but shall not have any right to vote in such meetings: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. Further we note that the RP again sent an email dated 30.04.2019 requesting all the operational creditors to appoint a consensus representative but it is clear from a perusal of the relevant emails that no name of representative by consensus could be decided and while Shri Ashok Kriplani, vide email dated 13.04.2019, wrote to the RP that he is an AR of one of the operational creditors, namely Shiv Shakti Elmech Pvt. Ltd., he is proposing his name as representative in any forthcoming CoC. This email evidently was sent by Mr. Ashok Kriplani to all the Operational Creditors as is clear from the pg. 115 to 116 of the Respondent No s 1 reply, but no name by consensus was then proposed. It is also clear from the email dated 27.05.2019 sent by the RP addressed to Mr. Ashok Kriplani requesting that a name representing all the operational creditors may be forwarded to the RP for necessary action but there is no document on record to show that such a name was suggested by all the operational creditors. Therefore, we do not find any fault or neglect committed by the RP in not including a representative of the operational creditors in the CoC. 21. We further note that the issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 date of such classification till the date of commencement of the corporate insolvency resolution process of the corporate debtor: Provided that the person shall be eligible to submit a resolution plan if such person makes payment of all overdue amounts with interest thereon and charges relating to non-performing asset accounts before submission of resolution plan; Provided further that nothing in this clause shall apply to a resolution applicant where such applicant is a financial entity and is not a related party to the corporate debtor. (h) has executed a guarantee in favour of a creditor in respect of a corporate debtor against which an application for insolvency resolution made by such c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t with the DSI s creditors in an out-of-court process. 26. There is no other document or record submitted by the Appellant or any other party in support of the claim that a connected party of SRA went into insolvency resolution. All that the press note states is that the company Drake and Scull International PJSC, UAE went into Financial Reorganization Process which was accepted by the relevant authority and a Financial Reorganization Committee (FRC) to conduct the financial reorganization process was formed. The date when such application was accepted by FRC is stated to be May, 2020. It is further noted that the CIRP commenced on 30.10.2018 in the present case and even if we consider financial reorganization process that Drake Scull International PJSC, UAE was undergoing as insolvency resolution, it commenced only on May, 2020. Further the resolution plan was submitted by the SRA in July, 2019 and it was approved by the CoC on 13.11.2019 where after it was submitted before the Adjudicating Authority for necessary approval. It is thus clear that even if the financial reorganization process that Drake and Scull International PJSC, UAE is undergoing is taken as an insolvency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Swiss Ribbons(supra): 82. It is clear that once the Code gets triggered by admission of a creditor s petition under Sections 7 to 9, the proceeding that is before the adjudicating authority, being a collective proceeding, is a proceeding in rem. Being a proceeding in rem, it is necessary that the body which is to oversee the resolution process must be consulted before any individual corporate debtor is allowed to settle its claim. A question arises as to what is to happen before a Committee of Creditors is constituted (as per the timelines that are specified, a Committee of Creditors can be appointed at any time within 30 days from the date of appointment of the interim resolution professional). We make it clear that at any stage where the Committee of Creditors is not yet constituted, a party can approach NCLT directly, which Tribunal may, in exercise of its inherent powers under Rule 11 of NCLT Rules, 2016, allow or disallow an application for withdrawal or settlement. This will be decided after hearing all the parties concerned and considering all relevant factors on the facts of each case. 53. The word such creditor in Section 29-A(h) has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definitely invoked by a financial creditor and when it was invoked. Thus, we find that a reading of Para 52 of the above cited judgment states that all creditors of the same class would have a right to file an application for insolvency resolution. In the present case, the application for insolvency resolution is not filed by a financial creditor and therefore, we are of the view that ineligibility as per Section 29-A (h) r/w Section 29-A(i) is also not attracted vis a vis the SRA. 30. Thus, we have found on the basis of pleadings and documents submitted by the parties that no ineligibility is attached to the SRA as per Section 29-A(c) and 29-A(h) r/w 29-A(i), merely the fact that the SRA is a related party of the CD as per Section 5(24) does not imply that the SRA is ineligible to submit a resolution plan in relation to the insolvency resolution of the CD. The ineligibility of any party to submit a resolution plan has to be seen strictly in the lens of Section 29-A of the IBC and we find that such ineligibility under Section 29-A does not attach to the SRA. 31. We have perused the documents submitted by the Appellant vide diary no. 285870 dated 03.08.2021 and it is clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant and event mentioned in the fact have had happened subsequent to commencement of insolvency resolution process, the Resolution Applicant would not fall under the clutches of disqualification: Reliance could be placed on the statutory amendments and judicial precedents that have had evolved over period of time in issues connected thereto, that, the Resolution Applicant ought to have shown some delinquency or impregnated with some antecedents so to attract the vagaries of Section 29-A. 34. In the light of the above, we are of the view that the RP only formed an opinion regarding the eligibility of Passavant Energy and Environment GmbH, Germany to submit a resolution plan. Both the plans were presented in their 13th meeting of CoC where members of Axis Bank and RBL Bank were present and noticeably the CoC members present in the meeting did not raise any issue about the ineligibility of Passavant Energy and Environment GmbH, Germany to submit a resolution plan and two resolution plans submitted by Maa Pahari Mercantiles Pvt. Ltd. and Passavant and Environment GmbH, Germany were considered in detail in the 14th meeting of CoC held on 13.11.2019. The resolution plan of P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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