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TMI Blog2023 (2) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent : Mr. Rohit Rathi and Mr. Rahul Totla , Advocates for R - 3 / NAMCO JUDGMENT Justice Anant Bijay Singh ; The instant Appeal preferred under Section 61 of the Insolvency and Bankruptcy Code, 2016 (for short IBC) being aggrieved and dissatisfied by the order dated 05.08.2021 passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Court No.-I) in IA No. 244 of 2021 in C.P. (IB) No. 1661/MB/2018 wherein the application i.e. I.A. No. 244 of 2021 filed by the Resolution Professional Mr. Alkesh Rawka under Section 33 of the I B Code read with Rule 11 of the NCLT Rules 2016 for initiating Liquidation Process against the Gourmet Renaissance Private Limited (Corporate Debtor). By which the Adjudicating Authority passed the following orders: The application be and the same is allowed. Gourmet Renaissances Private limited shall be liquidated in the manner as laid down in Chapter-III of the Code with the following consequential directions: a) Ms. Vaishali Arun Patrikar having Registration No. IBBI/IPA/-002/IP-N00812/2019-2020/12566 to act as Liquidator of the Corporate Debtor. b) She shall issue public announcement stating that Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the name of Appellant bearing No. MH19F0145436. ii) The Respondent No.1, Deepak Advertisement Marketing is an outdoor Publicity Hoardings contractor, primarily engaged in outdoor media communications by erecting hoardings and advertisements in Mumbai. The Respondent No. 2 Company, an MSME, is represented before this Tribunal through its Insolvency Resolution Professional who was chosen by the Committee of Creditors (CoC) constituted pursuant to an order dated 11.03.2019 passed by the Adjudicating Authority. The Respondent No. 3, The Nasik Merchants Co-operative Bank Ltd., Nashik (hereinafter referred to as NAMCO ) is a Multistate Scheduled Bank that in the usual course of its business, lent certain sums to Corporate Debtor and went to have the largest representation on the Committee of Creditors. On 28.06.2019, the aforementioned IRP, Mr. Alkesh Rawka furnished FORM AA written consent to act as Resolution Professional of Appellant pursuant to which was appointed as the Resolution Professional vide a resolution passed by the CoC on 04.07.2019. The IRP subsequently filed an Application under Section 33 of the IBC code, 2016 read with Rule 11 of the National Company Law Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther. Further, Respondent No. 2 - Corporate Debtor emphasized that the defaults were not wilful and on account of unexpected force majeure occurrences such as demonetization, restrictions on sale of liquor, introduction of GST etc. Respondent No.2 -Corporate Debtor could not provide a definitive timeline to settle unpaid amounts qua Respondent No. 1 Operational Creditor until the implementation of a comprehensive resolution plan. iv) Admitting the Section 9 Petition for initiation of CIRP, the Adjudicating Authority inter alia declared a moratorium under Section 14 of the I B Code, 2016 directing Corporate Debtor to refrain from acting to alienate in any way, its assets legal rights and also forbid any action amounting to recovery/foreclosure/ enforcement of any security interest created by Corporate Debtor in respect of its properties. The Adjudicating Authority declared that the Order of Moratorium would be in effect till culmination of the resolution process, or an Order is passed approving liquidation of Corporate Debtor, Respondent No. 2 under relevant provisions of the IBC. It also proceeded to appoint Mr. Naren Seth as the Interim Resolution Professional to oversee func ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided under Regulation 3(1A) of the IBC. The second meeting of the CoC was held on 01.07.2019 wherein only the matter for consideration was the CIRP costs, the decision of which was deferred to the next meeting. The proposed plan by Appellant alluded to in the first meeting of the CoC was thereafter never discussed by the CoC despite the fact that Appellant would not fall under the category of persons more fully described in Section 29 A of the IBC which bars certain persons from being eligible as Resolution Applicant on account of Section 240-A(1) acquiring primacy and overriding the former and stating that notwithstanding anything to the contrary, that provisions of Clause (c) and (h) of Section 29-A shall not apply to the resolution applicant in respect of CIRP of MSME's. The third meeting convened at the behest of Respondent No.3, Mr. Alkesh Rawka, was appointed as Resolution Professional, replacing the incumbent Mr. Seth. The proposal was approved by 99.91% of the Committee. vi) In the fourth CoC meeting held on 07.07.2019, due to the fact that CIRP would in all likelihood extend beyond the prescribed 180 days, approval was accorded to Resolution Professional to appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 NAMCO Rs. 35,44,84,967/- 2 Invent Arc Ltd. Rs. 34,34,016/- 3 Arohan Financial Services Limited Rs. 10,71,273/- Details of the Committee of Creditors, also reconstituted, are provided hereinunder: S. No. Particulars Amount (In Crores) Percentage 1 NAMCO 35.45 98.77% 2 Invent Arc Ltd. 0.35 0.98% 3 Arohan Financial Services Limited .09 0.25% 4 Total 35.89 100% vii) The new entrant to the COC, Invent Arc Pvt. Ltd was represented by Ms. Yamini Surana and its COO, Mr. A.K Gupta. Invent Arc Pvt. Ltd. had acquired all the liabilities owed by the Corporate Debtor to RBI licensed NBFC's under the assignment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eous Application with the Ld. Adjudicating Authority intimating the takeover of some of the loans of Respondent No.2, Corporate Debtor. On 18.12.2019, the COC met for the Seventh time, but Mr. Atul Kumar Gupta was absent from the same. The COC inter alia discussed the failure of Appellant to provide requisite documents relating to statutory compliances, the appointment of values and forensic Auditor, and the Resolution Plan submitted by Mr. Aul Kumar Gupta. It was resolved to allow the Resolution Plan after affording revision of Eligibility Criteria. The Evaluation Matrix and the Request for Resolution Plan ( RFRP ) was circulated and ratified by the COC. The COC deferred the discussion of proposed Application against Appellant under Section 19(2) of the Code. The Miscellaneous Application No. 2434/2019 filed by IRP herein seeking extension of CIRP before the Ld. Adjudicating Authority and the same was dismissed on 02.01.2020 stating that Under no circumstances, the extension of CIRP period be granted twice. Earlier the Applicant has come forward for extension of CIRP Period and the same was granted for 90 days. This Application is filed seeking extension of further 90 days which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OC resolved to proceed with liquidation in case the Resolution Plan was not submitted in time and proposed that Mrs. Vaishali Arun Patrikar oversee the proposed liquidation of Respondent No. 2, Corporate Debtor. Alleging that the Resolution Plan put forward by Prospective Resolution Applicant dated 11.02.2020 did not comply with Section 30 of the Code, read with Regulations 36B, 37 ,38 and 39 of the IBBI (Insolvency Resolution Process for Corporate Persons), RP representing Respondent No. 2 herein in a mail dated 13.2.2020 informed Prospective Resolution Applicant that it was not acceptable. A revised plan dated 18.02.2021 submitted by Prospective Resolution Applicant was rejected by RP representing Respondent No. 2 on the same grounds mentioned herein above vide a mail dated 27.02.2020, Thereafter, in its Order dated 27.2.2020, the Ld. Adjudicating Authority allowed MA 58I of 2020 seeking exclusion of 72 days on account of replacement of RP filed by Resolution Professional representing Corporate Debtor herein and directed that the CIRP period will end on 03.04.2020. Disposing MA 3693 of 2019, the Ld. Adjudicating Authority directed Prospective Resolution Applicant to file a Resolu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son and not through emails. Alleging inter alia inconsistencies in the payment term, the Chairman sought further details and additional compliances. Mr. Atul Kumar Gupta provided clarifications sought for. It was then decided that a fine print of the Resolution Plan shall be submitted by Prospective Resolution Applicant by 20.03.2020 and the same had to be submitted physically despite the onset of Covid-l9 and the accompanying restrictions. The proposed meeting on 21.03.2021 was postponed on account of Covid Restrictions. Thereafter, the meeting i.e., the extended Ninth COC meeting could be held on 30.09.2020. In a letter to the CEO of NAMCO dated 22.04.2020, Prospective Resolution Applicant Mr. Atul Gupta expressed satisfaction with the proposed plan that had been agreed to by all members of the CoC in principle. He appreciated the assistance and cooperation rendered by Appellant Mr. Suniel Bharwani and inter alia pointed out that the plan submitted by M/s Invent ARC was the onlv feasible one submitted so far. The letter prayed for proceeding with the matter in a logical and practical manner and avoiding trivial squabbles that would derail the process resulting in all round hardsh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CO that Appellant, Mr. Bharwani was designated as a wilful defaulter despite infusion by him of substantial equity and noteworthy achievements of Corporate Debtor when it was helmed and managed by Appellant herein. The RA stressed that the actions of the bank in branding Appellant as a wilful defaulter effectively barred him from coinvesting in the Resolution Plan and acted as a barrier for other financial institutions to step in and take over the entire amount owed to NAMCO. Needless to say, this was in contravention to Section 240(A) (1) of the Code that specifically provided certain privileges to MSME entities. However, the legal advisor chose to overrule this portion of the plan stating that there could be no preconditions for the implementation of the plan. xiv) The Legal Advisor assented to setting up of a 3 member Implementation and Monitoring Committee in accordance with Regulation 32(2)(c) of CIRP regulations to monitor and ensure compliance of the proposed plan until complete execution of the proposed plan i.e. 36 months as per the Resolution Plan. However, he expressed scepticism on the feasibility and viability of Resolution Applicant's plans to monetize land ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he payment of outstanding dues in full to NAMCO. On 22.09.2020, the Prospective Resolution Applicant was constrained to voice out several procedural discrepancies, acts smacking of malafide intentions and prejudicial actions indulged in by the RP and the legal counsel that belittled the entire CIRP in a detailed mail addressed to Mr. Sane, Chairman of the CoC. The Resolution Applicant had in fact submitted the proposed Resolution Plan within the specified timeline in the March 2020 and provided clarifications to queries raised by the RP vide a mail dated 04.08.2020. However, the Bank responded through its legal advisor only on 18.09.2020, just one day prior to a meeting with Appellant herein that took place at the NAMCO headquarters at Nashik. The RA was asked to furnish his response prior to a proposed meeting of the CoC scheduled to be held on 23.09.2020 despite knowing that the time provided for preparing the response was highly inadequate and that the RA was crippled due to lack of support staff on account of pandemic related work restrictions. Despite the challenges, Mr. Atul Kumar Gupta pointed out that he had already in compliance with 33 of the 55 queries raised by the Reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided clarifications on issues such as the sale of land, tax liabilities and expected timelines for obtaining permissions from statutory and regulatory authorities. However, he reiterated that the continuation of Mr. Suniel Bharwani, Appellant herein, as consultant was non-negotiable, and he indicated that the matter would be put forth to the Ld. Adjudicating Authority. He requested NAMCO to issue a letter declassifying Mr. Bharwani as a wilful defaulter as his classification as such was solely on account of errors by predecessors of the current management personnel helming NAMCO. He pointed out that this would not only speed up the turnround of the MSME but also allow equity participation of Appellant and persons connected with him. A copy of the email dated L10.2020 is annexed herewith in the list of additional documents accompanying the present petition and being filed with the leave of this Hon'ble Tribunal. xvii) In a letter dated 08.10.2020, Prospective Resolution Applicant, Mr. Atul Kumar Gupta informed the Chairman, CoC that submissions pertaining to clarifications of the revised Resolution Plan could not be proceeded with on account of various reasons including a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 months of the approval and the remaining Rs. 21 Crore in a space of 36 months as set out in the Financial Section of the Resolution Plan. The plan detailed the various compliances in consonance with Section 30 of the I B Code, 2016 and Regulation 37 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Proposal for Corporate Persons). It also contained the future roadmap for restructuring Respondent No. 2 Corporate Debtor. ARC Invent Pvt Ltd. also proposed infusion of fresh funds to rejuvenate ailing Corporate Debtor. The extended Tenth Meeting took place on 16.012021. The roadmap and intricacies of the Plan were dealt with in detail by Resolution Applicant. xviii) Mr. Umesh Biyani, consultant confirmed that most of the infirmities called out in the earlier meetings had been dealt with by Resolution Applicant. Subsequent to detailed observations made by Mr. Biyani, he submitted that Prospective Resolution Applicant had the capacity to implement the Resolution Plan. He also stated that the Resolution Plan is not entirely non- compliant, and it can be accepted by the CoC as many of the important observations have been taken care of in the plan. However, R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was discharged from the Sir. H. N Reliance Foundation Hospital and Research Centre only on 06.01.2021. He was thereafter advised rest for another 16 weeks to allow for recovery and rehabilitation. On 05.08.2021, the Ld. Adjudicating Authority allowed IA. No. 244 of 2021 stating that it found no reason to take a contrary view in terms of Section 33 (1) (a) of the Act and that it had no option than to pass an order for liquidation of the Company in the manner laid down in Chapter III of the Code. The Ld. Adjudicating Authority inter alia directed that Ms. Vaishali Arun Patrikar act as Liquidator of Corporate Debtor and lifted the Moratorium declared under Section 14 of the I B Code, 2016. Hence this Appeal. 3. The Ld. Counsel for the Appellant during the course of argument and grounds mentioned in his memo of appeal submitted that the Adjudicating Authority has seriously erred in granting assent to the Liquidation Process despite serious flaws in the CIRP and also despite holding a Udyog Aadhaar Memorandum has been excluded from the CIRP of Corporate Debtor. A bare perusal of the minutes of the meetings of the Committee of Creditors would have revealed a recurring pattern to sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember of the CoC and the Resolution Professional always engaged in threats to move an Application under Section l9(2) of the I B code despite Appellant extending cooperation with the CoC and Resolution Professional in the face of a debilitating illness that significantly incapacitated Appellant. 6. It is further submitted that the Impugned Order stands in stark contrast to the subsequent stance of the Ld. Adjudicating Authority in the matter of Brijendra Kumar Mishra, RP of Lakeland Chemicals (India) Ltd and that the prevailing laws and notifications relied on by the Adjudication Authority were in place at the time of pronouncement of the Impugned Order and remain unchanged. The CIRP was meant to facilitate the equitable reliefs to all interested parties and not enacted to fritter away assets and opportunities of stressed entities under the guise of liquidation. The 'fair value' of Appellant and Corporate Debtors were not arrived at by the CoC. The significant steps of CIRP of Corporate Debtors were beset by various maladies including conflict of interest. The Ld. Adjudicating Authority did not peruse well documented and voluminous evidence put forth by the Resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Professional as there was lack of cooperation of behalf of Respondent No. 2. Further, the Respondent No. 2 would like to bring to notice the opportunities given to the Resolution Applicant for the submission of Resolution Plan. 19.11.2019 Expression of Interest was published by Respondent No. 2. 02.12.2019 Email was communicated by Respondent No. 2 to the Prospective Resolution Applicant and had stated that 03.12.2019 was the last date to submit the EOI and still no EOI was received. Further, it was also intimated by the Respondent No. 2 that 05.12.2019 was the last date of CIRP proceedings and thereafter the Corporate Debtor would go into liquidation. The Respondent No. 2 received an email by the Prospective Resolution Applicant regarding intention to share the EOI in night. 03.12.2019 Respondent No. 2 sent an email to Prospective Resolution Applicant to share the EOI by the end of the day which was also received. Further after due verification it was found by Respondent No. 2 that Financial of West End Investments and Finance Consultancy Private Limited instead of ARC Pvt. Ltd. were submitted and did not meet the eligibility criteria as set out by the committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or which had been affected due to order from Income Tax Department of Rs. 30 Crore for the Financial Year 2016-2017 so extension of time is required to calibrate the economic viability and appropriate means required to prepare resolution plan. Thus, yet another opportunity was provided to submit the resolution plan till 24.01.2020. 23.01.2020 The Respondent No. 2 filed Miscellaneous Application before the Hon'ble National Company Law Tribunal. Mumbai Bench for the purpose of seeking exclusion of time in the CIRP period of the Corporate Debtor for the total time period of 72 days. So, as to give opportunity to the Resolution Applicant to submit resolution plan for revival of the Corporate Debtor. 28.01.2020 The Respondent No. 2 received another letter from Mr. Atul Kumar Gupta, CEO of Invent ARC and Prospective Resolution Applicant requesting more time to submit the resolution plan as it was not possible for him to comply due to absence of communication, he could not schedule the visit for deliberation of resolution plan and requested for revised date so as to submit the resolution plan. 30.01.2020 The Respondent No. 2 responded to the letter received from Prospec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent No. 2 and final observations were sent on 14.04.2020. 10. It is further submitted that on 17.04.2020 the Respondent No. 2 sent an email to members of Committee of Creditors to hold meeting via video conferencing and reminder email on 06.05.2020. On 13.05.2020, an email was received by the Resolution Applicant regarding inability to attend the meeting due to Covid-19 pandemic and thus meeting was cancelled. Due to every time request of the Resolution Applicant the meetings were tend to be cancelled. Further Respondent No. 2 on 05.09.2020 sent an email to member of committee of creditors informing that there are no updates on the resolution plan. Further on 16.09.2020 after telephonic discussion, a meeting was proposed to be held on 23.09.2020 and again the Respondent No. 2 received an email from the Resolution Applicant to postpone the meeting by indicating health issues. Later, on 27.09.2020 a meeting was scheduled on 30.09.2020. 11. It is further submitted that on 29.09.2020 one day prior to the meeting the Resolution Applicant requested for certain clarification merely after the period of 10 months after submission of expression of Interest. The details reque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent No. 3 to discuss the proposal of the Resolution Applicant with the chairperson of the Respondent No. 3 and same was not accepted by the chairman of the Respondent No. 3. Thus, the Resolution Plan was rejected and thus it was requested to the Respondent No.2 by the Respondent No. 3 to proceed with liquidation of the Corporate Debtor as per Section 33 of Insolvency and Bankruptcy Code, 2016.From the above-mentioned facts, from nowhere it seems that Respondent No. 2 acted in malafide manner and hampered the CIRP of the Corporate Debtor. Subsequently, IA. No. 244 of 2021 was moved praying for initiation of liquidation process of the corporate debtor before the Tribunal, as the Resolution Plan submitted by the Resolution Applicant was rejected by the Committee of Creditor of the Corporate Debtor and on 5th August 2021, the Ld. Adjudicating Authority IA. No. 244 of 2021 stating that it found no reason to take a contrary view in terms of Section 33 (1) (a) of the Act and that it had no option than to pass an order for liquidation of the company in the manner laid down in Chapter III of the Code. The Ld. Adjudicating Authority inter alia directed that Ms. Vaishali Arun Patrikar act as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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