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TMI Blog2023 (5) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... shrutyi Sahni, Adv. JUDGMENT DINESH MAHESHWARI, J. Preliminary and brief outline .............................................................................. 2 Particulars of the proceedings and the parties .................................................. 7 The relevant factual and background aspects ................................................ 13 Initiation of CIRP ................................................................................................... 14 CoC Meetings and ancillary proceedings .............................................................. 16 Resolution plan approved by the Adjudicating Authority (NCLT) .................... 26 Disapproval of the Appellate Tribunal (NCLAT) .............................................. 40 Proceedings in this Court ................................................................................ 59 The events during pendency of these appeals...................................................... 62 Rival submissions ............................................................................................ 65 Points for determination ..................................................................... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stage of publication of Form 'G', and invite the expression of interest 'EOI', for short afresh as per the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 Hereinafter also referred to as 'the CIRP Regulations'. 2. In view of multiple issues raised in this batch of matters, where several steps have been taken at different stages and different parties are having different stands and interests, we may draw a brief outline with salient features of the factual and background aspects, in order to indicate the contours of the forthcoming discussion. 2.1. CIRP against the corporate debtor got initiated on 05.05.2020, with the NCLT admitting an application moved under Section 7 of the Code by one of its financial creditors, Tourism Finance Corporation of India Limited 'TFCI', for short. In the course of proceedings, after various rounds of CoC meetings, ultimately, the resolution plan in question was approved with 87.39 per cent. majority of voting share on 22.01.2021. However, the CoC recommended certain changes to be made in the resolution plan. After incorporating the changes as suggested by CoC, an application was move ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ummarised thus: First, that Regulation 35 of the CIRP Regulations does not mandate sharing of the valuation report to the CoC and instead mandates only sharing of liquidation value. Second, that the non-core assets were not significant in value and the valuation was communicated to and agreed upon by the members of the CoC on 15.12.2020. Third, that non-publication of Form G on the designated website was a mere procedural irregularity which did not prejudice interests of any of the parties. Fourth, that the commercial wisdom of CoC was not justiciable and once the CoC had approved the resolution plan by the requisite majority, there was very limited scope of interference by the Courts. Fifth, that the Appellate Tribunal has overstepped its jurisdiction by declaring the resolution applicant ineligible under Section 88 of the Trusts Act and disqualified under Section 164(2)(b) of the Companies Act. Sixth, that the claims of related party creditors cannot be treated at par with the unrelated creditors. And seventh, that Section 12-A IBC application of the promoter was merely a dilatory tactic and that he was not entitled to file any such application. These and other grounds raised in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooking to the overall circumstances, while keeping the judgment reserved, we requested the Adjudicating Authority to await the decision of this Court in these matters. Particulars of the proceedings and the parties 5. In view of the issues arising for determination in these appeals, with several parties carrying different roles, interests, and positions, worthwhile it would be to narrate at the outset, in brief, the relevant particulars of the proceedings leading to these appeals as also the principal parties involved herein. 6. As noticed, the CIRP against the corporate debtor got initiated on 05.05.2020, with the NCLT admitting an application moved under Section 7 of the Code by one of its financial creditors, TFCI. This application had been registered as IBA No. 1459 of 2019. The application for approval of the resolution plan, moved before NCLT was registered as IA No. 150/CHE/2021 in the said IBA No. 1459 of 2019. This application and several other correlated applications were considered together and were dealt with in the common order dated 15.07.2021 whereby, the National Company Law Tribunal, Chennai rejected the objections and approved the resolution plan approved by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before NCLAT) by way of Civil Appeal Nos. 1756 of 2022 and 1807 of 2022 respectively. The resolution professional has further questioned the order passed in relation to the claim of the related party (in Appeal No. 176 of 2021 before NCLAT) by way of Civil Appeal No. 1757 of 2022. Lastly, the resolution professional has questioned the order passed in relation to the claim of the NRI shareholder (in Appeal No. 218 of 2021 before NCLAT) by way of Civil Appeal No. 1759 of 2022. 7. Now, we may take note of the relevant particulars of the principal parties involved in this litigation. The parties could broadly be divided into three categories with reference to their respective stands vis-à-vis the order of the Appellate Tribunal, the CIRP, and the resolution plan in question. 7.1 The first category is of the parties who are aggrieved of the order passed by the Appellate Tribunal on several counts and are opposing the rejection of resolution plan and remand of the matter to CoC. They are: 7.1.1. Mr. M.K. Rajagopalan He is the resolution applicant and had submitted the resolution plan in question, which was approved by a majority of 87.39 per cent. of the voting share of CoC bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corporate debtor with nearly 26.41% voting share in CoC, though had earlier voted in favour of the resolution plan in question but now, looking to the order of NCLAT relating to eligibility deficiency of the successful resolution applicant as also the deficiency in process, is essentially supporting the rejection of resolution plan in question and remand of matter to CoC for consideration afresh. 8.2. Edelweiss Asset Reconstruction Company Limited along with IDBI Debentures Trusteeship Limited and Allium Finance Private Limited 'Edelweiss & associates', for short and collectively These financial creditors, with about 21.13% voting share in CoC, too had voted in favour of the resolution plan in question. They have raised questions on the order passed by NCLAT on various grounds. This apart, they have underscored certain other areas of concern including the amount deposited by the resolution applicant, and have also suggested that CIRP must be allowed to go on while leaving the promoter a right to better the resolution plan by way of a Swiss Challenge Process only after depositing the matching amount in an escrow account prior to voting on his settlement offer. 8.3. Tourism Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion process. Accordingly, the NCLT, by its order dated 05.05.2020, admitted this application and appointed one Mr. Mukesh Kumar Gupta as interim resolution professional 'IRP' for short with other necessary directions in the following terms: - "12. Heard the Counsel for both the parties and perused the documents placed on record. It Is a fact borne on record that the Corporate Debtor is unable to repay the dues to the Financial Creditor and as such on the garb of OTS settlement the Corporate Debtor wanted to gain time to settle of the dues to the Financial Creditor. Further, a perusal of the record of proceedings dated 04.02.2020, also shows that the Corporate Debtor was putting in efforts to settle of the dues of the Financial Creditor and upon such representation being made, the Corporate Debtor was granted time to settle the matter and the matter was finally posted to 02.03.2020 for reporting settlement or to proceed with the matter. Thus, when the matter was taken up for enquiry on 02.03.2020, it has been brought to the notice of this Tribunal by the Counsel for the Financial Creditor that the Corporate Debtor has not paid the dues of the Financial Creditor and also the Learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e this Bench. The powers of the Board of Directors of the Corporate Debtor shall stand superseded as a consequence of the initiation of the CIR Process in relation to the Corporate Debtor in terms of the provisions of I&B Code, 2016. *** *** *** 19. Based on the above terms, the Petition stands admitted in terms of Section 7 of the Code and the Moratorium shall come into effect as of this date. A copy of the order shall be communicated to the Petitioner as well as to the Respondent above named by the Registry. In addition, a copy of the order shall also be forwarded to IBBI for its records. Further, the IRP above named be also furnished with copy of this order forthwith by the Registry, who will also communicate the initiation of the CIRP in relation to the Corporate Debtor to the Registrar of Companies concerned." CoC Meetings and ancillary proceedings 12. CIRP in relation to the corporate debtor having thus been initiated, various steps were taken in terms of the requirements of the Code and the CIRP Regulations, including the meetings of CoC which ultimately led to the approval of the resolution plan in question. Some of those steps carry their own relevance in these appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution plans were received, from Mr. Madhav Dhir, Mr. M.K. Rajagopalan (the resolution applicant - appellant herein) and Kotak Special Solutions. 12.5. In the fourth CoC meeting held on 12.10.2020, IRP apprised the members about the valuers visiting the properties of the corporate debtor and the valuation being in process. 12.6. On 27.10.2020, the appellant Mr. M.K. Rajagopalan submitted his resolution plan alongwith a demand draft in the sum of Rs. 2 crore. On 02.11.2020, the Tribunal approved the appointment of Mr. Radhakrishnan Dharmarajan as the resolution professional. 12.7. In the fifth CoC meeting held on 12.11.2020, in the first item on the agenda, the members took note of the appointment of Mr. Radhakrishnan Dharmarajan as the resolution professional. Thereafter, on the second item, the CoC approved that the resolution professional shall file an application before NCLT to seek extension of time period from 05.05.2020 to 31.10.2020 under Section 12(2) of the Code due to Covid-19 and lockdown. In the third agenda item as regards updates from RP and to decide on the resolution plan deadline extensions/possible reissuance of Form G, various views were expressed by various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be reproduced as under: - "The RP apprised the CoC members that based on the resolution passed in 5th CoC meeting an exclusion application along with an urgent application was filed before the NCLT Chennai on 19.11.2020. The application was listed for hearing 15.12.2020 and the Order has been reserved. The RP further apprised that he has provided the CoC members with the fair value and liquidation value to all those who have submitted the confidential undertaking. RP further apprised, that due to significant difference in the value of land and building submitted by the valuers appointed by IRP, the RP has to appoint third valuer in accordance with provisions of Regulation 35 of CIRP Regulations 2016. After it was noted that valuation of non-core assets was not done, the third valuer appointed by RP has submitted the value of non-core assets and the same has been shared with CoC members who have submitted their undertaking. The RP emphasized that their value is not very significant, and it will not affect the liquidation value much. However, second valuation for the non-core assets will be needed in order to reach a final value. RP apprised the CoC members that the valuers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Learned Counsel for the Applicant submitted that he sought to exclude the period from 05.05.2020 till 31.10.2020, a total of 179 days from the period of CIRP. Thus, as to the facts of the present case, in view of Regulation 40C of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 the period from 05.05.2020 till 31.10.2020 is excluded from the period of CIRP in terms of Section 12(2) of IBC, 2016. The Applicant shall make every endeavour to complete the CIRP in relation to the Corporate Debtor within the timelines as prescribed under the Code. Accordingly, the application stands allowed." 12.9.1. Two equity shareholders of the corporate debtor challenged the aforesaid order of the Tribunal before the Appellate Tribunal in Company Appeal (AT)(CH)(Ins.) Nos. 19 of 2021 and 20 of 2021 but, the appeals were dismissed on 05.05.2021 with the following observations There had been other observations occurring in this judgment and order dated 05.05.2021, which have been relied upon by NCLT while approving the resolution plan in question and have formed a part of contentions in these appeals, as shall be noticed later : - "33. .....In the instant case, eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the resolution plan submitted by the resolution applicant - Mr. M.K. Rajagopalan - was put to vote in the ninth CoC meeting held on 22.01.2021. Though, the said plan was approved with 87.39% of the total voting share of financial creditors present and voting in the meeting, the RP was required to send the resolution plan back to the resolution applicant as there was dissent by some of the financial creditors and in terms of Section 30 (2) of the Code, the amount to be paid to dissenting financial creditors shall not be less than the amount paid to such creditors in accordance with Section 53 in the event of liquidation of the corporate debtor. Therefore, resolution applicant was asked to further revise the resolution plan. The relevant resolution on Agenda Item No. A.1. in the ninth CoC meeting, having its relevance to the present matter is reproduced as under: - "Agenda Item No. A.1 - To discuss and put to vote the Resolution Plan submitted by Mr. M.K. Rajagopalan. The Resolution Professional apprised the CoC members that as decided in the last CoC meeting the revised Resolution Plan submitted by Mr. M.K. Rajagopalan will be put to physical voting for approval of the CoC membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Form H by the RP, the proceedings before the Adjudicating Authority are to be noticed but, there remains one significant feature of this case that in the ninth meeting dated 22.01.2021, even while approving the resolution plan, the CoC asked the resolution applicant to further revise the resolution plan, particularly in relation to the dissenting financial creditors. The resolution applicant indeed revised the resolution plan but, such a revised plan was not placed in CoC before presenting the matter to the Adjudicating Authority for approval. This aspect has formed a part of contentions in these appeals and, in this regard, it has been one of the contentions on the part of the resolution applicant that there had not been any material change in the plan and in any case, in the later meeting of CoC, there had been a deemed post facto approval of the revised resolution plan incorporating the changes earlier suggested by CoC. In view of the issues involved, apt it would be that before adverting to the decision of the Adjudicating Authority, we refer to the tenth meeting of CoC, which was held on 15.06.2021, and where the RP's updates on the latest developments were taken note of by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e voting share, the application bearing IA No. 150 of 2021 was filed by the resolution professional under Section 30(6) of IBC before the Adjudicating Authority (NCLT) for approval of the resolution plan. 14.1. During the proceedings before the Adjudicating Authority, several objections were raised by the related party, the promoter, an unsuccessful potential resolution applicant and by some of the unsecured financial creditors. 14.2. One of the objectors to the resolution plan was the suspended director/promoter of the resolution plan - Dr. Periasamy Palani Gounder - who filed MA No.13 of 2021 alleging procedural irregularities in the conduct of CIRP; non-compliance of Regulation 35(1)(a) of the CIRP Regulations, in carrying out valuation of non-core assets of corporate debtor alongwith several other procedural errors; and for consideration of his proposal under Section 12-A of the Code with the option to modify the same on the request of the members of CoC. 14.3. Two applications were filed by Dharani Finance Limited seeking that resolution professional be directed to admit its claim of Rs.1,94,14,024, as operational creditor in application bearing MA No.18 of 2021; and of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate Debtor was arrived at by the Resolution Professional. 81. Thus, it is clear that the RP has arrived at a Fair Value and the Liquidation Value based on the average of all the three valuers and the same has been done in accordance with Regulation 35 of the IBBI (IRPCP) Regulations 2016. Further, the valuation certificate dated September 2019 relied on by the promoter / suspended Director of the Corporate Debtor would be of no relevance as the same was not done in accordance with the Regulations framed under the IBC, 2016. Also, the RP who is in charge of the affairs of the Company Debtor once the CIRP has been triggered in relation to the Corporate Debtor, he has to act as per the provisions of the Regulations and cannot act according to the whims and fancies of the promoters I erstwhile directors of the Corporate Debtor. The valuation certificate dated September 2019 relied on by the promoter I suspended Director of the Corporate Debtor was done during pre-Covid period and the same cannot be a yardstick for the valuers who have been appointed pursuant to the Regulations framed under the provisions of IBC, 2016. Also, the stance of the Learned Senior Counsel for the promoter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter following the procedure prescribed under the Code and the Rules and Regulations made thereunder. 84. Hence for reasoning stated supra, this Adjudicating Authority finds that there was no error committed by the IRP / RP in so far as appointing the registered valuers in relation to the Corporate Debtor, nor there was any error on the valuation being submitted by those Registered valuers and as a consequence thereof, the objections as raised by all the objectors in relation to the valuation of the Corporate Debtor are overruled. Accordingly, MA/13/CHE/2021 stands dismissed." 15.2. As regards the question of non-consideration of the proposal given under Section 12-A IBC by the promoter, the Adjudicating Authority referred to the proposition made by another erstwhile promoter of the corporate debtor which was considered by CoC in its ninth meeting and it was found that even the original applicant of CIRP, i.e., TFIC was kept in dark about such a proposal. It was also noticed that even the proposal with the term sheet from Deutsche Bank came with a disclaimer. The Adjudicating Authority formed the opinion that such a proposal had only been of dilatory tactics and was mooted only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to allow for the agenda items to go through as the majority of the CoC in favour of that and no further discussions can be made on the letter sent to the CoC." 86. A perusal of the aforesaid minutes would show that the promoter of the Corporate Debtor has proposed for a 12A settlement only at the 9th CoC meeting, when the Resolution Plan of the Resolution Applicant was about to be put to vote. Further, it is also seen that the Petitioning Creditor viz. Toursim Finance Corporation of India (TFCI) was also kept in dark about the 12A proposal by the promoters and also flagged an issue stating that the letter has been addressed to the CoC and not to them. However, it is seen that the said agenda of proposal to be made under Section 12A was not considered by the CoC and that they proceeded to vote for the Resolution Plan. 87. It is also seen that the Term Sheet relied on by the Learned Senior Counsel for the promoter in order to substantiate that they have the source to settle the entire dues of the CoC, it is seen that the said Term Sheet dated 22.01.2021 issued by Deutsche Bank would start of with a disclaimer as follows; "Please note that the terms set out in this Term Sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or by the Liquidator and the model timeline prescribed under the attendant Regulations states that the same should be filed in T+75 days. If the said model timelines is construed as mandatory then the avoidance transactions which entitle the Liquidator to file an Application, would be rendered as nugatory. 90. It is significant to note here that, a statutory provision regulating a matter of practice or procedure will generally be read as directory and not mandatory. Thus, even though the objectors to the Resolution Plan have alleged many procedural irregularities in relation to the conduct of the proceedings in relation to the CoC; however those objectors have miserably failed to establish as to what prejudice has been caused to them in respect of the same. Further, a person who has been inducted as a member of the CoC in its 6th meeting cannot be allowed to question the actions taken by the CoC in the past meetings. However, in relation to the objections raised by the Applicants in IA/181/CHE/2021 and IA/183/CHE/2021, this Tribunal is unable to comprehend their objections in relation to the plan, especially when they are getting 100% of their claim amount to be paid by the Reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umar Gupta and Ors.: (2020) 8 SCC 531 and rejected those contentions while observing that in the scheme of the Code, there was no provision which mandatorily requires payment to the related party in parity with the unrelated party. In this regard, the Adjudicating Authority, inter alia, observed as under: - "(IV) DISCRIMINATION IN THE RESOLUTION PLAN:- 94. Another rival contention put forth by the Learned Senior Counsel for the objectors was that there was is a discrimination in respect of the distribution of amount to the Financial Creditor - Related Party compared with the Financial Creditor - unrelated Party. It was contended that no amount is paid by the Resolution Applicant, to the Related Party of the Corporate Debtor, be it Financial Creditor or Operational Creditor. In this regard, it is to be noted here that the way in which the amount has to be distributed and paid, purely falls within the domain of the Resolution Applicant and further the CoC in its commercial wisdom has accepted the same. Further, there is no provision in the IBC, 2016 which mandates that the Related party should be paid in parity with the unrelated party.... 95. It must be noted here that so long ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016 The Affidavit of the Resolution Applicant (RA) is found in "Format 3B" in Volume II of the Resolution Plan wherein Mr. M. K. Rajagopalan, the Resolution Applicant has stated that he is eligible under Section 29A of IBC, 2016 to submit a Resolution Plan. Further, the Resolution Professional in Form - H has certified that the said Affidavit is in order. S. 30(2)(a) - Payment of Insolvency and Resolution cost in the manner specified by the Board Clause 5.3.1 of the Resolution Plan provides for the payment of CIRP costs in priority. The CIRP Cost is arrived at Rs.2.90 Crore and would be paid within 45 days from the date of approval of the Resolution Plan. S. 30(2)(b) - Payment of debts of Operational Creditors in such manner as may be specified by the Board, which shall not be less that the amount to be paid to the Operational Creditors in the event of a liquidation of the Corporate Debtor under Sec. 53 Clause 5.3.5 and 5.3.6 of the Resolution Plan states that all the Operational Creditors (Unrelated Party) are being paid 100% of their admitted claim within 45 days from the date of approval of the Resolution Plan. Reg.38(1A)- Resolution Plan shall include a statement as to ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent Dissent No. Creditor (%) (%) 1. State Bank of India 26.41 - 2. IDBI Debentures Trustees hip Ltd. 19.64 - 3. Indian Bank 17.80 - 4. Bank of India 13.41 - 5. TFCI 5.62 - 6. IDBI 3.03 - 7. Edelweiss ARC 1.06 - 8. Allium Finance (P) Ltd. 0.42 - 9. Prabhat Resources Ltd. - 4.28 10. Sun Bright Industries - 4.25 11. M/s. RSM Industries - 1.43 12. Aryav Exports (P) Ltd. - 1.25 13. Modern Constructions - 0.86 14. URC Builders - 0.39 15. M. Chandrasekaran - 0.16 Total 87.39 12.62 17. The Adjudicating Authority, thereafter, referred to the decisions of this Court in the cases of Essar Steel (supra); K. Sashidhar v. Indian Overseas Bank: (2019) 12 SCC 150; Jaypee Kensington Boulevard Apartments Welfare Association and Ors. v. NBCC (India) Limited and Ors.: (2022) 1 SCC 401 and Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh and Ors.: (2020) 11 SCC 467 as regards the principles that the Adjudicating Authority would not be sitting in appeal over the commercial wisdom of CoC and also observed that there was no requirement that the bid of the resolution applicant has to match the liquidation value of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were preferred before the Appellate Tribunal, respectively by the promoter Dr. Periasamy Palani Gounder, the related party Dharani Finance Limited and the NRI shareholder Dr. V. Janakiraman, the details whereof have been noticed hereinbefore in the particulars of proceedings and parties. 19. After considering the said appeals together, the Appellate Tribunal (NCLAT) proceeded to allow the same by its impugned judgment and order dated 17.02.2022. The Appellate Tribunal reversed the order of the Adjudicating Authority and while rejecting the resolution plan in question, remanded the matter to the CoC with directions to the resolution professional, inter alia, to proceed from the stage of publication of Form 'G', and to invite the EOI afresh as per the CIRP Regulations. Having regard to the questions raised in these appeals, it shall be apposite to take note of the observations, findings, and conclusions of the Appellate Authority as relevant for the present matter in necessary details It may be indicated that the emphasis in bold/italics/underlining in the extractions from the judgment of the Appellate Tribunal are as in the copy thereof placed on record before us. 19.1. As regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." 81. It is further evident from the minutes of the COC meetings that the two valuers appointed by the IRP differs significantly and therefore warranted the appointment of a third valuer. Furthermore, the RP has also admitted in the 6th COC meeting that only the 'Core Assets' of the Corporate Debtor were valued, and the 'Non-Core Assets' has not been appropriately valued. Therefore, the 3rd Valuer was also supposed to value the Non-Core Assets. Still, the RP, as evident from the minutes of the 6th meeting of the Committee of Creditors, made it clear that another valuer needs to be appointed to value the Company's non-core assets, which was not done. Therefore, the Valuation of the non-core assets is not in compliance with Regulation 35 (1) (a) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. 82. It is pertinent to point out that due to lockdown, quarantine and travel restrictions, the appointed valuers could not conduct the Valuation and their agents at or near Chennai who are not registered valuers and lacked the expertise to conduct the exercise on their behalf. Therefore, further physical verificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iolation of the corporate debt assets." 19.2. The Appellate Tribunal also held that compliance with statutory requirements regulating a matter of practice and procedure were mandatory in character and the Tribunal being a creature of a statute cannot dilute the statutory compliances in the following words: - "88. However, the learned Adjudicating Authority/NCLT's observation that 'A statutory provision regulating a matter of practice or procedure will generally be read as a directory and not mandatory is erroneous. Compliance with statutory requirements in regulating a matter of practice and procedure are mandatory.' The Tribunal is a creature of statute, and by interpretation, it cannot dilute the statutory compliances." 19.3. After noticing non-compliance of Regulation 36-A(2)(iii) of the CIRP Regulations that mandates publication of Form-G at the earliest and not later than 75th day from the insolvency commencement date, the Appellate Tribunal held that the publication of Form G on the designated website was essential and failure to advertise as mandated had a direct impact on the maximization of asset value, more so when the entire CIRP was conducted during lockdown at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproval of the Resolution Plan shall lie under Section 61 (3) of the IBC on the ground, namely, there has been a material irregularity in exercise of the powers by Resolution Professional during the Corporate Insolvency Resolution period. 99. Further, it is necessary to mention that Regulation 36 A of CIRP Regulations mandates publication of Form-G at the earliest, not later than the 75th day from the insolvency commencement date, from interested and eligible prospective resolution applicants to submit Resolution Plans. 100. Non-compliance with the above regulatory provision is admitted. It is also important to point out that this entire CIRP was conducted during lockdown when the world faced Covid19 Pandemic. At that time, most people avoided reading the newspaper under the apprehension of Covid infection. So the publication of 'Form-G' for inviting Expression of Interest was essential. It is also important to point out that the Government of India also brought some amendments in the Code considering the impact of the Pandemic. Relevant Regulation about inviting 'EOI' is given below for ready reference;" 19.4. Further, the Appellate Tribunal declared the resolution applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... say that the 2nd Respondent has not gained any advantage from the charitable Trust. The case on hand squarely falls within the ambit of Section 88 of the Indian Trusts Act, and as such, the Resolution Plan is illegal. Since the said 'Sri Balaji Vidyapeeth' has already been declared as ineligible, the 2nd Respondent cannot act as its alter ego in implementing the Resolution Plan and attain any financial advantage or gain is barred by Section 88 of the Indian Trusts Act. The said provision is extracted hereunder for ready reference. "Section 88. Advantage gained by fiduciary. Where a trustee, executor, partner, agent, director of a company, legal adviser, or other person bound in a fiduciary character to protect the interests of another person, by availing himself of his character, gains for himself any pecuniary advantage, or where any person so bound enters into any dealings under circumstances in which his own interests are, or may be, adverse to those of such other person and thereby gains for himself a pecuniary advantage, he must hold for the benefit of such other person the advantage so gained." *** *** *** 108. It is illogical and fallacious to claim that the Reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gained any advantage from the charitable Trust. 112. The case on hand squarely falls within the ambit of Section 88 of the Indian Trusts Act, and as such, the Resolution Plan is illegal. Since the said 'Sri Balaji Vidyapeeth' has already been declared as ineligible, the 2nd Respondent cannot act as its alter ego in implementing the Resolution Plan and attain any financial advantage or gain is barred by Section 88 of the Indian Trusts Act. 19.4.3. As to the question of disqualification under Section 164(2)(b), the Appellate Tribunal observed that Mr. M.K. Rajagopalan was the director of International Aviation Academy Private Limited, and as seen from the audited financial statements of the said company, from 2010-2011 to 2017-2018, a sum of Rs. 12,03,000/- was collected by the said company as 'share application money pending allotment'. The Appellate Tribunal further noticed that the said sum was not refunded and as such, was to be treated as 'deposit' in terms of Explanation (a) to Rule 2(1)(c)(vii) of the Companies (Acceptance of Deposits) Rules, 2014 as a consequence of which, in terms of Section 164(2)(b) of the Companies Act, the resolution applicant stood disqualif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d M/s. International Aviation Academy Private Limited for the years from 2011 to 2018. 121. The 2nd Respondent has suppressed the above facts and has submitted the Resolution Plan by giving a false declaration that he does not suffer from any disqualification. Now, the 2nd Respondent has claimed that Rs.12,03,000/- was paid by himself to the said M/s. International Aviation Academy Private Limited and that him being a member/ Director of the said Company, such payment would not amount to 'deposit' as per Rule 2(1)(c)(viii) of The Companies (Acceptance of Deposits) Rules, 2014 and General Circular No. 5 dated 30.03.2015, issued by the Ministry of Corporate Affairs. 122. The 2nd Respondent has chosen not to file any document to support the above contention and has failed to discharge his burden under Section 106 of the Indian Evidence Act, 1872. 123. Suppose it is considered that the sum of Rs.12,03,000/- was paid by the 2nd Respondent to the said M/s. International Aviation Academy Private Limited, the Application of Rule 2(1)(c)(viii) of The Companies (Acceptance of Deposits) Rules, 2014 is subject to the conditions stipulated therein, which have not been complied wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t COC did not finally approve the Resolution Plan on 22 January 2021. In this meeting, COC sent back the Resolution Plan to the Resolution Applicant for further revision based on the CoC Resolution. This revised Resolution Plan dated 25 January 2021 was never sent for Approval before the COC. 131. The Resolution Professional's statement that 'the revised Resolution Plan was approved at the 9th COC meeting' is incorrect. Although the Resolution Plan was allegedly approved on 22 January 2021, it is not the Revised Resolution Plan. Instead, the Resolution Plan was further modified based on the CoC resolution Dt.22.1.2021. But the final Revised Resolution Plan, dated 25 January 2021, was never laid before the CoC for its approval. Thus the approval of the Resolution Plan by the Adjudicating Authority is not in compliance with Sec. 31(1) of the I & B Code, 2016. 132. It is pertinent to mention that after Approval of the Resolution Plan by COC entire exercise for revising the Resolution Plan for making a complaint with Section 30 (2) of the Code was left with the Resolution Applicant. Revised Resolution Plan dated 25 January 2021, without further approval of CoC, was presented by RP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Creditors, the Applicant Financial Creditor has to file the proposal as per Form FA. Thus, it is clear that the Resolution Professional cannot disregard the proposal for conducting a meeting of the CoC on such an untenable and superficial ground. 141. It appears that based on the settlement offer, the appellant sent a letter to the Financial Creditor Tourism Finance Corporation of India that an investor has expressed its willingness to infuse funds of 350 crores to settle the secured Financial Creditors in full within 30 days. This amount will be deposited in the current account. Regarding the claims made by other Unsecured Financial Creditors, Operational Creditors, implies, and other stakeholders, it will be settled after discussion with them and out of the generation of funds from the company's operation. In the circumstances, the appellant requested to accept the settlement so that the 12 A application may be submitted before the NCLT. The term sheet of the Deutsche Bank was also annexed with the settlement offer. 142. It is also necessary to mention that when the appeal was filed, then on the 1st date of admission of the Appeal, i.e. 30 July 2021, the learned counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taken by the "Committee of Creditors", we are not expressing any opinion on the same." 144. In this case, CoC never considered the settlement proposal submitted by the Appellant. Although, after getting the settlement proposal, it was incumbent upon the resolution professional to call the COC meeting to consider the settlement proposal. It is essential to mention that the settlement offer could not have been rejected without consideration by the COC." 19.7. As regards the question of discrimination between the claims of related party and unrelated party, the Appellate Tribunal, while placing reliance on the decision of this Court in Phoenix ARC (P) Ltd v. Spade Financial Services Ltd. and Ors.: (2021) 3 SCC 475 observed that 'related party' was specifically treated as a class unto itself and was restricted from any involvement in the CIRP in any capacity (under Section 21 IBC) and disqualified from being a resolution applicant (under Section 29-A IBC), the underlying object being that involvement of a related party in the CIRP is seen as giving unfair benefit to the corporate debtor and in fact, the related party is treated in the same class as the corporate debtor itself. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld pay to a related party at all as this would mean paying to the same persons who are behind the Corporate Debtor. *** *** *** 157. Thus, it is well-settled that a 'related party' can be treated as a separate class independent of an unrelated party. Such 'related party' ought to be equated with the promoters as 'equity shareholders as partners. *** *** *** 162. In the instant case of approved resolution plan discriminates between related party unsecured Financial Creditor and other unsecured Financial Creditors, likewise related party operational creditors and other operational creditors. The appellant argues that its claim ought to be treated equally to an unrelated Operational/ Financial Creditor given the equality clause enshrined under Article 14 of the Constitution of India. *** *** *** 171. It is important to mention that related parties are barred from participating in the COC to avoid sabotaging the COC. Per contra, the claim filed by the related party, based on their admitted claims, would have influenced the CIRP if they had been permitted to participate in the COC. After completion of the CIRP and after approval of the Resolution Plan, if any amount is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procedure was mandatory and observation of Adjudicating Authority that a statutory provision regulating a matter of practice or procedure would generally be regarded as directory and not mandatory was erroneous; (c) non-publication of notices of Form G, inviting EOI, was a material irregularity in exercise of the powers by resolution professional; (d) the resolution applicant was ineligible to submit the resolution plan; (e) the revised resolution plan was filed before the Adjudicating Authority without laying it before the CoC for approval violating Sections 30(2) and 30(3) of the Code and thereby, vitiating the entire CIRP and rendering the resolution plan as void ab initio; and (f) the related party financial or operational creditor could not have been discriminated by denying their right to get payments under the resolution plan only on being a related party. 19.9. The Appellate Tribunal recorded its conclusions in the following terms: - "CONCLUSION 174. The increase in RP fees with retrospective effect can not be considered as CoC's prudent decision. The possibility of an impact on the decision of RP for the submission of the Resolution Plan before the Adjudicating A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs by Resolution Professional during the Corporate Insolvency Resolution Process. 180. Since the said Trust (Prospective Resolution Applicant) 'Sri Balaji Vidyapeeth' has already been declared as ineligible, the 2nd Respondent (SRA) cannot be permitted to act as its alter ego in implementing the Resolution Plan and attain any financial advantage or gain, which is barred by Section 88 of the Indian Trusts Act. 181. The Resolution Professional made an incorrect statement that the revised Resolution Plan was approved at the 9th COC meeting. The revised Resolution Plan was not approved on 22 January 2021. After 22nd January 2021, based on the COC Resolution Dt.22.1.2021, the Resolution Plan was further modified, and the final Revised Resolution Plan dated 25 January 2021 was never laid before the CoC for approval. Thus the approval of the Resolution Plan by the Adjudicating Authority can not be treated as valid under Sec. 31(1) of the I & B Code, 2016. 182. However, the IBC does not treat Related Party as a separate class for any other purpose. Therefore, a rationale nexus must exist for any classification between the object sought to achieve the classification and sub-cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this Court. 22.1. On 07.03.2022, civil appeals bearing numbers 1682-1683 of 2022, 1759 of 2022, 1756 of 2022, 1757 of 2022, 1807 of 2022 were called for hearing by this Court. During the hearing, counsel for the resolution applicant and counsel for contesting parties were heard but the arguments of counsel for the resolution professional remained inconclusive and the matter was posted to 11.03.2022 for further hearing. It was further pointed out during the submissions that the resolution applicant has filed two other civil appeals, bearing numbers 1810 of 2022 and 1827 of 2022, respectively against Dr. V. Janakiraman and Dharani Finance Limited. The said appeals were ordered to be listed along with this batch of matters on 11.03.2022. Further, learned counsel for the resolution professional also placed before this Court the minutes of eleventh CoC meeting held on 03.03.2022 which were ordered to be filed in the registry with appropriate affidavit. Later on, RP filed the minutes of the eleventh CoC meeting as also the tenth CoC meeting and other documents with affidavit. The details of these and other subsequent meetings of CoC are set out in the next segment of this judgment. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority in its judgment dated 17.02.2022, which allowed only 15 days for the CoC to examine the pending or existing Section 12-A proposal of the promoter which was rejected by the CoC on 25.03.2022 and therefore, the only recourse after such a rejection available with CoC was to continue with the fresh CIRP and it had no legal authority to consider or vote on a new application after issuance of fresh Form G. 24.2. In the wake of the applications so moved, the matter was again taken on board by this Court on 17.11.2022 and after having heard learned counsel for the respective parties this Court requested the Adjudicating Authority to await the decision in these appeals while granting permission to learned counsel for the respective parties to file further submissions in relation to the said application by 21.11.2022. The events during pendency of these appeals. 25. To piece together a timeline, it would be worthwhile to take note of the subsequent events that took place pursuant to the orders and directions as passed by the Appellate Authority in the order impugned dated 17.02.2022 directing the resolution professional to proceed with the CIRP from stage of publication of Form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agopalan - resolution applicant herein - was even being considered. To this, the Chairperson responded that in the order dated 16.03.2022 this Court while reserving the judgment clearly stated that all the meetings/proceedings of CoC shall continue subject to the final orders to be passed by the Court and this information was clearly laid down with disclaimers in the list of prospective resolution applicants as well as final list of eligible resolution applicants and was known to everyone. He also stated that as regards this, legal advice had been sought and the CoC also gave its consent. 26.5. In the eighteenth CoC meeting held on 29.09.2022, after informing the members of CoC that 7 resolution plans have been received till date and their evaluation was under process, the Chairperson apprised the CoC that a revised settlement proposal has been submitted by the promoter - Dr. Periasamy Palani Gounder - under Section 12-A IBC on 19.09.2022. The members of the CoC debated on the possibilities of consideration of Section 12-A proposal vis-à-vis evaluation and consideration of resolution plans as received. However, noticing that the mandatory 330 days period was about to end on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d observations of the Appellate Tribunal with the following principal submissions: 28.1. As regards the proposition of settlement put forward by the promoter with reference to Section 12-A of the Code, it has been contended that the entitlement to file for withdrawal of the application admitted under Section 7 of the Code would be restricted to TFCI i.e., the applicant who had filed the application, with the approval of ninety per cent. voting share of the CoC and such an application for withdrawal could have only been moved through the resolution professional. In the absence of any such move by TFCI, the promoter did not have any right to move an application for withdrawal. 28.1.1. It has further been submitted that the letter of settlement dated 21.01.2021 was submitted without proof of funds and there was no commitment towards funding in the proposal indicated in the Deutsche Bank Indicative Term-Sheet dated 22.01.2021. Even the letter of support for funds dated 14.07.2021 as issued by Saveetha Institute was withdrawn by a subsequent email dated 02.09.2021. Thereafter, in the eleventh CoC meeting dated 03.03.2022 that took place after the passing of the impugned NCLAT judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese valuers physically visited the properties for that purpose, in compliance of Regulation 35 of the CIRP Regulations. Thereafter, the CoC approved this valuation in their commercial wisdom, following which NCLT approved it as well, which cannot be second-guessed at a subsequent stage. It has also been submitted that the question as to whether valuer was registered, was not required to be adjudged since it was not in question before IBBI. 28.4. Learned senior counsel has also submitted that insofar as non-publication of Form-G on the website is concerned, the issue was discussed during the fifth CoC meeting dated 12.11.2020 and the CoC proceeded with the CIRP in its commercial wisdom after a detailed deliberation. Moreover, the earlier judgment of NCLAT dated 05.05.2021 approving non-publication would act as res judicata. Placing reliance on Kalpraj Dharamshi and Anr. v. Kotak Investment Advisors Limited and Anr.: (2021) 10 SCC 401, it was submitted that non-publication of Form-G on the website cannot be treated as a grave irregularity. 28.5. As regards the issue of not placing the revised final resolution plan before the CoC, it has been submitted that the appellant had alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so been vehemently submitted that deliberate dilatory tactics have been adopted by the promoter to frustrate the process of CIRP, with substantial amount of time having been lost on account of the delays. 28.9. As regards the application bearing IA No. 168602 of 2022 in Civil Appeal Nos. 1682-1683 of 2022 filed by the promoter and erstwhile director of the corporate debtor - seeking permission to bring on record subsequent facts that during the pendency of these appeals his proposal of settlement under Section 12-A of the Code was passed by CoC in its nineteenth meeting held on 12.10.2022 by 100% voting power of members - learned counsel for resolution applicant has submitted that the very consideration of Section 12-A application of the promoter by CoC had been against the explicit direction of the Appellate Tribunal in the order dated 17.02.2022, whereby only 15 days' time was allowed to the CoC to examine the pending or existing Section12-A proposal of the promoter; and such a proposal was indeed rejected by the CoC on 25.03.2022. Therefore, the only course available with CoC after such rejection was to continue with the fresh CIRP; and the CoC had no legal authority to conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... With respect to the physical valuation of assets, learned senior counsel emphasised on agenda item No. 4 of the fourth CoC meeting, wherein it was clearly mentioned that the valuers visited the property of the corporate debtor. 30.1.2. Insofar as the issue of non-core assets not being valued is concerned, it was submitted on behalf of RP that although the value of non-core assets was fairly insignificant, in the seventh CoC meeting dated 29.12.2020, the RP informed that the second valuer Mr. G Vaidya Ramana, visited the premises for non-core assets and had subsequently submitted his report. The statement containing the said reports was placed before the Tribunal. It has, thus, been submitted that it was incorrect for the Tribunal to render a finding that the valuation of non-core assets had not been done in the present case. 30.2. As regards non-publication of Form-G on the website, it has been argued that the same was published in all leading newspapers on 09.08.2020 and the then IRP had emailed IBBI to intimate them that there was some technical issue in uploading the said form on the website, with a request to upload the same. Thus, all the requisite steps having been reasona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lications against the promoter-director of the corporate debtor under Section 43 of the Code seeking avoidance of certain transactions which are preferential in nature. The said applications are pending before the NCLT for adjudication. With regard to these avoidance applications, however, reliance on a judgement of the Delhi High Court in Venus Recruiters Private Limited v. Union of India and Ors.: 2020 SCC Online Del. 1479 is of no avail as in the said case, the High Court has examined the jurisdiction of the Adjudicating Authority to entertain an application under Section 43 after the approval of the resolution plan. 31. Learned senior counsel Mr. Mukul Rohatgi appearing on behalf of Dr. Perisamy Palani Gounder (promoter and erstwhile director), has supported the order impugned while contesting the submissions made on behalf of the appellant. 31.1. Learned senior counsel has submitted that the CoC approved the resolution plan in question without considering the settlement proposals put forth by the promoter under the letters dated 21.01.2021 and 08.03.2021, for settling with all creditors and for withdrawal of CIRP under Section 12-A of the Code. While placing reliance on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich prohibits a director of the company from involving himself in a situation in which he may have direct or indirect interest that conflicts or possibly may conflict, with the interest of the company. For this reason too, the resolution plan in question is contrary to law and cannot pass muster under Section 30(2)(e) of the Code. 31.2.2. Another argument by the learned senior counsel on behalf of promoter has been that the appellant is not eligible to submit a resolution plan under Section 29A(e) of the Code. It has been argued that the resolution applicant has been the director of a company named 'International Aviation Academy Private Limited'; and as per the audited financial statements of the said company for 2010-2011 to 2017-2018, there was evidence that Rs. 12,03,000 had been collected as "share application money pending allotment" and had not been refunded. This would result in the same being treated as an "unrefunded deposit" within the meaning of the proviso to Explanation (A) of Rule 2(1)(c)(viii) of the Companies (Acceptance of Deposits) Rules, 2014 and result in disqualification of the appellant-resolution applicant, from being a director under Section 164(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undervalues the assets of the corporate debtor. In the present case, the total debt of the corporate debtor is much lower than the liquidation value of its assets. This apart, according to the learned counsel, the proposition concerning the application of principles of res judicata remains wholly misplaced since the said proceedings in NCLAT were at the instance of a different party and the principal issue in the previous litigation had nothing to do with the resolution plan, or statutory violations in the CIRP. 31.4. Dealing with the issue of non-publication of Form G on the website, it has been submitted that Regulation 36A(2)(iii) of the CIRP Regulations, which mandates the publication on the website of IBBI and the website of corporate debtor has been violated as it has been an admitted position that the same was not done by the resolution professional. The actions of the resolution professional, therefore, had been in violation of Regulation 36A and Circular Bearing No. IP (CIRP)/006/2018 dated 23.02.2018. The resolution professional has claimed that the form could not be uploaded for technical reasons but has failed to explain the steps taken to rectify this deficiency in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argued that the shareholders would not have the requisite locus to intervene in the CIRP process, by placing reliance on the decision of this Court in Jaypee Kensington (supra). 33. Mr. Dhruv Mehta, learned senior counsel appearing for the other promoter and erstwhile director Dr. V. Janakiraman has made largely the similar submissions, relying on the minutes of the ninth CoC meeting that there was a violation of Section 30(4) and 30(6) of IBC. Learned senior counsel has further referred to the judgment in Essar Steel (supra) to emphasise on the point that the revised resolution plan was never placed before the CoC and hence, the entire process stands vitiated. 34. Learned counsel for Dharani Finance, Ms. Haripriya Padmanabhan has primarily argued against the treatment of related parties as a separate class for payment of dues under the resolution plan. It has been submitted that Dharani Finance is a non-banking financial institution, listed in Bombay Stock Exchange. In this case, it is a financial creditor and an operational creditor of the corporate debtor and even though its claims of Rs. 1,94,14,024 and Rs. 4,81,62,175, of operational debt and financial debt respectively, wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... footing, uninfluenced by the observations of the NCLAT. 35.1. In regard to the fresh proceedings during the pendency of these appeals (as noticed above), it has been submitted on behalf of SBI that after being given further opportunity, the promoter re-submitted the settlement proposal under Section 12-A IBC with deposit of upfront amount of Rs. 105 crore and a Bank Guarantee of Rs. 325 crore; and on being put to vote, this settlement proposal was approved by 100% voting share in the CoC which deserves to be taken forward. Learned SG has relied on the decisions of this Court in Vallal RCK v. Siva Industries and Holdings Ltd. and Ors.: 2022 SCC OnLine SC 717 and Brilliant Alloys (P) Ltd. v. S. Rajagopal and Ors.: (2022) 2 SCC 544. 36. Appearing for Edelweiss and associates, learned senior counsel Mr. Rakesh Dwivedi has submitted that these financial creditors of the corporate debtor with total of about 21.13% voting share in CoC, too had voted in favour of the resolution plan in question; and the plan so approved with 87.39% of the voting share in CoC could not have been lightly interfered with. The learned counsel has contended that merely for non-consideration of revised resolu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in holding that the resolution plan in question, which was placed before the Adjudicating Authority for approval, was void and non-est in law because in the ninth CoC meeting dated 22.01.2021, the resolution plan was sent back to the resolution applicant for further revision; and the revised resolution plan thereafter submitted by the resolution applicant on 25.01.2021 was directly filed before the Adjudicating Authority without being put to vote before CoC? D2. Whether the Appellate Tribunal has erred in making observations against increase of the fees of the resolution professional and assuming the possibility of its impact on his decision to submit the resolution plan before the Adjudicating Authority without approval of CoC? E. Whether the Appellate Tribunal has erred in applying the principles of non-discrimination in relation to related party of corporate debtor and thereby holding against the resolution plan in question for want of provision for related party? F. Whether the Appellate Tribunal has erred in holding that settlement offer of the promoter in terms of Section 12-A of the Code was not placed for consideration of CoC; and as to whether non-consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Subs. by Act 26 of 2018, sec. 15(i)(a), for "related party to whom a corporate debtor owes a financial debt" (w.r.e.f. 6-6-2018) [financial creditor or the authorised representative of the financial creditor referred to in sub-section (6) or sub-section (6A) 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: Ins. by Act 26 of 2018, sec. 15(i)(b) (w.r.e.f. 6-6-2018) [Provided further that the first proviso shall not apply to a financial creditor, regulated by a financial sector regulator, if it 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 Ins. by Act 1 of 2020 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial creditors, such trustee or agent shall act on behalf of such financial creditors; (b) is owed to a class of creditors exceeding the number as may be specified, other than the creditors covered under clause (a) or sub-section (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. (6B) The remuneration payable to the authorised representative- (i) under clauses (a) and (c) of sub-section (6A), if any, shall be as per the terms of the financial debt or the relevant docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntative of operational creditors, as the case may be, shall not invalidate proceedings of such meeting. (5) Subs. by Act 26 of 2018, sec. 18 (ii), for "Any creditor" (w.r.e.f. 6-6-2018) [Subject to sub-sections (6), (6A) and (6B) of section 21, any creditor] who is a member of the committee of creditors may appoint an insolvency professional other than the 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. Section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. 6-6-2018) [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: Ins. by Act 26 of 2018, sec. 22(i)(C) (w.r.e.f. 6-6-2018) [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. Explanation. I.-For the purposes of this proviso, the expression "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 Ins. by Act 1 of 2020, sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial sector regulator or a court, and such resolution applicant has not otherwise contributed to the preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction;] (h) has executed Subs. by Act 26 of 2018, sec. 22(v)(A), for "an enforceable guarantee" (w.r.e.f. 6-6-2018) [a guarantee] in favour of a creditor in respect of a corporate debtor against which an application for insolvency resolution made by such creditor has been admitted under this Code Ins. by Act 26 of 2018, sec. 22(v)(B) (w.r.e.f. 6-6-2018) [and such guarantee has been invoked by the creditor and remains unpaid in full or part]; (i) Subs. by Act 26 of 2018, sec. 22(vi), for "has been" (w.r.e.f. 6-6-2018) [is] subject to any disability, corresponding to clauses (a) to (h), under any law in a jurisdiction outside India; or (j) has a connected person not eligible under clauses (a) to (i) Explanation renumbered as Explanation I thereof by Act 26 of 2018, sec. 22(vii) (w.r.e.f. 6-6-2018) [Explanation. I]. -- For the purposes of this clause, the expression "connected person" means- (i) any person who is the promoter or in the management or control of the resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest Act, 2002 (54 of 2002); (e) an Alternate Investment Fund registered with the Securities and Exchange Board of India; (f) such categories of persons as may be notified by the Central Government.]] Section 30. Submission of resolution plan.-(1) A resolution applicant may submit a resolution plan Ins. by Act 26 of 2018, sec. 23(i) (w.r.e.f. 6-6-2018) [along with an affidavit stating that he is eligible under section 29A] 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 Subs. by Act 26 of 2018, sec. 23(ii)(A) for "repayment" (w.r.e.f. 6-6-2018) [payment] of other debts of the corporate debtor; Subs. by Act 26 of 2019, sec. 6(a), for clause (b) [w.e.f. 16-8-2019, vide S.O. 2953(E), dated 16th August, 2019] [(b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than- (i) the amount to be paid to such creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution plans which confirm the conditions referred to in sub-section (2). Subs. by Act 8 of 2018, sec. 6, for sub-section (4) (w.r.e.f. 23-11-2017) [(4) The committee of creditors may approve a resolution plan by a vote of not less than Subs. by Act 26 of 2018, sec. 23(iii)(a) for "seventy-five" (w.r.e.f. 6-6-2018) [sixty-six] per cent. of voting share of the financial creditors, after considering its feasibility and viability, Ins. by Act 26 of 2019, sec. 6(b) [w.e.f 16-8-2019, vide S.O. 2953(E) dated 16th August, 2019) [the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interest of a secured creditor] and such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017(Ord. 7 of 2017), where the resolution applicant is ineligible under section 29A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 confirm 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 the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database. Ins. by Act 26 of 2018, sec. 24(b) (w.r.e.f. 6-6-2018) [(4) The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later: Provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed on grounds of material irregularity or fraud committed in relation to such a liquidation order. (5) An appeal against an order for initiation of corporate insolvency resolution process passed under sub-section (2) of section 54-O, may be filed on grounds of material irregularity or fraud committed in relation to such an order.] Section 238. Provisions of this Code to override other laws. - The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." 38.2. We may also take note of regulations in the CIRP Regulations as are relevant to the facts of the present case as follows: - Substituted by Notification No. IBBI/2021-22/GN/REG075, dated 14th July, 2021, for regulation 27 (w.e.f. 14-7-2021). Earlier regulation 27 was substituted by Notification No. IBBI/2017-18/GN/REG024, dated 6th February, 2018 (w.e.f. 6-2-2018) and amended by Notification No. IBBI/2018-19/GN/REG031, dated 3rd July, 2018 (w.e.f. 4-7-2018). Regulation 27 before substitution, stood as under: "27. Appointment of registered valuers.- The resolution pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019 for regulation 30A (w.e.f. 25-7-2019) [30A. Withdrawal of application. - (1) An application for withdrawal under section 12A may be made to the Adjudicating Authority - (a) before the constitution of the committee, by the applicant through the interim resolution professional; (b) after the constitution of the committee, by the applicant through the interim resolution professional or the resolution professional, as the case may be: Provided that where the application is made under clause (b) after the issue of invitation for expression of interest under regulation 36A, the applicant shall state the reasons justifying withdrawal after issue of such invitation. (2) The application under sub-regulation (1) shall be made in Form-FA of the Schedule accompanied by a bank guarantee- (a) towards estimated expenses incurred on or by the interim resolution professional for purposes of regulation 33, till the date of filing of the application under clause (a) of sub-regulation (1); or (b) towards estimated expenses incurred for purposes of clauses (aa), (ab), (c) and (d) of regulation 31, till the date of filing of the application under clause (b) of sub-regulation (1). (3) W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) After the receipt of resolution plans in accordance with the Code and these regulations, the resolution professional shall provide the fair value and the liquidation value to every member of the committee in electronic form, on receiving an undertaking from the member to the effect that such member shall maintain confidentiality of the fair value and the liquidation value and shall not use such values to cause an undue gain or undue loss to itself or any other person and comply with the requirements under sub-section (2) of section 29. (3) The resolution professional and registered valuers shall maintain confidentiality of the fair value and the liquidation value." Subs. by Notification No. IBBI/2018-19/GN/REG031, dated 3rd July, 2018, for regulation 36A (w.e.f. 4-7-2018) [36A. Invitation for expression of interest.- (1) The resolution professional shall publish brief particulars of the invitation for expression of interest in Form G of the Schedule at the earliest, not later than seventy-fifth day from the insolvency commencement date, from interested and eligible prospective resolution applicants to submit resolution plans. (2) The resolution professional shall publi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) relevant records in evidence of meeting the criteria under clause (a); (c) an undertaking by the prospective resolution applicant that it does not suffer from any ineligibility under section 29A to the extent applicable; (d) relevant information and records to enable an assessment of ineligibility under clause (c); (e) an undertaking by the prospective resolution applicant that it shall intimate the resolution professional forthwith if it becomes ineligible at any time during the corporate insolvency resolution process; (f) an undertaking by the prospective resolution applicant that every information and records provided in expression of interest is true and correct and discovery of any false information or record at any time will render the applicant ineligible to submit resolution plan, forfeit any refundable deposit, and attract penal action under the Code; and (g) an undertaking by the prospective resolution applicant to the effect that it shall maintain confidentiality of the information and shall not use such information to cause an undue gain or undue loss to itself or any other person and comply with the requirements under sub-section (2) of section 29. (8) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion or modification of any security interest; (e) curing or waiving of any breach of the terms of any debt due from the corporate debtor; (f) reduction in the amount payable to the creditors; (g) extension of a maturity date or a change in interest rate or other terms of a debt due from the corporate debtor; (h) amendment of the constitutional documents of the corporate debtor; (i) issuance of securities of the corporate debtor, for cash, property, securities, or in exchange for claims or interests, or other appropriate purpose; (j) change in portfolio of goods or services produced or rendered by the corporate debtor; (k) change in technology used by the corporate debtor; and (l) obtaining necessary approvals from the Central and State Governments and other authorities.] 38. Mandatory contents of the resolution plan.- Subs. by Notification No. IBBI/2019-20/GN/REG052, dated 27th November, 2019, for sub-regulation (1) (w.e.f. 28-11-2019) [(1) The amount payable under a resolution plan - (a) to the operational creditors shall be paid in priority over financial creditors; and (b) to the financial creditors, who have a right to vote under sub-section (2) of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for sub-regulation (1) (w.e.f. 4-7-2018) [(1) A prospective resolution applicant in the final list may submit resolution plan or plans prepared in accordance with the Code and these regulations to the resolution professional electronically within the time given in the request for resolution plans under regulation 36B along with - (a) an affidavit stating that it is eligible under section 29A to submit resolution plans; Clause (b) omitted by Notification No. IBBI/2018-19/GN/REG032, dated 5th October, 2018 (w.e.f. 5-10-2018) [***] (c) an undertaking by the prospective resolution applicant that every information and records provided in connection with or in the resolution plan is true and correct and discovery of false information and record at any time will render the applicant ineligible to continue in the corporate insolvency resolution process, forfeit any refundable deposit, and attract penal action under the Code. Subs. by Notification No. IBBI/2021-22/GN/REG078, dated 30th September, 2021, for sub-regulation (1A) (w.e.f. 30-09-2021). Sub-regulation (1A), before substitution, stood as under: - "(1A) A resolution plan which does not comply with the provisions of sub-re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e resolution plan is put to vote, it shall be considered approved if it receives requisite votes. (3B) Where two or more resolution plans are put to vote simultaneously, the resolution plan, which receives the highest votes, but not less than requisite votes, shall be considered as approved: Provided that where two or more resolution plans receive equal votes, but not less than requisite votes, the committee shall approve any one of them, as per the tie-breaker formula announced before voting: Provided further that where none of the resolution plans receives requisite votes, the committee shall again vote on the resolution plan that received the highest votes, subject to the timelines under the Code. *** *** ***] Subs. by Notification No. IBBI/2018-19/GN/REG031, dated 3rd July, 2018, for sub-regulation (4) (w.e.f. 4-7-2018) [(4) The resolution professional shall endeavour to submit the resolution plan approved by the committee to the Adjudicating Authority at least fifteen days before the maximum period for completion of corporate insolvency resolution process under section 12, along with a compliance certificate in Subs. by Notification No. IBBI/2019-20/GN/REG040, dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicating Authority for directions.] 38.3. We may further take note of Section 88 of the Trusts Act which essentially provides for nullifying the pecuniary advantage if gained by a fiduciary and ordains that where a trustee, executor, partner, agent, director of a company, legal advisor, or other person bound in a fiduciary character to protect the interests of another person, by availing himself of his character, gains for himself any pecuniary advantage; or where the person so bound enters into any dealings under circumstances in which his own interests are, or may be, adverse to those of such other person and thereby the fiduciary gains for himself a pecuniary advantage, he would hold the advantage so gained for the benefit of such other person. Section 88 of the Trusts Act with a few of its illustrations read as under: - "Section 88. Advantage gained by fiduciary.-Where a trustee, executor, partner, agent, director of a company, legal advisor, or other person bound in a fiduciary character to protect the interests of another person, by availing himself of his character, gains for himself any pecuniary advantage, or where any person so bound enters into any dealings under circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 7th May, 2018] [Provided that where a person is appointed as a director of a company which is in default of clause (a) or clause (b), we shall not incur the disqualification for a period of six months from the date of his appointment.] *** *** ***" "Section 166. Duties of directors.- *** *** *** (4) A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company. *** *** ***" Objectives and scheme of IBC: crucial role-players : 39. For dealing with the questions involved, at the outset, a brief reference to the scheme of the Code, as noticed from its Preamble and as exposited by this Court need to be taken note of. The Preamble of the Code reads as under: - "An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1] at para 83, fn 3) 28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests....." (emphasis in bold supplied) 39.2. As regards to the process of insolvency resolution, while dealing with various provisions of Chapter II of Part II of the Code, this Court in the case of Essar Steel (supra) summed up the key role of resolution professional in the following terms: - "48. The detailed provisions that have been stated hereinabove make it clear that the resolution professional is a person who is not only to manage the affairs of the corporate debtor as a going concern from the stage of admission of an application und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Committee of Creditors by a vote of at least 66% of the voting shares This percentage of minimum votes of CoC, for approval of resolution plan as also for prior approval of certain actions, was "seventy-five" in the Code as originally enacted and was altered to "sixty-six" by way of an amendment with effect from 6-6-2018. 97.1. It is, therefore, evident that corporate insolvency resolution, with approval of the plan of resolution, is ultimately in the exclusive domain of the Committee of Creditors. Even during the resolution process, major decisions as regards management and finances of the corporate debtor are in the control of the Committee of Creditors. As per the composition delineated in Section 21 of the Code, the Committee of Creditors is comprised of all financial creditors of the corporate debtor; and the frame of Section 21 puts it beyond doubt that the voting share of each financial creditor is determined on the basis of financial debt owed to it. It is also clear from Section 30(4) as also Section 28(3) that the major decisions of approval are to be taken by the Committee of Creditors by a vote of at least 66% of the voting share of the financial creditors and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed resolution plan and assessment made by their team of experts. The opinion on the subject-matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justiciable. 53. In the report of the Bankruptcy Law Reforms Committee of November 2015, primacy has been given to CoC to evaluate the various possibilities and make a decision. It has been observed thus: "The key economic question in the bankruptcy process When a firm (referred to as the corporate debtor in the draft law) defaults, the question arises about what is to be done. Many possibilities can be envisioned. One possibility is to take the firm into liquidation. Another possibility is to negotiate a debt restructuring, where the creditors accept a reduction of debt on an NPV basis, and hope that the negotiated value exceeds the liquidation value. Another possibility is to sell the firm as a going concern and use the proceeds to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otiations. Typically, operational creditors are neither able to decide on matters regarding the insolvency of the entity, nor willing to take the risk of postponing payments for better future prospects for the entity. The Committee concluded that, for the process to be rapid and efficient, the Code will provide that the creditors committee should be restricted to only the financial creditors." (emphasis in italics is in original) 97.4. In Essar Steel, the Court referred to the above-quoted and other passages from the judgment in K. Sashidhar (supra) and explained the decisive role of the commercial wisdom of the Committee of Creditors, inter alia, in the following passages: "54. Since it is the commercial wisdom of the Committee of Creditors that is to decide on whether or not to rehabilitate the corporate debtor by means of acceptance of a particular resolution plan, the provisions of the Code and the Regulations outline in detail the importance of setting up of such Committee, and leaving decisions to be made by the requisite majority of the members of the aforesaid Committee in its discretion. ... *** *** *** 59. Even though it is the resolution professional who i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e resolution applicant, as to how and in what manner the corporate resolution process is to take place." (emphasis in bold supplied) 97.5. In Maharashtra Seamless Ltd. (supra), again, a three-Judge Bench of this Court referred extensively to the enunciations in Essar Steel and reiterated the primacy assigned to the commercial wisdom of the Committee of Creditors in the matter of corporate insolvency resolution. 98. For what has been noticed hereinabove, it would not be an exaggeration in terms that, in corporate insolvency resolution process, the role of Committee of Creditors is akin to that of a protagonist, giving finality to the process (subject, of course, to approval by the adjudicating authority), who takes the key decisions in its commercial wisdom and also takes the consequences thereof. As noticed, the process is aimed at bringing the corporate debtor back on its feet and it is acknowledged that appropriate disposition of a defaulting corporate debtor and the choice of solution, to keep the corporate debtor as a going concern or to liquidate it, is to be made by the financial creditors, who could assess the viability and may take decisions in modification of the ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s regards the process of valuation, the clarifications from the resolution professional and the steps taken by him for valuation and re-valuation had been to the satisfaction of CoC. It has rightly been contended on behalf of the appellants with reference to the decision in Maharashtra Seamless (supra) that resolution plan is not required to match the liquidation value as such. 41.3. The findings of the Appellate Tribunal in regard to the question of valuation and thereby taking the resolution plan to be in contravention of Sections 30(2) and 61(3) of the Code cannot be approved and are required to be set aside. Point B - Publication of Form G: Regulation 36-A 42. A long deal of discussion of the Appellate Tribunal had been diverted towards purported non-compliance of Regulation 36-A(2)(iii) of the CIRP Regulations for want of publication of Form G on the designated website with the Appellate Tribunal assuming that want of compliance of mandatory requirements had been of material irregularity on the part of the resolution professional. The findings of the Appellate Tribunal in this regard are also difficult to be accepted. 42.1. It has rightly been contended on behalf of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the aforesaid was a commercial decision of CoC not requiring interference of the Court. It has been argued on behalf of the contesting respondents that, the aforesaid decision cannot be considered res judicata for they being not the parties to the said appeals decided by NCLAT on 05.05.2021. In our view, even if principles of res judicata are as such not applied, fact of the matter remains that at the given stage, the process as undertaken by the resolution professional had been consistently approved by CoC, Adjudicating Authority and the Appellate Tribunal. Even otherwise, as observed hereinabove, there had not been any such illegality or material irregularity for which the entire process would have been considered vitiated. The findings of the Appellate Tribunal in this regard too, cannot be approved and are required to be set aside. Point C1 - Effect of Section 164(2)(b) Companies Act 43. A long length of argument has been advanced by the contesting parties as regards impact of Section 164(2)(b) of the Companies Act because of the alleged default of the company named International Aviation Academy Private Limited of which, the resolution applicant is a director. It has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question of ineligibility of the resolution applicant in terms of Section 164(2)(b) of the Companies Act, however, does not apply in relation to the other material objection as regards Section 88 of the Trusts Act. 44.1. It is not in dispute that the trust "Sri Balaji Vidyapeeth" of which the appellant-resolution applicant is the Managing Trustee, was one of the disqualified resolution applicants on the ground that the said entity was a charitable trust. It has been argued on behalf of the appellant that his status as Managing Trustee of the said trust does not render him ineligible while submitting the resolution plan in his individual capacity. It has also been argued that even if the trust may be disqualified, the appellant cannot be disqualified because his financial capability was independent of the trust money. In our view, this part of the matter cannot be examined by a broad and generalised reference to the separate status of the two entities, i.e., the trust on one hand and the resolution applicant as an individual on the other. 44.2. Noticeable it is that the said trust was held ineligible on the ground that it was a charitable trust and cannot run a profit-making ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the claim made by the resolution applicant himself, coupled with the fact that in CIRP in question, two resolution plans were submitted by this appellant, one in individual capacity and another as managing director of the said trust, it is difficult to detach him from the said resolution applicant-Sri Balaji Vidyapeeth. Hence, it cannot be said that the Appellate Tribunal committed any error in observing that the appellant was attempting to act as alter ego of the said ineligible applicant (the trust); and the benefit from his own (individual's) resolution plan cannot escape the operation of Section 88 of the Trusts Act. Even if the appellant would assert that his financial capability was independent of trust money, the fact of the matter remains that he projected the overall picture of his own profile while also relying on his status as Managing Trustee of the said trust, Sri Balaji Vidyapeeth. Thus, any pecuniary advantage gained by him under the resolution plan in question would be directly subsumed by operation of Section 88 of the Trusts Act. This would, in all practical purposes, bring about a position that what could not be done directly for the said trust was sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies Act prohibits a director of a company from involving himself in a situation in which he may have a direct or even indirect interest that conflicts, or may possibly conflict, with the interest of the company. Given the status of the resolution applicant as Managing Director of MGM Healthcare Private Limited, his dealing with property of the corporate debtor and converting the same into a hospital cannot be said to be having no impact on the activities of the said MGM Healthcare Private Limited. A direct conflict of interest being writ large on the face of the record, it cannot be said that the prohibition in terms of Section 166(4) does not operate and the resolution plan does not stand in contravention of any of the provisions of law for the time being in force. For this reason too, in our view, the appellant-resolution applicant could not have been accepted as eligible applicant. Point D1 - Revision of resolution plan after approval by CoC 46. Even when the findings of the Appellate Tribunal as regards valuation process and non-compliance of other procedural requirements have not been approved by us, a material factor which otherwise may appear to be of another procedural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that each and every aspect relating to the resolution plan, and more particularly its financial layout, has to be before the CoC before it could be said to have arrived at a considered decision in its commercial wisdom. 48. From the facts and the proceedings pertaining to the present case, as noticed in detail hereinbefore, it is but clear that in the ninth CoC meeting held on 22.01.2021, the resolution plan submitted by the appellant-resolution applicant was approved with 87.39% of the total voting share of the financial creditors present and voting. However, this approval came with a significant condition that in view of the dissent by some of the financial creditors, the plan would be sent back to the creditors for further revision so as to make it complaint with Section 30(2) of the Code which provides that the amount paid to the dissenting financial creditors will not be less than the amount paid to such creditors in accordance with Section 53 of the Code in the event of the liquidation of the corporate debtor. On 25.01.2021, the appellant-resolution applicant submitted the revised resolution plan incorporating the changes. He also submitted bank guarantee as noticed herei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was to be revised. As to what decision CoC would have taken after examination of the revised plan, pursuant to its decision in the ninth meeting, cannot be a matter of guess or assumption that it was bound to be approved. As to which aspect would have arisen for consideration of CoC after revision of the plan is again a matter of uncertainty but it cannot be said that the conditional approval in the ninth CoC meeting was to be treated as fait accompli. This, in our view, is not the true operation of the scheme of the process of corporate insolvency resolution nor could the commercial wisdom of CoC be a matter of assumption. Looking to the nature and form of decision taken by the CoC in its ninth meeting, such a conditional approval could not have been treated as a final approval. Whereafter, whatever be the revision, the plan was only to be presented to CoC and could have been presented to the Adjudicating Authority only after final approval of CoC by the requisite majority. In other words, when the modified resolution plan, even if carrying minor modification/revision was not finally approved by CoC, its presentation to the Adjudicating Authority amounts to a material irregu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for approval without having been put to vote before CoC was void and non-est but, an ancillary observation of the Appellate Tribunal in correlating this material irregularity with increase of fees of resolution professional is difficult to be accepted. 51.1. The CoC had precisely deliberated over the question of increase of fees of resolution professional and its decision in that regard could not have been correlated with any shortcoming in the process undertaken, which might have occurred for want of an erroneous assumption on the part of the resolution professional in view of the contents of minutes of ninth CoC meeting dated 22.01.2021. Though as aforesaid, when the resolution plan was to be revised so as to make provision for dissenting financial creditors, the financial outlay was going to be altered and it ought to have been placed before CoC again but, it is too far-stretched to connect this irregularity with the increase of fees of the resolution professional. The findings and observations of the Appellate Tribunal against resolution professional in this regard deserve to be set aside. Point E - The matter concerning related party 52. Another factor taken into consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide whether in its commercial wisdom it should pay to related party at all because that would mean paying to the same persons who are behind the corporate debtor. However, thereafter the Appellate Tribunal proceeded to observe that related party was required to be equated with the promoters as equity share-holders and then, further made certain observations about discrimination between related party unsecured financial creditor and other unsecured financial creditors as also between related party operational creditor and other operational creditors. Such far-stretched observations of the Appellate Tribunal are difficult to be reconciled with the operation of the statutory provisions. 54.2. It has rightly been argued on behalf of the appellants and had rightly been observed by the Adjudicating Authority (vide extraction in paragraph 15.4.1 hereinabove) that there was no provision in the Code which mandates that the related party should be paid in parity with the unrelated party. So long as the provisions of Code and CIRP Regulations are met, any proposition of differential payment to different class of creditors in the resolution plan is, ultimately, subject to the commercial wisdo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant extraction therein) while noting that even the original applicant of CIRP, i.e., TFIC, was kept in dark about such a proposal. It was also noticed that even the term-sheet to support the proposal from Deutsche Bank came with a disclaimer. In the totality of facts and circumstances, the proposals as made by the promoter and erstwhile director were all of eyewash and of dilatory tactics. However, the Appellate Tribunal (NCLAT) proceeded to observe that in the ninth CoC meeting, no discussion about settlement proposal had occurred and that CoC never considered the settlement proposal submitted by the promoter and erstwhile director; and that after getting the settlement proposal, it was incumbent upon the resolution professional to call the CoC meeting for consideration of such proposal. The observations of the Appellate Tribunal cannot be said to be in conformity with the record of proceedings. 57.1. As noticed, the proposal in question was forwarded for consideration only at the eleventh hour, i.e., a day before CoC was to vote on the resolution plan in its ninth meeting. The CoC, in the said meeting, indeed, took into consideration the proposition of settlement and applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ably. The relevant parts of proceedings in the ninth CoC meeting concerning such proposal have already been noticed hereinbefore. It is noticed that after approval of the resolution plan, the promoter again submitted a settlement proposal on 08.03.2021 which was followed by a letter dated 14.07.2021 from one Saveetha Institute of Medical and Technical Sciences as proof of funding, but the said letter was subsequently withdrawn by the said Institute. The resolution plan was approved by the Adjudicating Authority on 15.07.2021, which was challenged by the promoter and the Appellate Tribunal granted stay over operation of the order dated 15.07.2021. The Appellate Tribunal, ultimately, allowed the appeal and apart from disapproving the resolution plan in question, directed the resolution professional to call for the meeting of CoC within 15 days from the date of judgment and to proceed with CIRP from the stage of publication of Form G and put the proposal of promoter before CoC for consideration. In compliance of these directions of NCLAT, eleventh CoC meeting was held on 03.03.2022 where the settlement proposal of the promoter was put to vote in the CoC; the voting continued until 25. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., on 21.01.2021. The CoC, even when not formerly voting on it, clearly rejected the same for the Agenda having already set for dealing with the resolution plan received from the resolution applicant. As noticed, after approval of the resolution plan, the promoter again submitted a settlement proposal but the Institute, said to be supporting the same, subsequently withdrew. After allowing of the appeal by NCLAT and in terms of those directions, the new settlement proposal was precisely put to vote and was rejected. Thereafter, fresh EOIs were invited and resolution plans were received. Significantly, the promoter moved another settlement proposal for invoking Section 12-A of the Code on 19.09.2022, only after receiving of the resolution plans from seven prospective resolution applicants. A pattern in the aforesaid dealings by the promoter is quite striking. When the resolutions plans had been received at the earlier stage, only at the eleventh hour, the settlement proposal came up. This time too, the settlement proposal came up from the promoter only after resolution plans had been received. Prior to it, his proposal had already been rejected. It gets perforce commented that the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 (as held in point C1). The disapproval by the Appellate Tribunal, with reference to the settlement offer of promoter in terms of Section 12-A of the Code, and its purported non-consideration is also not approved by us and such findings of the Appellate Tribunal are required to be set aside (as held in point F). Similarly, the Appellate Tribunal has erred in applying the principles of non-discrimination in relation to the related party (as held in point E). However, the other findings in relation to points C2, C3 and D1 and the consequential order passed by the Appellate Tribunal deserve to be approved. 67.1. Therefore, the impugned judgment and order dated 17.02.2022 in relation to the issues covered by points for determination A, B, C1, D2, E and F is not approved and findings of the Appellate Tribunal in that regard are set aside. However, rejection of the resolution plan is maintained in view of the answers to points C2, C3 and D1. 68. Putting it in different words, we are clearly of the view that even while respecting the commercial wisdom of CoC, in the present case, the resolution plan in question could not have been approved by the Adjudicating Authority for two major re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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