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TMI Blog2024 (2) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... in CP(IBC)/46/KOB/2022 passed by the Adjudicating Authority/NCLT, Kochi Bench. 2. Earlier, while passing the impugned order in IA (IBC)/462/DOB/2023 in CP(IBC)/46/KOB/2022 the Adjudicating Authority/Kochi Bank among other things at paragraph no. 3 to 5:- "3. The Hon'ble Supreme Court in the matter of K.Shashidhar Versus Indian Overseas Bank & Ors. In Civil Appeal No. 10673 of 2018 has held that the commercial decision of CoC is non-justifiable. In this case, it is seen that CoC with a 100% majority has passed the resolution seeking liquidation of the Corporate Debtor. 4.Moreover, Section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 mandates that the Adjudicating Authority shall pass an order of liquidation where no resolution plan is received before the expiry of the CIRP. Sub-Section (2) thereof requires the Adjudicating Authority to pass the liquidation order where the Resolution Professional intimates to the Adjudicating Authority the decision of the Committee of Creditors approved by not less than 66% of the voting share to liquidate the Corporate Debtor. 5. We have heard the Learned Counsel for the applicant and perused the materials available on record. On 21/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttee of Creditors', just because of termination of 'Lease', by Bekal/Govt. of Kerala Undertaking. 9. Indeed, it is projected on the side of the Appellants, that nothing would have been lost, if such a 'decision' was backed by an 'evaluation' and 'assessment', after issuing an 'Expression of Interest'. In fact, that exercise, would have cost less than the 'fee paid', to the 'Resolution Professional' and that would have really brought before the 'Committee of Creditors', on record, what is the 'view of man in Business'? 10. On behalf of the Appellants it is pointed out that the view taken by the 'Resolution Professional' and the 'Committee of Creditors' are 'premptive', 'arbitrary', 'casual', and disregards the 'value created' and 'value potential' in store. Furthermore, the 'Asset maximisation', cannot be achieved by putting the 'Corporate Debtor' to 'Liquidation', according to the whims and fancies of the 'Resolution Professional' and the 'Committee of Creditors'. 11. The Learned Practicing Company Secretary for the Appellants refers to the decision of the Hon'ble Supreme Court in K. Rajkumar v. Nagarajan and Ors., reported in 2022 4 Supreme Court cases at pg. 617 wherein at par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Plan'. 16. The Learned Practicing Company Secretary appearing for the Appellants refers to the decision of the Hon'ble Supreme Court in Hari Babu Thota v. Shree Aashraya Infra-con Limited reported in 2023 SCC online SC 1642 wherein at paragraph 16 is observed as under:- 16. Under the heading "exemption of Micro, Small and Medium Enterprises from Section 29-A" the discussion begins. It is referred to the ILC report of March, 2018 and its finding that Micro, Small and Medium Enterprises form the foundation of the economy and are key drivers of employment, production, economic growth, entrepreneurship, and financial inclusion. The ILC report 2018 exempted these industries from Section 29-A (c) and (h) and the rationale for the same was contained in para 27.4 of the report which reads as under: 27.4 Regarding the first issue, the Code is clear that default of INR one lakh or above triggers the right of a financial creditor or an operational creditor to file for insolvency. Thus, the financial creditor or operational creditors of MSMEs may take it to insolvency under the Code. However, given that MSMEs are the bedrock of the Indian economy, and the intent is not to push them into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other Resolution Applicants, or other Resolution Applicants, or to annul the Resolution Process and embark on to re-issue RFRP. Regulation 39(1A) cannot be read as a fetter on the powers of the CoC to discuss and deliberate and take further steps of negotiations with the Resolution Applicants, which resolutions are received after completion of challenge mechanism." 19. It is represented on behalf of the Appellants that in the 4th 'CoC' meeting that took place on 11.7.2023 and the 7th CoC meeting held on 21.09.2023, the 'Forensic Audit' had not revealed the commission of any 'Fraud' on the part of the promoters and further Rs. 215 crores, was earlier invested in this project by the 'promoters'. 20. According to the Appellants the 'State Bank of India' was settled and they withdrew the Section 7 'Application' filed under the I&B Code, 2016. Also, that Dhanalaxmi Bank had approved the 'One Time Settlement' and further the Union Bank of India, is considering the 'One Time Settlement' and on 2.1.2024 Rs. 1,25,00,000/- was given to 'Union Bank of India'. 21. In so far as the 'Termination of the Lease', it is pointed out that without any efforts, forgetting that Section 17 to 20 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- "Para 48 - One cannot remain oblivious of the candid fact that the I&B Code, 2016, does not envisage that the 'Adjudicating Authority'/ Tribunal, ought to provide a 'Hearing to the Promoter' / 'Corporate Debtor' of the Company, at the time of passing of an 'Order' for Liquidation". 26. The Learned Practicing Company Secretary appearing for the Appellants comes out with an argument that when Resolution Plans are under consideration, whether to accept a Resolution Plan or not is a business decision, falling within the exclusive ambit of the Committee of Creditors and it is only when no Resolution Plan is found to be worthy of an approval, the Committee of Creditors may approve the liquidation. Indeed, the failure to issue the Expression of Interest is a step before the exercise of commercial wisdom, to approve or reject the Resolution Plans in the table. 27. The Learned Practicing Company Secretary appearing for the Appellants while summing up points out that the whole process was vitiated, compromise and 'material irregularity' and is writ large as per the records and hence, prays for the instant Appeal being allowed by this Tribunal, in the interest of justice. Pleas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proposal of renewal by the company... RP reiterated that no major changes in CIRP process, unless express of interest from the parent company and still no fresh communication of the Beckal Tourism has been received regarding the continuation of running with the lease property, which was the main and only asset of the company." 33. According to the Respondent No. 3 and 4 in the 7th Committee of Creditors meeting it was unanimously resolved by the 'Committee of Creditors' to initiate the Liquidation Proceedings in respect of the Corporate Debtor and further that Mr. CA Rajmohan was resolved to be appointed as the Liquidator in the said meeting. 34. On behalf of R3 and R4, it is brought to the notice of this Tribunal that (IBC)/462/DOB/2023 in CP(IBC)/46/KOB/2022 was filed by the Resolution Professional before the Adjudicating Authority/Tribunal for an initiation of Liquidation against the Corporate Debtor. Moreover, the 'Corporate Debtor' had no Assets and the Committee of Creditors had unanimously resolved, while exercising its commercial wisdom, to liquidate the Corporate Debtor, and the 'Liquidation of the Corporate Debtor' was ordered by the Adjudicating Authority/Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 petition was pending against the first Appellant and also taking note of the fact that the Dhanalaxmi Bank had classified the 1st Appellant as an NPA in its Books of Accounts, the requirements of Section 29A of the I&B Code were not complied with. 41. Moreover, there were genuine endeavours to revive the Corporate Debtor by seeking to assail the termination of the Lease Agreement but the representatives, of the Corporate Debtor who have present during the meeting had stated that they had not challenged the termination of the Lease Agreement till the commencement of Corporate Insolvency Resolution Process. Also, that the Resolution Professional had reiterated that he was unable to take any action as the termination of the Lease Agreement, which was more than 10 months before the CIRP and also that BRDCL' had informed of not changing its decision, as per letter dated 15.03.2023. 42. It is represented on behalf of R3 and R4 that there were no assets and no option was there for revival of the Corporate Debtor a unanimous decision 100% was taken by the Committee of Creditors, in its commercial wisdom, to liquidate the Corporate Debtor. Therefore, the stand of the Appellants that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. A reference in this respect could be make to the judgements of this Court in the cases of K.Sashidhar v. Indian Overseas Bank and Others, Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and Others, Maharashtra Padmanabhan Venkatesh Seamless Limited v. and Others, Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Anr., and Jaypee Kensington Boulevard Apartments Welfare Association and Ors. v. NBCC (India) Ltd. and Ors." 46. The Learned Counsel for R3, R4 relies on the decision in Ramakrishna Forges Ltd. V. Ravindra Loonkar, Resolution of ACIL Ltd. & Anr., reported in 2023 SCC online SC 1490 wherein at paragraph 30 it is observed as under:- "At this juncture, it also cannot be lost sight of that it is for the FC(s) who constitute the CoC to take a call, one way or the other. Stricto sensu, it is now well-settled that it is well within the CoC's domain as to how to deal with the entire d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner had filed IA(IBC)462/KOB/2023 in CP(IBC)/46/KOB/2022 (under Section 33(1)(a) and 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of NCLT Rules, 2016,2013). Seeking to order liquidation of the Corporate Debtor, based on the unanimous decision of the Committee of Creditors with 100% voting rights in the 7th meeting that took place on 21.10.2023. 54. According to the Resolution Professional of Green Gateway Leisure Ltd. / Petitioner (in IA(IBC)462/KOB/2023 in CP(IBC)/46/KOB/2022) the Corporate Debtor was admitted into CIRP through an order of an Adjudicating Authority / Tribunal on 25.01.2023 in CP(IBC)/46/KOB/2022). Admittedly, the Adjudicating Authority/Tribunal was pleased to extend the 'Corporate Insolvency Resolution Process' from 26.7.2022 to 25.10.2023(for a period of 90 days). 55. The 'Resolution Professional' in his IA(IBC)462/KOB/2023 in CP(IBC)/46/KOB/2022) was appointed as the 'Resolution Professional' of Green Gateway Leisure Ltd. / Corporate Debtor, by means of an order dated 22.06.2023 in IA(IBC)231/KOB/2023 in CP(IBC)/46/KOB/2022) and further that the Corporate Debtor had functioned in the 'Lease Hold Property', which was owned by 'Bekal R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 12 of the I&B Code, 2016 or a Resolution Plan was rejected by the 'Adjudicating Authority/Tribunal' (ii) where the Resolution Professional, prior to the affirmation of the Resolution Plan, intimates the 'Adjudicating Authority' / Tribunal of the decision of the 'Committee of Creditors' to liquidate the Corporate Debtor or (iii) where the Resolution Plan, approved by the Adjudicating Authority/Tribunal was violated by the concerned Corporate Debtor. 62. It must be borne in mind that any 'person' other than the Corporate Debtor whose interest are prejudicially affected by such a violation, may apply to the Adjudicating Authority / Tribunal who may then, pass an 'Order of Liquidation', based on such 'Application', as per the decision of the Hon'ble Supreme Court in the matter of Arcelormittal India Pvt. Ltd. v. Satish Kumar Gupta reported in AIR 2018 SC 5646. 63. At this stage, it is worthwhile to refer to the 7th Committee of Creditors meeting that took place on 21.10.2023 which reads as under:- "The resolution Professional informed to the meeting that he has contact with the directors of the BRDCL- the lessor of the land regarding the renewal of the lease agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny such assets. In case, if individual's personal guarantee collateral security having been furnished for availing the loan by the Corporate Debtor, it is requested that the dues amounting to Rs. 17,17, 60,711/- as arrears of lease rent etc. may also be recovered from such securities, as it is govt. dues and calls for priority etc." 66. Merely because there were 'No Assets' and no option for revival of the Corporate Debtor an unanimous 100% decision was taken by the Committee of Creditors in its commercial wisdom to liquidate the Corporate Debtor. 67. It is not out of place for this Tribunal to make a pertinent mention that the commercial wisdom can be exercised only when all the relevant information is available before the Committee of Creditors and is duly discussed / deliberated by all its members, who have a direct and substantial interest in the survival of the 'Corporate Debtor' and in the whole 'Corporate Insolvency Resolution Process'. Also that each and every aspect pertaining to the Resolution Plan, its financial lay out, has to be before the 'Committee of Creditors' before it could be, set to have arrived at a considered decision in its commercial wisdom. 68. In fact, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors' recommending Liquidation of the Corporate Debtor after proper evaluation of the Assets and Liabilities of the Corporate Debtor, with no Resolution Plan forthcoming, would be a 'business decision' which come within the purview of the commercial wisdom of Committee of Creditors and was not amenable to Judicial Review. 73. As far as the present case is concerned, commercial decision taken by the Committee of Creditors was in fulfilment of the relevant provisions of the I&B Code, 2016 and Regulations, especially in the teeth of Regulation 40D of the IBBI Corporate Persons Regulations, 2016. 74. The I&B Code, 2016 does not any way spell out 'any such opportunity' being provided to the Appellants (Promoters/Shareholders), at the time of passing of the Liquidation order and they don't have any semblance of any 'legal right' or 'vested right' to oppose the 'Liquidation order' before the 'Adjudicating Authority/Tribunal' in the considered opinion of this Tribunal. Viewed in that perspective the Appellants in the instant Appeal are not to be characterised as 'Aggrieved Persons' within the parameters of Section 61 of the I&B Code, 2016. 75. The First Appellant was ordered into CIRP ..... X X X X Extracts X X X X X X X X Extracts X X X X
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