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TMI Blog2024 (2) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... that the CoC had, with 100% voting, recommended that the CD should be liquidated and that there were no reasons on record for the adjudicating authority not to disagree with the recommendations of RP/CoC. Further, as per Section 33(2) of the IBC 2016, where the Adjudicating Authority has been intimated by the Resolution Professional about the decision of the CoC for initiation of liquidation, it has go to along with it. Adjudicating Authority has gone along with the recommendations of the COC and ordered for its liquidation. Therefore, it cannot be faulted for not reviewing the decision of the CoC when no such grounds are available. The Appellants also brings the issue of the hesitation of the interim resolution professional, which is recorded in the first CoC meeting dated 08.11.2021. In the CIRP proceedings under the IBC, the decision of the CoC is supreme and IRP or RP s subjective views and feelings cannot dictate the outcome or change the direction of the proceedings. The members of the CoC decided to go for liquidation and IRP has to record like that without inserting his feelings - it cannot be said that there has been material irregularity in the decision of the CoC. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusion for liquidation of the CD. Commercial wisdom of the CoC has been exercised in a clear and forthright manner. The Adjudicating Authority has also relied upon that. There are no irregularity on the part of CoC or Adjudicating Authority, so these averments of the material irregularity and arbitrariness cannot be sustained. The liquidation was ordered by the Committee of Creditors with 100% majority vote. This was very clearly and un-ambiguously established in the very first meeting of CoC. The commercial wisdom of the COC has been converted into a decision of liquidation as per Section 33(2) of the IBC, instead of going for calling for resolution claim. When such a decision has been taken and when no grounds have been made out as per Section 61(4) of the IBC and there is no grounds of material irregularity, there are no justification for review of the orders of the Adjudicating Authority, which are based on commercial wisdom of the CoC. Appeal dismissed. - [ Justice Ashok Bhushan ] Chairperson , [ Mr. Barun Mitra ] Member ( Technical ) And [ Mr. Arun Baroka ] Member ( Technical ) For the Appellant : Ms. Vaishnavi Viswanathan , Advocate For the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the CD had failed to receive any resolution plan from prospective resolution applicants. It is submitted that the decision of the COC is arbitrary as it is based on misplaced assumptions. It is claimed that decision to liquidate was taken overlooking the express hesitation of the IRP, which is noted in the minutes of the first COC which is a material irregularity. The order of Adjudicating Authority is rooted in the incorrect premise that the decision of the COC is non justiciable when it has already resolved with requisite majority to liquidate the CD. Adjudicating Authority erred in not even considering the resolution plan that the appellants were desirous of submitting. CD claims to be an MSME and is entitled to revive itself. It is further claimed that Applicants ineligibility under Section 29-A(b) of the Code does not take effect if the classification of wilful default is dehors the RBI circular. Main issues 8. From the above grounds of relief, the main issues which emerge are as follows: a) Whether CoC s decision to liquidate was tainted with material irregularity and arbitrariness or not b) Whether the decision of the Adjudicating Authority is based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C were of the view that there are minimal/no chances of getting the resolution plan. Further, Mr Jigar Shah questioned to the suspended management that whether there are any ongoing contracts/ licenses of the corporate Debtor which might be beneficial for the resolution applicant as it is into EPC activity and is there any scope for the Resolution Applicant to reap the benefits and to get into the business/ contracts entered by the Corporate Debtor to which the member of the suspended board replied that there were few contracts entered by the corporate Debtor however, the same could not be completed due to financial constraints of the Corporate Debtor. Few contacts are completed up to 80-85% but for further completion it will require investments by the investor so possibility is low to get investment into these projects. Further there is no license involved in this work as it is purely EPC activity and is more of a know how work and not related to technology. ...Further, Mr. Kishor Pankhaniya, authorised representative of Bank of Baroda stated that going through the EOI process is not mandatory and that there are cases in which the Hon'ble NCLT has approved and passed ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reasons on record for the adjudicating authority not to disagree with the recommendations of RP/CoC. Further, as per Section 33(2) of the IBC 2016, where the Adjudicating Authority has been intimated by the Resolution Professional about the decision of the CoC for initiation of liquidation, it has go to along with it. Adjudicating Authority has gone along with the recommendations of the COC and ordered for its liquidation. Therefore, it cannot be faulted for not reviewing the decision of the CoC when no such grounds are available. 16. Other arguments of the Appellant that CoC assumed that the CD was not functional since 2016 and there were no chances of getting any EoI or no chance of revival of the CD and also that the resolution applicants bid only on the basis of the available tangible assets and hence the CoC were of the view that there were minimal / no chances of getting their resolution plan and also that other group companies of the CD had failed to receive any resolution plan from prospective resolution applicants are all business inputs which go into the decision making of the CoC. We don t want to dwell into commercial wisdom. But would be useful to see only few num ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se may be, does not receive a resolution plan under sub-section (6) of section 30; or (b) rejects the resolution plan under section 31 for the non-compliance of the requirements specified therein, it shall - (i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter; (ii) issue a public announcement stating that the corporate debtor is in liquidation; and (iii) require such order to be sent to the authority with which the corporate debtor is registered. (2) Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors approved by not less than sixty-six per cent of the voting share to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of subsection (1). Explanation. For the purpose of this sub-section, it is hereby declared that the committee of creditors may take the decision to liquidate the corporate debtor, any time after its cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Debtor after approval of the resolution plan, the implementation and supervision of the resolution plan, it should not contravene any provisions of the law and should confirm to such other requirements as may be specified by the board. Since in the present case, the CoC had decided to go ahead with the liquidation in the very first meeting, therefore, the above conditions are not attracted. 25. Further, the Appeal under Section 61(3) of the IBC lies on the grounds that (i) the approved resolution plan is in contravention of the provisions of any law for the time being in force; (ii) there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period; (iii) the debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified by the Board; (iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or (v) the resolution plan does not comply with any other criteria specified by the Board. And in the present case, the CoC in its very first meeting had decided to go ahead the liquidatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CoC was in the facts of the present case and it cannot be said that whenever decision is taken for liquidation the same is not open to judicial review by the Adjudicating Authority and this Appellate Tribunal. It depends on the facts of the each case as to whether the decision to liquidate the Corporate Debtor is in accordance with the I B Code or not. With these observations, the Appeal is dismissed. [ emphasis supplied ] Even in the above-mentioned judgment, it is noted that the CoC, in the Legislative Scheme, has been empowered to take decision to liquidate the Corporate Debtor, any time after its constitution and before confirmation of the resolution plan. The observation as highlighted above alone cannot be used to review this decision of the liquidation. Facts in each case have to be seen independently. Here in this case, the facts are distinguishable. There are no circumstances for the decision taken by the CoC to be judicially reviewed by either the Adjudicating Authority or the Appellate Tribunal. Even otherwise as noted in the K Shashidhar versus Indian Overseas Bank [supra] the Hon ble Apex Court has already noted that review of the decision of the CoC with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was taken by CoC to liquidate the Corporate Debtor. In subsequent CoC meeting when CoC permitted the Appellant to submit a plan by 14th August, 2020, the indication is clear that the CoC has reconsidered its earlier decision and proceeded to consider the plan submitted by the Appellant which was a MSME but ultimately plan was refused to be considered only on the ground that no Resolution Plan was not invited. When in the CoC meeting Appellant was permitted to file a Resolution Plan, it cannot be said that Appellant was not invited to submit a Resolution Plan. It is another issue that CoC ought to have given opportunity to others to submit Resolution Plan by directing for issuance of Form G which was never done. As noted above, the Appellant was not considered as MSME during the proceedings of the CoC and the Liquidators view as reflected in the meeting of CoC and as submitted before us is clearly refuting the claim of the Appellant as Registered MSME. Non-acceptance of Corporate Debtor as a Registered MSME is a material irregularity which has been committed in the Insolvency Resolution Process. 31. It is argued by the Appellant that when faced with identical facts in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed as follows: Case No. Status SCA No.7598 of 2019 Petitioner: 1. Penta Aqua Private Limited 2. Ashit Dhirajlal Doshi 3. Rakshit Dhirajlal Doshi Respondent: 1. Doshion Water Solution Private Limited Thru. Resolution Professional Ketulbhai Ramubhai Patel 2. Bank of Baroda Thru. Asst. General Manager Vide Oral Order dated 18.04.2019, the Petitioner was permitted to participate in the process by offering resolution plan to respondent no1. SCA No.12728 of 2020 Petitioner: 1. Doshion Private Limited 2. Ashit Dhirajlal Doshi 3. Rakshit Dhirajlal Doshi 4. Amit Dhirajlal Doshi Respondent: 1. Reserve Bank of India 2. IDBI Bank Limited High Court set aside the order of declaration of wilful default by IDBI Bank and on the behalf of violation of provisions contained in the revised master circular and the matter was remanded back to the identification committee of the bank. SCA No.2428 of 2022 Petitioner: 1. Ashit Dhirajlal Doshi 2. Rakshit Dhirajlal Doshi 3. Fivebro Internation Pvt Ltd Respondent: 1. Reserve Bank o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Adjudicating Authority in the CP(IB) No.59 of 2019. The Appellant had once again, on 18.04.2023 filed an I.A. No.528 of 2023 in CP(IB) No.19 of 2019, praying that the Adjudicating Authority may direct the respondents to invite EoI and further call for the resolution plan of the CD in accordance with the provisions of the Code. Appellant has submitted before the Adjudicating Authority on 04.09.2023 that they are willing to submit a resolution plan for an amount which is above the estimated liquidation value of the CD i.e. around Rs.15 Crores. But the Adjudicating Authority admitted the CD into liquidation. 38. The findings of the Adjudicating Authority on 03.10.2023 are very clear. The relevant extracts of the order of the Adjudicating Authority would help to underscore the justification for liquidation and counter to all the arguments of the Appellant relating to violation of objects of the Code for resolution and also judicial scrutiny of the recommendations of the CoC and also material irregularity. Relevant extracts of the orders of the Adjudicating Authority dated 03.10.2023 are: 13. The CoC of the corporate debtor with 100% majority has already resolved to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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