9911796707
TMI Blog2023 (7) TMI 1400X X X X Extracts X X X X X X X X Extracts X X X X ..... the RP had exceeded his jurisdiction or had acted unilaterally or that RP had supplanted the commercial wisdom of the CoC. Further, the fact that the RP had opined that the Appellant was not eligible in terms of Section 29A criteria cannot be held against the RP simply because the opinion of the RP did not suit the interest of the Appellant - Further it is the CoC which took the decision to intimate the decision of the RP to Epitome which the RP carried out dutifully vide their email dated 16.07.2021. It is significant to note that the 29th CoC meeting was held on 15.07.2021 which pre- dated the letter from the RP to the Appellant informing them about their ineligibility which was dated 16.07.2021. Thus what was conveyed by the RP to the Appellant also clearly had the sanction of the CoC. It is also noticed that it was the CoC which had directed the RP to give his opinion on the Section 29A compliance of the Appellant and in terms of the IBC, the RP was duty-bound to give his views to the CoC. The CoC members having seconded the RPs opinion after due consideration of all facts presented before it by the RP, it can be safely inferred that this acquired the character of being the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no reasons to disagree with the decision of the Adjudicating Authority in passing the liquidation order of the Corporate Debtor as a going concern having been so voted and unanimously recommended by the CoC in the exercise of its commercial wisdom - there are no merit in both the appeals - appeal dismissed. - HON'BLE JUDGES ASHOK BHUSHAN, J. (CHAIRPERSON) AND BARUN MITRA, MEMBER (T) For the Appellant : Abhijeet Sinha, Meghna Rao, Rahul Totala and Rajat Malu, Advocates For the Respondents : Krishnendu Datta, Sr. Advocate, Anand Varma, Kaustubh Prakash, Hita Sharma, Kirti Gupta, Apoorva Pandey, Bishwajit Dubey, Madhav Kanokia, Prafful Goyal and Neha Shivhare, Advocates JUDGMENT BARUN MITRA, MEMBER (T) 1. Present is a set of two appeals filed under Section 61 of Insolvency and Bankruptcy Code, 2016 ( IBC in short) arising out of the common order dated 10.03.2023 (hereinafter referred to as Impugned Order ) passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Court- II) in CP (IB) No. 559/(MB)/2018. By the impugned order, the Adjudicating Authority ordered the liquidation of the Corporate Debtor - Trend Electronics Limited, as a going concern under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived from the potential resolution applicants including Epitome, the CoC invited EOIs afresh with the last date fixed as 31.12.2020. Three resolution plans were received but all the three potential resolution applicants including Epitome were thereafter requested to submit revised resolution plans by 29.05.2021. A resolution plan was submitted by Epitome on 05.05.2021 and pursuant to a query raised by the RP, furnished their final signed resolution plan on 05.06.2021. The RP again sent an email on 08.06.2021 seeking certain further clarifications from Epitome as to whether it was barred by Section 29A of the IBC to which Epitome clarified in the negative. On 08.07.2021, the RP informed Epitome that the CoC had decided to place compliant resolution plans for voting on 13.07.2021 and sought specific information regarding alleged ineligibility of Mrs. Sushma Dhoot ('Sushma' in short) and Ms. Nalini Dhoot ('Nalini' in short) to submit a resolution plan on account of their being classified as promoters of Videocon Industries Limited ('VIL' in short). Epitome thereafter sent an email on 14.07.2021 clarifying that Sushma and Nalini cannot be considered to be prom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.2023 has been accepted by the successful bidder. Aggrieved by this impugned order, the present set of appeals have been preferred by Epitome in the first appeal and Sanghatan in the second appeal. Company Appeal (AT)(Insolvency) No.565/2023 3. Making his submissions, the Learned counsel for the Appellant submitted that the Appellant from the very beginning had persistently made genuine and sincere attempt towards the successful and beneficial resolution of the Corporate Debtor by repeatedly expressing before the RP its bona fide interest and willingness to revive the business of the Corporate Debtor. It was added that the Appellant is still interested in submission and implementation of the resolution plan for the purpose of revival and rehabilitation of the Corporate Debtor. It was contended that it was wrong and misconceived on the part of the RP to unilaterally reject the resolution plan of the Appellant by holding that Sushma and Nalini were part of the promoter group of VIL. Merely because both of them held some negligible share-holding in VIL and that they were relatives of some shareholders of the Appellant, the Appellant could not be treated as disqualified and ineligibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e overarching framework of IBC which contemplates liquidation only as a last resort. Furthermore, it was submitted that though the Corporate Debtor fell within the definition of a MSME company as the value of its plant and machinery did not exceed Rs. 50 Crores nor its turnover exceeded Rs. 250 crores, yet, the RP failed to disclose this critical input to the potential resolution applicants including the Appellant at the time of the EOI or thereafter. This was yet another ground to show that the CIRP of the Corporate Debtor clearly suffered from material irregularity and therefore has the effect of vitiating the order of liquidation passed by the Adjudicating Authority. 6. It was therefore emphatically asserted that the RP exceeded the power and authority cast upon him under the provisions of the IBC in rejecting the resolution plan of the Appellant without placing the same before the CoC, thereby irregularly driving the Corporate Debtor into liquidation. In support of their contention, the Learned Counsel for the Appellant relied on the judgement delivered by the Hon'ble Apex Court in the matter of Arcelor Mittal India (P) Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1 ('Arcel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down by the Arcelor judgement. It was asserted that the RP was willing to submit the resolution plan submitted by the Appellant before the CoC but several CoC members having insisted on the specific views of the RP on the eligibility of the Appellant during their deliberations, the RP had no choice before it but to place its views. Based on facts before it, the RP in the discharge of its responsibilities had expressed that Epitome did not meet the eligibility criteria for Section 29A compliance. The CoC members having clearly informed the RP during the 29th CoC meeting that only Section 29A compliant plan should be placed before CoC for consideration and voting, the RP was obligated to act accordingly. The same stance was adopted in the submissions made by the Learned Counsel for Respondent No. 2 that the RP had placed the relevant material on the Appellant's ineligibility under Section 29A before the CoC which was deliberated upon by the CoC in the 29th CoC meeting held on 15.07.2021. In the said meeting, the CoC in its commercial wisdom unanimously decided not to place Epitome's resolution plan for voting as it was found to be non-compliant with Section 29A of the IB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to disrupt the resolution process through liquidation of the Corporate Debtor as a successful bidder has been declared pursuant to the auction conducted in terms of the impugned order and the successful bidder is in the process of implementing its bid. Company Appeal (AT) (Insolvency) No. 528/2023 12. The Learned Counsel for the Appellant submitted that Sanghatan is a registered labour union which is aggrieved with the impugned order for initiation of liquidation proceedings on the ground that it does not take into account the interests of all stakeholders of the corporate debtor and that the livelihood of nearly 134 families which are dependent on the operations of the Corporate Debtor have been imperilled. It is further submitted that the CoC by rejecting the resolution plans as well as the restructuring proposal received from the ex- promoter, Mr. Venugopal Dhoot had not taken a commercially sound decision and instead put the corporate debtor into liquidation with ulterior motives. It was emphatically asserted that the IBC expects the CoC to take into account all material facts, the best interest of the corporate debtor and to make genuine attempts at reviving and maximising the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther, with respect to apprehensions of the Appellant with respect to the payment of gratuity and provident fund, it is submitted that the auction process document clearly provided that The total gratuity liability of the Company amounts to around INR 3.75 Crores if the services of all the employees are terminated on March 31, 2023. The balance with gratuity fund as on March 31, 2022 was around INR 0.57 Crores resulting into unfunded gratuity liability of around INR 3.18 Crores. The Qualified Bidders to note that the said liability shall be to the account of the Successful Bidder post the Transfer Date and shall not be included in the Bid Value. Therefore, the dues of the Appellant towards gratuity and provident fund payments have adequately been taken care of under the Liquidation and it is clear that the gratuity and provident fund payments will be made to the workmen and employees by the successful bidder as and when such payments are due and payable. The successful bidder was liable to make such payments over and above the value it is providing for acquisition of Corporate Debtor as a going concern. 15. It was also added that liquidation process of Corporate Debtor is near comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in the CIRP of the corporate debtor which vitiated the liquidation order. 19. Having perused the records and after hearing both parties, we find that it is an admitted fact that the RP had sought clarifications from the Appellant on 08.07.2021 regarding their eligibility under Section 29A of the IBC to submit a resolution plan as placed at page 172 of Appeal Paper Book ('APB' in short). It is also an undisputed fact that a detailed reply was given thereto by the Appellant on 14.07.2021 in their defence of being Section 29A compliant as seen at pages 168-171 of APB. It is, however, the case of the Appellant that the RP had wrongly declared them ineligible unilaterally and did not place the resolution plan before the CoC for their consideration and voting and that this action of the RP was in breach of the IBC and beyond the powers and authority vested upon the RP. In support of their contention, the Learned Counsel for the Appellant has adverted attention to a communication received from the RP on 16.07.2021 as placed at page 176 of APB. It may be relevant to notice the contents of the said communication which is to the effect: From: Divyesh Desai [email protected] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords that Mazars advised the RP to take a legal opinion on the eligibility of the Appellant under Section 29A. The legal opinion was accordingly obtained and the legal opinion tendered by the legal counsel of the RP was also placed before the CoC. We also notice that it is recorded in the said minutes that in the opinion of the legal counsel of the RP, strictly as per law, Epitome did not appear to be qualified under Section 29A but since Epitome had disputed the classification of Sushma and Nalini as promoters of VIL, the CoC could discuss the matter and take action accordingly. In fact, it deserves particular attention that the minutes clearly record that the RP was even ready to place the resolution plan of Epitome for consideration of the CoC. It may be pertinent to reproduce here the relevant excerpts of the 29th CoC meeting: The RP then stated that considering the Section 29A undertaking the subsequent clarifications provided by Epitome and the technical nature of determining the eligibility involved, he is willing to place the resolution plan of Epitome which is otherwise compliant as per IBC for CoC's consideration. The RP also highlighted the waiver sought by Epitome i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Appellant before the CoC to enable the CoC to take a well-considered and holistic view. We are fully satisfied with the conduct of the RP and the endeavours made by him to keep the CoC properly apprised on the eligibility aspect of Epitome. 24. Given this background, it is noteworthy that after due deliberations, it is the CoC members who advised the RP that only Section 29A compliant plan should be placed before CoC for consideration and voting. Given that CoC had decided that only Section 29A compliant resolution plan can be placed for consideration of CoC members and further that the CoC had sought the opinion of the RP on the Section 29A eligibility of Epitome, it cannot be said that the RP had exceeded his jurisdiction or had acted unilaterally or that RP had supplanted the commercial wisdom of the CoC. Further, the fact that the RP had opined that the Appellant was not eligible in terms of Section 29A criteria cannot be held against the RP simply because the opinion of the RP did not suit the interest of the Appellant. The RP had formed his opinion on the basis of available material on record which was clearly placed before the CoC in a most candid and forthright man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed by the RP. This is sufficiently borne out from the minutes recorded during the 29th meeting which is to the effect: As such Epitome's Resolution plan cannot be placed for CoC members' consideration or voting given that only Section 29A compliant resolution plan can be placed for consideration of CoC members. It was also decided to intimate RPs decision to Epitome. 27. This now brings us to the second part of the issue as to whether the liquidation order passed by the Adjudicating Authority should be allowed to be completed or be set aside. Both Epitome, the Appellant in the first appeal and Sanghathan, the Appellant in the second appeal have contended that the liquidation order passed by the Adjudicating Authority should be set aside on grounds of the alleged material irregularities in the CIRP of the Corporate Debtor. 28. It is the case of the Appellant in Company Appeal (AT) (Insolvency) No. 565/2023 that the RP exceeded the power and authority cast upon him under the provisions of the IBC by rejecting the Resolution Plan of the Appellant himself without placing the same before the CoC thereby driving the Corporate Debtor into liquidation. Further it is the contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. These resolution plans were discussed threadbare in the 29th and 30th CoC meetings by the creditors at length. Also, a Section 12A proposal received from Mr. P.N. Dhoot, one of the promoters of the Corporate Debtor for restructuring was also discussed and put up for voting during the 30th CoC meeting. The same was rejected by 100% voting share of the CoC on account of various commercial reasons including non- payment of CIRP cost, deferred payments proposed etc. Thus, we find adequate substance in the contention of both the RP and the CoC that the RP had undertaken all steps of CIRP envisaged under the IBC to ensure that creditors/stakeholders of the Corporate Debtor achieved maximum recovery. It is only when the Section 12A proposal and the resolution plan of PASPL were not found to be feasible and compliant with the provisions of IBC that the CoC had unanimously resolved and voted in favour to liquidate the Corporate Debtor as a going concern with 100% majority. This has been clearly recorded in the minutes of the 30th meeting of the CoC which was placed on record before this Tribunal by the Respondents during the course of hearing. We also notice that only in pursuance of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommencement of the liquidation process. Moreover, we find no reasons to disagree with the Adjudicating Authority that the ex-promoter having brought the Corporate Debtor to its present state do not deserve another chance at revival especially when the liquidation process had made serious progress. 33. It is also pertinent to note that Epitome was informed of its ineligibility under Section 29A of the IBC vide email dated 16.07.2021 sent by the RP. RP thereafter vide his email dated 12.08.2021 asked the Appellant to provide the bank account details for refund of Bid Bond amount. The Appellant on same date provided its bank account details. Further, on 18.08.2021, the Appellant followed up with RP for the refund. On 21.08.2021, the refund of Bid Bond amount was processed for payment to the Appellant. Hence, the very fact that the Appellant had already accepted the Bid Bond amount without any protest or prejudice and that the decision of their ineligibility was communicated way back in 2021, it does not stand to any cogent reasoning to allow them to belatedly revive their claim to submit a resolution plan afresh after hibernating for almost two years. To ignore this delay at this stag ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
