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TMI Blog2022 (9) TMI 1582X X X X Extracts X X X X X X X X Extracts X X X X ..... IRP process. It is only the case of the Respondents such averments allegations have been made and the Adjudicating Authority without going into the reality simply ratified the submissions of the Respondents, which this Tribunal highly deprecate the said stand. In the present case, the case of the Respondents is that despite submission of resolution plan beyond the CIRP period and much later to the last date of submission of plans, sought a direction to the RP to place its / their plan before the CoC. Therefore, the Respondents are not at all to be considered as PRAs since they have backed out from submission of the plan and intend to make an entry in to the CIRP belatedly even beyond the period of CIRP. In view of the decisions of the Hon ble Supreme Court in Ebix Singapore, Committee of Creditors of Essar Steel India [ 2019 (11) TMI 731 - SUPREME COURT] and this Tribunal judgment in M/s Renganayaki [ 2021 (4) TMI 776 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , CHENNAI] and in Union Bank of India [ 2022 (1) TMI 1182 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] , this Tribunal comes to an irresistible and inescapable conclusion that the Appellant has made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisional list of Resolution Applicants and the 'RP' provided the copies of 'Information Memorandum' (in short 'IM'), evaluation matrix and Request For Resolution Plan (in short 'RFRP') in accordance with Section 25(2)(h) of the I&B Code, 2016 on 09.10.2019 in order to enable the consortium to submit Resolution Plan for the 'Corporate Debtor'. Even 'Virtual Data Room' (in short 'VDR') access was provided to the consortium on 15.10.2019 along with 20 other 'Prospective Resolution Applicants' (in short 'PRAs'). The consortium was included in the final list of PRAs. The consortium vide e-mail dated 05.11.2019 requested for a site visit on 11.09.2019 and also requested for the extension of date for submission of the Resolution Plan. However, the consortium never asked for audited balance sheet and was proceeded on the basis of information available on the 'VDR' and the 'IM' as was disclosed to all 'PRAs'. 4. It is submitted that on 06.11.2019 the consortium sent an e-mail to the Resolution Professional declining their participation in submission of Resolution Plan for the non-availability of audit financial statements of 'Corporate Debtor'. It is submitted that all relevant informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iling its counter. The 'Adjudicating Authority' passed the impugned order in I.A. No. 227 of 2020 directing 'RP' to place before the 'CoC' / Appellant the Respondents No.1 to 3 (consortium) plans along with Resolution Plan submitted by 5th Respondent for its consideration. 8. Apart from the facts as narrated above, the Learned Senior Counsel raised the following grounds in the Appeal. 9. It is submitted that the impugned order is completely baseless and untenable on the ground that the resolution plan of the consortium is being directed to be put up for consideration especially when such a resolution applicant had expressly moved out of 'CIRP' by giving a written communication to the Resolution Professional. It is submitted that the Resolution Applicant has no vested right to have its resolution plan considered or approved as held by the Hon'ble Supreme Court in Arcelor Mittal India Private Limited Vs. Satish Kumar Gupta and Ors. in Civil Appeal No. 9402 -9405 of 2018. 10. It is submitted that after various rounds of negotiations between the Appellant and the 5th Respondent, the plan submitted by the 5th Respondent was approved by 100% voting share of 'CoC'. It is submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for collation of data and preparation of a viable and effective plan and the same was filed on 27.05.2020. Since no reply was forthcoming, the Respondents vide e-mail dated 16.06.2020 sent a reminder to the 'RP' to place the plan before the 'CoC'. However, the RP vide e-mail dated 18.06.2020 stated that the plan submitted would not be placed before the 'CoC'. 15. It is submitted that the plan submitted by the Respondent is within the 'CIRP' period. Post 14.03.2020 any day in the 'CIRP' period would not be considered as a day passed by, by virtue of the order passed by the Hon'ble Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 8 of 40 Apex Court. Further, Regulation 40C of the 'CIRP' Regulations specifically excluded the time from the CIRP period which could not be done due to the lockdown imposed. 16. The Learned Senior Counsel submitted that the Hon'ble Supreme Court in the case of Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors. (2020) 8 SCC 531 held that the term 'mandatorily' in Section 12 is struck down as being manifestly arbitrarily under Article 14 of the Constitution of India. The Audited Financials by the statutory auditors for the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , shall be placed before the CoC along with the Resolution Plan filed by METL and submitted for our approval in I.A. 161, for the CoCs evaluation and approval, strictly keeping in mind the objects of the Code, and superior commercial viability. The Resolution Plan approved out of the two by the CoC shall be submitted to us for our consideration and approval. (6) The directions at Sl. Nos1, 2, & 4 shall be carried out within a period of 12 weeks from the receipt/uploading of this order. This period is considered appropriate considering the present Covid-19 pandemic situation and the ensuing lockdown in several states. The RP is granted liberty to bring an application before this Adjudicating Authority for any further exclusion of time, if the same is for exceptional and justifiable reasons, and in the interest of completing the process and achieving the objects of the Code. 2. All the IAs in C.P. (IB) No. 51/BB/2018 are disposed of as above. No order as to cost. 3. Post the case for report of the RP on 30th June 2021." 22. Aggrieved by the above order of the 'Adjudicating Authority', the Appellant filed the present Appeal raising various grounds and sought interim stay of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssociate Decor Limited which is due on 11.11.2019. The above is forever information With best regards, Mahavir Shankarlal Mehta, Partner Svamitva Landmark" 26. The RP vide e-mail dated 02.12.2019 addressed to all the 'PRAs' informing them that the last date for submission of resolution plans for Associate Decor Limited has been extended from 30.11.2019 to 07.12.2019 till 4 p.m. Further in the e-mail it is stated that no resolution plan shall be entertained post 4 p.m. on 07.12.2019. Thus, from the mail from RP dated 02.12.2019, the last date for submission of plan has been extended till 07.12.2019. 27. The Respondents No.1 to 3 vide their e-mail dated 06.11.2019 (supra) expressly shown their inability to submit their Resolution Plan. However, the Respondents No.1 to 3 submitted their resolution plan by e-mail dated 27.05.2020 and sent a reminder letter dated 16.06.2020. The fact remains that the RP vide his e-mail dated 02.12.2019 extended the time from 30.11.2019 to 07.12.2019 till 4:00 p.m. From the mail, it is evident that the said mail has been sent to the Respondents and the Respondents are aware of the said extension of date for submission of resolution plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 is that the Respondents submitted their 'EoI' vide their letter dated 29.08.2019 and sought balance sheets and Profit and Loss accounts and other financial information about the Corporate Debtor' from the Resolution Professional in order to prepare resolution plan, however, the 'RP' was reluctant and did not provide the same despite several requests and email correspondences. It is also contended that the Respondents No.1 to 3 vide their e-mail dated 06.11.2019 specifically referred that non-availability of documents in virtual data room and non-availability of financials of 'Corporate Debtor' and therefore, in absence of the said documents, the Respondents decided not to participate in submission of resolution plan. 31. The fact remains that the Respondents themselves vide their e-mail dated 06.11.2019 clearly expressed their decision not to participate in the resolution plan and it is clearly stated in the letter that they have gone through the available documents in virtual data room and non-availability of audited financials of the 'Corporate Debtor' and further a preliminary due diligence from their end. The Respondents No.1 to 3 have at no point of time requested the RP to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys and placed the plan before the 'CoC' for its consideration and the 'Adjudicating Authority' condoned the delay, in our view is completely misinterpreting and misjudging the facts. Further, the 'Adjudicating Authority' misread the judgment of the Hon'ble Supreme Court in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta (2020) 8 SCC 531 para 73. The Hon'ble Supreme Court in the above decision held that the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the 'Committee of Creditors', the limited judicial review available is to see that the ''Committee of Creditors have taken into account the fact that the 'Corporate Debtor' needs to keep going as a going concern during the insolvency process, that it needs to maximise the value of the assets and that the interests of all stakeholders including 'Operational Creditors' has been taken care of. In view of the aforesaid facts the Hon'ble Supreme Court held that "if the 'Adjudicating Authority' finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the CoC to resubmit such plan after satisfying the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Government due to the COVID-19 PANDEMIC. Regulation 40(c) provides that the delay in completing any activity related to the CIRP because of imposition of lockdown will not be counted for the purposes of the timeline that has been stipulated under the statutory framework. If the CIRP is not completed within the prescribed timeline, the Corporate Debtor sent into liquidation. This understanding of the evolution of the law is critical to our task of judicial interpretation. We cannot afford to be swayed by abstract conceptions of equity and 'contractual freedom' of the parties to freely negotiate terms of the Resolution Plan with unfettered discretion, that are not grounded in the intent of the IBC. 149. The IBC and the regulations provide a detailed procedure for the completion of CIRP. An application for initiation of CIRP is filed either by the financial creditor, operational creditor or the Corporate Debtor itself under Sections 7, 9 and 10 of the IBC, respectively. Once the application is admitted by the Adjudicating Authority, it passes the following orders under Section 13(1) of the IBC: (i) declaration of a moratorium for the purposes referred to in Section 14 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) evaluate the resolution plans received under sub-regulation (2) as per evaluation matrix; (b) record its deliberations on the feasibility and viability of each resolution plan and (c) vote on all such resolution plans simultaneously. 35. From the above provisions of law and the Regulations the procedure for submission of resolution plan and the powers of the 'Committee of Creditors' in approving the resolution plan by a vote of not less than 66% of voting share of the 'Financial Creditors' after considering its feasibility and viability may approve the plan. Once the plan is approved by the 'Committee of Creditors', the 'Adjudicating Authority' empowered to approve the plan under Section 31 which was approved by the 'Committee of Creditors' and meets the requirements as referred to in sub-section (2) of Section 30. Further, the procedure encapsulated under the regulations and as per Regulation 39(1-B) the Committee shall not consider any Resolution Plan received after the time as specified by the Committee under Regulation 36B. In view of the reasons every Resolution Applicant shall comply with the procedure as prescribed under the law and regulations. The due procedure and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents have failed to submit the resolution plan within the time, therefore there is no immunity to the respondents to file beyond the time prescribed. The RP rightly rejected the request of the Respondents. 37. The Respondents failed to establish that the 'RP' violated the CIRP process. It is only the case of the Respondents such averments allegations have been made and the 'Adjudicating Authority' without going into the reality simply ratified the submissions of the Respondents, which this 'Tribunal' highly deprecate the said stand. 38. It is not in dispute that the 'CIRP' period has been expired prior to submission of plan by the Respondents and as held (supra) the Respondents have not evinced any interest in submitting of resolution plan, after they backed out from the submission of plans vide letter dated 06.11.2019. It appears that the Respondents took complete U-turn and submitted its plan beyond the 'CIRP' period by levelling baseless allegations against the RP to pressurise the 'RP' to place its plan before the 'CoC'. Such conduct of the Respondents highly deprecated. 39. It is unequivocal that the 5th Respondent submitted its 'EoI' on 04.10.2019 and submitted it pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not applicable to the facts of the present case. 42. The Learned Counsel for the Appellant relied upon judgment of the Hon'ble Supreme Court in Ebix Singapore in para 169 holding that judicial restraint must be exercised while intervening in a law governing substantive outcomes through procedure such as the IBC. "169. Judicial restraint must not only be exercised while adjudicating upon the constitutionality of the statute relating to economic policy but also in matters of interpretation of economic statutes, where the interpretative maneuvers of the Court have an effect of transgressing into the law-making power of the legislature and disturbing the delicate balance of separation of powers between the legislature and the judiciary. Judicial restraint must be exercised in such cases as a matter of prudence, since the court neither has the necessary expertise nor the power to hold consultations with stakeholders or experts to decide the direction of economic policy. A court may be inept in laying down a detailed procedure for exercise of the power of withdrawal or modification by a successful Resolution Applicant without impacting the other procedural steps and the timelines unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the impugned order dated 24.02.2021 passed by the Adjudication Authority (National Company Law Tribunal, Hyderabad Bench, Hyderabad) In IA No. 1094/2020 in CP No (IB) No. 153/7/HDB/2019 and sets aside the same, in Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 27 of 40 furtherance of substantial cause of justice. Consequently, the Appeal succeeds. 19. In fine, the instant Comp App (AT) (CH) (INS) No. 23/2021 is allowed. No costs. The 'Adjudicating Authority' (National Company Law Tribunal, Bench-I, Hyderabad) is to approve the 'Resolution Plan' approved by the "Committee of Creditors' with 100% voting in favour of 'KALS Group'. I A No. 53/2021 (stay application) I A No. 54/2021 (for urgent hearing) are closed." 44. This Tribunal in the matter of Union Bank of India Vs. Mr. Kapil Wadhawan & Ors. in CA (AT) (Ins) No.370, 376-377 and 393 of 2021 dated 27.01.2022 a similar issue fell for consideration and the Tribunal framed the following issue as under: "Whether after Approval of the resolution plan by the COC and pending Approval, the Adjudicating Authority can direct the COC to convene a meeting and place the settlement proposal as offer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany Appeal (AT) (CH) (Ins.) No. 159 of 2021 29 of 40 it stood then, i.e., Regulation 39(3) which directed that "[t]he committee shall evaluate the resolution plans received under sub-regulation (1) strictly as per the evaluation matrix to identify the best resolution plan and may approve it with such modifications as it deems fit". This power of the CoC to suggest modifications invariably entailed an element of negotiation with the Resolution Applicants, who would make suitable revisions and re-submit their Resolution Plans. The scope of a commercial bargain with the Resolution Applicants evinces a sense of a negotiated agreement that is arrived between the parties, which resembles an exercise of contractual freedom by the CoC and the Resolution Applicant. 127. If this court were to hold that CoC-approved Resolution Plans are indeed contracts, their provisions would still have to conform to the statutory provisions of the IBC. However, such an interpretation would entail that CoC-approved Resolution Plans are at the intersection of the IBC and the Contract Act. This would mean that certain principles of contract law, for example those relating to discharge, penaltie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sufficient for Approval of a resolution plan. The constitution of the CoC is based on specific scenarios envisaged in the statute and accounts for varying compositions, based on factors such as the nature and quantum of debt owed. For example, if it comprises of operational creditors alone, the percentage of debt owed between the operational and financial creditors and other such variables impact voting thresholds inter se members of the CoC. A sixty-six per cent vote of the CoC is required to approve a Resolution Plan. The dissenting creditors are deemed to have given their Approval and are bound by the decision of the majority of the CoC. The dissenting creditors are bound as a result of the statutory provision and not because they have actually consented to be parties to such an arrangement. Other elements governing the Resolution Plan indicate that the entire process from initiation and leading up to its acceptance by the CoC takes place within the framework of the IBC. In addition, the IBC provides penalties for non-compliance with the Resolution Plan after its Approval under Section 31 and forfeiture of the PBG for failing to implement the Resolution Plan or contributing to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y scenario." Thus, insolvency law recognises that parties can take benefit of such 'incomplete contract' to hold each other up for their individual gain. In an attempt to solve the issue of incompleteness and the hold-up threat, the insolvency law provides procedural protections i.e., "the law puts in place guardrails that give the parties room to bargain while keeping them from taking position that veer toward extreme hold up". 131. It may be useful to refer to how this Court has analysed instruments that are analogous to a Resolution Plan. In SK Gupta v. KP Jain, this Court while discussing the nature of compromise or arrangements entered between a company and its creditors or members observed that such a compromise or arrangement once sanctioned by the court is not merely an agreement between parties because it binds even dissenting creditors or members through statutory force. This Court made the following observations: "12. The scheme when sanctioned does not merely operate as an agreement between the parties but has statutory force and is binding not only on the Company but even dissenting creditors or members, as the case may be. The effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l would be limited to the power exercisable by the resolution professional under Section 30(2) of the I&B Code or, at best, by the adjudicating Authority (NCLT) under Section 31(2) read with Section 31(1) of the I&B Code. No other inquiry would be permissible. Further, the jurisdiction bestowed upon the appellate Authority (NCLAT) is also expressly circumscribed. It can examine the challenge only in relation to the grounds specified in Section 61(3) of the I&B Code, which is limited to matters "other than" enquiry into the autonomy or commercial wisdom of the dissenting financial creditors. Thus, the prescribed authorities (NCLT/NCLAT) have been endowed with limited jurisdiction as specified in the I&B Code and not to act as a court of equity or exercise plenary powers. 59. In our view, neither the adjudicating Authority (NCLT) nor the appellate Authority (Nclat) has been endowed with the jurisdiction to reverse the commercial wisdom of the dissenting financial creditors and that too on the specious ground that it is only an opinion of the minority financial creditors……" (emphasis supplied) 38. The Court, also held (in paragraph 62) that the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ats (P) Ltd. v. Reliance Infratel Ltd. (Monitoring Committee), (2021) 10 SCC 623 4 is fully applicable in this case. "47. Hence, once the requirements of IBC have been fulfilled, the adjudicating Authority and the appellate Authority are duty-bound to abide by the discipline of the statutory provisions. It needs no emphasis that neither the adjudicating Authority nor the appellate Authority have an unchartered jurisdiction in equity. The jurisdiction arises within and as a product of a statutory framework." 9.6 Based on the law laid down by Hon'ble Supreme Court in the cases mentioned above, it is clear that; Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 38 of 40 a) Once the Resolution Plan is approved by a 100 per cent voting share of the CoC. The jurisdiction of the Adjudicating Authority was confined by the provisions of Section 31(1) to determining whether the requirements of Section 30(2) have been fulfilled in the plan as approved by the CoC. b) Once the requirements of the IBC have been fulfilled, the Adjudicating Authority and the Appellate Authority are duty-bound to abide by the discipline of the statutory provisions. Neither the Adjudicating A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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