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TMI Blog2024 (6) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... t filed by RP, it was always open for the Adjudicating Authority to call for the relevant documents from the RP for examination of the same and rejection of the Plan on the ground that RP has not filed Information Memorandum, RFRP and certain Minutes of the CoC is clearly uncalled for - There are no consideration of materials or findings based on any material or facts regarding Plan being non-compliance of Section 30(2). In the facts of the present case, interest of justice be served in setting aside the impugned order passed by the Adjudicating Authority and reviving the application filed by the RP for fresh consideration. To obviate the delay in disposal of the application, the Minutes and the Documents which have not been filed by RP, may be submitted by RP along with an Additional Affidavit before the Adjudicating Authority within two weeks from today. Appeal allowed. - [ Justice Ashok Bhushan ] Chairperson , [ Barun Mitra ] Member ( Technical ) And [ Arun Baroka ] Member ( Technical ) For the Appellant : Mr. Krishnendu Datta, Sr. Advocate with Mr. Amol Vyas, Advocates For the Appellants : Mr. Krishnendu Datta, Sr. Advocate with Mr. Vivek Malik and Mr. Vivek Sinha, Advocates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary documents for consideration of the Resolution Plan and rejecting the Resolution Plan on the ground that RP has not submitted, the aforesaid documents was not appropriate. 5. It is further submitted that Adjudicating Authority has also made the observation that claim of Statutory Authorities has not been accepted by the RP, whereas decision of RP not to accept the claim of the Statutory Authority was never challenged. The observation of the Adjudicating Authority that liquidation is better option cannot be ground for rejecting the Resolution Plan. All the Resolution Applicants were subjected to Swiss Challenge Method to determine the maximum value of the Corporate Debtor. Resolution Applicants were also given opportunity to revise their Resolution Plans. 6. Learned Counsel for the SRA also submitted that SRA was fully eligible under Section 29-A and observation in the order that it has not been disclosed the dealing of the SRA with Corporate Debtor is not correct. 7. The Adjudicating Authority in Paragraph 20 has noted the following which led to the rejection of application. Para 20 of the order is as follows: 20. We have heard the learned counsel for the applicant/RP and perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Process has been undertaken. However, since a challenging method was undertaken and the bidding process was closed between the H1 bidder (initial) who was subsequently rejected after deliberations due to non - non-compliance with certain conditions and the next successful bidder, the process complies and seems to have gone through the process of due diligence and no merit of rejection is applied. f) While the Adjudicating Authority has limited jurisdiction to review the commercial wisdom of CoC the judgments in this regard give limited scope to this Tribunal to intervene and reject the application as it complies with Sec 30(2) of the IBC. The judgments passed in the matter of the Committee of Creditors of Essar Steel India Limited vs Satish Kumar Gupta and Ors. and in the matter of Maharashtra Seamless Steel Ltd vs. Padmanabhan Venkatesh Others in Civil Appeal No.4242 of 2019 held that the Resolution Plans need not match up to liquidation value of the CD. g) It is also observed that the Customs and State Tax Department filed their claim i.e. 55.20 crores ( approx) but the RP admitted nil amount and did not give any reason for the same at Schedule - 4 ( List of Statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the record and could have very well called for by the Adjudicating Authority. Not recording reason for dissent by original applicant has no bearing, dissent is recorded and expressed by votes in the Meeting of the CoC. In observation (d), it has been observed that an opportunity to submit the revised bid was not given to the H1 bidder, whereas it was further observed that Resolution Plan of H1 bidder was a conditional plan regarding non-inclusion of the CIRP cost in the Plan itself. It was further observed that document submitted it is not clear whether the SRA has had any dealings with the Corporate Debtor in the past, the eligibility certificate under Section 29-A has not been submitted to the Adjudicating Authority. The eligibility under Section 29-A is of utmost importance and only after satisfying with the eligibility of the SRA, the CoC proceeds further to consider a Plan. It does not appear that there was any objection raised before the Adjudicating Authority regarding eligibility of the SRA, nor any grounds have been indicated and as to on what grounds SRA can be held to be not eligible. In observation (e), it has been observed that a copy of the two valuations done was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cating Authority has observed that 8th CoC Meeting has not been filed, it was open for the Adjudicating Authority to direct the RP to produce the 8th CoC Meeting for consideration. 10. In observation (j), it has been observed that Operational Creditor Statutory Authorities have not paid amount in terms of Section 30(2)(b). However, there is no finding or details as to how the observation has been made that Operational Creditor, Statutory Authorities has not been paid the amount under Section 30(2)(b). In sub-Paragraph (k), it is observed that Resolution Plan does not confirm the requirement of the Section 30 of the Code. 11. The observations of the Adjudicating Authority as noticed above are observation, relating to various documents not being filed by the RP, including the Minutes of the 8th CoC, rejection of the claim of the Customs and State Tax Department without giving any reason and further non-payment of Operational Creditor/Statutory Authorities. Adjudicating Authority itself in sub-Paragraph (f) has noted the limits of jurisdiction of the Adjudicating Authority while reviewing the commercial wisdom of the CoC. 12. The observation made in paragraphs (j) and (k) that there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated in Section 196 of the I B Code. None of the specified functions of the Board, directly or indirectly, pertain to regulating the manner in which the financial creditors ought to or ought not to exercise their commercial wisdom during the voting on the resolution plan under Section 30(4) of the I B Code. The subjective satisfaction of the financial creditors at the time of voting is bound to be a mixed baggage of variety of factors. To wit, the feasibility and viability of the proposed resolution plan and including their perceptions about the general capability of the resolution applicant to translate the projected plan into a reality. The resolution applicant may have given projections backed by normative data but still in the opinion of the dissenting financial creditors, it would not be free from being speculative. These aspects are completely within the domain of the financial creditors who are called upon to vote on the resolution plan under Section 30(4) of the I B Code. 56. For the same reason, even the jurisdiction of NCLAT being in continuation of the proceedings would be circumscribed in that regard and more particularly on account of Section 32 of the I B Code, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vency resolution period. Third, the debts owed to operational creditors have not been provided for in the resolution plan in the prescribed manner. Fourth, the insolvency resolution plan costs have not been provided for repayment in priority to all other debts. Fifth, the resolution plan does not comply with any other criteria specified by the Board. Significantly, the matters or grounds be it under Section 30(2) or under Section 61(3) of the I B Code are regarding testing the validity of the approved resolution plan by CoC; and not for approving the resolution plan which has been disapproved or deemed to have been rejected by the CoC in exercise of its business decision. 58. Indubitably, the inquiry in such an appeal 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, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cope of enquiry and the grounds on which the decision of approval of the resolution plan by CoC can be interfered with by the adjudicating authority (NCLT), has been set out in Section 31(1) read with Section 30(2) and by the Appellate Tribunal (NCLAT) under Section 32 read with Section 61(3) of the I B Code. No corresponding provision has been envisaged by the legislature to empower the resolution professional, the adjudicating authority (NCLT) or for that matter the appellate authority (NCLAT), to reverse the commercial decision of CoC much less of the dissenting financial creditors for not supporting the proposed resolution plan. Whereas, from the legislative history there is contra indication that the commercial or business decisions of the financial creditors are not open to any judicial review by the adjudicating authority or the appellate authority. *** 64. Suffice it to observe that in the I B Code and the Regulations framed thereunder as applicable in October 2017, there was no need for the dissenting financial creditors to record reasons for disapproving or rejecting a resolution plan. Further, as aforementioned, there is no provision in the I B Code which empowers the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is in non-compliance of Section 30(2). From the observations made by the Adjudicating Authority in the impugned order, it is clear that apart from only bare observation that Plan does not confirm to Section 30(2), there are no reasons or material given as to how the plan can be said to be non-compliance of Section 30(2). 14. As observed above with regard to Minutes and Documents which were not filed by RP, it was always open for the Adjudicating Authority to call for the relevant documents from the RP for examination of the same and rejection of the Plan on the ground that RP has not filed Information Memorandum, RFRP and certain Minutes of the CoC is clearly uncalled for. 15. It is further relevant to notice that Paragraph 20 is the only Paragraph where Adjudicating Authority has noticed and made observation in sub-Paragraphs (a) to (k). There are no consideration of materials or findings based on any material or facts regarding Plan being non-compliance of Section 30(2). In the facts of the present case, interest of justice be served in setting aside the impugned order passed by the Adjudicating Authority and reviving the application filed by the RP for fresh consideration. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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