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TMI Blog2024 (10) TMI 831X X X X Extracts X X X X X X X X Extracts X X X X ..... ied on the doctrine of prudence to justify that resolution of the Corporate debtor is preferred option over the liquidation of the Corporate Debtor. It is worth noting that according to the Adjudicating Authority the other issues like pending writ before the Hon ble High Courts suits file by the Corporate Debtor, FIR filed by the investigation agencies (perhaps referred to CBI) report submitted to RBI for declaring the Corporate Debtor and the promoter directors as wilful defaulter are not related to the matter and cannot be grounds or factors relevant to decide about rejection of the Resolution Plan - From reasoning recorded by the Adjudicating Authority, it is seen the Adjudicating Authority was not impressed by the commercial wisdom of the CoC and sought it fit to start fresh process for the resolution of the Corporate Debtor. In catena of judgements by the Hon ble Supreme Court of India including K. Sashidhar [ 2019 (2) TMI 1043 - SUPREME COURT ] and Kalpraj Dharamshi [ 2021 (3) TMI 496 - SUPREME COURT ] , it has been stipulated that there is hardly any scope for judicial interference on the part of the Adjudicating Authority or the Appellate Tribunal except ensuring that the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of dues and the term loan was classified as NPA on 30.04.2018. 5 .The Appellant followed up payment with few reminders calling upon the Corporate Debtor to make the payments and in absence of any payments, the Appellant filed CP (IB) No. 37/GB/2019 under Section 7 of the Code which was admitted by the Adjudicating Authority vide its order dated 12.02.2020 and the Corporate Debtor was taken into CIRP, and Mr. Pradeep Kumar Goenka, was appointed as Resolution Professional of the Corporate Debtor who is Respondent No. 1 in the present appeal. 6 .It has been brought out that the Respondent No. 1 gave the public announcement calling for the claims on 14.02.2020 with the last date to submit the claims to be 26.02.2020 and after verification of the claims, the Respondent No. 1 constituted the CoC wherein only one Financial Creditor i.e., the Appellant was nominated as a sole member of the CoC having 100% voting shares. The Respondent No. 1 invited Expression of Interest (in short EOI ) and four EOI were received and only two Resolution Plans were received and one of Resolution Plan happened to be Seema Holding Pvt. Ltd. who did not submit Earnest Money Deposit (in short EMD ) as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant submitted that the Adjudicating Authority gave specific directions to the Respondent No. 1 to negotiate with the Promoters of the Corporate Debtor to find viable Resolution Plan and the meeting was directed to be held preferably at the office of the Corporate Debtor. The Adjudicating Authority also directed the Respondent No. 1 to submit compliance report. The Appellant stated that this was in contrast to the I.A. No. 10/2021 in CP (IB) No. 37/GB/2019 which was filed for liquidation of the Corporate Debtor based on the commercial wisdom exercised by the CoC with 100% voting rights. 11 .The Appellant submitted that the Respondent No. 1, nevertheless, complied with the order of the Adjudicating Authority dated 10.02.2021 and filed his report pointing out that the Rare Asset Reconstruction Ltd. had expressed inability to improve the Resolution Plan. The Respondent No. 1 also informed the Adjudicating Authority that the Resolution Plan was found non-compliance of Section 25(2)(h) of the Code with regard to EMD to be and few other requirements of the Code and related regulations. 12 .It has been brought out that on 23.03.2021, based on the Respondent No.1 s report and after noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have resulted into loss of at least Rs. 8.5 Crores for the Appellant bank as the same could have been recovered from the guarantors, based on their guarantee assets. The Appellant submitted that these are more than fair chances for bank to recover their money from the guarantee amounts of the Corporate Debtor and its directors. The Appellant also stated that acceptance of the resolution plan of the Promoters of the Corporate Debtor would have required the Appellant to withdraw the recovery proceedings filed against the Corporate Debtor and its directors which is prejudicial to rights of the Appellant. 19 .The Appellant submitted that the term given by the Promoters of the Corporate Debtor for extinguishment of all pending suits, enforcement actions,SARFAESI Notices, suits, proceedings and cases by any person/agency against the personal and corporate guarantors are not acceptable. 20 .The Appellant further submitted that they had strong doubt about the viability of the Final Resolution Plan submitted by the promoter of the Corporate Debtor and after excising their conscious and judicial commercial wisdom, the Committee of Creditors recommended for liquidation of the Corporate Debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .85%), Alok Industries (83%), Deccan Chronicle Holdings Limited (96%), Ramsarup Industries Ltd. (94%). 27 .The Respondents submitted that they were offering much more than the liquidation value despite their financial limitations and the Appellant should have been move gracious, graceful and accommodative to allow the Corporate Debtor function smoothly. 28 .The Respondents submitted that to kill the Corporate Debtor, the Appellant on 11.02.2019 reported the accounts of the Corporate Debtor to be fraud account and on 06.03.2019 filed the Fraud Management Report in terms of the RBI Circular Dated 01.07.2018, consequent to which, the matter was reported to Central Bureau of Investigation for further investigation against the Corporate Debtor and its Promoters. 29 .The Respondents submitted that even after initiation of CIRP against the Corporate Debtor, the Resolution Professional could not find any suitable Resolution Applicant and only Resolution Plan of the Promoters of the Corporate Debtor was viable and should have been accepted by the Appellant. The Respondents alleged that the wrong decision was taken by the Appellant to initiate liquidation of the Corporate Debtor. 30 .The Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application of ratio given by the Hon ble Supreme Court of India in the case of K. Sashidhar (Supra) and tried to differentiate that when there is single Financial Creditor constituting 100% of CoC, the commercial wisdom cannot be treated as supreme since it gives unfettered arbitrary powers in hands of the individual. Similarly, the Respondents also tried to differentiate from Kalpraj Dharamshi (Supra) where there were more than one Financial Creditor who took commercial decision as Members of the CoC in contrast to the present case where there is only sole Financial Creditor, who is Appellant, as Member of the CoC. 35 .The Respondents alleged that the Appellant were not acting reasonably and rather acted against the spirit of the Code and never discussed the issues with the Respondents including viability of the projects which could have been clarified by them to the Appellant. The Respondents alleged that of the Corporate Debtor failed due to wrong action of the Appellant in advising wrong insurance policy which was for a completed project against the policy required by the Corporate Debtor for a project which was under implementation. 36 .The Respondents submitted that the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Resolution Plan as the same does not fall within the authority of Hon'ble NCLT to approve . Mr. Gaurav Jaina requested the CoC to specifically identify those points/clauses in the Resolution Plan to enable them to look into the same and address appropriately. Representative of the Bank of India, the sole member of the CoC agreed to forward their observations in this regard after getting the minutes of this meeting. (Emphasis Supplied) 42 .We note from above 15th CoC Minutes that Resolution Applicants were asked to withdraw concessions and waivers sought, as these are not in power of the Adjudicating Authority. 43 .We note that the Appellant recorded details of objections against acceptance of the Resolution Plan of the Promoters of the Corporate Debtor as well as regarding non-viability of the Resolution Plan, in the 16th CoC Meeting dated 19.10.2021 which reads as under Minutes of Proceedings at the 16th meeting of the Committee of Creditors (CoC) of Agnipa Energo Private Limited, Corporate Debtor held on Tuesday, the 19th day of October, 2021 through videoconferencing at 10.30 A.M. via Google Meet link meet.google.com/rzn- jmco- war. Present: In person via videoconfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Company / Directors of the Company in the Court of Civil Judge, Kamrup (M). f)Bank cannot agree on withdrawal of enquiry by the CBI against the Company / Directors of the Company. g)Resolution Plan is not clear about the Sources of Funds for its implementation. h)Resolution Plan is not clear about its viability . i)Resolution Plan does not provide for Tripartite Agreement between the Bank, Resolution Applicant and the NBFC with regard to the funds to be brought in by the Resolution Applicants. Mr. Pradeep Kumar Goenka, the Resolution Professional, requested Mr. Gaurav Jaina, one of the Resolution Applicants to address the issues one by one. Mr. Gaurav Jaina, the resolution applicant addressed the issues one by one as follows: a)Resolution Applicants are agreeable to withdraw clauses relating to withdrawal of pending suits against the Company/ Directors of the Company from the Resolution Plan. However, bank's insistence on continuance of proceedings against the personal/ corporate guarantors is not acceptable to the Resolution Applicants. Mr. Jaina clarified that the company being an MSME unit and the Resolution Applicants being the guarantors, continuance of actions agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Company as the unit was closed since long and RA does not have any documentary evidence of source of funds required for revival of the Company to which Mr. Gaurav Jaina stated that the project is still viable as the electricity rates have been revised upwards by the State Electricity Board and they are having alternate sources of funds available for effective implementation of Resolution Plan including those from other VBFCs / FIs. Also, he pointed out the Business Plan narrated in page no 26 of the Resolution Plan which elaborates the alternate avenues available to the Directors to ensure effective implementation of the proposed Resolution Plan and viability of the project. i)***. Mr. Vijoy Kumar Verma representing the Bank of India asked Mr. Gaurav Jaina to ensure submission of an unconditional Resolution Plan as the present plan stipulates several conditions / reliefs sought from FC whereas these conditions/ reliefs should not be linked with the Resolution of the CD.***. (Emphasis Supplied) From above minutes of the 16th CoC, it becomes very clear that along with the bank, Mr. Gaurav Jaina as Suspended director of the Corporate Debtor and Resolution Applicant attended me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity. 45 .The moot question to be decided in present appeal as to whether the Adjudicating Authority can discard the recommendation of the CoC and rather give its own directives overriding the commercial wisdom of the CoC. 46 .In this regard we would like to go through the rational given by the Adjudicating Authority in the Impugned Order overruling the recommendation of the CoC. The relevant portion of the Impugned Order reads as under :- 32 . We find that the CoC /FC has lost the sight of the prime objectives of the IBC. It does not show the Doctrine of Prudence to advance argument for Liquidation instead of Resolution of the Stressed Assets that it is a Commercial Wisdom/Commercial Decision to reject the amount offered to them in terms of the Resolution Plan is more than the twenty times of the Liquidation Value. Issues like a Suit filed by the CD, a Writ pending before the Hon'ble High Court, FIR filed with an Investigating Agency, report submitted to the RBI for declaring the CD, Suspended Directors as Wilful Defaulters are apparently not related matter at this stage to be considered for rejection of the Resolution Plan and rescue of the Stressed Assets with its employees f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating Authority, it is seen the Adjudicating Authority was not impressed by the commercial wisdom of the CoC and sought it fit to start fresh process for the resolution of the Corporate Debtor. 50 .We will like to note decision of this Appellate Tribunal s earlier order in case of Amit Bharana and Ors vs. Gian Chand Narang [Company Appeal (AT) (Insolvency) No. 274 of 2020] w.r.t. commercial wisdom of CoC. The relevant portion reads as under :- 24 . Based on the above decision of the Committee of Creditors, with 87.30% of vote share, i.e. more than the required threshold 66%, passed the Resolution for Liquidation of the corporate debtor. Thus the decision of liquidation of the Corporate Debtor is a valid order. It is pertinent to mention that in the case of K. Sashidhar (supra) Hon'ble Supreme Court has clearly laid down the law that upon receipt of rejected Resolution Plan the Adjudicating Authority is not expected to do anything more, but is obliged to initiate liquidation process under Section 33(1) of the I B Code. The legislature has not endowed the Adjudicating Authority with the jurisdiction or authority to evaluate the commercial decision of the CoC. It is further held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) and (iii) of clause (b) of sub-section (1). 2[Explanation.--For the purposes 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 constitution under sub-section (1) of Section 21 and before the confirmation of the resolution plan, including at any time before the preparation of the information memorandum.] 34 . Thus, it is clear the CoC was empowered to decide to liquidate the Corporate Debtor at any time before confirmation of the Resolution Plan, including any time before the preparation of Information Memorandum. (Emphasis Supplied) 51 .Above order of this Appellate Tribunal is crystal clear and settle the principle of paramount supremacy of the commercial wisdom of the CoC. We also note that in catena of judgements by the Hon ble Supreme Court of India including K. Sashidhar (Supra) and Kalpraj Dharamshi (Supra), it has been stipulated that there is hardly any scope for judicial interference on the part of the Adjudicating Authority or the Appellate Tribunal except ensuring that the Resolution Plan meets the requirements of the Code and the related regulations. We do not find an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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