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TMI Blog2024 (12) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... et of two appeals filed under Section 61(1) of Insolvency and Bankruptcy Code 2016 ('IBC' in short) by the Appellants arises out of a common Order dated 03.09.2024 (hereinafter referred to as 'Impugned Order') passed by the Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench-I) in IA (Plan)/18/2024, IA/900/2024 and IA/576/2024 in C.P (IB) No. 111(AHM)/2022. By the impugned order, the Adjudicating Authority has directed that the Corporate Insolvency Resolution process ("CIRP" in short) of the Corporate Debtor be reinitiated and completed within 90 days from the date of the impugned order and for that purpose extended the CIRP period besides replacing the Resolution Professional- Fintech Restructuring LLP with Shri Ravindra Kumar Goyal. Aggrieved by the impugned order, one set of appeal has been preferred by the Saraswat Cooperative Bank Ltd.-Financial Creditor and the other appeal has been preferred by the erstwhile Resolution Professional- Fintech Restructuring LLP. 2. The facts in both these appeals being common, the same are being briefly and conjointly outlined as below: Adjudicating Authority initiated CIRP against the Corporate Debtor on 21.02.2023 and ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.2024 and was successfully completed. In the 14th CoC meeting on 30.03.2024, Fintech reported e-bidding result to the CoC members. The highest bid was of M/s Parth Poly Coat Yarn Pvt Ltd. ("Parth" in short) for Rs 9,36,00,000/- and the second highest bid was of Mr Manoj Sanklecha & Zabbarraj Sanklecha ("Sanklecha" in short) for Rs 9,26,00,000/-. In the 15th CoC meeting on 02.04.2024, the CoC members called the PRAs for further negotiations and asked them to submit their revised resolution plans on or before 03.04.2024. The plan submitted by M/s Kanter Steel (India) Pvt. Ltd. was found non-compliant and not taken into consideration. Thereafter, Sanklecha, suspended director of Corporate Debtor, submitted the revised resolution plan of Rs 9.76 cr. on 03.04.2024. However, Parth did not revise their plan and their plan value remained at Rs 9.36 cr. Fintech submitted the revised plans of both PRAs to the CoC members on 03.04.2024. Fintech opened the e-voting platform on 04.04.2024 to enable the CoC members to cast their votes. The e-voting was closed on 08.04.2024. As per the result of e-voting on 08.04.2024, the Resolution Plan submitted by Parth was approved by the CoC wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed order. We have also heard the submissions made by the Ld. Counsel on behalf of the new RP-Mr. Ravindra Kumar Goyal. Interestingly, the PRAs have not challenged the impugned order and are not parties in the matter before us. 5. Making his submissions, the Ld. Counsel for erstwhile RP-Fintech stated that the primary reason for feeling aggrieved with the impugned order stems from the irregularities and non-compliance of CIRP Regulations identified by the Adjudicating Authority purportedly committed by Fintech in the CIRP of the Corporate Debtor. These irregularities have been summarised by the Adjudicating Authority at para 23 of the Impugned Order which is as reproduced below: "23....The irregularities observed are thus summarized as below: a) Multiple revisions in the plan allowed in violation of Regulation 39(1A) of the CIRP Regulations. b) Voting by members of CoC in violation of Regulation 25(3). c) Non consideration of plan dated 03/04/2024 submitted by the applicant of IA/900/2024 by the CoC and marking on basis of the evaluation matrix was carried out by CoC on 02.04.2024, while the plan was received on 03.04.2024." 6. It is the contention of the erstwhile RP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e meeting cannot be counted is inapplicable as this judgment did not consider Regulation 25(5)(b) of CIRP Regulations. It was asserted that the amended Regulation 25(5)(b) of CIRP Regulations clearly permits the RP to seek votes of those CoC members who are not physically present at the meeting by electronic means. 8. On the third ground of irregularity pointed out by the Adjudicating Authority that marks based on the evaluation matrix could not have been allocated on the resolution plans of the PRAs by the CoC on 02.04.2024 since the resolution applicants were granted time to submit a modified resolution plan till 03.04.2024, it was contended by the Ld. Counsel for Fintech that this was yet another erroneous finding on the part of the Adjudicating Authority. It was pointed out that the Adjudicating Authority had arrived at this wrong finding since it relied on the unamended Regulation 39(3) of the CIRP Regulation which provided that CoC is required to evaluate the resolution plans strictly as per evaluation matrix. However, the amended Regulation 39(3)(B) makes it clear that the resolution plan which receives the highest vote is to be considered as approved. Thus, when there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also their contention that once CoC has approved the resolution plan by requisite majority, there was limited scope of interference by the Adjudicating Authority since commercial wisdom of CoC is not justiciable. In such circumstances, when the CoC had approved the resolution plan with majority share, the Adjudicating Authority erred in setting aside the entire CIRP proceedings and re-initiating fresh proceedings merely on the grounds of irregularities purportedly committed by the RP. 11. It was further contended by the Ld. Counsel for the Financial Creditor that the Adjudicating Authority at best could have struck off the minutes of the meeting dated 02.04.2024 of the CoC wherein it had detected irregularities and ordered conduct of fresh voting in compliance with the CIRP regulations instead of ordering CIRP proceedings to be started anew from the stage of issue of Form-G as the existing proceedings had already consumed a period of two years. By starting the process afresh by issue of fresh Form-G, a lot of time would be consumed which would go against the principles of IBC where time is of essence and delay in the proceedings would cause grave injury to the Financial Cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny irregularity on the part of the RP until this stage. 14. The irregularities in the conduct of the RP have been observed in the impugned order by the Adjudicating Authority only after the stage of receipt of resolution plans from the three eligible PRAs. One allegation which has been taken note of by the Adjudicating Authority is that RP had allowed multiple revisions in the plan. When we look at the proceedings of the CoC meetings, it becomes clear that the decision for allowing modifications in the plan was taken by the CoC after due deliberations of the CoC in the 11th, 14th, and 15th meetings and the RP was merely carrying out the instructions of the CoC in this regard. It is a well settled legal precept as held by this Tribunal in Vistra ITCL (India) Vs Torrent Investment Pvt. Ltd. supra wherein it has been held at para 60 that "Regulation 39(1A) cannot be read as a fetter on the powers of the CoC to discuss and deliberate and take further steps or negotiations with the Resolution Applicants, which resolutions are received after completion of Challenged Mechanism." Hence, it may not be fair to hold the RP for being responsible for having committed infraction of the statutor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2024 for holding the e-bidding process. The e-bidding process was completed by the RP on 29.03.2024 which has not been contested by any party. The RP had duly reported the e-bidding results to the CoC in the 14th CoC meeting held on 30.03.2024 and requested the CoC members to deliberate on the plan. The CoC directed the RP to call the final plan after incorporating the e-bidding amount and to put it on vote on 03.04.2024. Subsequently, in the 15th CoC meeting held on 02.04.2024, the CoC had again deliberated on the feasibility and viability of the resolution plan and directed the RP to call for further negotiation with the PRAs and seek revised plan from the by 03.04.2024. Accordingly, the RP had opened the evoting platform on 04.04.2024. In this e-voting process which ended on 08.04.2024, the plan of Parth was approved by the CoC with a majority of 84.52%. Further, the contention of erstwhile RP is that the amended CIRP Regulation 39(3)(B) makes it clear that the resolution plan which receives the highest vote is to be considered as approved and there is no mandatory requirement to use the evaluation matrix to identify the best resolution plan. 19. For clarity we may refer to R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. (3A) Where only one resolution plan is put to vote, it shall be considered approved if it receives requisite votes. (3B) Where two or more resolution plans are put to vote simultaneously, the resolution plan, which receives the highest votes, but not less than requisite votes, shall be considered as approved : Provided that where two or more resolution plans receive equal votes, but not less than requisite votes, the committee shall approve any one of them, as per the tie-breaker formula announced before voting: Provided further that where none of the resolution plans receives requisite votes, the committee shall again vote on the resolution plan that received the highest votes, subject to the timelines under the Code. In the given circumstances, the RP cannot be blamed for having breached the IBC for the CoC to have approved the resolution plan of Parth with requisite majority share which action was taken by the CoC in the exercise of its commercial wisdom. We also find that the erstwhile RP has acted in deference to the wisdom of the CoC which is in line with the well settled legal precept of attaching paramount importance to the commercial wisdom of the CoC. 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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