National Company Law Appellate Tribunal
Pnc Infratech Limited vs Deepak Maini & Anr on 22 August, 2022
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH: NEW DELHI
Company Appeal (AT) (Ins) No. 143 of 2020
[Arising out of Impugned Order dated 2nd January, 2020 passed by the
Adjudicating Authority (National Company Law Tribunal, Principal
Bench, New Delhi) in CA No. 1569(PB)/2019 in CP (IB)-1126(PB)/2018]
IN THE MATTER OF:
PNC Infratech Limited
NBCC Plaza, Tower-II
4th Floor, Pushp Vihar, Sector-5
New Delhi - 110017 ...Appellant
Versus
1. Deepak Maini
Having its office at:
C-100, Sector-2, Noida
Uttar Pradesh - 201301 ...Respondent No.1
2. Central Bank of India
Having its Corporate Office Branch at:
Ground Floor, Jeevan Tara Building
5 Parliament Street, Patel Chowk,
New Delhi - 110001 ...Respondent No.2
3. Shree Metals (Mujbi) Private Limited
Having its registered office at:
Mujbi Post Bela, District-Bhandra
Maharashtra - 441906 ...Respondent No.3
Present:
For Appellant : Mr. Abhijeet Sinha, Mr. Abhishek Garg, Mr. Yash
Gaiha and Mr. Aayush Kuchhal, Advocates
For Respondents : Mr. Abhishek Anand and Mr. Sahil Bhatia,
Advocates for R-1
Mr. Kunal Tandon and Ms. Richa Sandilya,
Advocates for R-2
Mr. Sandeep Bajaj, Ms. Aakansha Nehra and Ms.
Sakshi Digvijay, Advocates for R-3
Company Appeal (AT) (Ins) No. 143 of 2020 1 of 26
J U D G M E N T
KANTHI NARAHARI, MEMBER (TECHNICAL) Preamble:
The Present Appeal is filed against the Impugned Order dated
02.01.2020, passed by the Adjudicating Authority (National Company Law Tribunal, Principal Bench, New Delhi), in CA No. 1569(PB)/2019 in CP (IB)- 1126(PB)/2018, whereby the Adjudicating Authority has approved the Resolution Plan under Sub-section (1) of Section 31 of the I&B Code, 2016. Brief Facts:
Appellant's Submissions:
2. Sh. Abhijeet Sinha, Learned Counsel for the Appellant has submitted the brief facts. It is submitted that the Appellant is aggrieved by the impugned order dated 02.01.2020 in approving the Resolution Plan of 3rd Respondent herein is in complete contravention to the objects and provisions of the I&B Code, 2016 and its Regulations thereof. The Appellant is one of the prospective Resolution Applicant whose plan has been rejected by the Committee of Creditors in its 9th meeting dated 26.07.2019 and the same was approved by the Adjudicating Authority (NCLT).
3. The Corporate Debtor was admitted into CIRP vide order dated
03.12.2018, the RP made a public announcement on 06.12.2018 and CoC was constituted consisting of sole Financial Creditor i.e. 2nd Respondent herein who holds 100% voting right. The RP published The Expression of Company Appeal (AT) (Ins) No. 143 of 2020 2 of 26 Interest (EoI) on 01.02.2019 for inviting prospective Resolution Applicants and the Appellant submitted an EoI on 15.02.2019. The RP issued RFRP (Request for Resolution Plan) on 07.03.2019 and the Appellant submitted its plan on 27.04.2019. The Appellant had a meeting with RP on 06.05.2019.
4. While matter stood thus, the CIRP period was extended to 90 days and the Appellant submitted its revised plan on 30.05.2019 to the RP. The 7th CoC meeting was held on 31.05.2019 in which 3 Resolution Plans were opened in the presence of all three Prospective Resolution Applicants including the Appellant without disclosing contents of the Resolution Plans and name of the highest bidder. On 21.06.2019 a meeting of PRA's was proposed to be convened by the RP, the Appellant conveyed its inability to attend the meeting and requested to adjourn the same for some other day, however, the RP did not accept. The RP informed the Appellant that the CoC expects the PRAs to enhance their amount and the term of the plan should be reduced to one year and upfront amount should be higher. The Appellant submitted its revised Resolution Plan in a sealed envelope through its representative. All the three plans were opened in the presence of three PRAs but neither the amount quoted by the PRAs nor the name of the highest bidder was disclosed.
5. The Appellant enhanced its bid amount from Rs.10 crores to 12.06 cores and submitted its revised Resolution Plan on 25.07.2019. The bid of the Appellant was higher by Rs. 56 lakhs to that of the bid of Shree Metals (Mujbi) Private Limited (3rd Respondent), whose bid was for Rs.11.5 crores. The Company Appeal (AT) (Ins) No. 143 of 2020 3 of 26 Appellant Made a commitment of making an 100% upfront payment of the total amount of the plan within 30 days of its approval. The Appellant also stated that, it can further improve its resolution amount during the discussion and negotiation with the CoC member.
6. The CoC, in its 9th meeting held on 26.07.2019, declared the 3rd Respondent as the highest bidder and the Appellant as the 2nd highest bidder. The Appellant on 27.07.2019, being unaware of the decision of the CoC dated 26.07.2019, again submitted the copy of the revised Resolution Plan to the Resolution Professional by hand delivery. While so, the RP vide e-mail dated 16.08.2019, merely informed about the outcome of the 9th CoC Meeting. The Appellant vide letter dated 24.08.2019 responded to the RPs email dated 16.08.2019 expressing its grievances regarding the belated communication from the RP about the CoC decision approving the Resolution Plan of 3rd Respondent. In 10th CoC held on 28.08.2019, wherein the letter of the Appellant dated 24.08.2019 was put for discussion and the RP vide e-mail dated 03.09.2019 informed the Appellant that the CoC stood by its decision taken on 26.07.2019 and never intended to have a revised bid process.
7. The Appellant filed an application under Section 60(5)(c) of the Code, 2016 challenging the CoC decision dated 26.07.2019 for declaring 3rd Respondent as the highest bidder and approving its plan.
8. Apart from the facts as stated above, the Learned Counsel raised following grounds in the Appeal stating that the Adjudicating Authority has Company Appeal (AT) (Ins) No. 143 of 2020 4 of 26 failed to appreciate the material irregularity, referred to in Section 61(3)(ii), which includes incorrect calculation of the evaluation criteria provided for in the RFRP. It is stated that the Appellant had scored 32 marks in the parameter of upfront payment, however, in the parameter of NPV payments to be made within 0-5 years, the Appellant was awarded astonishing 0. The Adjudicating Authority failed to appreciate the true and correct interpretation of Section 30(5) of the I&B Code, 2016. Further, the Adjudicating Authority failed to appreciate the law laid down by this Tribunal in Padmanabhan Venketesh Vs. Shri V. Venkatachalam and Ors. in CA(AT) (Ins) No. 128/2019, para 54.
9. The Learned Counsel also relied upon a decision of this Tribunal in Rajputana Properties Pvt. Ltd. Vs. Ultra Tech Cement Ltd. & Ors. CA(AT)(Ins) No. 188/2018.
10. In view of the reasons as stated above, the Learned Counsel has prayed that the Appeal be allowed and the impugned order dated 02.01.2020 passed by the Adjudicating Authority be set aside.
1st Respondent's Submissions:
11. Learned Counsel for the 1st Respondent raised certain preliminary submissions and objections assailing the maintainability of the present Appeal. It is submitted that there is no infirmity in the impugned order, no locus standi to file the Appeal, the commercial wisdom of the CoC is paramount, the Appellant cannot challenge the order which is impugned and Company Appeal (AT) (Ins) No. 143 of 2020 5 of 26 relied upon the judgments of the Hon'ble Supreme Court in support of his stand.
12. It is submitted that the 1st Respondent had published the EoI on 01.02.2019 in Form-G and as per the decision taken in 3rd CoC dated 25.05.2019 since no EoI was received from the PRA's, this Respondent again published a revised Form-G on 16.02.2019. In response thereto, 7 EoIs were received, however, 3 Resolution Plans were received i.e. from (1) Team Universal Infratech Pvt. Ltd. (2) PNC Infratech Ltd. (Appellant) (3) Shree Metals (Mujbi) Private Limited (3rd Respondent) herein. The CoC in its 6th Meeting convened on 09.05.2019, decided to call all the 3 PRAs for discussions, clarifications, negotiations and compliances on 16.05.2019, 17.05.2019 and 01.07.2019 with them and it appraised the Appellant that complete revised set of all 3 Resolution Plans were opened in the presence of all the PRAs. This Respondent appraised the member of CoC convened on 26.07.2019 (9th CoC), for identifying the best Resolution Plans in terms of Regulation 39(3) of CIRP Regulations, 2016. The CoC provided final scores on the basis of evaluation matrix used for the purpose of comparing plans and gave the following marks:
(i) PNC Infratech Ltd. 56/100 (Appellant)
(ii) Team Universal Infratech Ltd. 26/100 (Not a Party)
(iii) Shree Metals (Mujibi) Pvt. Ltd. 58/100 (3rd Respondent)
13. The Team Universal was not found eligible. As per the evaluation matrix approved by CoC, Shree Metals (Mujbi) Private Limited obtained the highest marks and being H1, its plan was considered and placed for voting. While so, Company Appeal (AT) (Ins) No. 143 of 2020 6 of 26 this Respondent informed the CoC that vide mail dated 25.07.2019 the Appellant submitted its revised Resolution Plan. The CoC was of the view that the said revised Resolution Plan is not to be considered. Further, the CoC was of the view that even after the calculations, it was found that even if the figures of their revised Resolution Plan are put in the evaluation matrix the said resolution applicant (Appellant) continues to be H2.
14. It is submitted that after deliberations and discussions, the Resolution Plan put up for voting and the CoC approved the plan by 100% voting minuted as under:
"To approve the Resolution Plan submitted by Shree Metals Mujibi Private Limited for the CD, Era T & D Ltd. and authorize the Resolution Professional to submit the approved Resolution Plan before the Hon'ble NCLT for approval thereof.
The above resolution is resolved as under:
"RESOLVED THAT" in accordance with sections 30(4) & 30(6) of the Code read with regulations made thereunder, the approval of the members of Committee of Creditors be and is hereby accorded to the Resolution Plan submitted by Shree Metals Mujibi Private Limited for the CD, Era T&D Ltd. and for filing of the approved Resolution Plan with Hon'ble Adjudicating Authority i.e. NCLT by RP"
15. The Learned Counsel further submitted that the Appellant has failed to prove that how the Resolution Plan is non-compliant in terms of Section 30(2) of the Code. Section 30(5) of the Code, 2016 provides that the Resolution Applicant may attend the meeting of the CoC, in which the Resolution Plan of Company Appeal (AT) (Ins) No. 143 of 2020 7 of 26 the Applicant is considered. The representative of the Appellant was very much present in various meetings of the CoC when the Resolution Plan was considered by the CoC. It is submitted that the legislature has not given the powers to the Adjudication Authority to analyse or evaluate the commercial decision of the CoC. In this regard, the Learned Counsel has relied upon the judgment of the Hon'ble Supreme Court in the matter of Maharashtra Seamless Ltd. vs. Padmanabhan Venkatesh & Ors. in Civil Appeal No.4242/2019 dated 22.01.2020 (para 28). He also relied upon the judgment of the Hon'ble Supreme Court on the point that if the CoC exercises its discretion by casting its vote in its meeting is a collective business decision, the legislatures have not provided any ground to challenge the commercial wisdom of the Financial Creditors as held in the matter of K. Sashidhar Vs. Indian Overseas Bank & Ors. in Civil Appeal No.10673 of 2018 (para 28, 31 and 33).
16. In view of the aforesaid reasons the Learned Counsel has prayed for the dismissal of this Appeal.
2nd Respondent's Submissions (CoC):
17. The Learned Counsel appearing for this Respondent has submitted that the Appeal is not maintainable since the Resolution Plan of the 3rd Respondent was approved by 100% voting of the CoC in its 9th Meeting held on 26.07.2019. The Resolution Plans provided by the Resolution Applicants were categorised and evaluated on the basis of evaluation matrix provided to all the Company Appeal (AT) (Ins) No. 143 of 2020 8 of 26 prospective Resolution Applicants. Neither of the prospective Resolution Applicants challenged or even raised any objection to the criteria of calculation as mentioned in the evaluation matrix. It is an admitted fact that the Appellant, vide e-mail dated 25.07.2019 i.e. one day before 9th CoC dated 26.07.2019, sent a revised Resolution Plan to the RP by enhancing its proposed value from Rs.10 crore to 12.06 crores. The RP, in 9th CoC, apprised the CoC about the Resolution Plans submitted by the prospective Resolution Applicants. Upon going through the entire observations made by the RP and in accordance with the evaluation matrix and financials provided by the PRAs, the CoC compared the plan and provided the scores. On the other hand, the 3rd Respondent viz. Successful Resolution Applicant was infusing a total amount of Rs.11.5832 crores to be paid within a period of 12 months. The decision of the CoC in approving the plan of the 3rd Respondent was communicated to the Appellant vide e-mail dated 16.08.2019. On the basis of evaluation matrix, the 3rd Respondent has been categorised as H1 bidder and the Appellant still fell within the category of H2 bidder. The Appellant has proposed to make entire payment within 30 days, thus, upon evaluating the proposal of payment with the evaluation matrix, the Appellant has taken the benefit under parameter mentioned at point No A1 and has been granted 32 points. The Appellant revised its plan by enhancing its proposed finance from Rs.10 crore to 12.06 crore, the fresh equity infused in the operation of the corporate debtor still remained Rs. 98.96 lacs i.e. 3.77% thus, upon evaluating the plan provided by the Appellant with the evaluation matrix, it is Company Appeal (AT) (Ins) No. 143 of 2020 9 of 26 evident that the infusion of working capital falls within the category of > = 1% < 5% of the Resolution debt amount resulting into grant of 2 points to the Appellant.
18. The CoC while approving the Resolution Plan of the 3rd Respondent has duly considered all the aspects namely;
i. The Resolution plan addresses the interest of all stock holders and provides for a time-bound resolution of Corporate Debtor in a very short period of time.
ii. No layoff of workmen and employees of the Corporate Debtor and no change in their employment terms and conditions.
iii. The Successful Resolution Applicant has been supplying Zinc metal to the Corporate Debtor for last many years and is well-acquainted with functions of Era T&D Limited.
iv. The Successful Resolution Applicant has progressive figures in their revenue generation in balance sheets. v. The strategy of the Resolution Applicant to turn around the business of the Corporate Debtor by (a) containing the finance cost by mean normative gearing between equity and debt, (b) by enhancing the revenue and cutting down the depreciation by optimum capacity utilization, (c) efficient operations and efficient working capital management."
Company Appeal (AT) (Ins) No. 143 of 2020 10 of 26
19. This Respondent being the sole CoC member holding 100% voting share and upon considering the above-mentioned strategy opined in its commercial wisdom that the resolution plan provided by the 3rd Respondent is feasible, viable and accordingly the same was approved.
20. The Learned Counsel has relied upon the judgments of the Hon'ble Supreme Court in K. Shashidhar Vs. Indian Overseas Bank (Para 52) and Maharashtra Seamless Ltd. & Ors. Vs. Padmanabhan Vantekesh & Ors. in Civil Appeal No. 4242/2019. Further, the Learned Counsel also relied upon the judgment of this Tribunal in IMR Metallurgical Resources AG Vs. Ferro Alloys Corporation Ltd. & Ors. (Para 12).
21. In view of the reasons as stated above, the Respondent has prayed that this Appeal may be dismissed.
3rd Respondent's Submissions (Successful Resolution Applicant):
22. The Learned Counsel appearing for this Respondent has filed a detailed reply and submitted that the plan submitted by this Respondent was approved by the CoC after considering merits and demerits of both the plans of the Appellant and this Respondent and the reasons have been duly recorded in the Minutes of Meetings.
23. This Respondent submitted its plan on 30.05.2019 and upon evaluating the plan, the CoC approved the same on 26.07.2019 and the formalities were completed on 13.08.2019. The plan has been implemented Company Appeal (AT) (Ins) No. 143 of 2020 11 of 26 and 5 meetings of monitoring committee have already taken place on 09.01.2020, 22.01.2020, 04.02.2020, 24.02.2020 and 17.03.2020. The following steps have already been taken in respect of the Corporate Debtor that a sum of Rs.8,30,00,000/- has been transferred to the account of the Corporate Debtor by this Respondent and the performance bank guarantee has been released by this Respondent. The dues payable to the employees of the Corporate Debtor and the 2nd Respondent have already been paid. The financial statement up to 02.01.2020 has been prepared under the aegis of the monitoring committee. The Board of Directors of the Corporate Debtor has been modified and the representatives of this Respondent have been appointed as the Directors of the Corporate Debtor. It is submitted that in view of the compliance of the resolution plan by this Respondent, the Appeal is liable to be dismissed as infructuous.
24. The Learned Counsel has also relied upon the judgment of the Hon'ble Supreme Courts in (i) K. Sashidhar Vs. Indian Overseas Bank reported in 2019 SCC Online SC 257 (Para 49), (ii) Maharashtra Seamless Ltd. Vs. Padmanabhan Venketesh & Ors. (Para 8).
Analysis / Appraisal:
25. Heard, the Learned Counsel appeared for the respective parties perused the pleadings, documents and citations relied upon by them.
Company Appeal (AT) (Ins) No. 143 of 2020 12 of 26
26. After analysing the pleadings, the moot point for consideration is whether the Appellant has made out any case to interfere with the order passed by the Adjudicating Authority?
27. On filing of an application by the RP under Section 30(6) read with Section 60(5) of the I&B Code, 2016 before the Adjudicating Authority seeking approval of the Resolution Plan under Section 31 of the Code read with Regulation 39 of the IBBI (CIRP Regulations), 2016, the Adjudicating Authority after careful consideration of the plan submitted by the 3rd Respondent herein approved the same vide order dated 02.01.2020 observing that the requirements as contemplated under the Code and Regulations have been complied with and the Resolution Plan has been unanimously approved by 100% voting share of the Members of the CoC.
28. There is no dispute regarding the EoI, submissions of plans by the prospective resolution applicants, meetings of CoC and shortlisting of PRAs after evaluation of the plans. In the 6th CoC meeting convened on 09.05.2019, the RP placed 3 Resolution Plans for discussion, examination and evaluation. The RP also met the Resolution Applicants on 06.05.2019 and informed them of the deficiencies in the resolution plan. In the 8th CoC meeting, convened on 01.07.2019, the 3 resolution plans received from the Appellant, 3rd Respondent and M/s Team Universal Infratech Pvt. Ltd. were opened in the presence of all the 3 PRAs. From the minutes of the meeting of 7th and 8th CoC, it is evident that the representative of the Appellant was present. The 9th Company Appeal (AT) (Ins) No. 143 of 2020 13 of 26 CoC meeting which was held on 26.07.2019 after a detailed consideration of the plans submitted by all the 3 PRAs, the CoC approved the resolution plan of the 3rd Respondent. It is to be noted that the Appellant prior to approval of resolution plan addressed a letter to the RP on 25.07.2019 requesting the RP to consider revised /improvised plan. The CoC held on 26.07.2019 even considered the aspect of letter of the Appellant dated 25.07.2019 and observed that the revised resolution plan of the Appellant is not to be considered. The CoC in its 9th meeting dated 26.07.2019 recorded the reasons for selecting the 3rd Respondent to be a Successful Resolution Applicant as under:
"The above resolution is resolved as under:
RESOLVED THAT in accordance with sections 30(4) & 30(6) of the Code read with regulations made thereunder, the approval of the members of Committee of Creditors be and is hereby accorded to the Resolution Plan submitted by Shree Metals Mujibi Private Limited for the CD, Era T&D Ltd and for filing of the approved Resolution Plan with Hon'ble Adjudicating Authority i.e. NCLT by RP."
Reasons for selection of CoC are:
The Resolution Plan addresses the interest of all the stakeholders and provides for a time-bound resolution of corporate debtor in a very short period of time. There is no layoff of workmen and employees of the Corporate Debtor and no change in their employment terms or conditions.
Comments on feasibility and viability of CoC:
Company Appeal (AT) (Ins) No. 143 of 2020 14 of 26 The Resolution Applicant has progressive figures in their revenue generation in Balance Sheet for the year 2015-16 Rs.135.70 Cr. 2016-17 Rs.228.28 Cr. And for 2017-18 Rs.301.51 Cr. Besides they have strong net-worth of 2015-16 Rs.8.11 Cr. 2016-17 Rs. 11.71 Cr. And for 2017-18 Rs.17.17 Cr.
They are supplying Zinc metal to the Corporate Debtor for the last many years and are well-acquainted with function of Era T&D Limited.
As deliberated in the Resolution Plan under the head 'mobilization of Equity' the financials of Companies from which funds are to be arranged looks to be strong and convincing. Similarly, mobilization of debt of Rs.808 Lacs looks quite possible given the strength of the Resolution Applicant. Thus, CoC observes no challenge for the Resolution Applicant in mobilizing the required funds.
The strategy of the Resolution Applicant has mentioned at pg. no. 34 for turn-around of the corporate debtor is as under:
1. Containing the finance cost by means of normative gearing between equity and debt.
2. Enhancement of revenue and cutting down the depreciation through optimum capacity utilization.
3. Efficient operations
4. Efficient working capital management CoC finds that the above strategy of Resolution Applicant is effective.
Company Appeal (AT) (Ins) No. 143 of 2020 15 of 26 Therefore, the Resolution Plan in totality in the opinion of CoC is feasible and viable."
29. From the minutes of the 9th CoC, this Tribunal is of the view that the letter of the Appellant dated 25.07.2019 regarding revision of plan, has also been considered in the said meeting and thereafter the CoC evaluated the plan and provided the score matrix at page 210 of Appeal paper book, Vol.-I.
30. On the other hand, the Learned Counsel for the Appellant contends that the evaluation of matrix adopted by the CoC is not in accordance with the law and submitted that the Appellant should have been declared as Successful Resolution Applicant whereas the Appellant was treated as H2 bidder. Before adverting to the finding, the relevant provision of law is extracted hereunder for beneficial reference.
Provision of Law:
31. Section 30 of the Code deal with submission of Resolution Plan and sub-section (6) states that "the resolution professional shall submit the Resolution Plan as approved by the Committee of Creditors to the Adjudicating Authority". The Resolution Professional after approval of the plan by the CoC in its meeting dated 26.07.2019 filed an application before the Adjudicating Authority seeking approval of the Resolution Plan under Section 31 of the Code. Section 31 deal with approval of Resolution Plan. Sub-section (1) thereof states that "if the Adjudicating Authority is satisfied that the Resolution Plan as approved by the Committee of Creditors under sub-section (4) of Section 30 Company Appeal (AT) (Ins) No. 143 of 2020 16 of 26 meets the requirements as referred to in sub-section (2) of Section 30, it shall by order approve the resolution plan which shall be binding on the Corporate Debtor and its employees, members, creditors (including the Central Government, any Statement Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such an authorities to whom statutory dues are owed), guarantors and others stakeholders involved in the Resolution Plan.
(Provided that the Adjudicating Authority shall, before passing an order for approval of Resolution Plan under this sub-section, satisfy that the Resolution Plan has provisions for its effective implementation).
32. In this regard, the procedure has been enunciated regarding approval of Resolution Plan under Regulation 39 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 which emphasises the approval of Resolution Plan. Sub-regulation (1) thus, provides, a prospective Resolution Applicant in the final list may submit Resolution Plan or Plans prepared in accordance with the Code to the Resolution Professional electronically within the time given in the request for Resolution Plans under Regulation 36-B. Sub-regulation (3) thereof, empowers the Committee who shall-
(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.
Company Appeal (AT) (Ins) No. 143 of 2020 17 of 26
33. As per the provision and procedure prescribed with regard to approval of Resolution Plan and the powers and functions of the Committee (CoC) as detailed out herein above, the CoC has evaluated the plan after detailed deliberations on feasibility and viability of each Resolution Plan as discussed in 9th CoC meeting. This Tribunal does not find any contravention of law by the Committee regarding approval of the plan of 3rd Respondent.
34. Further, the Adjudicating Authority at para 51 of the order clearly stated that all the requirements of Section 30(2) have been fulfilled and no provision of law for the time being in force appears to have been contravened.
35. It is apt to point out that the Appellant has failed to point out the contravention of any provision by the CoC in approving the plan. This Tribunal is of the view that the CoC has meticulously evaluated the matrix in approving the plan of the 3rd Respondent and it is not the case of the Appellant that they are challenging the RFRP, however, it is their case that the steps prescribed in RFRP are not followed. This Tribunal cannot go into the technical issues when there is no contravention of the provisions of law. On the other hand, the sole member of CoC having 100% voting share has approved the plan, neither the Adjudicating Authority nor this Tribunal (NCLAT) can substitute its views with the commercial wisdom of the CoC nor should it deal with the technical complexity and merits of Resolution Plan unless it is found it to be contrary to the express provisions of law and against the public interest. The Adjudicating Authority had also relied upon the Company Appeal (AT) (Ins) No. 143 of 2020 18 of 26 decision of this Tribunal in Darshak Enterprise Pvt. Ltd. Vs. Chhaparia Industries Pvt. Ltd. passed in CA (AT)(Ins) No. 327/2020 and observed that "in absence of any discrimination or perverse decision it is not open to the Adjudicating Authority or Appellate Tribunal to modify the plan."
36. From the record and the order passed by the Adjudicating Authority, this Tribunal finds that there is neither any material regularity nor contravention of any provisions of law by the CoC and the plan has been rightly approved by the Adjudicating Authority. Moreover, as stated supra, the plan has been approved by the sole member of CoC with 100% voting share in their commercial wisdom as contemplated under the law. Therefore, the commercial wisdom of the creditors is paramount and cannot be interfered with by the Adjudicating Authority or this Tribunal. Precedents:
37. The Hon'ble Supreme Court in the matter of:
(i) K. Shashidhar Vs. Indian Overseas Bank (2019) 12 SCC 150, paras 52, 58, 59 and 64 held that;
"52. As aforesaid, upon receipt of a rejected resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of the CoC much less to enquire into the justness of the rejection of the resolution Company Appeal (AT) (Ins) No. 143 of 2020 19 of 26 plan by the dissenting financial creditors. From the legislative history and the background in which the I&B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies.
In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of Sick Industrial Companies Act, 1985 or under other such enactments which has now been forsaken. Besides, the commercial wisdom of the CoC has been given paramount status without any judicial intervention, for ensuring completion of the stated processes within the timelines prescribed by the I&B Code. There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject matter expressed by them after due deliberations in the CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the commercial wisdom of the individual financial creditors or their collective decision before the adjudicating authority. That is made non− justiciable.
Company Appeal (AT) (Ins) No. 143 of 2020 20 of 26
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 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. The fact that substantial or majority percent of financial creditors have accorded approval to the resolution plan would be of no avail, unless the approval is by a vote of not less than 75% (after amendment of 2018 w.e.f. 06.06.2018, 66%) of voting share of the financial creditors. To put it differently, the action of liquidation process postulated in Chapter−III of the I&B Code, is avoidable, only if approval of the resolution plan is by a vote of not less than 75% (as in October, 2017) of voting share of the financial Company Appeal (AT) (Ins) No. 143 of 2020 21 of 26 creditors. Conversely, the legislative intent is to uphold the opinion or hypothesis of the minority dissenting financial creditors. That must prevail, if it is not less than the specified percent (25% in October, 2017; and now after the amendment w.e.f. 06.06.2018, 44%). The inevitable outcome of voting by not less than requisite percent of voting share of financial creditors to disapprove the proposed resolution plan, de jure, entails in its deemed rejection
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 adjudicating authority (NCLT) to oversee the justness of the approach of the dissenting financial creditors in rejecting the proposed resolution plan or to engage in judicial review thereof. Concededly, the inquiry by the resolution professional precedes the consideration of the resolution plan by the CoC. The resolution professional is not required to express his opinion on matters within the domain of the financial creditor(s), to approve or reject the resolution plan, under Section 30(4) of the I&B Code. At best, the Adjudicating Authority (NCLT) may cause an enquiry into the approved resolution plan on limited grounds referred to in Section 30(2) read with Section 31(1) of the I&B Code. It cannot make any other inquiry nor is competent to issue any direction in relation to the exercise of commercial wisdom of the financial creditors Company Appeal (AT) (Ins) No. 143 of 2020 22 of 26 − be it for approving, rejecting or abstaining, as the case may be. Even the inquiry before the Appellate Authority (NCLAT) is limited to the grounds under Section 61(3) of the I&B Code. It does not postulate jurisdiction to undertake scrutiny of the justness of the opinion expressed by financial creditors at the time of voting. To take any other view would enable even the minority dissenting financial creditors to question the logic or justness of the commercial opinion expressed by the majority of the financial creditors albeit by requisite percent of voting share to approve the resolution plan; and in the process authorize the adjudicating authority to reject the approved resolution plan upon accepting such a challenge. That is not the scope of jurisdiction vested in the adjudicating authority under Section 31 of the I&B Code dealing with approval of the resolution plan."
(ii) The Hon'ble Supreme Court in the matter of Maharashtra Seamless Ltd. & Ors. Vs. Padmanabhan Vantekesh & Ors. in Civil Appeal No. 4242 of 2019, para 28 held that;
"28. The Appellate Authority has, in our opinion, proceeded on equitable perception rather than commercial wisdom. On the face of it, release of assets at a value 20% below its liquidation value arrived at by the valuers seems inequitable. Here, we feel the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. Such is the scheme of the Code. Section 31(1) of the Code lays down in clear terms that Company Appeal (AT) (Ins) No. 143 of 2020 23 of 26 for final approval of a resolution plan, the Adjudicating Authority has to be satisfied that the requirement of sub- section (2) of Section 30 of the Code has been complied with. The proviso to Section 31(1) of the Code stipulates the other point on which an Adjudicating Authority has to be satisfied. That factor is that the resolution plan has provisions for its implementation. The scope of interference by the Adjudicating Authority in limited judicial review has been laid down in the case of Essar Steel (supra), the relevant passage (para 54) of which we have reproduced in earlier part of this judgment. The case of MSL in their appeal is that they want to run the company and infuse more funds. In such circumstances, we do not think the Appellate Authority ought to have interfered with the order of the Adjudicating Authority in directing the successful Resolution Applicant to enhance their fund inflow upfront."
Finding:
38. In view of the decisions of the Hon'ble Supreme Court, it is the settled proposition of law that the commercial wisdom of the Committee of Creditors in approving or rejecting a resolution plan is essentially based on a business decision which involves evaluation of resolution plan based on its feasibility besides the Committee of Creditors being fully informed about the viability of the Corporate Debtor. The Committee of Creditors invariably examine the Resolution Plan and an assessment is made through their team of experts in that regard.
Company Appeal (AT) (Ins) No. 143 of 2020 24 of 26
39. Further, there is no such mechanism under the Code that gives the right to the Unsuccessful Resolution Applicant to challenge the score granted as per the evaluation matrix prepared by the CoC and the Resolution Professional as per the provisions of CIRP Regulations. Though, Section 61 of the Code provides Appeals against the orders of the Adjudicating Authority and Sub-section (3) thereof provides an Appeal against an order approving a Resolution Plan under Section 31 which may be filed on the following grounds namely:
(i) The approval resolution plan is in contravention of the provisions of any law for the time being enforce.
(ii) There has been material irregularity in exercise of the powers by the Resolution Professional during the Corporate Insolvency Resolution Period.
(iii) ........
(iv) ......
It is unequivocal, in preferring the Appeal by the aggrieved person under the above provision more particularly sub-section (3)(i) of Section 31 thereof which specifically provides that the approved Resolution Plan can be questioned / challenged on the ground that the plan is in contravention of the provisions. This Tribunal in clear terms observes and holds that there is no contravention in approving the Resolution Plan either by the CoC or by the Adjudicating Authority. The plan approved is in accordance with law and there is no material irregularity and cannot go into the technical issues with regard to evaluation and score matrix which is in the exclusive domain of the CoC.
Company Appeal (AT) (Ins) No. 143 of 2020 25 of 26 Conclusion:
40. In view of the aforesaid reasons, this Tribunals comes to an irresistible and inescapable conclusion that there is no legal infirmity or illegality in the order passed by the Adjudicating Authority. The Appeal sans merit.
Accordingly, the same is dismissed. No order as to costs. Applications, if any, pending stands closed.
[Justice Rakesh Kumar Jain] Member (Judicial) [Kanthi Narahari] Member (Technical) [Dr. Alok Srivastava] Member (Technical) 22nd August, 2022 pks Company Appeal (AT) (Ins) No. 143 of 2020 26 of 26