National Company Law Appellate Tribunal
Committee Of Creditors Of Associate ... vs Svamitva Landmarks on 19 September, 2022
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
CHENNAI BENCH: CHENNAI
Company Appeal (AT)(CH) (Insolvency) No. 159 of 2021
[Arising out of Impugned Order dated 28th May, 2021 passed by the
Adjudicating Authority (National Company Law Tribunal, Bengaluru
Bench, Bengaluru) in I.A. No. 227/2020 in C.P. (IB) No. 51/BB/2018]
IN THE MATTER OF:
Committee of Creditors of Associated Décor
Limited through Union Bank of India
(Erstwhile Corporation Bank) ...Appellant
Versus
1. Svamitva Landmarks
No. 110/2, 1st Floor,
Krishnappa Loyoit,
Lalbagh Road, Bengaluru - 560027 ...Respondent No.1
2. Shankeshwar Landmarks, LLP
No. 110/2, 1st Floor,
Krishnappa Loyoit,
Lalbagh Road, Bengaluru - 560027 ...Respondent No.2
3. Shankeshwar Landmarks,
No. 110/2, 1st Floor,
Krishnappa Loyoit, Lalbagh Road,
Bengaluru - 560027 ...Respondent No.3
4. Mr. Alok Kailash Saksena
Resolution Professional of
Associate Décor Limited,
C/o Desai Saksena and Associates
Chartered Accountants, First Floor,
Laxmi Building, Sir Phirozshah Mehta
Road, Fort, Mumbai - 400001 ...Respondent No.4
5. Mohammed Enterprises
(Tanzania) Limited
Textile House, Morogoro Road/
Indira Gandhi Street, Ground Floor
Ilala District, P.O. Box 20660
Dar Es Salaam, Tanzania ...Respondent No.5
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Present:
For Appellant : Mr. Gopal Jain, Senior Advocate
For Respondents : Mr. P.H. Arvindh Pandian, Senior Advocate
for R1 to R3
J U D G M E N T
(Virtual Mode) KANTHI NARAHARI, MEMBER (TECHNICAL) Preamble:
The Present 'Appeal' is filed against the order dated 28.05.2021 passed by the 'Adjudicating Authority' ('National Company Law Tribunal', Bengaluru Bench, Bengaluru) in I.A. No. 227/2020 in C.P. (IB) No.51/BB/2018, whereby the 'Adjudicating Authority' has allowed the application filed by the Respondents No.1 to 3 herein and directed the 4th Respondent to place the Respondents resolution plan before the Appellant for consideration.
Brief Facts:
Appellant's Submissions:
2. The Learned Senior Counsel for the Appellant submitted that the Appellant is aggrieved by the common order dated 28.05.2021 passed in I.A. No. 227 of 2020 in C.P. (IB) No.51/BB/2018.
3. It is submitted that the CIR Process was initiated against M/s Associate Décor Limited, the Corporate Debtor vide order dated 26.10.2018 by the 'Adjudicating Authority' ('National Company Law Tribunal', Bengaluru Bench). In compliance of the I&B Code, 2016 and Regulations thereof, the 'RP' initiated the process namely issuance of 'Form-G' inviting Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 2 of 40 'Expression of Interest' (in short 'EoI') etc. In response thereto, the Respondents No. 1 to 3 herein as consortium submitted their 'EoI' on 06.09.2019 as consortium members and reconfirmed their interest vide e-
mails dated 14.09.2019, 03.10.2019 and 12.10.2019. Accordingly, the consortium was a part of the provisional 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 information as required under Section 2 of the Code and Regulation 36 of 'CIRP' Regulation including financial data that was available with the 'RP' was made available to all the 'PRAs' for due diligence. None of the 'PRAs' backed out from the Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 3 of 40 'CIRP' citing reasons of non-availability of documents. It is to state that there was no request from Respondent No.1 to 3 (consortium) seeking for the said documents at any point of time after given access to the documents. The non-availability of information / audited financial statements was merely an excuse for consortium to not being able to conduct its due diligence within time and not being able to submit Resolution Plan within time lines as prescribed under the Request For Resolution Plan (in short 'RFRP').
5. It is submitted that the last date for submission of plans expired on 07.12.2019 and the 330 days period of CIRP expired on 16.03.2020, however, the consortium did not bother to submit a Resolution Plan or even informed the 'RP' that they are in the process of submitting a Resolution Plan.
6. It is submitted that two Resolution Applicants including the 5th Respondent herein had submitted their resolution plans within the time lines prescribed for the same. The 'RP' negotiated with the 'PRAs' and both the 'PRAs' were revised their plans and submitted from time-to-time basis. The 19th 'CoC' meeting held on 11.02.2020 and the plans submitted by the 'PRAs' decided to be placed before the 'CoC'. The e-voting was conducted from 13.02.2020 to 06.03.2020 and the plan submitted by the 5th Respondent was approved by all the members of ''CoC pursuant to the voting process. After approval of the plan by the 'CoC', the 'RP' filed an application bearing I.A. No.161 of 2020 in CP No. 51 of 2018 under Sections Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 4 of 40 30(6) of the I&B Code, 2016 before the 'Adjudicating Authority' for its approval.
7. It is submitted that after completion of CIR Process, the consortium (Respondents No.1 to 3) submitted its resolution plan to the RP vide e-mail dated 27.05.2020 and the RP responded to the said mail on 18.06.2020 stating that 'CIRP' period was already expired on 16.03.2020. Against the said reply of the 'RP', the Respondents No.1 to 3 filed an application before the 'Adjudicating Authority' bearing I.A. No. 227 of 2020 seeking direction against the RP for placing its plan for consideration before the CoC. The 'RP' contested the I.A. by filing 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 Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 5 of 40 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 the resolution applicant or prospective resolution applicant has no vested right to challenge the decision of the 'CoC' and to have its plan approved or considered by the 'CoC' under the I&B Code. It is submitted that the belated resolution plan of the Respondents does not deserve to be placed before the 'CoC', especially when the same is filed without any communication or request to the 'RP' to allow time to submit a resolution plan. Further the consortium by its own volition was no more in the process after receipt of its letter dated 06.11.2019 whereby it expressed its inability to participate in the 'CIRP'. The finding of the 'Adjudicating Authority' in dispensing with the mandatory requirement of filing a resolution plan within the prescribed time line is legally untenable, such finding should be rejected in toto as the same is against the basic tenets of the Code and would lay down a completely wrong precedent leading to failure of the Code in near future.
11. Further, the 'Adjudicating Authority' has exceeded its jurisdiction under Section 30 & 31 of the I&B Code by directing reconsideration of resolution plans and this amounts to judicial review of commercial wisdom exercised by the 'CoC'. In this regard, the Learned Senior Counsel relied upon the judgment of the Hon'ble Supreme Court in K. Sashidhar Vs. Indian Overseas Bank (2019) 12 SCC 150.
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12. The Learned Counsel also submitted that non-submission of resolution plan by the consortium during the entire 'CIRP' of 'Corporate Debtor' has estopped the consortium from seeking consideration of its Resolution Plan at the belated stage.
13. In view of the reasons as stated above the Learned Senior Counsel prayed this Bench to allow the Appeal and set aside the impugned order passed in I.A. No. 227 of 2020.
Respondent's Submissions:
14. The Learned Senior Counsel for the Respondents No. 1 to 3 submitted that it is an admitted fact that they have filed I.A. No. 227 of 2020 before the 'Adjudicating Authority' challenging the rejection letter / reply of the RP dated 18.06.2020. The Respondents are one of the biggest building material constructions and real estate companies with more than 30 years of experience in the field and has undertaken all efforts with utmost diligence in order to participate in the 'CIRP'. However, due to the onslaught of the pandemic and nationwide lockdown it took some time to 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 7 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 financial years 2015-2019 were shared with the stakeholders only on 03.02.2020, this is almost one and a half years after the insolvency process commenced.
17. It is submitted that the 'CIRP' was Riddled with irregularities by the 'RP' and shows utter disregard in providing sufficient opportunity and time to the parties to prepare a plan that would ensure that the affairs of the 'Corporate Debtor' are effectively taken care of. It is also submitted that the RP issued multiple 'Form-G'. The Learned Senior Counsel also submitted that the audited financial statements for the past two financial years, list of creditors and amounts claimed by them etc. should be provided in the 'Information Memorandum' (for short 'IM') and the contents of this memorandum are of material relevance and cannot be given a go by to suit the convenience of the RP. For this reason, the consortium / Respondents vide their e-mail dated 06.11.2019 did not proceed to participate in the site visit.
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18. The Learned Senior Counsel further submitted that the commercial wisdom of the 'CoC' has not been interfered with. The 'Adjudicating Authority' has passed the present order not because there were any irregularities noticed in the conduct of the Appellant, but rather because there was irregularity in the manner in which the 'RP' has conducted the whole 'CIRP'. It is submitted that the 'Adjudicating Authority' has inherent powers to pass appropriate orders in case there is a gross violation in the CIRP process.
19. In view of the reasons as stated above the Learned Counsel prayed this bench to dismiss the appeal.
Analysis / Appraisal:
20. Heard the Learned Senior Counsel for the respective parties, perused the pleadings, documents and relevant citations. After analysing the pleadings, the issue fell for consideration is whether the Appellant has made out any case warranting interference by this 'Tribunal' in the order passed by the 'Adjudicating Authority' (impugned order).
21. The 'Adjudicating Authority' entertained/considered the Application filed by the Respondents No.1 to 3 herein i.e. I.A. No. 227 of 2020 and passed the following directions at Page 118 of Appeal Paper Book as under:
"V. (1).
(2) I.A. No. 227 of 2020 CP(IB) No.51/BB/2018 is disposed of with the directions that the resolution plan submitted by Swamitva Landmark, Shankeshwar Landmarks LLP and Shankeshwar Landmarks, shall be placed before the CoC Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 9 of 40 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 the impugned order vide I.A. No. 323 of 2021 in the above Company Appeal. This Tribunal stayed the impugned order on 03.08.2021 in respect of directions passed herein above.
23. The facts are not in dispute with regard to initiation of 'CIRP' against the Corporate Debtor i.e. M/s Associate Decor Limited by the Financial Creditor M/s Oriental Bank of Commerce under Section 7 of the I&B Code, 2016 and the 'Adjudicating Authority' vide order dated 26.10.2018 admitted Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 10 of 40 the application filed by the Oriental Bank of Commerce and imposed moratorium. The IRP started the process with regard to publication in the newspaper and issuing Form-G i.e. Invitation for 'Expression of Interest' (in short 'EOI') in accordance with the Rules and Regulations of the I&B Code. The 'CoC' has been formed on 26.12.2018 and the list of creditors has been prepared.
24. From the records, it is a fact that one of the Suspended Director the 'Corporate Debtor' filed writ petition No. 26084 of 2019 before the Hon'ble High Court of Karnataka seeking stay of the 'CIRP' and the 'RP' and the 'CoC' have not taken any further steps in relation to the CIRP till the writ petition is disposed of. The Hon'ble High Court dismissed the said writ petition on 08.08.2019 and vacated the stay granted by it on 20.06.2019. The 'RP' issued 'Form-G' inviting 'EoI' for submission of resolution plans by Prospective Resolution Applicants on 23.08.2019. The Respondents No.1 to 3 formed as consortium submitted their 'EoI' on 29.08.2019. The Respondent No.5 also submitted its 'EoI' on 04.10.2019. The Respondents No.1 to 3 vide their e-mails dated 06.09.2019, 24.09.2019 and 03.10.2019 confirmed their intention with regard to submission of 'EoI'. The RP prepared final list of PRAs in which the name of the consortium is reflected.
25. While so, the Respondents No.1 to 3 vide their e-mail dated 06.11.2019 (Annexure-A7 at page 159 of Vol.-I) stated as under:
"Dear Sir/Madam, With reference to the above cited subject and further to your telephonic discussion, after going through the available Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 11 of 40 documents in virtual data room and non availability of Audited Financials of Corporate Debtor M/s Associate Decor Limited and on further preliminary due-diligence from our end, have decided not to participate in submission of resolution plan of the Corporate Debtor M/s Associate 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 plans. The Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 12 of 40 Respondents No.1 to 3 have vide their communication dated 06.11.2019 expressed their inability not to participate in the resolution plan. However, they have submitted their resolution plan on 27.05.2020 i.e. after lapse of more than 5 months from the last date of submission of plan i.e. 07.12.2019. The RP vide reply dated 18.06.2019 addressed to the Respondents as under:
"I am surprised to see this mail and submission of a purported Resolution Plan for Associate Decor Ltd. I may inform you that the CIRP was over on 16 March 2020. During this process we have been able to approve a resolution plan and the same is pending approval of the H'ble NCLT, Bengaluru. Since the process and CIRP is over there is no scope of receiving any plan in terms of the RFRP issued. Further, all timelines prescribed in the RFRP and the IBC and the Regulations have expired. I may also bring to your notice that you had initially shown some interest in participating in the process but in your mail dated 6th November 2019 decided not to participate and proceed in submission of a Resolution plan which as per your mail was to be submitted by 11 November 2019. Therefore this communication from you is even more surprising.
I confirm that I have not received any Bank Guarantee of Rs.2 Crores which has been referred to by you. I will also be returning the papers sent to my residence at the earliest considering that there is a lockdown in the city and disruption of office. Kindly refrain from sending any documents to my residence as the same will not be accepted.
Thanking you Alok Saksena"
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28. Aggrieved by this reply of the RP, the Respondents No.1 to 3 has filed the I.A. No. 227 of 2020 and the Adjudicating Authority after hearing the parties passed the aforesaid impugned order.
29. The moot point for consideration is whether the Respondents No.1 to 3 after expressing their inability to submit the Resolution Plan vide their e- mail dated 06.11.2019 can again submit the Resolution Plan after lapse of more than 5 months and that to after approval of the Resolution Plan by the CoC in accordance with law. Before answering the issue this Tribunal intend to deal with the events subsequently happened. It is an admitted fact that the 'CIRP' is completely a time bound process as per the mandate of the I&B Code.
30. The contention of the Respondents No.1 to 3 in I.A. No. 227 of 2020 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.
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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 furnish the said documents. In the aforesaid e-mail, it is only stated that the reason being non-availability of audited financials. It is also clear that the Respondents No.1 to 3 have done due diligence of the documents. It is apt to record the submissions and the stand taken by the RP before the Adjudicating Authority in I.A. No. 227 of 2020 that the Respondents No.1 to 3 submitted their EoI on 06.09.2019 and was reaffirmed vide e-mails dated 24.09.2019, 03.03.10.2019 and 12.10.2019. From the aforesaid e-mails, the Respondents No.1 to 3 has shown their interest in submission of Resolution Plan. However, to the dismay the Respondents No.1 to 3 backed out and vide their e-mail dated 06.11.2019 dropped from being a 'PRA'. The RP issued information memorandum, evaluation matrix and request for Resolution Plan (RFRP) to all the Resolution Applicants including the respondents on 09.10.2019 and also provided the access of virtual data room to the Respondents on 15.10.2019. Further, as per Clause 1.10.5 of the request for resolution plan of the 'Corporate Debtor' it was to be resolved on an "as is where is" basis with the available data and resources as available with the 'Corporate Debtor' at the time of invitation for the Resolution Plan. Thus, the Respondents No.1 to 3 have been provided the available data as per 'RFRP' by the 'RP' thereby the Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 15 of 40 RP complied with the rules. Further, as on the last date for submission of plan being 07.12.2019, the 'Corporate Debtor' has audited accounts only for Financial Year 2014-15 which was updated with the Ministry of Corporate Affairs. The unaudited and the provisional balance sheet for Financial Year 2015-16 to 2018-19 were provided. From the information provided, all the Resolution Applicants have access to the said documents. The Respondents No.1 to 3 vide their e-mail dated 05.11.2019 requested for site visit, however, on the next day i.e. 06.11.2019 the Respondents No.1 to 3 vide their e-mail expressed their inability to participate in submission of resolution plan. The 'Adjudicating Authority' without going into the facts observed that the RP has not followed the correct procedure as per the Code. Further, the 'Adjudicating Authority' without any basis hold that the Respondents cannot be held responsible for delay in submission of its plan on 27.05.2020 and observed that the RP should have condoned such delay of 72 days 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 Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 16 of 40 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 aforesaid parameters". In the said context the Hon'ble Supreme Court has held that "the 'Adjudicating Authority' can only look from that point of you and if the 'Adjudicating Authority' satisfied that the CoC has paid attention to these key features, it must then pass the Resolution Plan. From the aforesaid judgment, it is unequivocal that the Hon'ble Supreme Court has not given any power to the 'Adjudicating Authority' to consider the resolution plan of a new applicant who has submitted its plan beyond a period of five months from the last date for submission of plan and that too after completion of 'CIRP' period and approval of the plan by the CoC with 100% voting share. Thus, the 'Adjudicating Authority' misinterpreted the judgment of the Hon'ble Supreme Court and gave a finding in favour of the respondents which is without applying its mind and this Tribunal find that the said finding is unjust, illegal, unwarranted. The rejection of the plan submitted by the Respondents vide their mail dated 27.05.2020 which was rejected by the RP vide letter dated 18.06.2020 is in all respects holds good and no interference is called for.
32. The Learned Counsel appeared for the Respondents No.1 to 3 submitted that the plan submitted by these Respondents is within the 'CIRP' Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 17 of 40 period on the ground that the Hon'ble Supreme Court has extended the limitation period post 14.03.2020, any day in the 'CIRP' period would not be considered as a day passed by. Further Regulation 40C of the 'CIRP' Regulation specifically excluded the 'CIRP' period which could not be done due to the lockdown imposed. The said stand of the Respondent is against the dictum of the Hon'ble Supreme Court held in Ebix Singapore Pvt. Ltd. Vs. Committee of Creditors of Educom Solutions Ltd. & Anr. Reported in (2021) SCC Online SC 707, Para 148 as under:
"148. The evolution of the IBC framework, through an interplay of legislative amendments, regulations and judicial interpretation, consistently emphasizes the predictability and timelines of the IBC. The legislature and the IBBI have been proactive to introduce amendments to the procedural framework, that respond to changes in the economy. For instance, Regulation 40(c), which came into effect on 20 April 2020, was inserted in the CIRP Regulations to take into account the delay that may be caused to the CIRP on account of the lockdown being imposed by the Central 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.
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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 IBC; (ii) causing a public announcement to be made for the initiation of CIRP and issuing a call for submissions of claims as may be specified under Section 15 of the IBC; and (iii) appointing an IRP in accordance with Section 16 of the IBC."
(Emphasis Supplied)
33. From the judgment of the Hon'ble Supreme Court (supra), it is clear that the delay in CIRP cannot be condoned because of imposition of lockdown and it is apt to recapitulate the relevant observation of the Hon'ble Supreme Court thus read as "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".
34. The submission of plan within the time stipulated cannot be excluded and the Respondents have to follow the time line as per the procedure and the law. In this regard, the relevant provision of law is necessary to be looked into for better appreciation of legal position. Section 30 of the I&B Code deal with submission of Resolution Plan, sub-section (1) thereof, a resolution applicant may submit a resolution plan along with affidavit stating that he is eligible under Section 29A to the Resolution Professional Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 19 of 40 prepared on the basis of the information memorandum. Sub-section (2) read that the Resolution Professional shall examine each resolution plan received by him to confirm that each resolution plan provides the following;
"(a), (b), (c), (d), (e), (f)"
The procedure laid down in the 'CIRP' Regulation with regard to Information Memorandum is Regulation 36, invitation for 'Expression of Interest' is in Regulation 36A, request for resolution plans Regulation is 36B. The Regulation 39 deal with approval of resolution plan. Sub- regulation (1) thereof, a Prospective Resolution Applicant in the final list may submit resolution plans or plans prepared in accordance with the Code and the Regulations. Sub-regulation (1B) empowers the Committee shall not consider any resolution plan (a) received after the time as specified by the Committee under Regulation 36B or (b) received from a person who does not appear in the final list of 'Prospective Resolution Applicants', or (c) does not comply with the provisions of sub-section (2) of Section 30 and sub- regulation (1). Sub-regulation (3) thereof empowers the Committee ('CoC') 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.
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 Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 20 of 40 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 the scrutiny are a continuous process and cannot be considered as a simple contractual negotiation between two parties as held by the Hon'ble Supreme Court in the matter of Ebix Singapore (supra) at para 145 as under:
"145. The absence of any specific provision in the IBC or the regulations referring to a CoC-approved Resolution Plan as a contract and the lack of clarity in the BLRC report regarding the nature of such a Resolution Plan, constrains us from arriving at the conclusion that CoC approved Resolution Plans will be governed by the Contract Act and common law principles governing contracts, save and except for the specific prohibitions and deeming fictions under the IBC. Regulation 39(3) of CIRP regulations, as it stood before the IBBI (CIRP) (Fourth Amendment) Regulations 2020 and applicable to the three appellants before us, enabled a framework where a draft Resolution Plan would involve several rounds of negotiations and revisions between the Resolution Applicant and the CoC, before it is approved by the latter and submitted to the Adjudicating Authority. However, this statutorily-enabled room for commercial negotiation is not enough to over-power the other Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 21 of 40 elements of regulation that detract from the view that CoC approved Resolution Plans are contracts. CoC-approved Resolution Plans, before the Approval of the Adjudicating Authority under Section 31, are a function and product of the IBC's mechanisms. Their validity, nature, legal force and content is regulated by the procedure laid down under the IBC, and not the Contract Act. The voting by the CoC also occurs only after the R.P. has verified the contents of the Resolution Plan and confirmed that it meets the conditions of the IBC and the regulations therein. The amended Regulation 39(3) further regulates the conduct of the CoC on voting on Resolution Plans and has introduced the requirement of simultaneous voting. The IBBI's Discussion Paper issued on August 27 2021 has invited comments on regulating the process on revisions that can be made to resolution plans submitted to the CoC. These developments bolster the conclusion that the mechanism prior to submission of a CoC-approved resolution plan is subject to continuous procedural scrutiny by the IBC and cannot be considered as a simple contractual negotiation between two parties."
(Emphasis Supplied)
36. In the instant case, the Respondents 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 Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 22 of 40 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 plan on 11.02.2020 has been approved by the CoC in an e-voting took place from 13.02.2020 to 06.03.2020 with 100% voting share. The 5th Respondents declared as Successful Resolution Applicant on 09.03.2020 and issued a letter of intent. Thus, the plan of the 5th Respondent has been approved and the RP filed an application being I.A. No. 161 of 2020 before the Adjudicating Authority for approval of plan. The 5th Respondents also furnished a performance bank guarantee on 19.03.2020 for an amount of Rs. INR 30 Crore in favour of Bank of Baroda as per the requirement.
40. The Respondents relied upon a citation of this Tribunal in Bank of Maharashtra Stressed Asset Management Branch Janmangal Vs. Videocon Industries Ltd. & Ors., reported in (2022) SCC Online NCLAT 6. This Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 23 of 40 Tribunal at para 52 observed that "the Resolution plan was not incompliance with Section 30(2)(b) of the Code read with Section 31 of the I&B Code, hence remitted back to ''CoC' for completion of the process relating to 'CIRP in accordance with the provisions of the Code". In the said case, this Tribunal was of the view that the resolution plan should have gone for a review to the 'CoC' as it fails to meet the criteria of Section 30(2)(b) read with Section 31 of the Code. The said decision is not applicable to the facts of the present case. 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.
41. The Learned Counsel for the Respondents also relied upon the judgment of this Tribunal in the matter of Dr. Periasamy Palani Gounder Vs. Mr. Radhakrishnan Dharamarajan & Ors. in CA(AT) (CH) (Ins) No. 164, 176, 218 & 219 of 2021 dated 17.02.2022 and this Tribunal hold that the submission of the resolution plan before the Adjudicating Authority violates the statutory provision of Section 30(2) & (3) of the Code and has vitiated the entire CIRP and made the resolution plan void ab initio. The said judgment is in respect of the violation of statutory requirement in approving the plan. Therefore, the said judgment is not applicable to the facts of the present case.
Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 24 of 40
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 under the IBC which are sacrosanct. Thus, judicial restraint must be exercised while intervening in a law governing substantive outcomes through procedure, such as the IBC. In this case, if Resolution Applicants are permitted to seek modifications after subsequent negotiations or a withdrawal after a submission of a Resolution Plan to the Adjudicating Authority as a matter of law, it would dictate the commercial wisdom and bargaining strategies of all prospective Resolution Applicants who are seeking to participate in the process and the successful Resolution Applicants who may wish to negotiate a better deal, owing to myriad factors that are peculiar to their own case. The broader legitimacy of this course of action can be decided by the legislature alone, since any other course of Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 25 of 40 action would result in a flurry of litigation which would cause the delay that the IBC seeks to disavow."
43. The Learned Counsel for the Appellant relied upon the judgment of this Tribunal in Renganayaki Agencies Vs. Sreenivasa Rao Ravinuthala reported in (2021) SCC Online NCLAT 136 para 18 & 19 held that:
"18. On a careful consideration of the submissions advanced on either side, this 'Tribunal' after going through the impugned order dated 24.02.2021 in IA No. 1094/2020 in CP (IB) No. 7/HDB/2019 inter alia to the effect that ... "we are of the view that there is a need for further pursuance of the resolution plan and with the very hope that the Corporate Debtor may fetch better value that what has been offered by the Resolution Applicants. In this case, even though the Resolution Plan M/s. KALS Group has been approved with 100% voting in favour of it by the Committee of Creditor in view of the very meagre difference between both the resolution plan, we are of the view that there is scope for further improvement of the Resolution amount to be payable by the Resolution Applicants' and the direction issued to the Committee of Creditors to take fresh bids from the existing two Resolution Applicants to submit a Resolution Plan for its consideration within a period one month" are clearly unsustainable in view of the recent judgment of the Hon'ble Supreme Court in Kalpraj Dharamshi & Anr. V. Kotak Investment Advisors Ltd. & Anr dated 10.03.2021, which squarely applies to the facts of the present case. Viewed in that perspective, this Tribunal interferes 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 26 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 offered for consideration, decision and voting on that within a certain period?
45. In the above case, the 'Adjudicating Authority' vide its impugned order had directed the CoC to consider the 2nd settlement offer of the 1st Respondent therein, when the Resolution Plan after approval from 'CoC' was pending adjudication under Section 31 before the Adjudicating Authority.
46. In the present case also in the 'Adjudicating Authority' in I.A. No. 227 of 2020 directed the 'RP' to place the resolution plan of the Respondents No.1 to 3 before the 'CoC' for its consideration when an application under Section 31 of the Code was pending before the Adjudicating Authority for its consideration.
Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 27 of 40
47. This 'Tribunal' in Re-Union Bank of India (supra) at paras 9.2 to 9.8 answered the above issue as under:
"9.2 Admittedly in the instant case, the Adjudicating Authority vide the Impugned Order had directed the COC to consider the 'IInd Settlement Offer of Ist Respondent when the Resolution Plan after Approval from CoC was pending adjudication u/s 31 of the Code.
9.3 The CoC contends that the settlement offer was neither submitted in compliance with the RFRP nor with Section 12 A of the I&B Code and related Regulations. Such a direction of the Adjudicating Authority was passed despite that the CoC of the corporate debtor had by an overwhelming majority approved the Resolution Plan of DHFL. The Administrator had already filed the plan approval application, and that application was heard and reserved for orders by the learned Adjudicating Authority.
9.4 It is pertinent to mention that the Hon'ble Supreme Court in the case of Ebix Singapore Private Limited versus Committee of Creditors of Educomp Solutions Ltd, reported in 2021 SCC online SC 707, has very recently dealt with the same issue which has arisen in this appeal. In this case, Hon'ble Supreme Court had observed that;
"126. Since the interpretation of the IBBI (CIRP)(Fourth Amendment) Regulations 2020 and the impact on the Resolution Applicants and the CoC to negotiate the terms of the Resolution Plan is not before this Court and the present appeal essentially seeks to determine the nature of the Resolution Plan after its Approval by the CoC and prior to its Approval by the Adjudicating Authority, this Court will proceed to determine of the nature of such a Plan, on the assumption of the law as Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 28 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, penalties, remedies and damages would become applicable to CoC-approved Resolution Plans. For instance, in the United States, plans confirmed by courts have been characterised as contracts, whose breach can even give rise to contractual remedies. In In re Hoffinger Indus, Inc, a bankruptcy court in Arkansas has held that "a confirmed plan should be enforceable and amenable to damages between contractually bound parties." Indeed, it has been argued before us that Resolution Plans should be enforced through the contractual remedy of Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 29 of 40 specific performance. Further, a determination that Resolution Plans are contracts in the period between Approval by the CoC and the Approval of the Adjudicating Authority would require us to analyse whether all elements of contract formation have been satisfied, including the question of whether the acceptance of the Resolution Plan by the CoC fulfils the criteria laid down under Section 7 of the Contract Act or whether the conditionality of seeking Approval from the Adjudicating Authority makes the Resolution Plan a contingent contract. Our intent of laying down the consequences of our determination of Resolution Plans as contracts is to highlight the importance of ascertaining the nature of a CoC-approved Resolution Plan, prior to its Approval by the Adjudicating Authority.
128. The text of the IBC does not specify whether Resolution Plans at the second stage of the process, i.e., in the intervening period of submission to and Approval by the Adjudicating Authority, are pure contracts. As noted previously, by specifications such as eligibility for resolution applicants, the contents of the I.M. and duties of the R.P. to prospective Resolution Applicants and statutory procedures on timelines and voting, strictly govern the insolvency process even prior to the submission of the Plan to the Adjudicating Authority. The CoC, who the appellants allege is in the nature of a free contracting party, is governed by the binding principles of the statute with regard to the contents and nature of the statutory plan that it approves under Section 30(4) and even its own composition.
129. Section 30(4) provides that the consent of all the members of the CoC, though a unanimous vote is not Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 30 of 40 required and a sixty-six per cent vote is 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 the failure of its implementation. The violation of the terms of the Resolution Plan does not give rise to a claim of damages, rather it leads to prosecution and imposition of punishment under Section 74 of the IBC. On the contrary, a CoC's withdrawal of the CIRP under Section 12A is coupled with a requirement of payment of CIRP costs, but no damages are statutorily payable to the Resolution Applicant, irrespective of the stage of the withdrawal.
Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 31 of 40
130. The CoC even with the requisite majority, while approving the Resolution Plan must consider the feasibility and viability of the Plan and the manner of distribution proposed, which may take into account the Order of priority amongst creditors as laid down in sub- section (1) of section 53 of the IBC. The CoC cannot approve a Resolution Plan proposed by an applicant barred under Section 29A of the IBC. Regulation 37 and 38 of the CIRP Regulations govern the contents of a Resolution Plan. Furthermore, a Resolution Plan, if in compliance with the mandate of the IBC, cannot be rejected by the Adjudicating Authority and becomes binding on its Approval upon all stakeholders - including the Central and State Government, local authorities to whom statutory dues are owed, operational creditors who were not a part of the CoC and the workforce of the Corporate Debtor who would now be governed by a new management. Such features of a Resolution Plan, where a statute extensively governs the form, mode, manner and effect of Approval distinguishes it from a traditional contract, specifically in its ability to bind those who have not consented to it. In the pure contractual realm, an agreement binds parties who are privy to the contract. In the context of a resolution Plan governed by the IBC, the element of privity becomes inapplicable once the Adjudicating Authority confirms the Resolution Plan under Section 31(1) and declares it to be binding on all stakeholders, who are not a part of the negotiation stage or parties to the Resolution Plan. In fact, a commentator has noted that the purpose of bankruptcy law is to actually solve a specific 'contracting failure' that accompanies financial distress. Such a contracting failure arises because "financial Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 32 of 40 distress involves too many parties with strategic bargaining incentives and too many contingencies for the firm and its creditors to define a set of rules of every 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 of the sanctioned scheme is "to supply by recourse to the procedure thereby prescribed the absence of that individual agreement by every member of the class to be bound by the scheme which would otherwise be necessary to give it validity" [see J.K. (Bombay) Pvt. Ltd. v. New Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 33 of 40 Kaiser-i-Hind Spg. & Wvg. Co. Ltd. [AIR 1970 SC 1041: (1969) 2 SCR 866, 891: (1970) 40 Comp Cas 689]].."
(emphasis supplied)
132. While the above observations were made in the context of a scheme that has been sanctioned by the Court, the Resolution Plan even prior to the Approval of the Adjudicating Authority is binding inter se the CoC and the successful Resolution Applicant. The Resolution Plan cannot be construed purely as a 'contract' governed by the Contract Act, in the period intervening its acceptance by the CoC and the Approval of the Adjudicating Authority. Even at that stage, its binding effects are produced by the IBC framework. The BLRC Report mentions that "[w]hen 75% of the creditors agree on a revival plan, this plan would be binding on all the remaining creditors". The BLRC Report also mentions that, "the R.P. submits a binding agreement to the Adjudicator before the default maximum date". We have further discussed the statutory scheme of the IBC in Sections I and J of this judgment to establish that a Resolution Plan is binding inter se the CoC and the successful Resolution Applicant. Thus, the ability of the Resolution Plan to bind those who have not consented to it, by way a statutory procedure, indicates that it is not a typical contract.
9.5 Further, the Hon'ble Supreme Court in case of Pratap Technocrats(P) Ltd v Monitoring Committee of Reliance Infratel Ltd reported in 2021 SCC Online SC 569 has held that;
"Jurisdiction to approve a Resolution Plan
26. The resolution plan was approved by the CoC, in compliance with the provisions of the IBC.
Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 34 of 40 The jurisdiction of the Adjudicating Authority under Section 31(1) is to determine whether the resolution plan, as approved by the CoC, complies with the requirements of Section 30(2). The NCLT is within its jurisdiction in approving a resolution plan which accords with the IBC. There is no equity-based jurisdiction with the NCLT, under the provisions of the IBC.
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, 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) Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 35 of 40
38. The Court, also held (in paragraph 62) that the legislative history of the IBC indicated that "there is a contra indication that the commercial or business decisions of financial creditors are not open to any judicial review by the adjudicating authority or the appellate authority".
39. The above principles have been re-emphasised and taken further by a three-Judge Bench in Essar Steel India Limited (supra). The Court, speaking through Justice R F Narminan, held:
"73. There is no doubt whatsoever that the ultimate discretion of what to pay and how much to pay each class or sub-class of creditors is with the Committee of Creditors, but, the decision of such Committee must reflect the fact that it has taken into account maximising the value of the assets of the corporate debtor and the fact that it has adequately balanced the interests of all stakeholders including operational creditors. This being the case, judicial review of the Adjudicating Authority that the resolution plan as approved by the Committee of Creditors has met the requirements referred to in Section 30(2) would include judicial review that is mentioned in Section 30(2)(e), as the provisions of the Code are also provisions of law for the time being in force. Thus, while 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 has taken into account the fact that the corporate debtor needs to keep going as a going concern Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 36 of 40 during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. 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 Committee of Creditors to resubmit such plan after satisfying the aforesaid parameters. The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal."
50. The ratio of the Judgement as observed in Paragraph 47 quoted below, in case of Pratap Technocrats (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 37 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 Authority nor the Appellate Authority has an unchartered jurisdiction in equity. The jurisdiction arises within and as a product of a statutory framework.
c) The jurisdiction of the Adjudicating Authority is 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.
d) There was no scope for negotiations between the parties once the CoC had approved the Resolution Plan. Thus, contractual principles and common law remedies, which do not find a tether in the wording or the intent of the IBC, cannot be imported in the intervening period between the acceptance of the CoC and the Approval by the Adjudicating Authority.
9.7 In the instant case, we found that after Approval of the Resolution Plan by the Committee of Creditors, the application was pending before the Adjudicating Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 38 of 40 Authority under Section 31 of the Insolvency and Bankruptcy Code, 2016, for Approval of the resolution plan the Adjudicating Authority accordingly while disposing of the Interim Application, IA no. 2431 of 2020, directed the CoC to consider the 'IInd Settlement Proposal' of the First Respondent, i.e. Applicant/ Promoter, within ten days and take an appropriate decision.
9.8 Considering the ratio of the Judgement of the Hon'ble Supreme Court in the case of Ebix Singapore (supra), "there was no scope for negotiations between the parties once the CoC has approved the Resolution Plan. Thus, contractual principles and common law remedies, which do not find a rope in the wording or the intent of the IBC, cannot be imported in the intervening period between the acceptance of the CoC Approved Resolution Plan and the Approval by the Adjudicating Authority."
9.9 The said exercise was beyond the jurisdiction of the Adjudicating Authority hence unsustainable and liable to be set aside.
Consequently, the impugned Orders passed in I.A. No. 2431 of 2020 in Company Petition (I.B.) No. 4258/MB/C-II/2019 under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (in short 'I&B Code') is set-aside.
Conclusion:
48. In view of the decisions of the Hon'ble Supreme Court in Ebix Singapore, 'Committee of Creditors' of Essar Steel India and this Tribunal judgment in re-M/s Renganayaki and in re-Union Bank of India, this Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 39 of 40 'Tribunal' comes to an irresistible and inescapable conclusion that the 'Appellant' has made out a 'prima-facie' case to be interfered with the order passed by the 'Adjudicating Authority' in I.A. No. 227 of 2020, whereby the 'Adjudicating Authority' exceeded its jurisdiction in directing the 'Resolution Professional', to place the 'Resolution Plan' of the 'Respondent Nos.1 to 3', before the 'Committee of Creditors', amounts to interfering with the 'Commercial Wisdom' exercised by the 'Committee of Creditors', more particularly absence of any 'material irregularity' and 'violation' of any Law' for the time being enforce.
49. With the aforesaid observations, this 'Tribunal' comes to a resultant conclusion that the 'impugned order', passed in I.A. No. 227 of 2020 in CP No. 51 of 2018 by the 'Adjudicating Authority', (National Company Law Tribunal, Bengaluru Bench) is an 'illegal one' and hence, the same is set aside, to secure the 'ends of justice'. Accordingly, the Company Appeal (AT)(CH) (Ins.) No. 159 of 2021 is 'allowed'. However, there is no order as to 'costs'. The 'interim stay' granted by this `Tribunal', dated 03.08.2021 is made absolute.
[Justice M. Venugopal] Member (Judicial) [Kanthi Narahari] Member (Technical) 19th September, 2022 Pks Company Appeal (AT) (CH) (Ins.) No. 159 of 2021 40 of 40