Ankit Patni Erstwhile And Suspended ... vs State Bank Of India And Others on 6 April, 2022

[Cites 6, Cited by 2]

National Company Law Appellate Tribunal

Ankit Patni Erstwhile And Suspended ... vs State Bank Of India And Others on 6 April, 2022

1. This Appeal has been filed against judgment dated 25.11.2021 passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata 2 Bench, Kolkata, rejecting I.A (IB) No. 644/KB/2021 in C.P. (IB) No. 1214/KB/2018. The Appellant, a Suspended Director of the Corporate Debtor, has filed this Appeal challenging the order of the Adjudicating Authority rejecting the I.A filed by the Appellant. The brief facts of the case necessary for deciding this Appeal are:-

By an order dated 07.02.2020, an Application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("Code" for short) by the State Bank of India against the Corporate Debtor- 'Rohit Ferro Tech Limited' was admitted. In pursuance of the initiation of Corporate Insolvency Resolution Process (CIRP), the Resolution Professional published statutory Form "G" on 10.12.2020 inviting Expression of Interest (EoI). The provisional list of the Prospective Resolution Applicants as per Form- "G" issued on 10.12.2020 was published on 26.12.2020. As on 01.01.2021, the Resolution Professional had identified eight Prospective Resolution Applicants. The list of Prospective Resolution Applicants was updated on 25.01.2021 and on 20.03.2021, the said list was again updated including Respondent No.3. In the 19th CoC meeting, Resolution Plans submitted by the Resolution Applicants were opened. Resolution Professional informed all Resolution Applicants that CoC in its meeting dated 18.03.2021 decided to extend the last date for submission of revised financial proposal/ Resolution Plan on 25.03.2021. The Resolution Plan submitted by Respondent No.3 was considered. The Respondent No.3 held to be H-1. The Resolution Plan of Respondent No.3 was ultimately approved by the CoC by 100% votes in its meeting dated 01.06.2021. After the plan was approved, the Appellant- Suspended Director filed I.A (IB) No. Company Appeal (AT) (Ins.) No.326 of 2022 3 644/KB/2021 on 17.07.2021 praying for various reliefs including prayer to set aside the entire Insolvency Resolution Process and to reinstate the Board of Directors of the Corporate Debtor. It was further prayed that proceedings instituted under Section 230 of the Companies Act, 2013 be revived. The Adjudicating Authority after hearing the Applicant as well as the Respondent by order dated 25.11.2021, rejected the Application. The Appellant aggrieved by the said order has come up in this Appeal.

2. We have heard Shri Anuj Singh, Learned Counsel for the Appellant. Learned Counsel for the Appellant challenging the impugned order submits that inclusion of the Respondent No.3 in the list of Prospective Resolution Applicants was illegal since before the said date, the Resolution Plans submitted by other Resolution Applicants were already discussed in the 18th meeting of the CoC held on 02.03.2021. After plans of other Resolution Applicants were discussed, there was no occasion to permit the Respondent No.3 to submit any Resolution Plan or to consider the Resolution Plan. The representative of the Respondent No.3 were well aware of the proceedings and they visited the site since December, 2020 but deliberately did not submit any Expression of Interest. It is submitted that inclusion of the Respondent No.3 as Prospective Resolution Applicants as well as acceptance of the Resolution Plan by Respondent No.3 is wholly against the provisions of the IBC and deserves to be set aside. It is further submitted that Applicant who had submitted a Scheme to settle the entire debt of the Financial Creditor was not considered and in the meeting convened for consideration of the Scheme except one Financial Creditor, no other Creditors appeared. The Applicant was Company Appeal (AT) (Ins.) No.326 of 2022 4 denied opportunity to pay off all the Creditors by the Scheme which was submitted on behalf of the Appellant under Section 230 of the Companies Act, 2013. Learned Counsel also referred to the order of the Adjudicating Authority dated 18.12.2019 and submits that the Adjudicating Authority has noticed that opportunity be given to convene the meeting of the Creditors as per the relevant provisions of the Companies Act, 2013 for approval of the Scheme of Arrangement.

3. We have considered the submissions of the Learned Counsel for the Appellant and have perused the record.

4. As per Form- 'G' published, the last date for submission of the Expression of Interest was 31.12.2020. The list of Prospective Resolution Applicants was also uploaded. It is true that in the 18th meeting of the CoC dated 02.03.2021, the CoC took note of the three Resolution Plans which were received from 'Mainthan Alloys Limited', 'ESL Steel Limited' and 'Rimjhim Ispat Private Limited'. However, minutes of the 18th meeting of the CoC indicate that Resolution Plans were not voted upon in the said meeting. Similarly, in the 19th CoC meeting dated 08.03.2021 detailed discussion was made on the Resolution Plans received from the Resolution Applicants. The minutes under Agenda Item No.5 noticed that Applicants were requested to reconsider the financial proposal made by them. On 20.03.2021, the Resolution Professional issued a final list of the Prospective Resolution Applicants in which Respondent No.3 was also included. In the final list, following note was approved with respect to Respondent No.3 'Tata Steel Mining Limited'-:-

Company Appeal (AT) (Ins.) No.326 of 2022 5 "**The Expression of Interest (EOI) from M/s. Tata Steel Mining Limited was received by me on 16th March, 2021, i.e. after the expiry of the last date of submission of EOI. Tata Steel Mining Limited while citing its reason for delay also requested for condonation of delay in submission of EOI. In order to maximize the value of assets of the Corporate Debtor the EOI submitted by Tata Steel Mining Limited was placed before the Committee of Creditors in its meeting held on 18th March, 2021 (and e-voting results dated 20th March, 2021) and after considering all aspects the CoC decided to condone the delay of Tata Steel Mining Limited in submitting its EOI and include its name in the final list of Prospective Resolution Applicants for Rohit Ferro Tech Limited."

5. The above note indicates that delay in submission of Expression of Interest by 'Tata Steel Mining Limited' was condoned by the CoC in its meeting held on 18.03.2021 and e-voting results dated 20.03.2021. It is well settled that the commercial wisdom of the CoC is to be given due regard. The CoC having decided to condone the delay in submission of Expression of Interest by Respondent No.3 and to include the Respondent No.3 in the list of Resolution Applicants, no exception can be taken by the Appellant to the decision of the CoC. The object of the IBC is to maximise the assets of the Company Appeal (AT) (Ins.) No.326 of 2022 6 Corporate Debtor and as noted above, in the 19th CoC meeting, earlier Resolution Applicants were requested to revise the financial proposal. Thus, by the time Respondent Nos.3 was permitted to submit a Resolution Plan neither any Resolution Plan was accepted nor even put to e-vote. Hence, the commercial wisdom of the CoC to accept the Respondent No.3 as Prospective Resolution Applicant cannot be faulted. The Resolution Plan submitted by the Respondent No.3 was subsequently deliberated and found to be H-1 and was ultimately approved by 100% vote share of the CoC. The Adjudicating Authority has considered the objection raised by the Appellant with regard to the above aspect and has ultimately held that there is neither any arbitrariness nor any illegality or foul play either on the part of the CoC or the Resolution Professional by including the name of Respondent No.3 in the final list of Prospective Resolution Applicants or approval of Resolution Plan of Respondent No.3 by the CoC. It was further held by the Adjudicating Authority that CoC has also accorded opportunity to the Resolution Applicants to submit their revised Resolution Plan in order to maximise the value of assets of the Corporate Debtor. We do not find any infirmity in the above findings of the Adjudicating Authority and we do not find any substance in the submissions of the Counsel for the Appellant.

6. Now, the next submission of the Learned Counsel for the Appellant is with regard to Scheme filed under Section 230 of the Companies Act, 2013. It is true that the Adjudicating Authority in its order dated 18.12.2019 noticed the Application C.A. (C.A.A.) No. 1683/KB of 2019 filed under Section 230 of the Companies Act, 2013 wherein the Adjudicating Authority granted four Company Appeal (AT) (Ins.) No.326 of 2022 7 weeks' time to the Corporate Debtor to convene the meeting of the Creditors and get the approval of the Scheme of Arrangement. It is on record that in spite of the opportunity granted by the Adjudicating Authority, the Scheme of Arrangement never came to be approved. No creditor other than State Bank of India attended the meeting. The State Bank of India has also intimated the Applicant by an e-mail dated 09.12.2020 that the financial proposal under the Scheme of Arrangement was not tenable in law. The creditor having not agreed with the Scheme, no reliance can be placed by the Appellant on the said Scheme. Further, after initiation of the CIRP, the Applicant being Suspended Director of the Corporate Debtor stands disqualified under Section 29A of the Code in submission of any Scheme of Arrangement or Resolution Plan.

7. Section 230 of the Companies Act as well as Section 29A of the Code came for consideration before the Hon'ble Supreme Court in "Arun Kumar Jagatramka vs. Jindal Steel and Power Ltd. & Anr.- (2021) 7 SCC 474" where it was held that it would be far-fetched to hold that the ineligibilities which attach under Section 35(1)(f) read with Section 29A would not apply when Section 230 is sought to be invoked. In paragraphs 71 and 72 of the Judgment, following has been laid down by the Hon'ble Supreme Court:-

"71. The IBC has made a provision for ineligibility under Section 29A which operates during the course of the CIRP. A similar provision is engrafted in Section 35(1)(f) which forms a part of the liquidation provisions contained in Chapter III as well. In the context of the statutory linkage provided by the Company Appeal (AT) (Ins.) No.326 of 2022 8 provisions of Section 230 of the Act of 2013 with Chapter III of the IBC, where a scheme is proposed of a company which is in liquidation under the IBC, it would be far-fetched to hold that the ineligibilities which attach under Section 35(1)(f) read with Section 29A would not apply when Section 230 is sought to be invoked. Such an interpretation would result in defeating the provisions of the IBC and must be eschewed.

72. An argument has also been advanced by the appellants and the petitioners that attaching the ineligibilities under Section 29A and Section 35(1)(f) of the IBC to a scheme of compromise and arrangement under Section 230 of the Act of 2013 would be violative of Article 14 of the Constitution as the appellant would be "deemed ineligible" to submit a proposal under Section 230 of the Act of 2013. We find no merit in this contention. As explained above, the stages of submitting a resolution plan, selling assets of a company in liquidation and selling the company as a going concern during liquidation, all indicate that the promoter or those in the management of the company must not be allowed a back-door entry in the company and are hence, ineligible to participate during these stages.

Proposing a scheme of compromise or arrangement under Section 230 of the Act of 2013, while the company is undergoing liquidation under the provisions of the IBC lies in a similar continuum. Thus, the prohibitions that apply in the former situations must naturally also attach to the latter to ensure that like situations are treated equally."

Company Appeal (AT) (Ins.) No.326 of 2022 9

8. The submission raised by the Appellant on the basis of Scheme of Arrangement under Section 230 of the Companies Act, 2013 was elaborately considered by the Adjudicating Authority and it has been rightly held that the said Scheme having never been approved by the Creditors cannot come to any benefit of the Appellant and further after initiation of the CIRP, the present Appellant who is Suspended Director of the Corporate Debtor is hit by Section 29A of the Code. The submission of the Learned Counsel for the Appellant, thus, on the basis of Scheme of Arrangement under Section 230 of the Companies Act, 2013 has no substance. The Adjudicating Authority by a very elaborate and well considered order has discussed all the submissions which were raised on behalf of the Appellant and has rightly rejected the submission. The Order passed by the Adjudicating Authority is a well considered order which needs no interference by us in exercise of our Appellate Jurisdiction.

9. We do not find any substance in any of the submissions of the Counsel for the Appellant. There is no merit in the Appeal. The Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson [Dr. Alok Srivastava] Member (Technical) [Shreesha Merla] Member (Technical) New Delhi Anjali Company Appeal (AT) (Ins.) No.326 of 2022

Unlock Advanced Research with PRISMAI

National Company Law Appellate Tribunal