National Company Law Appellate Tribunal
Mohammed Enterprises (Tanzania) ... vs M/S Associate Decor Ltd on 19 September, 2022
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
CHENNAI BENCH: CHENNAI
Company Appeal (AT)(CH) (Insolvency) No. 165 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 and 225/2020 in C.P. (IB) No.
51/BB/2018]
IN THE MATTER OF:
Mohammed Enterprises (Tanzania) Ltd.
Successful Resolution Applicant
20th Floor, Golden Jubilee Towers
Ohio Street, P.O. Box 20660
Dar es Salaam, Tanzania ...Appellant
Versus
1. Alok Kailash Saxena
Resolution Professional
Associate Décor Limited
1st Floor, Laxmi Building,
Sir P.M. Road, Fort, Mumbai - 400001 ...Respondent No.1
2. Punjab National Bank
14th Floor large corporate branch
Maker Tower F Wing
Cuffe Parade, Mumbai - 400005 ...Respondent No.2
3. Bank of Baroda
Stressed Assets Management Branch
1st Floor, 17/B, Homji Street Fort
Mumbai - 400023 ...Respondent No.3
4. Union Bank of India
Bharat House, Ground Floor
Near Bombay Stock Exchange
Fort, Mumbai - 400001 ...Respondent No.4
5. Svamitva Landmarks
110/2, 1st Floor, Krishnappa Layout
Lalbagh Road, Bengaluru - 560027 ...Respondent No.5
6. Shankeshwar Landmarks LLP
110/2, 1st Floor, Krishnappa Layout
Lalbagh Road, Bengaluru - 560027 ...Respondent No.6
Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 1 of 25
7. Shankeshwar Landmarks
110/2, 1st Floor, Krishnappa Layout
Lalbagh Road, Bengaluru - 560027 ...Respondent No.7
Present:
For Appellant : Mr. Abhijeet Sinha, Advocate
For Respondents : Mr. P.H. Arvindh Pandian, Senior Advocate
for R5 to R7
J U D G M E N T
(Virtual Mode) KANTHI NARAHARI, MEMBER (TECHNICAL) Preamble:
The Present Appeal is filed against the common order dated 28.05.2021 passed by the Adjudicating Authority (National Company Law Tribunal, Bengaluru Bench, Bengaluru) in I.A. Nos. 227/2020 and 225/2020 in C.P. (IB) No.51/BB/2018, whereby the Adjudicating Authority directed the Resolution Professional (R-1) to place the Resolution Plan submitted by Swamitva Landmark & Ors. before the CoC along with the Resolution Plan filed by METL (Appellant) and after considering both the plans by the CoC, the plan approved by the CoC shall be submitted to the Adjudicating Authority for its consideration and approval.
Brief Facts:
Appellant's Submissions:
2. The Learned Counsel for the Appellant submitted that the Appellant is aggrieved by the impugned order whereby it has directed the RP and the Members of CoC to consider evaluation and approval of Resolution Plans after elapse of nearly 14 months and after the resolution plan submitted by Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 2 of 25 the Appellant was approved unanimously by 100% voting share of the CoC pursuant to the 19th Meeting held on 11.02.2020.
3. It is submitted that the Appellant submitted a Resolution Plan on 07.12.2019 and the plan of the Appellant was discussed and negotiated with the members of the CoC and pursuant to the discussions the Appellant submitted an amended and restated resolution plan dated 11.02.2020 and all the resolution plans were put up for the approval of the CoC by way of e-
voting. The e-voting was conducted and the plan of the Appellant was approved unanimously by 100% voting share of the CoC of the Corporate Debtor. The Appellant being confirmed as the Successful Resolution Applicant, it furnished a performance bank guarantee dated 19.03.2020 for an amount of USD 4,109,590 (equivalent to INR 30,00,00,000/-) in favour of Bank of Baroda.
4. It is submitted that the Respondent No.1 filed I.A. No. 161 of 2020 before the Adjudicating Authority seeking approval of resolution plan of the Appellant in terms of Section 31 of the I&B Code, 2016, however, in view of outbreak of Covid-19 and the restrictions on movement imposed, the hearing was not taken up. The PBG of the Appellant was valid for an initial period of 12 months and the same was extended and renewed due to the pending application before the Adjudicating Authority. The Appellant addressed a letter dated 17.04.2021 to the Respondents No. 2 to 4 expressing its concern on the depleting value of the Corporate Debtor and impact of the inordinate delay on the Appellants ability to successfully Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 3 of 25 implement its business plan for the Corporate Debtor. The Appellant was awaiting the reply from the Respondents No. 2 to 4.
5. While matter stood thus, the Appellant received copy of the impugned order on 08.06.2021 from R-1. From the impugned order the Appellant became aware that subsequent to the completion of CIRP period on 16.03.2021 and after filing of the plan for approval before the Adjudicating Authority, a consortium of Respondents No. 5 to 7 purportedly submitted a resolution plan for the Corporate Debtor and thereafter filed I.A. No. 225/2020 and I.A. No. 227/2020 in C.P. No. 51 of 2018 before the Adjudicating Authority inter-alia seeking a direction from the Adjudicating Authority to Respondent No.1 to place the resolution plan submitted by the consortium before the CoC for its consideration.
6. It is submitted that the Respondents No. 5 to 7 earlier submitted an EOI to submit a resolution plan for the Corporate Debtor, however, they backed out of the process in November, 2019 and did not submit any resolution plan for the Corporate Debtor within the date specified for submission of resolution plan. It is submitted that the CIRP period had already concluded on 16.03.2020 and no resolution plan could have been accepted thereafter. The Adjudicating Authority has directed that period from 05.03.2020 till the receipt of the impugned order dated 28.05.2021 stands excluded and the CIRP period extended by a period of 12 weeks (approximately 3 months) to carry out the directions set out in the impugned order.
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7. The Learned Counsel further submitted that the Adjudicating Authority has disposed of the Application No. 161 of 2020 seeking approval of the resolution plan without consideration on merits and without approving or rejecting Appellant's resolution plan in accordance with Section 31 of the I&B Code, 2016.
8. The Learned Counsel in the grounds of appeal submitted that the resolution process under the IBC is a time bound process where Prospective Resolution Applicants (in short PRAs) are required to submit resolution plans for the consideration of the CoC within the time lines prescribed under the IBC. The Adjudicating Authority does not have the power to direct the CoC to consider a resolution plan submitted beyond the expiry of the CIRP period. The said extension of time beyond the period of 330 days is in the teeth of the judgment of the Hon'ble Supreme Court in Committee of Creditors of Essar Steel (India) Ltd. Vs. Satish Kumar Gupta & Ors. (2020) 8 SCC 531.
9. It is submitted that the Hon'ble Supreme Court in the matter of Kalpraj Dharamshi Vs. Kotak Investment (2021) SCC Online SC 204, held that the "NCLAT was not correct in interfering with the commercial wisdom taken by CoC by a thumping majority of 84.36%". Further the Learned Counsel also relied upon the judgment of this Tribunal in Kalinga Allied Industries (India) Pvt. Ltd. Vs. Hindustan Coils Ltd. & Ors. (2021) SCC Online NCLAT 51 at para 15 observed as under:
"Admittedly, the Respondent No.1 has not submitted any resolution plan pursuant to the Expression of Interest issued Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 5 of 25 by the RP. Thus, the Respondent No.1 is not part of CIRP. The Respondent No.1 has filed application directly before the Adjudicating Authority. The Adjudicating Authority in the guise of maximation of the value of assets of the Corporate Debtor directed that the Respondent No.1's application and resolution plan be put up before the CoC for consideration. There is no provision in the Code or Regulation which provides that while exercising the power under Section 31 of the I&B Code the Adjudicating Authority can direct the CoC to consider their resolution plan of such person who has not been part of CIRP. Otherwise also if such procedure is adopted than the CIRP will be frustrated."
10. The Learned Counsel further submitted that the impugned order exceeds the limited jurisdiction of the Adjudicating Authority under Section 31 of the I&B Code. The CoC cannot change / reverse its decision of approving a resolution plan after expiry of the CIRP period. Further the commercial wisdom of the CoC cannot be questioned / adjudicated upon by the Adjudicating Authority.
11. In view of the reasons as stated above the Learned Counsel prayed this Bench to allow the appeal by setting aside the impugned order. Submissions of Respondents No. 5 to 7
12. The Learned Senior Counsel for the Respondents No. 5 to 7 submitted that these Respondents being consortium filed I.A. No. 227 of 2020 in August 2020 itself and the orders could not be passed due to stay granted by the Hon'ble High Court of Karnataka. These Respondents also filed I.A. No. 225 of 2020 before the Adjudicating Authority being aggrieved by the Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 6 of 25 action of the RP in rejecting the plan without even it being placed before the CoC. The Adjudicating Authority has rightly allowed the other applications owing to the merits in them. The I.A. No. 161 of 2020 filed by the RP seeking approval of the plan is concerned the same is a result of an irregular process followed in by the RP.
13. It is submitted that the submission of plan by these Respondents is within the CIRP period on the ground that 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 Supreme Court. The Regulation 40C of the CIRP Regulations specifically excluded the time for any activity from the CIRP period by virtue of the lockdown imposed by the Central Government in the wake of outbreak of Covid-19. The Adjudicating Authority considered all submissions and rightly concluded that the time could be extended for completion of CIRP by virtue of this Tribunals ruling in Quinn logistics India Pvt. Ltd. Vs. Macks of Softtech Pvt. Ltd., which permitted such extension of time under justified circumstances.
14. The Learned Senior Counsel relied upon the judgment of the Hon'ble Supreme Court in the case of Creditors of Essar Steel India Limited through Authorised Signatory Vs. Satish Kumar Gupta & Ors. (2020) 8 SCC 531, the Hon'ble Supreme Court held that the term "mandatorily" in Section 12 is struck down as being manifestly arbitrary under Article 14 of the Constitution of India and as being an unreasonable restriction on the litigant's right to carry on business under Article 19(1)(g) of the Constitution. The effect of this declaration is that ordinarily the time taken in relation to Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 7 of 25 the CIRP must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. However, if the delay or a large part thereof is attributable to the tardy resolution process, it may be open in such cases for the Adjudicating Authority and/or NCLAT to extend time beyond 330 days. Considering the facts, the Adjudicating Authority has rightly extended the time limit.
15. It is submitted that the CIRP conducted by the RP was riddled with irregularities. The commercial wisdom of the CoC has not been interfered with. However, when there is a gross violation in the CIRP process, the Adjudicating Authority has inherent powers to pass appropriate orders.
16. It is submitted that the RP failed to submit the mandatory details in the Information Memorandum and the audited financial statements were only provided up to 2014-15. The Respondents were in a bona-fide belief that the process was still going on undertook all efforts to collate all information pertaining to the Corporate Debtor from the website of the Ministry of Corporate Affairs. While in the process of collating information and submitting the plan, the lockdown was imposed due to the outbreak of the pandemic Covid-19 and there was a delay in submitting the plan. The Respondents submitted its plan on 27.05.2020, the RP had not sent any reply to the same. A reminder was sent on 16.06.2020, however, the RP vide its reply dated 18.06.2020 rejected the plan without placing the same before CoC for its consideration. Aggrieved by the same Respondents filed I.A. No. Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 8 of 25 227/2020 in the above application and the Adjudicating Authority rightly allowed the application by granting the reliefs.
17. In view of the reasons as stated above the Learned Counsel prayed this Bench to dismiss the appeal.
Analysis / Appraisal:
18. 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).
19. The Appellant is the Successful Resolution Applicant of the Corporate Debtor whose plan has been approved by the Committee of Creditors on 06.03.2020 unanimously by 100% voting share.
20. It is an admitted fact that the Corporate Debtor was admitted and CIRP was initiated against it vide order dated 26.10.2018. The 1st Respondent being the RP published invitation for EoI for submission of resolution plan and the last date for submission of EoI was extended from time to time. The Appellant submitted its EoI on 04.10.2019 for submission of resolution plan. The Appellant submitted its resolution plan on 07.12.2019 and the members of CoC deliberated the said plan in various meetings of the CoC. The Appellant submitted an amended and re-stated resolution plan on 11.02.2020 and the resolution plan of the Appellant along with other resolution plans received by the 1st Respondent was put for Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 9 of 25 e-voting. The e-voting took place from 13.02.2020 till 06.03.2020 and the plan of the Appellant was approved unanimously by 100% voting share of the CoC of the Corporate Debtor. The Appellant was issued a letter of intent dated 09.03.2020 in accordance with the RFRP dated 09.10.2020 (request of resolution plan). Pursuant to confirmation as Successful Resolution Applicant, the Appellant furnished a Performance Bank Guarantee (PBG) dated 19.03.2020 for an amount for Rs. 30 crores in favour of Bank of Baroda in accordance with the requirement under RFRP. Thereafter, the 1st Respondent filed I.A. No. 161/2020 in C.P. (IB) No.51/BB/2018 before the Adjudicating Authority on 12.03.2020 seeking the Adjudicating Authority approval of the Appellant's plan in terms of the Section 31 of the I&B Code, 2016. It is seen that the said application was pending for consideration. Since the said application has not taken up for hearing the Respondent No.1 requested the Appellant to renew PBG and accordingly, the Appellant renewed the PBG. The fact remains that the CIRP period of the Corporate Debtor expired on 16.03.2021 and the application for approval was still pending before the Adjudicating Authority for its consideration.
21. While matter stood thus, the Appellant contended that it received an e-mail dated 08.06.2021 from the 1st Respondent herein and became aware for the first time that the Adjudicating Authority passed the present impugned order dated 28.05.2021 with regard to certain directions that had been passed. The Appellant is aggrieved by the directions passed in I.A. No. 227 of 2020, the said application was filed by the Respondents No. 5 to 7 seeking directions to the 1st Respondent for placing their resolution plan Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 10 of 25 before the CoC on the ground that the RP rejected the plan submitted by the said respondents vide communication dated 18.06.2020.
22. The Respondents No. 5 to 7 in pursuance of Form-G, submitted their EoI to submit a resolution plan on 06.09.2019. Thereafter, all PRAs including the Appellant and the Respondents No. 5 to 7 were given access to the Information Memorandum (IM), Request For resolution plan (RFRP) and Virtual Data Room (VDR) to conduct its due diligence process for resolution plan on 19.10.2019. After conducting a preliminary due diligence of the Corporate Debtor, the Respondents vide its letter dated 06.11.2019 addressed to the RP decided to withdraw from resolution process. In spite of withdrawal from the resolution process by the Respondents No. 5 to 7, the 1st Respondent continued to keep them informed about the time lines in the resolution process including the extension and last date for submission of the resolution plan was on 30.11.2019 to 07.12.2019.
23. As per Clause 2.1.5 of Request for Resolution Plan (RFRP) dated 09.10.2019, it is made clear that any resolution plan submitted beyond date would be at the sole discretion of the resolution professional and it would be considered that the plan to be considered as "non-responsive", at the sole discretion of the resolution professional. The Adjudicating Authority was of the view that the 1st Respondent had not complied with the provisions of law contained in Regulation 36(2)(b), (c), (d) and (f) of CIRP Regulation, 2016 by not providing the requisite details such as audited accounts and details of creditors as required under the above Regulation.
Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 11 of 25
24. The Adjudicating Authority miserably failed to note that the Respondents No.5 to 7 have withdrew from the resolution process on 06.11.2019 and they have not submitted any resolution plan nor there is any request for asking the details of the Corporate Debtor from the RP. The Respondents No.5 to 7 have deliberately took a considerable time to submit a plan on 25.07.2020 i.e. after expiry of CIRP period i.e. 330 days. Having expired the CIRP period prior to submission of plan by the Respondents No. 5 to 7, the Adjudicating Authority excluded the period and also extended the CIRP period even though the resolution plan of the Appellant has been approved by the CoC and pending before the same Adjudicating Authority for consideration is in our view completely non-est and without applying its judicial mind. The 1st Respondent rightly rejected the request made by these respondents to consider for placing their plan before the CoC.
25. The Adjudicating Authority erred into allowing the I.A. No. 227 of 2020 filed by the Respondents No. 5 to 7 when an application being I.A. No.161 of 2020 which was filed by the 1st Respondent herein seeking approval of the resolution plan of the Appellant under Section 31 of the I&B Code, 2016 is pending for consideration. Non disposal of the said application and allowing the I.A. No.227 of 2020 is illegal and arbitrary.
26. From the above factual point of law this Tribunal makes it clear that the order of the Adjudicating Authority dated 28.05.2021 is per se illegal. However, this Tribunal intend to look into from legal aspect supported by the judicial precedents.
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27. As per sub-section (1) of Section 12 of the I&B Code, 2016 the CIRP period shall be completed within a period of 180 days from the date of admission of the application to initiate such process. However, the resolution professional may file an application to extend the period of CIRP before the Adjudicating Authority beyond 180 days if so instructed to do by a resolution passed at the meeting of CoC by a vote of 66% of the voting share under sub-section (2). The Adjudicating Authority if satisfied that the CIRP process cannot be completed within 180 days and it may by order extend the duration by 90 days under sub-section (3). A proviso has been inserted w.e.f. 16.08.2019 by Act 26 of 2016 that the CIRP period shall mandatorily be completed within a period of 330 days from the insolvency commencement date including any extension given of the CIRP. However, the word mandatorily has been struck down by the Hon'ble Supreme Court in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors. (2020) 8 SCC 531 at para 127. Whilst with regard outer limit of 330 days. The Hon'ble Supreme Court held "it is only in such exceptional cases that time can be extended, the general rule being that 330 days is the outer limit within which resolution of the stressed assets of the Corporate Debtor must take place beyond which the Corporate Debtor is to be driven into liquidation".
Thus, the CIRP is to be completed in 330 days and only extension can be granted in exceptional circumstances.
28. Further, this Tribunal in Pioneer Rubchem Vs. Vivek Raheja & Ors. Company Appeal (AT) (Ins) No. 706 of 2020 at para 4 observed that Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 13 of 25 "although it is directory that CIRP can be completed up to a period of 330 days or so which is largely to consider the time frame of judicial process. Hence, practically all attempts to be made to complete the CIRP within 270 days".
29. The point for consideration is whether the resolution plan submitted for approval of the Adjudicating Authority under Section 31 of I&B Code, 2016 is binding on the CoC and Successful Resolution Applicant. From the judicial precedents it is a settled position of the law that once the CoC has approved a resolution plan which has been submitted for approval under Section 31 of the Code, whether the same is binding on the CoC. It is unequivocal that Section 31 of the Code deal with approval of resolution plan and if the Adjudicating Authority is satisfied that the resolution plan as approved by the Committee of Creditors under sub-section (4) of Section 30 meets the requirement as referred to in sub-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 State Government or any Local Authority etc. In this regard, the Hon'ble Supreme Court in Ebix Singapore Pvt. Ltd. Vs. Committee of Creditors of Educomp Solution Ltd. & Anr. reported in (2021) SCC Online SC 707 para 175 held as under:
"175. The approval of the Adjudicating Authority under Section 31(1) of the IBC has the effect of making the Resolution Plan binding on all stakeholders. These stakeholders include the employees of the corporate debtor whose terms of employment would be governed by the Resolution Plan, the Central and State Governments who Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 14 of 25 would receive their tax dues on the basis of the terms of the Resolution Plan and local authorities to whom dues are owed. These stakeholders are not direct participants in the CIRP but are bound by its consequence by virtue of the approval of the Resolution Plan, under Section 31(1) of the IBC. Section 31(1) ensures that the Resolution Plan becomes binding on all stakeholders after it is approved by the Adjudicating Authority. The language of Section 31(1) cannot be construed to mean that a Resolution Plan is indeterminate or open to withdrawal or modification until it is approved by the Adjudicating Authority or that it is not binding between the CoC and the successful Resolution Applicant. Regulation 39(4) of CIRP Regulations mandates that the RP should endeavour to submit the Plan at least fifteen days before the statutory period of the CIRP under Section 12 is due to expire along with a receipt of a PBG and a compliance certificate as Form H. It is pertinent to note that sub-Section (3) to Section 12 mandates that the CIRP process, including legal proceedings, must be concluded within 330 days. This three- hundred-and- thirty-day period can be extended only in exceptional circumstances, if the process is at near conclusion and serves the object of the IBC, as held by a three judge Bench of this Court in Essar Steel (supra). Therefore, after accounting for all statutorily envisaged delays which the RP has to explain in its Form H and otherwise through Regulation 40B, the procedure envisages a fifteen-day window between submission of Resolution Plan and its approval or rejection by the Adjudicating Authority. This clearly indicates that the statute envisages a certain level of finality before the Resolution Plan is submitted for approval to the Adjudicating Authority. Even the CoC is not permitted to approve multiple Resolution Plans or solicit EOIs after submission of a Resolution Plan to the Adjudicating Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 15 of 25 Authority, which would possibly be in contemplation if the Resolution Applicant was permitted to withdraw from, or modify, the Plan after acceptance by the CoC. Regulation 36B(4A) requires the furnishing of a performance security which will be forfeited if a Resolution Applicant fails to implement the Plan. This is collected before the Adjudicating Authority approves the Plan. Notably, the regulations also direct forfeiture of the performance security in case the Resolution Applicant contributes to the failure of implementation, which could potentially include any attempts at withdrawal of the Plan."
30. In the above judgment, the Hon'ble Supreme Court clearly held that the Section 31(1) of the Code, cannot be construed to mean that the resolution plan indeterminate or open to withdrawal or modification until it is approved by the Adjudicating Authority or that it is not binding between the CoC and the Successful Resolution Applicant. From the aforesaid judgment of the Hon'ble Supreme Court, it is clear that when the plan is pending before the Adjudicating Authority for approval, it is not open even to withdraw or modification. The plan is even binding between the CoC and the Successful Resolution Applicant when it is pending for approval. The Adjudicating Authority miserably failed to consider this aspect. Further, the Hon'ble Supreme Court in the above judgment held that the CIR Process including legal proceeding must be concluded within 330 days, however, the period can be extended beyond 330 days only in exceptional circumstances as held by the Hon'ble Supreme Court in Essar Steel (supra). Further. the Hon'ble Supreme Court in this very same para held that even the CoC is not Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 16 of 25 permitted to approve multiple resolution plans or solicit EoIs after submission of a resolution plan to the Adjudicating Authority.
31. Whilst in the present case, the Adjudicating Authority vide impugned order directed the 1st Respondent to place the resolution plan before the CoC for its consideration by excluding and extending the CIRP period, when an application is pending for approval of resolution plan, which is completely illegal and against the law laid down by the Hon'ble Supreme Court in Ebix Singapore (supra).
32. This Tribunal in Committee of Creditors of Meenakshi Energy Ltd. Vs. Consortium of Prudent ARC Ltd. & Ors. reported in Company Appeal (AT) (CH) (Ins) No. 166 of 2021 at para 103 held as under:
"103. Indeed, all the concerned authorities are necessarily required to adhere to the time line enunciated in Regulation 40A of the IBBI (Corporate Insolvency Resolution Process for Corporate Person) Regulation, 2016. No wonder, the I&B Code, 2016 provides for the consequences of the period mentioned in Section 12 coming to an end in the event that the said period is over without the receipt of a resolution plan or after rejection of a resolution plan in terms of Section 31."
33. This Tribunal in the facts of the present case, is of the opinion that there are no reasons for extending and excluding the CIRP period by the Adjudicating Authority. It is not the case that no PRAs received in the CIRP process and to afford an opportunity to call for PRAs with an aim to avoid liquidation of the Corporate Debtor. In the present case, the plan is pending for approval before the same Adjudicating Authority and the Adjudicating Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 17 of 25 Authority for reasons best known to it allowed the application filed by the Respondents No. 5 to 7 in our view arbitrary and against all canons of law.
34. The other point needs to be addressed/considered is whether the Adjudicating Authority can overlook the decision of CoC which was taken in their commercial wisdom. The Hon'ble Supreme Court in K. Shashidhar Vs. Indian Overseas Bank & Ors. reported in (2019) 12 SCC 150 para 52 held as under:
"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 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 Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 18 of 25 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."
35. Further in Kalpraj Dharamshi Vs. Kotak Investment (2021) SCC Online 204 para 143 held as under:
"143. This Court has held, that it is not open to the Adjudicating Authority or Appellate Authority to reckon any other factor other than specified in Sections 30(2) or 61(3) of the I&B Code. It has further been held, that the commercial wisdom of 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. This Court thus, in unequivocal terms, held, that 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. It has been held, that the opinion expressed by CoC after due deliberations in the meetings through voting, as per voting shares, is a collective business decision. It has been held, that the legislature has consciously not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 19 of 25 their collective decision before the Adjudicating Authority and that the decision of CoCs 'commercial wisdom' is made non−justiciable."
36. From the decisions of the Hon'ble Supreme Court, it is unequivocal that the commercial wisdom of the CoC has been given paramount status without any judicial intervention for ensuring completion of the stated process within the time lines prescribed by the I&B Code. Further the Hon'ble Supreme Court in Kalpraj Dharamshi (supra) at para 145 held as under:
145. This Court held, that what is left to the majority decision of CoC is the "feasibility and viability" of a resolution plan, which is required to take into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. It has further been held, that CoC is entitled to suggest a modification to the prospective resolution applicant, so that carrying on the business of the Corporate Debtor does not become impossible, which suggestion may, in turn, be accepted by the resolution applicant with a consequent modification as to distribution of funds, etc. It has been held, that what is important is, the commercial wisdom of the majority of creditors, which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place."
37. The other point for consideration is that as per the decision of the Hon'ble Supreme Court in Ebix Singapore (supra), para 246 it is held that the resolution plan submitted is binding and irrevocable as between the CoC and the Successful Resolution Applicant in terms of the provisions of the IBC and the CIRP Regulations:
Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 20 of 25 "246. In the present framework, even if an impermissible understanding of equity is imported through the route of residual powers or the terms of the Resolution Plan are interpreted in a manner that enables the appellants' desired course of action, it is wholly unclear on whether a withdrawal of a CoC-approved Resolution Plan at a later stage of the process would result in the Adjudicating Authority directing mandatory liquidation of the Corporate Debtor. Pertinently, this direction has been otherwise provided in Section 33(1)(b) of the IBC when an Adjudicating Authority rejects a Resolution Plan under Section 31. In this context, we hold that the existing insolvency framework in India provides no scope for effecting further modifications or withdrawals of CoC-
approved Resolution Plans, at the behest of the successful Resolution Applicant, once the plan has been submitted to the Adjudicating Authority. A Resolution Applicant, after obtaining the financial information of the Corporate Debtor through the informational utilities and perusing the IM, is assumed to have analyzed the risks in the business of the Corporate Debtor and submitted a considered proposal. A submitted Resolution Plan is binding and irrevocable as between the CoC and the successful Resolution Applicant in terms of the provisions of the IBC and the CIRP Regulations. In the case of Kundan Care, since both, the Resolution Applicant and the CoC, have requested for modification of the Resolution Plan because of the uncertainty over the PPA, cleared by the ruling of this Court in Gujarat Urja (supra), a one-time relief under Article 142 of the Constitution is provided with the conditions prescribed in Section K.2."
38. The Adjudicating Authority is not authorised to pass any orders which would circumvent and attempt to frustrate the resolution plan pending before it for consideration under Section 31 of the Code. The bitter truth Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 21 of 25 remains that the Respondents No. 5 to 7 are completely standing outside of the CIRP and once evinced their EoI and backed out from participating in resolution process and now after completion of the CIR period their application cannot be considered. In this regard, this Tribunal in Kalinga Allied Industries Pvt. Ltd. Vs. Hindustan Coils Ltd. (2021) SCC Online NCLAT 51 para 15 held as under:
"15. In pursuant to the expression of interest issued by RP on 24.08.2018 the Appellant submitted a Resolution Plan. After several rounds of deliberation by the COC revised Resolution Plan was submitted by the Appellant on 19.12.2018. The same was approved on 28.12.2018 by the COC in the 13th meeting by requisite majority. Thereafter, the RP filed an Application under Section 30 (6) of the I&B Code for approval of Resolution Plan in the month of January, 2019 and sometime in the month of February, 2020 the Respondent No. 1 filed an Application seeking direction for consideration of its Resolution Plan. Admittedly the Respondent No. 1 has not submitted any Resolution Plan pursuant to the expression of interest issued by the RP. Thus, the Respondent No. 1 is not part of CIRP. The Respondent No. 1 has filed Application directly before the Adjudicating Authority. The Adjudicating Authority in the guise of maximization of the value of assets of the Corporate Debtor directed that the Respondent No. 1's Application and Resolution Plan be put up before the COC for consideration. There is no provision in the code or regulation which provides that while exercising the power under Section 31 of the I&B Code the Adjudicating Authority can direct the COC to consider the Resolution Plan of such person who has not been part of CIRP. Otherwise also if such procedure is adopted then the CIRP will be frustrated. Once the Resolution Plan has been opened and fundamentals and financials of the Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 22 of 25 Plan and offer made therein were disclosed to all the participants including RP. Then anyone can enhance its offer before the Adjudicating Authority in the guise of maximization of realisation. Therefore, no further fresh bid or offer could have been accepted or considered as held by this Appellate Tribunal in the case of Kotak Investment Advisors Ltd. (Supra) (See Para 23)"
39. Further this Tribunal in Shrawan Kumar Agarwal Consortium Vs. Rituraj Steel Pvt. Ltd. & Ors. reported in (2020) SCC Online NCLAT 380 para 16 observed as under:
"16. Thus it is clear that the Adjudicating Authority is having limited power of judicial scrutiny under Section 31, which has to remain within the four corners of Section 30(2) of the Code and the same cannot, in any circumstance, trespass upon the commercial wisdom of the CoC. The directions of the Adjudicating Authority for re-bidding, after the approval of Resolution Plan by the requisite majority, is not in consonance with the law laid down by Hon'ble Supreme Court in K. Shashidhar (supra) case, as a Resolution Plan is neither a sale nor an auction but it all depends on the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority and 'that is made non-justiciable'. Thus, the Appeal No 1490/2019 deserves to be allowed.
40. We avowed the precedents/decisions of this Tribunal in re-Kalinga Allied Industries (supra) and in re-Shrawan Kumar Agarwal (supra) and affirm that there is no such provision in the Code or Regulation which provides that while exercising the power under Section 31 of the I&B Code, the Adjudicating Authority can direct the CoC to consider the resolution Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 23 of 25 plan of such person who has not been part of CIRP. Otherwise, also if such procedure is adopted then the CIRP will be frustrated. Admittedly, in the present case the Respondents No. 5 to 7 were not part of CIRP.
41. The reason given by the Adjudicating Authority that the 1st Respondent has not provided the documents to the Respondents No. 5 to 7 is concerned from the records, it is seen that the audited balance sheet up to a period of financial year 2014-15 was available from the data room which was accessible by all the PRAs including the Respondents No. 5 to 7.
Further the financial statements for years 2015-16, 2016-17 and 2017-18 were also made available in the data room. There is no denial by the Respondents No. 5 to 7 that the above documents made available to all the PRAs. Further from the records, the audited but unsigned financial statements were also uploaded on the data room on 05.12.2019 and the signed versions were made available in February, 2020. Even after withdrawal from the CIRP by the Respondents No. 5 to 7 the 1st Respondent informed the Respondents regarding extension of the last date for submission of resolution plan from 30.11.2019 to 07.12.2019. However, the Respondents No. 5 to 7 have not submitted their resolution plan until the expiry of CIRP period. This Tribunal does not go into the oblique motive of these Respondents in submitting the resolution plan belatedly.
42. Having discussed the legal issue and the precedents in this regard this Tribunal is of the view that the resolution plan submitted by the Respondents No. 5 to 7 on 27.05.2020 after expiry of CIRP period is illegal and this Tribunal upholds the decision taken by the 1st Respondent in Company Appeal (AT) (CH) (Ins.) No. 165 of 2021 24 of 25 rejecting the plan of the Respondents No. 5 to 7 vide its communication dated 18.06.2020 is legal and valid and takes a perspective conclusion as under.
Conclusion:
43. The Appellant has made out a prima facie case to be interfered with the order passed by the 'Adjudicating Authority'. Hence, this 'Tribunal' comes to an irresistible and inescapable conclusion that the 'impugned order' dated 28.05.2021, in I.A. No. 227/2020 and 225/2020 in C.P. (IB) No. 51/BB/2018, passed by the 'Adjudicating Authority', (National Company Law Tribunal, Bengaluru Bench, Bengaluru) is `unsustainable' and the same is set aside. Resultantly, the 'Appeal' succeeds.
44. In fine, the instant Company Appeal (AT)(CH) (Ins.) No. 165 of 2021 is 'allowed'. However, no orders as to costs. The 'interim order', passed 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. 165 of 2021 25 of 25