National Company Law Appellate Tribunal
Nitin Gupta vs M/S Applied Electro Magnetics Pvt Ltd on 16 March, 2022
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
Company Appeal (AT) (Insolvency) No. 502 of 2019
IN THE MATTER OF:
NITIN GUPTA
At present residing at:
C-215, 3rd Floor
Surajmal Vihar, Delhi - 92 ...Appellant
Versus
M/S. APPLIED ELECTRO-MAGNETICS PVT. LTD.
Regd. Office: M-120, First Floor,
Greater Kailash-II,
New Delhi - 48
At Present: D-130, Sector 63,
Nodia (UP) ...Respondent No. 1
SHRI VINAY TALWAR
S/o O.P. Talwar-RP.
R/o -1- Link Road, Jungpura Extension
New Delhi, 110014 ... Respondent No.2
BANK OF INDIA
Star House, H-2,
Cannaught Circus
New Delhi - 110001 ... Respondent No.3
Present:
For Appellant: Mr. RK Gupta, Advocate
For Respondent: Mr. Abhishek Anand, Mr. Kunal
Godhwani, Mr. Sahil Bhatia,
Advocates for RP
Mr. V. Seshagiri, For BOI Mr. Manish
Kaushik, Mr. Anubhav Gupta,
Advocates for R2 and R3
Company Appeal (AT) (Insolvency) No. 502 of 2019
Page 1 of 20
JUDGMENT
(Date: 16.03.2022) [Per.: Dr. Alok Srivastava, Member (Technical)] This Appeal has been filed by the Appellant under Section 61 of the Insolvency and Bankruptcy Code, 2016 (In short „IBC‟) who is aggrieved by the order dated 02.04.2019 passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi) in CA No. 371/C-II/ND/2018 in CP (IB)-334/(ND)/2017 (hereafter called „Impugned Order‟). By the impugned order, the Adjudicating Authority has approved the Resolution Plan for the Corporate Debtor "M/s Applied Electro Magnetics Pvt. Ltd." The Appellant is aggrieved certain legal infirmities in the examination of the Resolution Plan by the Resolution Professional and inadequate allocation for salary, pension and gratuity amounts of workmen/employees in the approved Resolution Plan.
2. In brief the facts of the case are that the Appellant was appointed as Manager R&D (Railway Projects) by the Respondent/Corporate Debtor "M/s Applied Electro Magnetics Pvt. Ltd." on 07.05.2008 and given a basic salary alongwith house rent allowance, PF, Gratuity and LTA and he joined the Corporate Debtor on duty on 07.05.2008. The Appellant has further stated that he continued to work well and consequently the Respondent kept on revising or increasing his salary package even though the payment of salary and other perks was not systematic and beset with delays. The Appellant has further stated that despite repeated requests for payment of pending salary and related amounts the Respondent paid no heed. A Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 2 of 20 final demand was made by the Appellant vide notice dated 17.08.2017 in Form-3 under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Rules,2016 which was served upon the Respondent on 18.08.2017, wherein the Appellant made a demand of Rs. 66,46,795/- as amount of debt due from the Corporate Debtor on the date of submission of Form-3. Thereafter, the Appellant filed an application under Section 9 of IBC on 01.09.2017 as operational creditor for initiation of Corporate Insolvency Resolution Process (In short „CIRP‟) under the IBC, which was duly considered and allowed vide order of the Adjudicating Authority dated 26.10.2017 and IRP was appointed for carrying out CIRP of the Corporate Debtor. While the CIRP was going on, the Bank of India, having a majority voting share in CoC, submitted an application for appointment of Mr. Vinay Talwar as Resolution Professional, which was allowed by the Adjudicating Authority vide order dated 16.01.2018.
3. Thereafter, the Appellant filed an Application bearing CA No. 101 of 2018 under Section 66 of the IBC before the Adjudicating Authority regarding fraudulent/trading of the Corporate Debtor with intent to defraud the creditors and for action and recovery of the amount received by the business associates of the Corporate Debtor. Thereafter, twelve other employees of the Corporate Debtor filed an application on 07.05.2018 with similar allegations as made by the Appellant. The said applications were heard by the Adjudicating Authority and reserved for orders but no orders were passed in them. Meanwhile, the Resolution Professional Mr. Vinay Talwar submitted the Resolution Plan for approval by the Adjudicating Authority. It is alleged by the Appellant that the Resolution Plan did not contain an Affidavit under Section 29A and Form-H, but Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 3 of 20 it was heard by the Adjudicating Authority, whereupon the Resolution Professional was directed to file Affidavit relating to Section 29-A and Form-H.
4. The Appellant has further stated that since the amount of pending gratuity, pension and Provident Fund dues of the employees/workmen of the Corporate Debtor were incorrectly shown in the Successful Resolution Plan, the employees/workmen filed a petition under Section 7A of EPF and MP Act, 1952 for correct assessment which was decided vide order dated 15.03.2019 of the Provident Fund Authority and the Provident Fund amount was assessed at Rs. 1,35,06,391 in presence of the legal representative of the Corporate Debtor. The Appellant has stated that the Successful Resolution Applicant (in short „SRA‟) did not make any change in the amount of PF dues of employees/ workmen in the light of the PF Authority‟s order, and the Resolution Plan was approved by the Adjudicating Authority vide impugned order dated 02.04.2019, which the Appellant has assailed by claiming it to be not inconsonance with the provisions of the IBC.
5. In this Appeal, the Appellant has alleged irregularities committed by the Resolution Professional in the constitution of Committee of Creditors (in short „COC‟), not carrying out forensic audit, preferential transactions carried out by the erstwhile management of the corporate debtor, among other allegations, and prayed for setting aside the impugned order thereby rejecting the Resolution Plan submitted by the Successful Resolution Applicant. The Appellant has also prayed for sending the matter for investigation of irregularities Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 4 of 20 committed by the Resolution Professional to Serious Fraud Investigation Office or investigation and necessary action.
6. We heard the arguments submitted by the Ld. Counsels for the parties and also perused the record.
7. The Ld. Counsel for the Appellant has argued that the approved Resolution Plan does not comply with Section 30(2)(e) as the workmen/employees have not been paid their dues in accordance with the provisions of the IBC but have been allocated only 15% out of the 24 months‟ dues of the period preceding the date of insolvency commencement dues for payment. He has also claimed that the dues of employees of the past 12 months preceding the date of insolvency commencement have not been paid in full but only 10% of the amount admissible was paid to them. He has also stated that only 20% of the gratuity amount was paid qua the Successful Resolution Plan whereas under the provisions of IBC no reduction can be done in payment of the full due amount.
8. The Ld. Sr. Counsel for the Appellant has cited the Judgment of Hon‟ble Supreme Court in the matter of 'H. Gangahanume Gowda Vs. Karnataka Agro Industries Corporation Ltd. [(2003) 3 SCC 40]' wherein it is held that even interest on the amount of gratuity to which the Appellant party is entitled is payable and it has fixed the rate of interest for delayed payment @ 10%. He has argued that as per the provisions of Payment of Gratuity Act, 1972 once the amount of gratuity is decided there can be no reduction in the said amount. He has also cited the judgment of NCLAT in 'State Bank of India Vs. Moser Baer Karamchari Union & Anr. [CA Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 5 of 20 (AT) (Ins) No. 396 of 2019]' in which this Tribunal has held that the provident fund, the pension fund and the gratuity fund of the employees/workmen do not come within the „liquidation estate‟ for the purpose of distribution of assets under Section 53 and therefore, they should be given to the employees/workmen on priority and in full.
9. The Ld. Counsel for the Appellant has referred to the impugned order stating that even though the Resolution Plan has been approved vide the Impugned Order, Appellant‟s applications regarding serious irregularities committed by the Resolution Plan have not been decided. He has referred to the letter dated 16.12.2015 (attached at Pg. 404 of the Appeal Paper Book, Vol.-II), wherein Tata Power Company has accepted that payment against purchase order No. 221052 and 221054would be made directly to M/s SM Finlease Pvt. Ltd. which is improper and an extortionate rate of interest is charged by them.
10. The Ld. Counsel for the Resolution Professional has argued that the Adjudicating Authority had to merely see whether the approved Resolution Plan was in accordance with Section 30(2)(e) of the IBC. He has further argued that since the liquidation value which was admissible to the operational creditor would have been NIL, hence, the amounts payable to workmen/employees on account of salary, PF and gratuity dues had to be reduced. He has further stated that in such an event, Section 36(4) will be applicable and the amounts of pension fund, gratuity fund and provident fund will have to be kept out of the „liquidation estate‟ and then payment will have to be done in accordance with the waterfall mechanism given in Section 53.
Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 6 of 20 His argument is that since the plan was approved by 100% voting in the CoC, the commercial wisdom of the CoC in approving such a Resolution Plan cannot be questioned and the distribution therein to various stakeholders cannot be changed by either the Adjudicating Authority or the Appellate Tribunal.
11. The Ld. Counsel for the Committee of Creditors has supported the arguments put forward by the Ld. Counsel for the Resolution Professional and has said that in view of the NIL liquidation value of the Corporate Debtor even the secured financial creditor such as the banks have had to take a large haircut of about 80%. The Ld. Counsel for the Resolution Applicant has also supported the arguments submitted by the Ld. Counsel for the Resolution Professional and urged that the Appeal may be dismissed as no illegality has been committed in the approval of the Successful Resolution Plan.
12. The following main issues have been raised with regard to the deficiencies in the approval of the Resolution Plan:-
(i) The workmen dues for the period of 24 months preceding the liquidation commencement date have been paid only to the extent of 15%.
(ii) The amount of gratuity payable to the employees does not have to be included in the liquidation estate for calculation of settlement amounts but it has been included and is paid only to the extent of 20% to current employees whereas it has to be paid in full to all the employees including ex-employees.
(iii) Operational creditors and financial creditors have not been accorded similar treatment and while the OCs have been paid only 10% of the due amount, the secured financial creditor has Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 7 of 20 been paid 28% because the Corporate Debtor had already paid Rs. 9.70 Crores to the Bank of India which was not reduced/adjusted in its verified claim of Rs. 41.49 Crores.
(iv) The Application submitted by the Appellant under Rule 11 of NCLT Rules for taking action regarding fraudulent transactions between the proposed Resolution Applicant, its Associates and the Corporate Debtor was heard and reserved for orders by the Adjudicating Authority but not disposed of before the finalization of the Resolution Plan, in this regard, the Ld. Counsel for the Appellant has cited the Judgment of Hon‟ble Supreme Court in the matter of 'Meera Mishra Vs. Satish Kumar [(2019) 2 SCC 375]'
(v) The proposed Resolution Applicant is ineligible under Section 29A of the IBC because the Successful Resolution Applicant SM Milkose Pvt. Ltd. and its Associates SM Finlease Pvt. Ltd. and Transworld Trade India (TTI) which are managed by Mr. Sharad Maheshwari (Director of the Proposed Resolution Applicant) has indulged in fraudulent transactions and routing of funds regarding which the Appellant has raised these issues in its Application under Rule 11 of NCLT, Rules before the Adjudicating Authority.
(vi) The dispute regarding provident fund was pending since 26.03.2018 which should have been mentioned in the information memorandum but it was not done and on this basis a Resolution Plan submitted by the Resolution Applicant fails to meet the legitimate liabilities of the employees.
(vii) No action was taken regarding forensic audit as opined by the then IRP (At Pg. 427 Para 5 of the Appeal Paper Book) which was denied by the CoC.
Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 8 of 20
(viii) The claim of Bank of India as financial creditor was wrongly shown as 41.50 Crores instead of Rs. 31.80 crores (since Bank of India had received Rs. 9.70 Crores as payment towards One Time Settlement). In such a situation the voting share of Bank of India was artificially inflated and thus, constitution of CoC as well as allocation of voting shares was wrong.
13. To appreciate the issues raised by the Appellant in the appeal, we peruse Section 30(2)(b) of the IBC as it stood at the time of approval of the Resolution Plan i.e. on 02.04.2019. This provision is as follows:-
"30. Submission of Resolution Plan xxx (2) The Resolution Professional shall examine each Resolution Plan received by him to confirm that each resolution plan -
xxx
(b) provides for the payment of the debts of the Operational Creditors in such manner as may be specified by the board which shall not be less than the amount to be paid to the Operational Creditors in the event of liquidation of the Corporate Debtor under Section 53."
14. Further, Section 53 of the IBC, which is regarding the distribution of assets in the event of liquidation, and which is to be followed in payment to various stakeholders in the resolution plan is also reproduced below:-
"53. Distribution of the Assets Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 9 of 20 (1) Notwithstanding anything to the contrary contained in any law enacted by the Parliament or any State Legislature for the time being in force, the proceeds from the sale of the liquidation assets shall be distributed in the following order of priority and within such period and in such manner as may be specified, namely :--
(a) the insolvency resolution process costs and the liquidation costs paid in full;
(b) the following debts which shall rank equally between and among the following :--
(i) workmen's dues for the period of twenty-four months preceding the liquidation commencement date; and
(ii) debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in section 52;
(c) wages and any unpaid dues owed to employees other than workmen for the period of twelve months preceding the liquidation commencement date;
(d) financial debts owed to unsecured creditors;"
15. Thus, it is seen that the share of the operational creditors as in accordance with Section 30(2)(b) in payment of debts shall not be less than the amount to be paid to the operational creditors in the event of liquidation of the Corporate Debtor under Section 53. The liquidation amount has been assessed to be Rs. 6.1 crores as mentioned in Paragraph 5 of the Impugned Order (at pg. 71 of the Appeal Paperbook Vol-1). After payment of the CIRP costs in full section 53(1)(b) stipulates that workmen dues for last 24 months and the debts of secured creditors who have relinquished their security shall rank equally. Wages and any unpaid dues owed to the employees Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 10 of 20 other than the workmen, in which gratuity and pension shall be governed, for the period of 12 months preceding the liquidation commencement date figures ones step below in the order of priority regarding payment of debts.
16. It is submitted by the Resolution Professional that the verified claims of the workmen/employees isof Rs. 8.17 Crores. Out of this amount the dues of workmen for the period of 24 months preceding the insolvency initiation date is shown as Rs. 0.59 crores. This class of debt and the debt of secured financial creditor Bank of India should rank equally in payment. After payment of full CIRP costs of Rs. 0.18 crores from the Liquidation amount of Rs. 6.1 crores, the payment to workmen for a period of 24 months and security creditors has to be made. The actual claim of the Bank of India is Rs. 31.80 crores instead of Rs. 41.50 crores and the claim of workmen for 24 months period preceding insolvency initiation date is Rs. 0.59 cores. Hence the remaining amount of Rs. 6.10 crores (-) 0.18 crores = Rs. 5.92 crores has to be distributed between them proportionately. Since the Bank of India has been offered Rs. 9 crores as settlement of its claim which is about 28% of its claim amount, the workmen should also be given 28% of Rs. 0.59 crore which is equal to Rs 0.1652 crore. Therefore the workmen should get an additional Rs. (0.1652-0.09) crores = Rs. 0.8834 crores to be distributed among them as per their proportionate shares.
17. In the scheme for payments according to section 53 as it stood on the date of passing of the approval order for resolution plan, the wages and unpaid dues of employees for the period of twelve months preceding the insolvency commencement date is accorded an order of priority just above that of statutory dues of Central and State Government in respect of last two years from the date of insolvency commencement. The liquidation value of Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 11 of 20 the assets of corporate debtor is Rs. 6.1 crores. The total amount paid for CIRP costs, workmen‟s dues of 24 months prior to insolvency commencement date and debts owed to secured financial creditors who have not relinquished their security intrest is Rs. (0.18+0.1652+9.00) crores = Rs. 9.3452 crores. This amount is more than the liquidation costs hence there is no amount available with SRA as per section 53 to pay to employees. Hence the amount proposed for payment to employees in the resolution plan which is Rs. 0.22 crores will remain as it is.
18. The Ld. Counsel for the Resolution Professional has cited the Judgment of Hon‟ble Supreme Court in the matter of 'Swiss Ribbons Pvt. Ltd.& Anr. vs. Union of India & Ors. [(2019) 4 SCC 17]' wherein it is held that "there is intelligible differentia between the „Financial Creditors‟ and „Operational Creditors‟ and what is required to be seen that a Resolution plan cannot pass muster under Section 30(2)(b) r/w Section 31 unless a minimum payment is made to the operational creditors, which is not less than the liquidation value. In our view the distribution as made in the previous paragraph does not go against the principle enunciated in this judgment.
19. The resolution plan envisages that the financial creditors are being paid 21.6 % of the total financial debt whereas the operational creditors are being paid 12.6% of the total verified operational debt. As we have seen the financial creditor Bank of India has been paid 28% and workmen dues of past 24 months has also been made 28% in view of the calculation in a previous paragraph. Creditors in the same class should be treated equally and hence such apportionment of the amount to be paid to the financial creditors and the operational creditors is the business decision in accordance with the commercial wisdom of Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 12 of 20 the CoC. The Successful Resolution Plan has been considered by the CoC and approved by a majority of 100% of members‟ voting share in the CoC. This approval is according to the provisions of Section 30(4) where the CoC has to approve a Resolution Plan by a vote of not less than 66 % of voting share of the financial creditors after considering its feasibility and viability, the manner of distribution proposed which would take into account order of priority amongst the creditors as laid down in sub-section 1 of Section 53. Hon‟ble Supreme Court has held in the case of K Shashidhar Vs. Indian Overseas Bank &Ors. Civil Appeal No. 10673 of 2018 as follows:-
"31.......... There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject matter expressed by them after due deliberations in the COC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority. That is made non justiciable."
20. Ld. Counsel for the Appellant has referred to the Judgment of Hon‟ble Supreme Court in the matter of 'H. Gangahanume Gowda Vs. Karnataka Agro Industries Corporation Ltd. [(2003) 3 SCC 40]' held that under the payment of Gratuity Act, 1972 that interest on delayed payment of gratuity is payable at the rate of 10% on the amount of the gratuity to which the Appellant in the case was entitled from the debt it became payable till the date of payment of the gratuity amount. This Judgment of Hon‟ble Supreme Court is distinguished from the present case as in the present case the interest rate for delayed payment of gratuity is not in question.
Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 13 of 20
21. The issue of payment of provident fund dues has been settled in the matter of 'Sikander Singh Jamuwal Vs. Vinay Talwar & Ors. [CA (AT) (Ins) No. 483 of 2019]' wherein the NCLAT has held that the Successful Resolution Applicant should release full provident fund dues in terms of the provisions of the Employee‟s Provident Fund and Miscellaneous Provident Act, 1952 by releasing the balance amount of (Rs. 1,35,06,391 - Rs. 78,00,000) and the impugned order dated 02.04.2019 whereby the Resolution Plan was approved has been modified to this extent.
22. The Ld. Counsel for the Appellant has also cited the Judgment of NCLAT in 'State Bank of India vs. Moser Baer Karamchari Union & Anr. (Supra) wherein it is held that the provident fund, the pension fund and the gratuity fund do not come within the „liquidation estate‟ for the purpose of distribution of assets under Section 53. In this case, the Corporate Debtor was ordered to be liquidated and therefore, in the calculation of liquidation estate it was ordered by NCLAT that provident fund, pension fund and gratuity fund should be kept out of liquidation estate. There is no indication in the resolution plan approval order of any gratuity or pension dues but we are of the view that if there any such dues they should be paid in full by the Successful Resolution Applicant.
23. We also look at the issue of constitution of CoC and allocation of voting share/rights regarding which allegation has been made by the Appellant. The constitution of COC has been done by taking the claim of Bank of India (Financial Creditor) as Rs. 41.50 Crores. It is seen that the Competent Authority of Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 14 of 20 Bank of India vide OTS Letter dated July, 29 2017 approved a OTS of the Corporate Debtor at Rs. 19.30 Crores, against which the Corporate Debtor paid an amount of Rs. 9,70,21,000/- to the Bank of India. Despite such a payment having been made, the representative of Bank of India continued to claim that the amount proposed by the Bank of India at Rs. 41.49 Crores be included as due as financial debt due from the Corporate Debtor, there are a series of communication (attached at PP. 126 - 135 of the Appeal Paperbook) which culminated in this issue being discussed in the first meeting of the CoC held on December, 22 2017 (Notice and Minutes of meeting attached at PP. 189 - 203 of the Appeal Paper Book). It is clear that the then IRP Mr. Navin Kumar Jain also raised the objection of the inflated claim of Bank of India being considered in the constitution of CoC and the voting rights therein but the matter was not taken to its logical conclusion by the next RP. Be that as it may, since the voting share of Bank of India even with the reduced claim shall be around 80% we do not think it would affect the overall voting pattern in the CoC when the resolution plan was approved with a 100% vote share, since any percentage of voting for approval more than 66% would have achieved the same result.
24. It is useful to reproduce the list of creditors prepared by Mr. Navin Kr. Jain under Regulation 13(2)(d) of IBBI (Insolvency Resolution Process for Corporate Persons), 2016 and report „Certifying the Constitution of CoC (attached at pp. 107 & 108 - 135 of the Appeal Paper Book). In the section „Claim from Secured Financial Creditor-Bank of India‟ of this report which was submitted to the Adjudicating Authority the then RP notes as follows:-
Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 15 of 20 "3) Claim for Secured Financial Creditor-Bank of India While calculating the claim to be admitted for Bank of India, Please note following points:
Competent authority of Bank of India, vide OTS letter dated July 29, 2017, approved OTS of the amounts outstanding from the Corporate Debtor, to an OTS of Rs. 19.30 Crores, subject to the terms and conditions referred in the OTS Letter;
OTS letter required some upfront payments to be made by the Corporate Debtor as also payments to be made on various occasions including by October 31, 2017; Bank of India, through their legal representative has submitted their claim for an amount equivalent to the "Original Amount due" from the Corporate Debtor, which was due prior the OTS amount approval as per OTS letter. Further, as per written submissions of the legal representative of the Bank of India, while calculating their claim submitted to us, the bank of India has not even adjusted the payments made by the Corporate Debtor amounting to Rs. 9,70,21,000/- (Rs. Nine crores seventy lacs twenty-one thousand only) from the total claim submitted by them for reasons beyond logical comprehension.
In support of their justifications about the amount so claimed with disregard to the OTS letter, bank of India has mentioned that they have submitted above claim since as per them, the terms of the OTS letter has been frustrated. We have considered strict reference to the relevant provisions of IBC Code read along with regulations thereof, including but not limited to the provisions which requires claims to be submitted should be as on the "Insolvency Commencement Date" which in the captioned matter is Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 16 of 20 October 26, 2017. All claims to be received and admitted has to be as on the Insolvency Commencement Date.
Based on the various documentations and information submitted to us, the terms of the OTS letter were not frustrated as on the date of Insolvency Commencement Date."
25. In the same report and attached annexure, submitted to the Adjudicating Authority regarding constitution of CoC, the IRP has made comments regarding related parties, claims of Mr. Naresh Aggarwal, MD and Ms. Kavita Aggarwal (Daughter of Mr. Naresh Aggarwal) as financial creditor and conversion of operational debt into financial debt. Further in the meeting for discussing the claim of Bank of India representative has proposed that the amount being 41.49 Crores with an agreement the mandatory bring it back to the agreed legal claim from Applied Electro Magnetics which is "OTS amount approved
- the amount paid by AEM so far subsequent to OTS date" in the first CoC meeting. These issues were discussed in the first CoC meeting held on 22.12.2017 (minutes attached at PP. 128 to 203 of the Appeal Paperbook) and the following has been recorded in Paragraph 7:-
"It was informed that some loans in the names of family members of Directors have been taken from DhanLaxmi Bank which were infused in the Company".
26. Again in Paragraph 10 it is noted in the minutes as follows:
"10. Mr. Navin Kumar Jain pointed out that loans were taken from SM Finlease has been obtained by practically assigning the receivables from Tata Power. Only net proceeds after deducting the repayment of dues to SM Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 17 of 20 Finlease was transferred to the Bank of Corporate Debtor.............."
27. The Ld. Counsel for the Appellant has also stated that the Appellant had made certain allegations against the Resolution Professional Mr. Vinay Talwar and also about fraudulent and preferential transactions made by the Corporate Debtor and also some allegations related to the decision to give voting rights on the basis of financial debt of Rs. 41.50 Crores to the Bank of India even though admittedly the Bank of India had received Rs. 9.70 Crores against the OTS. These applications were heard by the Adjudicating Authority and vide order dated 18.07.2018 (attached at PP. 491 to 492 of the Appeal Paper Book) orders have been reserved on these applications filed under Diary No. 2660, 2661, 4400, CA No. 300 of 2018 and CA No. 101 of 2018. Some of these applications that relate to various allegations as mentioned in earlier paragraphs, by the Appellant have not been adjudicated and according to the Appellant the Resolution Plan has been passed. Section 26 of the IBC provides as follows:
"26. Application for avoidance of transactions not to affect proceedings.- The filing of an avoidance application under clause (j) of sub-section (2) of section 25 by the resolution professional shall not affect the proceedings of the corporate insolvency resolution process."
28. In a judgment dated 26.11.2020 in the matter of Venus Recruiters (P) Ltd. v. Union of India [ 2020 SCC OnLine Del 1479] Hon‟ble Delhi High Court has emphasised on the strict timeline provided under the IBC and relied on Hon'ble Supreme Court's judgement in Innoventive Industries case to state that "Certainty and timeliness is the hallmark of the Insolvency and Bankruptcy Code, 2016" and therefore, since avoidance Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 18 of 20 proceedings are time barred, they cannot be entertained after the completion of the CIRP. Therefore the pendency of avoidance applications while the resolution plan is approved does not vitiate the approval of the plan.
29. There are various contentious issues mentioned in the earlier paragraphs of this judgment that have been raised in the appeal as also in repliy of the RP that are in the nature of allegations and counter-allegations regarding the role and functioning of various stakeholders. We do not want to comment on the seriousness or otherwise of these issues as they require deeper examination which is not in the purview of this appeal which basically assails the approval of the resolution plan. Yet we are inclined to say that the Resolution Professional Mr. Vinay Talwar should have got a forensic audit carried out, as had been opined by the erstwhile RP Mr Navin Kumar Jain to give quietus to allegations of malpractices that had a bearing on the functioning of the corporate debtor.
30. We are, therefore, of the view that the approved resolution plan complies with the provisions of the IBC with slight modification in the amounts proposed to be paid to the workmen and employees in relation to their dues including provident fund which is as follows:
The workmen should get an additional payment of Rs. 0.1652 crores - Rs. 0.09 crores = Rs. 0.8834 crores to be distributed among them as per their proportionate shares. The payment of provident fund amounts should be in accordance with the judgment of this tribunal in the matter Sikander Singh Jamuwal Vs. Vinay Talwar & Ors. [CA (AT) (Ins) No. 483 of 2019].
Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 19 of 20 With the above-stated modifications in the Resolution Plan we uphold the approval of the Resolution Plan by the Adjudicating Authority. The appeal is disposed of accordingly.
31. There is no order as to costs.
[Justice Ashok Bhushan] Chairperson [Dr.Alok Srivastava] Member (Technical) New Delhi 16th March, 2022 SC Company Appeal (AT) (Insolvency) No. 502 of 2019 Page 20 of 20