National Company Law Appellate Tribunal
M/S Kineta Global Limited vs Idbi Bank Limited on 16 January, 2024
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
AT CHENNAI
(APPELLATE JURISDICTION)
Company Appeal (AT) (CH) (Ins) No.302/2021
(IA Nos.639/2021, 641/2021, 640/2021, 97/2022, 340/2022,
622/2022, 92/2022, 942/2022, 1052/2022 & 417/2023)
In the matter of:
M/s. Kineta Global Limited
In consortium with Power Mech Projects Limited
Rep. by Authorised Signatory & Asst. General Manger
Mr. P. Satyanarayana
4th Floor, Kineta Towers,
Plot No. 51 to 54,Journalist Colony,
Road No. 3, Banjara Hills,
Hyderabad - 500034. ... Appellant
In
V
1. M/s. IDBI Bank Limited,
Branch Office at 115,
Anna Salai, Saidapet,
Chennai - 600015.
2. Bank of India
Branch Office at:
Chennai Mid Corporate Branch
IV Floor, Tarapur Towers
No. 826, Anna Salai,
Chennai - 600002.
3. Pridhvi Asset Reconstruction and Securitization
Company Limited
No. 1-55, Raja Prasasadamu
4th Floor, Wing 1, Majid Banda Road
Kondapur,
Hyderabad - 500001.
4. Bank of Baroda,
Stressed Asset Management Branch
No. 45, Moor Street,
IBAS Building, 4th Floor
Chennai - 600001.
Company Appeal (AT) (CH) (Ins) No.302/2021
1
5. Indian Overseas Bank
Branch Office at:
Asset Recovery Management Branch
No 762 Anna Salai,
Chennai - 600002.
6. The District Cooperative Central Bank Ltd.
Branch Office at:
Panuganti Vari Street,
R.R. Pet, Eluru,
West Godavari District - 534002.
7. Mr S. Harikarthik
Liquidator of
M/s. The Jeypore Sugar Company Limited
No. 3, A Block, Tamil Nadu Police Housing Quarters,
Bharathi Avenue,
2nd Street, Kottur,
Chennai - 6000085.
8. M/s. Aaria Projects Limited
Represented by Mr. C H Venkateswara Rao
Flat No. 1-206, Divya Sakthi Complex Green Lands
Ameerpet,
Hyderabad - 500016.
9. M/s Synergy Holdings
Rep. By Mr. Inuganti Murali Krishna
1101, A Block, Quiescent heights,
Raheja Mind Space, Madhapur,
Hyderabad - 500081. ...Respondents
Present :
For Appellant : Mr. P. Wilson, Senior Advocate
For Respondents : Mr. Arun Kathpalia, Senior Advocate For Mr.
Varun Srinivasan, Advocate, For R1-R6
Mr. J. Manivannan, Advocate, For R7 Mr. V.
Venkata Sivakumar, (For Impleadment)
Judgement
Company Appeal (AT) (CH) (Ins) No.302/2021
2
Justice M. Venugopal
Appellant's Submissions
The Learned Sr. Counsel for the
Appellant /Company submits that the
'Rayagada Property' was included in the
'Valuation Report' submitted during CIRP
process and further that the valuation
conducted during CIRP process include the 2nd
valuation report on land and buildings and the
'2nd valuation report', was on 'plant and
machinery'.
Company Appeal (AT) (CH) (Ins) No.302/2021
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2. According to the Appellant the 'valuation
report', during 'CIRP Process', is mentioned as
under in a tabular form:-
Valuation Report during CIRP Process
29.05.2019 Land and building Valuation Report Submitted
By Chandran (Pg. - 504,900)
30.05.2019 Land and Building Valuation Report by
Sugumar (pg. 637)
18.04.2019 Plant & Machinery valuation by Jayaraman
(Pg. 642)
Plant & Machinery valuation by Santha Kumar
(Pg. 643)
3. It is represented that the appointment of
these 'valuers', was acknowledged in the 'third
CoC meeting' (vide pg. 719 of Appellant's
Appeal Paper Book, para 3a) and slight
modification with respect to 'plant and
machinery valuation', was submitted by
Santha Kumar was suggested by the
Company Appeal (AT) (CH) (Ins) No.302/2021
4
'Committee of Creditors', considering the
closure of factories (vide para 3(b)(ii).
4. Added further, it is projected on the side of
the Appellant, that during the 'Fourth
Committee of Creditors', meeting, the
'Resolution Professional', had explained
'issues', pertaining to the 'Rayagada Land',
and he was directed to secure a 'legal opinion'
by the 'Committee of Creditors' .
5. It is the stand of the Appellant/Company
that resting upon the aforesaid, legal opinion,
was secured from Advocate Mr. Nrushing Nath
Panda whereby, it was mentioned that the
Land in question is in 'OLR proceedings' and
Company Appeal (AT) (CH) (Ins) No.302/2021
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as such, it was 'not marketable' and it could
not be disposed of or mortgaged.
6. The submission of the Appellant, is that in
the 14th CoC meeting, the 'Committee of
Creditors' checked upon the 'valuation' and in
their 'wisdom', had directed the 'valuers' to
make necessary corrections based on this
Legal opinion. That apart, the 'Rayagada
Property' value was brought down to 'nil', on
the direction of 'Committee of Creditors' during
15th Committee of Creditors meeting and the
same was accepted by the Committee of
Creditors, which was acknowledged in the
'17th CoC meeting'.
Company Appeal (AT) (CH) (Ins) No.302/2021
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7. It is pointed out on behalf of the Appellant,
that the 'Liquidator' had followed the direction
of the 'Committee of Creditors' and based on
the direction of the 'Committee of Creditors',
the direction in regard to the 'value' of the
'Rayagada Property' was changed to 'nil' and
that the 'Liquidation', was ordered on
29.05.2020. Also, that a 'revised valuation',
was ordered, because more than one year was
passed, since the 'earlier valuation report' and
the after math of 'COVID 19', was also
required to be considered. In reality, there will
be a reduction around 20-30% in value of
machineries was also acknowledged in the
Company Appeal (AT) (CH) (Ins) No.302/2021
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'15th Committee of Creditors meeting'. Indeed,
the reason for revised valuation was
mentioned by the 'Liquidator' through his
letter dated 2.10.2020 and the methodology
adopted and the impact of COVID was
analysed in the Report.
8. The plea, put forward by the Appellant's
side, is that based on the 'revised valuation'
was submitted by one Mr. Chandran for
landline Building and Mr. Sharat Kumar for
'Machineries', and the 'valuation' had dropped
around Rs. 100 crores/- compared to earlier
one, and reasons were clearly explained again
by Mr. Chandran through his letter.
Company Appeal (AT) (CH) (Ins) No.302/2021
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9. The Land and Building Report furnished
by Mr. Chandran dated 01.11.2020 is in pg.
644 of the Appeal Paper Book. In fact, the
'Liquidation Value' was mentioned as Rs. 166
crore and Mr. Santha Kumar had valued the
'plant and machinery' at Rs. 57.11 crore.
10. Apart from that, the second set of
'revised valuation' was secured and there was
a delay in the 'process', because of prevailing
COVID 19 restrictions during that period. In
fact, the Land and Building report was given
by Mr. Poovanan and in fact the valuation of
plant and machinery was done by Mr.
Karthikeyan of Veracity Associates.
Company Appeal (AT) (CH) (Ins) No.302/2021
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11. The main contention advanced on
behalf of the Appellant, is that the 'Rayagada
Property', was included in the audited
financial statement dated 31.03.2020 and the
value of the said property in the valuation was
changed to nil, based on the direction of the
'Committee of Creditors'.
12. Besides this, the property' was
considered as 'Liquidation Estate' but valued
as nil, based on legal opinion and the direction
of the 'Committee of Creditors'. As such, the
'Adjudicating Authority/Tribunal' had
mentioned that the 'Rayagada Assets', were
not included in Liquidation Estate being
Company Appeal (AT) (CH) (Ins) No.302/2021
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misconceived and the failure of appreciating of
what is meant by the 'Liquidation Estate'.
13. The stand of the Appellant is, that the
value of the 'Rayagada Property' was not
changed, ever since the 'Liquidation' was
initiated, as it was 'valued', nil during 'CIRP
proceeding' itself and there are no documents
to suggest that the 'Corporate Debtor' had
'Title' over the property and only, there are
revenue records, which do not confer Title i.e.
a valid title in law.
14. The Learned Counsel for the Appellant
relies upon the judgement of the Hon'ble
Supreme Court in the matter of Tata
Company Appeal (AT) (CH) (Ins) No.302/2021
11
Consultancy Services V Vishal Ghusulal
Jain, 2022, 2 SCC 583 wherein it was
observed and held that the rights in the realm
of public law cannot be heard by the National
Company Law Tribunal (NCLT) vide para 37.
15. The submission of the Learned
Counsel for the Appellant is that the
ingredients of Section 60(5) of the I&B Code,
2016 can be used only in cases of contracts
and people directly involved in insolvency. In
the instant case it was utilised for looking
upon the title in 'Rayagada Property', being the
subject matter of 'dispute', between the
'Debtor' and the 'Orissa Government', which
Company Appeal (AT) (CH) (Ins) No.302/2021
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is an excess jurisdiction. In short, an
endeavour is made to delay the whole process',
and when the matter had reached final stages,
the issue being brought, almost two years later
for discussion.
16. According to the Appellant, the
impugned order in IA /255/IB/2021 in
CP/1307 (IB) 2018 passed by the Adjudicating
Authority/Tribunal was a wrong one, wherein
it was held by mentioning that Liquidator had
not adopted the 'value' arrived during 'CIRP
process' and ordered for 'fresh valuation',
which was not in accordance with Regulation
35 of IBBI (Liquidation process) Regulations as
Company Appeal (AT) (CH) (Ins) No.302/2021
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the two registered valuers must be appointed
within 07 days of commencement of Litigation.
17. In fact, the Court had only pointed out
'one set of valuation', was followed and set
aside the valuation conducted on 01.11.2020
and 30.09.2020 and ordered for fresh
valuation.
18. Furthermore, the only connection
between the Companies Act, 2013 and the
'Liquidation Process Regulations' introduced
on 2016, confines to the Regulation 2B of
Liquidation Process and Section 29A and
Regulation 35(1)(f) of the I&B Code, 2016 deals
with disqualifications'. All other process, is
Company Appeal (AT) (CH) (Ins) No.302/2021
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covered under section 230 of the Companies
Act, 2013 as it can be inferred from the
decision in Arunkumar Jagartram vs. Jindal
steel power Ltd. As a matter of fact in this
case the Hon'ble Supreme Court had held that
'I&B' Code, 2016 will not apply to the
proceedings under Section 230 of the
Companies Act, 2013 (vide para 91, 92, 95 and
97.)
19. Proceeding further, the Learned
Counsel for the Appellant adverts to Section
230(2)(v) of the Companies Act, 2016 which
prescribes only a valuation by a 'registered
Company Appeal (AT) (CH) (Ins) No.302/2021
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valuer' and there is no requirement of 'two
valuers' under the Companies Act, 2013.
The plea of the Appellant is that the
Adjudicating Authority / Tribunal had failed to
consider the scheme of compromise as per
Section 230 of the Companies Act, 2013 and
on behalf of the Appellant, a reference is made
to the scheme of compromise' as per Section
230 of the Companies Act, 2013 and
specifically to the companies (Compromise,
Arrangement and Amalgamation) Rules, 2016
particularly Rule 3(1), Rule 6(3)(v)(c) with
explanation, and Rule 9. Also that the
liquidator despite envisaged under Section
Company Appeal (AT) (CH) (Ins) No.302/2021
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230 of the Companies Act, 2013, the
'Liquidator' also complied with the Regulation
35 of the I&B Code, 2016.
20. The contention of the Appellant is that
in respect of 'Fresh valuation' Liquidator would
have appointed valuers, within seven days of
commencement of 'Liquidation Process'. In the
instant case, according to the Appellant, the
'Liquidator' had adopted the valuation of CIRP
Process as per 'Regulation 35(1)' of IBBI
(Liquidation process) regulation and that the
'time' had passed and the impact of 'COVID'
was to be considered a 'revised valuation' was
obtained by him. In this connection, on behalf
Company Appeal (AT) (CH) (Ins) No.302/2021
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of the Appellant a reference is made to
Regulation 35 (2) which clearly mentions that
when the valuation was not covered by
regulation 35 (1) the Liquidator can order fresh
valuation if he wants and this was explained
in the decision in Amit Ahirrao vs Anagha
Anasingharaju reported in 2023 SCC
online NCLAT, 216 (vide paragraph 15),
wherein it was held that 'where valuation was
covered under Regulation 35 (1), the average
of valuation arrived at by the 'two valuers',
must be taken into account.
21. It is pointed out on behalf of the
Appellant that there was a significant lapse of
Company Appeal (AT) (CH) (Ins) No.302/2021
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time, as the 'First valuation', was conducted
15 months earlier, and hence, that was the
reason or the 'revised valuation' being
conducted. As a matter of fact, it was clearly
mentioned in the decision Bhula ram V.
Union of India 2014 11 SCC 307 (vide
paragraph 8) wherein it was held that the
valuer must take into account various aspect
while valuing the Land/property.
22. The Learned Counsel for the Appellant,
adverts to the decision in Miheer V. Mafatlal
1997 1 SCC pg. 579(vide Paragraph 29),
whereby it was clarified that it is not the
Tribunal job to go into valuation, as it needs
Company Appeal (AT) (CH) (Ins) No.302/2021
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commercial wisdom, which can only be
exercised by the committee of creditors under
the court had given no reason or rejecting the
valuation, ignoring the reasons for reduction
given by the valuer.
23. The clear cut submission of the
Appellant is that the Adjudicating Authority/
Tribunal had ordered for a relief, which was
not even prayed for, as they had prayed to
defer the negotiations, until the fresh
valuation report, but they had ordered for
invitation of application, from prospective
Applicants, by ignoring the previous order of
negotiation dated 12.02.2021 with Kineta
Company Appeal (AT) (CH) (Ins) No.302/2021
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global and Aaria projects, where Kineta was
chosen as 'H1 Bidders' and a plea, is taken on
behalf of the Appellant that the 'Court', cannot
grant a relief, which was not prayed for.
24. The other stand of the Appellant, is
that in the decision in Miheer V. Mafatlal
1997 (1 SCC 579) (Vide para 29), wherein it
was observed that the 'Court', cannot
scrutinise and find out whether 'better
scheme' could be adopted and it should be left
to the 'shareholders'.
25. The Learned Counsel for the Appellant
points out that in similar case of Jaypee
Industries V. NBCC (vide Paragraphs 170,
Company Appeal (AT) (CH) (Ins) No.302/2021
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171, 280), the Hon'ble Supreme Court had
addressed all the infirmities and no fresh
process was ordered.
26. The pleas of R-1 to R-6
The Learned Counsel for R-1 to R-6
submits that R-1 to R-6 are the major
stakeholders of the Corporate Debtor 'in
Liquidation' with a claim to an extent of
Rs.571.50 crores due and recoverable from the
liquidation process holding a total voting share
of 98.68%.
27. The Learned Counsel for R-1 to R-6
points out that pursuant to the Corporate
Debtor being order to be liquidated by the
Company Appeal (AT) (CH) (Ins) No.302/2021
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Adjudicating Authority/Tribunal, the
Respondent No. 7/Liquidator had called for an
invitation of expression of interest for
proposing a scheme for compromise or
arrangement under Section 230 of the
Companies Act, 2013 (Called and referred to
as 'scheme') pursuant to which, the Appellant/
M/s Kineta Global Ltd., was declared the H1
Bidder by the Liquidator/Respondent No. 7, as
against the requirements of Section 230 of the
Companies Act, 2013.
28. According to the Respondents Nos 1 to 6,
the 7th Respondent/Liquidator, in the
meanwhile had conducted a 'Fresh valuation
Company Appeal (AT) (CH) (Ins) No.302/2021
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of the Assets' of the 'Corporate Debtor' and for
the reasons best known to him, had excluded
a 'key Asset of the Corporate Debtor' in
'Rayagada, Orissa State', with a market value of
over Rs. 1,000 Crores, as mentioned by the 7th
Respondent/ Liquidator and had assigned it
with a 'Nil' valuation. Also, that the
Respondent No7/ Liquidator had not complied
with the requirement of Regulation 35 of the
Insolvency & Bankruptcy Board of India
(Liquidation Process) Regulations, 2016
('Liquidation Regulations') while conducting
the 'valuation of the assets of the Corporate
Debtor'.
Company Appeal (AT) (CH) (Ins) No.302/2021
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29. It is represented on behalf of R-1 to 6
(Secured Creditor) that the 7th
Respondent/Liquidator had filed an
application in CA/816/CAA/2020 in
CP/1307/IB/2018, which was opposed by the
Secured Creditors/ Respondents, for a very
reason of 'viability' and 'feasibility' of the
'scheme', when significant 'issues' of the
'valuation of the property' were in question.
30. The Learned Counsel for R-1 to 6
(Secured Creditor) points out that an
I.A/255/IB/2021 in IA No. 71 (CHE)/2021 in
IA/819/IB/2021 and IA 10/IB/2021 in CP No.
1307/IB/2018 primarily on the under
Company Appeal (AT) (CH) (Ins) No.302/2021
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mentioned grounds, only, as against the
Respondent No. 7/Liquidator.
(i) That the valuation report submitted by the
Respondent No.7/Liquidator portrayed a drastic
reduction in the liquidation value of the Corporate
Debtor's assets, which was initially valued at
Rs.332.52 Crores during the course of CIRP and
subsequently valued at Rs.223.21 Crores, which is
almost Rs. 100 Crores lesser than the previous
valuation.
(ii) That there was absolutely no basis/explanation
on which the said valuation had been arrived at and
as to why there has been such a significant drop in
such a short period of time. The Secured Creditors
had also clearly communicated their stand, during
the 3rd SCC held on 02.11.2020, that the re-
valuation as conducted by the Respondent No.
7/Liquidator was not acceptable to them.
Company Appeal (AT) (CH) (Ins) No.302/2021
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(iii) That additionally, the Respondent
No.7/Liquidator had also shared these draft
valuation report to the Potential Resolution
Applicants, including the Appellant and the
Respondent Nos. 8&9 herein, without even
informing the stakeholders about the same. By
doing so, it has thereby led to the potential
Resolution Applicants quoting offers much below
the old liquidation value of Rs.332.52 Crore,
thereby severely undervaluing the assets of the CD,
which ultimately goes against the principle of
maximization of assets as envisaged by the Code.
(iv) That the manner in which the revised valuation,
which was conducted by the registered valuers,
namely, Mr. Shanthakumar and Mr.R.Chandran,
who were appointed by the Respondent
No.7/Liquidator on the Assets of the CD, was not in
accordance with the procedure established under
Regulation 35(3) of the Insolvency and Bankruptcy
Company Appeal (AT) (CH) (Ins) No.302/2021
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Board of India (Liquidation Process) Regulations,
2016.
(v) That consequently, the Respondents sought for
a direction to set aside the improper process
adopted by the Respondent No. 7/Liquidator for
valuation of the 'Assets of the Corporate Debtor',
amongst other reliefs.
31. The Learned Counsel for R-1 to R-6 bring to
the notice of this Tribunal, that IA/ 256/IB/2021
was filed by R-1 to R-6, seeking to intervene raised
their objections in the Section 230 Application of
the Companies Act, 2013, filed by the 7th
Respondent/Liquidator in CA/861/2021 and these
application were allowed on 17.11.2021 by the
'Adjudicating Authority/Tribunal' and in terms of
Paragraph 46 of the order, directions were issued to
Company Appeal (AT) (CH) (Ins) No.302/2021
28
the 7th Respondent/Liquidator to carry out a 'Fresh
valuation' and thereafter call for 'Fresh scheme', as
per Section 230 of the Companies, Act, 2013.
32. It comes to be known that during a
pendency of the instant Comp. App. (AT) (CH) (Ins.)
No. 302 of 2022 the Corporate Debtor had filed WP
(C) No. 4490 of 2015 before the 'Hon'ble Orissa High
Court' and on 16.03.2022, an order was passed
directing the concerned authority to compute the
sum in respect of ceiling 'surplus lands', to an
extent of Ac.506.690 decimal, as per Section 47 of
the Orissa Land Reforms Act and Rules framed
thereunder and make the payment.
33. As a matter of fact, the Respondent
No.7/Liquidator, had addressed an email, to the
answering Respondents on 16.03.2022, wherein it
Company Appeal (AT) (CH) (Ins) No.302/2021
29
was mentioned that the Corporate Debtor is entitled
to "281 Acres (whose guideline value is Rs. 600
Crores with market value of more than Rs. 1000
Crores) (Sic)".
34. It is projected on the side of the Respondent
No. 1 to 6 that out of a total 784 Acres of Lands of
the Corporate Debtor available at Rayagada, Orissa
(i) 281 Acres (whose guideline value is Rs. 600
Crores with market value of more than Rs. 1000
Crores), as per the mail of the Respondent
No.7/Liquidator dated 16.03.2022, has been made
available at present and
(ii) that compensation for 506.690 acres, as per the
order dated 16.03.2022 passed by the Hon'ble High
Court of Orissa, should be computed and paid by
Company Appeal (AT) (CH) (Ins) No.302/2021
30
the concerned authority within a period 6 months
from the date of the order.
35. In view of the above, the stand of R-1 to 6
(Secured Creditor) is validated and their findings
and conclusions in terms of the impugned order
dated 17.11.2021 is validated and findings and
conclusion are so arrived at, as per the impugned
order is correct and requires no interference in the
hands of the this 'Tribunal' sitting in Appellate
Jurisdiction.
36. According to the Respondent 1 to 6, the
Respondent No. 7/Liquidator, had stated that he
had complied with the requirements of Regulation
35 of the IBBI (Liquidation Process Regulations,
2016) considering that he had procured a 'Report'
from a '2nd valuer', subsequently, during the
Company Appeal (AT) (CH) (Ins) No.302/2021
31
pendency of the 'Applications', filed by the
answering Respondents but the procurement of the
2nd report by the Respondent No. 7/ Liquidator,
subsequently, still does not demonstrate the
compliance of the Regulations, for the under
mentioned reasons.
(i) Regulation 35 of the Liquidation Regulations
contemplates that the report be procured
simultaneously from two independent registered
valuers on the realizable value of the assets or
business under clauses (a) to (f) of Regulation 32 of
the Corporate Debtor. However, in the present case,
as elaborated in detail in the pleadings, the
Liquidator has procured only one report on the
plant and machinery and another report on the land
and building, which is in gross derogation of the
procedure contemplated under the Regulations.
Company Appeal (AT) (CH) (Ins) No.302/2021
32
ii) Further, the said valuation done was without
(including a 'Prime Asset of the Corporate Debtor',
in Rayagada, Orissa State.
(iii) That additionally, the Respondent
No.7/Liquidator had also shared these 'Draft
Valuation Report' to the Potential 'Resolution
Applicants', including the Appellant and
Respondent Nos. 8 to 9 herein.
37. It is the submission of R- 1 to R-6 side, that
the 'conclusion' arrived at Paragraph 40 of the
impugned order by the 'Adjudicating
Authority/Tribunal' that the 7th
Respondent/Liquidator had not complied with the
procedure as required under the Regulations.
Company Appeal (AT) (CH) (Ins) No.302/2021
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38. In addition, there was a conflict as well as
between the 'Two Reports', which were shared, in
the initial report provided on the Land and Building,
the valuer had assessed value of Rayagada lands to
be Rs. 1087.90 crores. Later, based on the
information furnished by the 7th respondent/
Liquidator and on the basis of opinion furnished by
the 'Advocate', he arrived at a conclusion that the
value of the said Lands in 'Rayagada' should be
determined as 'Zero'. Consequently, the basis for
arriving at the Zero valuation, was solely based on
the opinion of the Learned Advocate alone, which is
not viable under any 'scenario' and hence, was
never approved by the 'Committee of
Creditors/Stakeholders consultative Committee' as
wrongly alleged by the 7th Respondent /Liquidator.
Company Appeal (AT) (CH) (Ins) No.302/2021
34
39. The Learned Counsel for R-1 to 6, refers to the
decision in Periasamy Palani Gounder and Ors.
V. Radhakrishnan Dharmarajan, RP of Appu
Hotels Ltd. and Ors. Company reported in
MANU/NL/0118/2022, whereby this 'Tribunal' had
dealt with in detail, the importance of the process of
valuation, including the process to be followed as
per Regulations 35 and the same runs as under:
"176. A valuation consisting of mere naked
values without a detailed report is not a
valid. It is a settled proposition that the
Valuation exercise is conducted to facilitate
the CoC decision-making process.
Therefore, the existence of a valid and
accurate valuation report is a sine qua non
for the COC to exercise its commercial
Company Appeal (AT) (CH) (Ins) No.302/2021
35
wisdom. A natural sequitur to the aforesaid
would be that a detailed valuation report is
necessary for the CoC to exercise its
Commercial Wisdom objectively."
"177. The Adjudicating Authority's
observation that a statutory provision
regulating a matter of practice or procedure
will generally be read as a directory and
not mandatory is erroneous. Compliance
with statutory requirements in regulating a
matter of practice and procedure are
mandatory. The Tribunal is a creature of
statute, any by interpretation, it cannot
dilute the statutory compliances."
40. The contention of the R-1 to 6 is that once
the I&B Code, 2016 process is triggered, then 'All
Company Appeal (AT) (CH) (Ins) No.302/2021
36
Acts' including the Companies Act, 2013 should
harmoniously work along with the object and
purpose of the I&B Code, 2016 and Regulations.
41. Also, that the valuation of the property at
Rs. Zero, is against the ingredients of Section 36 (3)
(e) of the I&B Code, 2016 and mere cursory glance
of the Section 36 (3) (e) of the Code clearly points
that the Assets subject to the determination of
ownership, by the Court or Authority shall form
part of the Liquidation Assets, which would thereby
include the Lands of the 'Corporate Debtor in
Rayagada'. But the order of the Hon'ble Orissa
High Court dated 16.03.2022 passed in WP No.
4490 of 2015, unerringly points out that 'in terms
of the order' passed, in the aforesaid 'writ petition'
that compensation is to be provide as which was
Company Appeal (AT) (CH) (Ins) No.302/2021
37
confirmed, later by the liquidator/ Respondent No.
7 through its email 16.03.2022, which would imply
that the 'valuation' ought to be conducted 'a fresh'
and 'fresh schemes', to be called for. Indeed, as per
the impugned order at Paragraph 33 it was clearly
recorded that the 7th
Respondent/ Liquidator, while submitting the
Asset Memorandum on 21.09.2020, had not
included the said Asset, as part of the 'Asset
Memorandum' and had arrived at value of Rs.
217.52 crores.
42. The plea taken on behalf of R-1 to 6, is
that the Liquidator/Respondent No. 7 had
circulated the 'valuation reports' of the Corporate
Debtor, which includes confidential information, to
Company Appeal (AT) (CH) (Ins) No.302/2021
38
the Respondent No. 7 to 9, who are the 'potential
resolution applicants.
43. Furthermore, the 'Valuation reports'
submitted by the Respondent No. 7/Liquidator,
must be kept as an extremely confidential
document and 'any leakage' of such information of
the Report would lead to adverse consequences.
Considering, the fact that it is also illegal and
against the I&B Code, 2016 the Regulations, to
circulate the valuation reports, without the
permission of the Adjudicating Authority, because
of this reason, the Adjudicating Authority/
Tribunal through the impugned order at Paragraph
43 had rightly held and observed that the
'Liquidator' ought not to have shared the
'confidential information'.
Company Appeal (AT) (CH) (Ins) No.302/2021
39
44. In this connection, the a refence is made to
Regulation 34 of the Insolvency and Bankruptcy
Board of India (Liquidator Process) Regulations
2016, and as per Regulation 34 (4), the 7th
Respondent/ Liquidator shall file the 'Asset
Memorandum' along with the preliminary report to
the 'Adjudicating Authority'. Regulation 34 (5)
mandates that the 'Asset Memorandum' shall not
be accessible to any person during the course of
Liquidation, unless permitted by the Adjudicating
Authority. Regulation 34 (2) (a) clearly states that
the asset memorandum would include the value of
the asset as arrived at in accordance with
Regulation 35. Consequently, the Respondent No.
7/ Liquidator by sharing the 'Reports' with the
Company Appeal (AT) (CH) (Ins) No.302/2021
40
potential resolution Applicants, has acted in
disregard to the above Regulation.
45. It is contended that when the aforesaid
provisions are read along with Regulation 21 of the
Insolvency and Bankruptcy Board of India,
(Insolvency Professional) Regulations, 2016, it is
quite clear that an 'Insolvency Professional' must
ensure that 'Confidentiality' of the 'information'
relating to the Insolvency Resolution Process,
Liquidation or Bankruptcy process is maintained
at all times.
46. In the instant case, the 7th Respondent/
Liquidator had acted in violation and against the
interest of the 'Corporate Debtor' and stakeholders
was dealt with in the 'impugned order' as well as in
the 'Reply of the Respondents'.
Company Appeal (AT) (CH) (Ins) No.302/2021
41
47. The Learned Counsel for R-1 to 6 cites the
decision of the Hon'ble Supreme Court in The
Karad Urban Cooperative Bank Ltd. V. Swwapnil
Bhingardevay and Ors. reported in
MANU/SC/0672/2020 wherein at paragraph 19 &
38 it is observed as held as under:
"19. It is true that in the last paragraph of the impugned
order, namely paragraph 14, the Appellate Tribunal holds
that the CIRP suffered from material irregularities and the
Resolution Plan approved suffers from feasibility and
viability. But then the operative portion of the impugned
order does not take the findings on other issues to their
logical end. For instance, the Tribunal holds that the
advertisement inviting Expression of Interest itself was
defective and that there was breach of confidentiality in as
much as the liquidation value appears to have been leaked
out. These findings should have taken the Appellate
Company Appeal (AT) (CH) (Ins) No.302/2021
42
Tribunal to the point of setting aside the entire process and
directing the Resolution Professional to start the process all
over again from the stage of issue of a fresh advertisement.
The NCLAT did not do so. In the operative portion, NCLAT
merely remanded the matter back to the Adjudicating
Authority with a direction to send back the Resolution Plan
to the Committee of Creditors to resubmit the plan after
taking into consideration the law laid down by this Court.
38. ........The question of breach of confidentiality and
leakage of confidential information can easily be tested on
the touchstone of the benefit that accrued to the party who
got the information. In the case on hand, no benefit accrued
to the SRA."
48. The Learned Counsel for R-1 to 6 refers to
the judgement of this Tribunal in the matter of
Bank of Maharashtra & Ors. V. Videocon
Industries Ltd. & Ors. (vide Comp. App. (AT)(Ins.)
Company Appeal (AT) (CH) (Ins) No.302/2021
43
No. 503, 505, 529, 545 and 650 of 2021) reported
in MANU/NL/0010/2022 wherein at paragraph 43
it is observed and held as under:-
....9.... As per the CIRP Regulations the Liquidation
Value and Fair Market Value is kept as confidential
and informed to the CoC Members only at the time
of finalizing the resolution plan..........Therefore,
even if the confidentiality clause is in upon the
confidentiality clause being in real time use
therefore, we request the IBBI to examine this issue
in depth so to ensure the confidentiality clause is
followed unscrupulously, without any compromise
in letter and spirit by all the concerned parties,
entities connected in the CIRP..."(Sic.)
49. The Learned Counsel for R-1 to 6 adverts
to the decision in Periasamy Palani Gounder and
Company Appeal (AT) (CH) (Ins) No.302/2021
44
Ors. Vs. Radhakrishnan Dharmarajan, RP of Appu
Hotels Limited and Ors. MANU/NL/0118/2022
wherein it is observed as under:-
"77... A. Objections about Valuation of the Corporate
Debtor (h)..."Insolvency and Bankruptcy Board of
India (Insolvency Resolution Process for Corporate
Persons) Regulations 2016.
35. Fair value and Liquidation value ... (3) The
Resolution professional and registered valuers shall
maintain confidentiality of the fair value and the
liquidation value..........
175. Further, Adjudicating Authority observation
that Regulation 35 of the IBBI (IRPCP) Regulations
2016 contemplates sharing of only fair value and
liquidation value figures on obtaining confidentiality
undertaking from the members of the CoC is
Company Appeal (AT) (CH) (Ins) No.302/2021
45
incorrect. Finding that since the Promoter
is not a member of the CoC, the values were shared
with the Promoter and that there are not
requirements under the law for the RP to share the
valuation report is also erroneous." (Sic.)
50. According to the Learned Counsel for R-1
to 6 that the 'violation of the confidentiality' by
circulating the 'Liquidation Reports', had
compromised the 'sanctity of the process' and
further, if the 'impugned order' passed by the
Adjudicating Authority / Tribunal is not affirmed
by this Tribunal, then the Appellant, being the 'H1'
bidder and who had offered Rs. 207 crores/- as its
'bid' in comparison, the 'Asset valuation' which is
worth more than Rs. 1000 crores, as mentioned by
the Liquidator / 7th Respondent, will be against the
Company Appeal (AT) (CH) (Ins) No.302/2021
46
object of the Code, which is to ensure that
maximisation of the value of 'Assets of the
Corporate Debtor' is achieved.
51. The Learned Counsel for R-1 to 6 refers to
the order passed by the Hon'ble High Court of
Orissa in WP (C) No. 4490/2015 wherein the order
was passed that the Corporate Debtor' has a right
to compensation, over the ceiling surplus of lands
at 'Rayagada Property' to an extent of 506.690
acres.
52. According to the Learned Counsel for R-
1 to 6 side, the relevant portion of the order passed
by the Hon'ble High Court of Orissa in WP (C) No.
4490/2015 runs as under:-
Company Appeal (AT) (CH) (Ins) No.302/2021
47
"5.....The Petitioner -Company is entitled to the
amount in respect of ceiling surplus land to an extent
of Ac. 506.690 decimal.
7. Taking into consideration the rival contentions
of the parties, this Court is of the considered opinion
that since ceiling surplus land has already been
determined, immediate steps should be taken by the
authorities under the Act to compute the amount in
respect of ceiling surplus land to an extent of Act.
506.690 decimal in terms of Section 47 of the Act
and Rules framed thereunder and make the
payment at an early date, if not paid in the
meantime.
8. The writ petition is therefore disposed of without
interfering with the impugned orders under
Annexures -7, 8 and 9 directing the authorities
Company Appeal (AT) (CH) (Ins) No.302/2021
48
under the Act to compute the amount under Section
47 of the Act and Rules framed thereunder, as
expeditiously as possible, preferably within a period
of six months from today, if not already done and
payment shall be made by that dated to the
person(s) authorized in that behalf.'(Sic.)
53. The Learned Counsel for R-1 to 6 points
out that the Liquidator / 7th Respondent in its
e.mail on 16.03.2022 addressed to the R1 to R6
had mentioned that the 'Corporate Debtor' is
entitled to "281 Acres (whose guideline value is Rs.
600 Crores with market value of more than Rs. 1000
Crores)(sic.)".
54. The Learned Counsel for R-1 to 6, points
out that in view of the above, 'Assets of the
Corporate Debtor' have to be 'revalued' in
Company Appeal (AT) (CH) (Ins) No.302/2021
49
accordance with Regulation 35 of the Liquidation
Process Regulations by the Liquidator / 7th
Respondent, without any further delay. Apart
from that, the valuers, who are to be appointed
have to be of international standard, as per
Regulation 35 and Rule 8 of the Companies (Regd.
Valuers and Valuation) Rules, 2017, has held by
this Tribunal in the decision in Periasamy Palani
Gounder and Ors. V Radhakrishnan
Dharmarajan, RP of Apu Hotels Ltd. & Ors.
Company MANU/NL/0118/2022.
55. The Learned Counsel for R-1 to 6,
contends that because of the change in
circumstances of the case, it is only in the interest
of justice and for the benefit of all the 'stakeholders'
and the 'Corporate Debtor' itself, a 'fresh valuation'
Company Appeal (AT) (CH) (Ins) No.302/2021
50
be conducted and that, the Section 230 of the
Companies Act 2013 process be conducted 'afresh'.
56. It is projected on the side of the R1 to R6
that as per Section 230 (2) of the Companies Act,
2013, there is a requirement for a 'mandatory
approval of the Creditors' with the voting share of
more than 75%, for the scheme to be an operational
one and brought to force, in addition to the other
conditions being fulfilled.
57. According to R1 to R6, the 7th Respondent
/ Liquidator had not taken the 'Approval of the
Secured Creditors', to bring to the effect of the
ingredients of Section 230 Scheme under the
Companies Act, 2013. However, the said 'scheme'
was thrusted to be accepted by R1 to R6, without
Company Appeal (AT) (CH) (Ins) No.302/2021
51
heeding to the genuine concerns of the
Respondents.
58. The Learned Counsel for R-1 to 6 places
reliance upon the decision of this Tribunal in
Ramesh Kumar Chaudhary & Ors. V. Anu
Agarwal & Ors., (vide Company Appeal (AT)(Ins.)
No. 957 of 2021), for the proposition that the
Section 230(2) Procedure under the Companies
Act, 2013 should be complied with, provided it is
not in derogation of any other law, including the
I&B Code, 2016.
59. The Learned Counsel for R-1 to 6 points
out that the object of the I&B Code, 2016 is for the
maximisation of the value of the Assets of the
Corporate Debtor, which is paramount and that all
steps are to be taken to revive the Company as per
Company Appeal (AT) (CH) (Ins) No.302/2021
52
decisions in Maharashtra Seamless Limited V.
Padmanabhan Venkatesh and Others (Civil
Appeal No. 4242 of 2019, 2020 SCC Online SC
67; Binani Industries Ltd. V. Bank of Baroda &
Another (CA (AT)(Ins.) 82/2018 & Others; Lal
Mohammad and Ors. Vs. SU KAM Power System
Ltd. and Ors. (29.04.2019 - NCLAT) :
MANU/NL/0177/2019; K Kuppusamy V. State
Bank of India and Ors. (08.08.2019) - NCLAT :
MANU/NL/0365/2019; Kshitiz Gupta V. Asset
Reconstruction Company (India) Limited and
Ors. (02.12.2019 - NCLAT) : MANU/NL/0591;
R.Vijay Kumar and Ors. vs. Kasi Vishwanathan
and Ors. (05.04.2019 - NCLAT) :
MANU/NL/0128/2019."
Company Appeal (AT) (CH) (Ins) No.302/2021
53
60. The Learned Counsel for R-1 to 6
emphatically points out that the instant Appeal
does not hold water, as the 'Rayagada Property'
has to be made part of the 'Asset
Memorandum' and a 'fresh value of the assets
of the Corporate Debtor', has to be made in
terms of the procedure, prescribed by law, for
the reasons of 'maximisation of the value of
the assets of the Corporate Debtor'. As such,
it is the plea of the Appellant that the 'Bid
submitted by the Appellant, remains as an
otiose one and, therefore, only after a fresh
valuation process is conducted, then the
Section 230 process under the Companies
Company Appeal (AT) (CH) (Ins) No.302/2021
54
Act, 2013 can be started afresh and placed for
an approval before the 'stakeholders
committee'.
61. Also it is pointed out on behalf of R1 to
R6 that the 7th Respondent / Liquidator was
specifically made clear by the answering
Respondent that a legal opinion, only from the
Hon'ble 'Rtd. Judge or a Sr. Advocate'
specialising in the 'Land Reforms' Laws of
Orissa State. can be taken, as seen in the 4th
Committee of Creditors 'Minutes', taking into
account of the seriousness of the 'issues',
involved.
Company Appeal (AT) (CH) (Ins) No.302/2021
55
62. The Learned Counsel for R-1 to 6 points
out that Section 230 of the Companies Act, 2013
'scheme' ought to be read in consonance with the
procedures prescribed under the I&B Code, 2016
and if, there is a contradiction, between the I&B
Code, 2016 and Section 230 scheme under the
Companies 2013 an harmonious interpretation
needs to be reported to further the object of the
I&B, Code, 2016. In fact, the stance of the
Appellant that the I&B Code, 2016 and Regulations
ought to be given a go by, and must yield to the
ingredients of Section 230 of the Companies Act,
2013 is a mis-conceived one.
63. In the 'Reply' filed by the 1st Respondent
/Bank (for itself and on behalf of R2 to R6 in
respect of the instant) Appeal it is made mention of
Company Appeal (AT) (CH) (Ins) No.302/2021
56
that the R1 to R6 are the 'major stakeholders' of
the Corporate Debtor in Liquidation, with a claim
to the tune of 571.50 crores dues and recoverable
from the 'Liquidation process' and where 'members
of the Committee of Creditors of the Corporate'
Debtor during the 'CIRP process', holding a total
voting share of 98.68%.
64. According to the R1 to R6, the subject,
'Applications' along with other pending
'Applications' in the subject CP 1307/2020,
including the Application of the liquidator / 7th
Respondent, for proposing the 'scheme' under
Section 230 application (under the Companies Act,
2013) viz. CA 816 of 2021 was listed for 'Hearing',
on numerous occasions, and all the interested
parties, including that of the Appellant, who was
Company Appeal (AT) (CH) (Ins) No.302/2021
57
represented by the Counsel was present and at no
point of time, chose to object to the Application filed
by the Respondents and finally, the 'impugned
order' came to be passed by allowing the
Applications.
65. The Learned Counsel for R-1 to 6 points
out that when the 'valuation' itself, is
'fundamentally flawed', then, the reasons for the
'delay in valuation' will be an 'irrelevant one' and it
will not in any way overcome the 'wrongful actions
of the Liquidator'.
66. The Learned Counsel for R-1 to 6,
contends that the 'impugned order' at paragraph
33 had clearly recorded that the 'Asset
Memorandum' furnished by the 'Liquidator', on
21.09.2020 had not included the property of the
Company Appeal (AT) (CH) (Ins) No.302/2021
58
'Corporate Debtor' in 'Raygada' and that he had
arrived at a 'realisable value of Rs. 217.52 crores'.
However, the 'Liquidator' before the 'Adjudicating
Authority' took a contra stand that the 'Assets in
Raygada' do form part of the 'Asset Memorandum'.
As such, the Adjudicating Authority/Tribunal had
rightly concluded that the said property, which was
excluded by the Liquidator due to Rs. zero
valuation ascribed, is to be included as part of the
'Asset Memorandum/Liquidator Estate'.
67. The Learned Counsel for R-1 to 6 proceeds
to point out that in the 'initial report' provided, on
the Land and Building, the 'valuer' had assessed
the value of the Raygada Lands to be Rs. 1087.98
crores. Thereafter, and only based on the
information furnished by the 'Liquidator' and basis
Company Appeal (AT) (CH) (Ins) No.302/2021
59
of the opinion given by the 'Advocate', he came to
the conclusion that the value of the said Lands in
'Raygada' ought to be determined as 'zero'.
The 7th Respondent / Liquidator's contentions
68. According to the 7th Respondent /
Liquidator the scheme proponent has no vested
right to be necessarily declared or considered as a
'scheme proponent'. Further, a 'bidder' has no
vested rights in the 'process', merely by taking part
and indeed, in the decision of the Hon'ble Supreme
Court Arcelor Mittal (India)(P) Ltd. V. Satish Kumar
Gupta, reported in 2019 2 SCC at pg. 1 it was
observed that a Resolution Applicant has no vested
right that is 'Resolution Plan' be considered and
also that 'there is no vested right' or 'fundamental
Company Appeal (AT) (CH) (Ins) No.302/2021
60
right' in the 'Resolution Applicant' to have its
'Resolution Plan' approved.
69. It is represented on behalf of the 7th
Respondent / Liquidator that the 'Liquidator' in
terms of the I&B Code, 2016 and as per the terms
and conditions of the invitation documents is to
examine the 'schemes' furnished by the 'numerous
proponents' in all respects before submitting them
to the 'Stakeholders Consultation Committee' and
confirm that the scheme does not contravene any
of the provisions of the 'law' for the time being in
force including Section 29A of the I&B Code, 2016.
70. It is the stand of the 7th Respondent /
Liquidator that the 'Liquidator' is not empowered to
decide the 'feasibility' and 'viability of the scheme'
and declare someone as an 'H1 proponent', without
Company Appeal (AT) (CH) (Ins) No.302/2021
61
the concurrence of 'stakeholders consultative
committee'.
71. The plea of the 7th Respondent / Liquidator
is that the instant Appeal proceedings, are an
'abuse of process of law' and are only an arm-
twisting practice, to consider the Appellant's
proposal alone.
72. The stand of the 7th Respondent /
Liquidator is that the 'erstwhile Liquidator' had
completely ignored the views expressed by the
'stakeholders consultative committee/Secured
Lenders'. Also, that the erstwhile Liquidator had
illegally classified the Appellant as an H1
proponent, without the concurrence of SCC/
Secured Lenders and he moved an application
before the 'Adjudicating Authority / Tribunal' for
Company Appeal (AT) (CH) (Ins) No.302/2021
62
an appropriate direction to consider the alleged
scheme in violation of the process document.
8th Respondent's contentions
73. According to the 8th Respondent it made a
payment of Rs. one lakh on 24.07.2020 and
submitted its "Éxpression of Interest'' and the 1st
Respondent/Bank acknowledged the receipt of
payment on 30.07.2020. Also that the 1st
Respondent/Bank advanced the deadline to
submit the 'scheme proposal' from 25.09.2020 to
15.08.2020. That apart, the 1st Respondent/Bank,
also advanced the time line for payment of earnest
money deposit of Rs.2 crores from 25.09.2020 to
15.08.2020. Moreover the 1st Respondent had
submitted the 'Information Memorandum',
valuation Reports, and the provisional financial
Company Appeal (AT) (CH) (Ins) No.302/2021
63
statement for the year ended 31.03.2008 by email
dated 01.08.2020. On 03.08.2020, the answering
respondent was eligible and was shortlisted for
submitting 'scheme proposal'.
74. The Learned counsel for the 8th
Respondent submits that due to an increase
number of 'Covid cases' in August, 2020 and the
'Lock downs', the 8th Respondent could not submit
the 'scheme proposal' together with EMD of Rs.2
crores in time to the 1st Respondent. Furthermore,
the 8th Respondent brought to the notice of the 1st
Respondent the difficulties faced by it in mobilising
the funds and had prayed for more time, to make
the payment. A "Letter of Request'' was addressed
by the 8th Respondent to the 1st Respondent/IDBI
Bank, the 'Lead Banker' had informed the 8th
Company Appeal (AT) (CH) (Ins) No.302/2021
64
Respondent that the Liquidation process was going
on and the 8th Respondent can get in touch with
the 1st Respondent/Bank, to participate in the
bidding process.
75. It is represented on behalf of the 8th
Respondent that an email dated 6.10.2020 was
issued by the 8th Respondent, outlining its 'intent'
to maximise the value of the corporate debtor and
to bring in terms, higher than the 'Liquidation
Value' of the corporate debtor. In fact, the 8th
Respondent's request for further time to bring in
funds and to participate in the 'Bidding process'
was turned down by the Liquidator on 7.10.2020
and 8th Respondent was not permitted to
participate in the 'Bidding process'.
Company Appeal (AT) (CH) (Ins) No.302/2021
65
76. It is the version of the 8th Respondent that
it sent its "Scheme Proposal" to the 'Liquidator' on
12.10.2020 and expressed its intent to deposit the
'earnest money deposit' and had prayed for
inclusion of it as an Eligible Bidder but the 1st
Respondent/Bank had refused to entertain the
application of the 8th Respondent. Moreover, the
8th Respondent was ready and willing to deposit a
sum of Rs.2 crores as EMD and submitted "Scheme
Proposal" for the resolution of the corporate debtor
but the Liquidator had not permitted the 8th
Respondent and the Learned 'Adjudicating
Authority' had permitted the 8th Respondent to
deposit a sum of EMD of Rs. two crores which was
deposited by it.
Company Appeal (AT) (CH) (Ins) No.302/2021
66
77. The stance of the 8th Respondent is that the
'Adjudicating Authority/Tribunal' had permitted
the liquidator through an order dated 12.02.2021
to begin fresh negotiations with prospective bidder
namely the 8th Respondent and the Appellant.
Indeed, the 'Adjudicating Authority/Tribunal' had
directed Synergy Holdings to satisfy the Liquidator
about the genuineness of the Bank guarantee
before the Liquidator can even consider the scheme
proposal of the said prospective bidder.
78. According to the 8th Respondent, the
proposed scheme of it was not placed by the
Liquidator for the consideration by the 'Stakeholder
Committee'. In the meanwhile, R2 to R7 before
considering the scheme filed an IA 255/IB/2021
among other things, seeking a direction to the 1st
Company Appeal (AT) (CH) (Ins) No.302/2021
67
Respondent/Bank to take steps, to include the
property at Rayagada, Orissa and update the Asset
Memorandum, as per Regulation 34 of the
IBBI(Liquidation Process) Regulations, 2016.
79. According to the 8th Respondent, the
Liquidator had shortlisted the candidate, who are
prospective bidder for the purpose of submitting
the proposed scheme and the 8th Respondent is one
of them. The 8th Respondent continues to remain
as an interested in the Corporate Debtor and its
Assets. In fact the Liquidator during the pendency
of Appeal, had disqualified the 8th Respondent by
citing Section 29A of the Code. The Adjudicating
Authority by an order dated 12.02.2021 had
directed the Liquidator to conduct fresh
negotiations between R2 to R7 and R8.
Company Appeal (AT) (CH) (Ins) No.302/2021
68
80. The Learned Counsel for the 8th
Respondent brings it to the notice of this Tribunal
that it has assailed the disqualification made the
by liquidator in IA 120/2021 and the same was
'Heard' and Reserved for orders by the
'Adjudicating Authority/Tribunal' through an order
dated 22.03.2022.
81. The contention of the 8th Respondent is
that the instant Company Appeal (AT)(CH)(Ins)
No.302/2021 filed by the Appeal/Prospective
Bidder is maintainable and the impugned order
does not affect the rights of the Appellant in any
manner. Further the Appellant who has not made
an entry to the 'doors of resolution', cannot be an
'Aggrieved', in any manner by the impugned order,
which directs the inclusion of Assets, in 'Asset
Company Appeal (AT) (CH) (Ins) No.302/2021
69
Memorandum' and Valuation of Assets of
Corporate Debtor.
82. Apart from the above it is submitted on
behalf of the 8th Respondent that the Appellant is
merely 'Bidding' for the corporate debtor and
further, it is not a stakeholder who can question
the 'issues' concerned.
83. According to the 8th Respondent, the
Appellant suffers from disqualification under
Section 29A of the Code and Mr. Bala Showry, MD
of the Appellant company was disqualified as per
Section 164(2) of the Companies Act, 2013,
mentioning that he is disqualified for a period from
01.11.2016 to 31.11.2021 and despite the same,
the Appellant, is endeavouring to 'Bid' for this
company, long before completion of this period.
Company Appeal (AT) (CH) (Ins) No.302/2021
70
84. The Learned Counsel for the 8th Respondent,
points out that in regard to the 'Fraud' committed
in the Appellant's company an arrest memo dated
18.11.2020 was issued by the Directorate General
of GST Intelligence, Hyderabad Zonal Unit against
the General Manager of the Appellant's company,
for having colluded with the Managing Director of
Appellant/Company, in hatching a 'Conspiracy' to
fraudulent avail, utilize and pass on irregular Input
Tax Credit and for indulging in fictitious
transactions without actual supplies, with an
intent to 'defraud' 'Government Exchequer'.
85. According to the 8th Respondent, the
'Liquidator' cannot take an 'Adversarial view', in
such matters, as the interest of the 'Corporate
Debtor' and the 'maximisation' of value of corporate
Company Appeal (AT) (CH) (Ins) No.302/2021
71
debtor is paramount. There are no 'counter claims'
disputing the inclusion of Rayagada property in the
Liquidation Estate.
86. The Learned counsel for 8th Respondent
points out that the 8th Respondent is interested in
transparent process of bidding and maximisation
of value of assets of corporate debtor. The
valuation exercise is to be undertaken, in respect
of the assets of the corporate debtor, so as to enable
the 'stakeholders' to have the benefit of 'liquidation
value' which will act as a guide to 'Stakeholders' in
taking a decision on the proposed scheme, to be
submitted by the bidder.
87. The Learned counsel for 8th Respondent
prays for an opportunity being granted to 8th
Respondent by issuance of directions to the
Company Appeal (AT) (CH) (Ins) No.302/2021
72
Liquidator, to participate in the Bid, with a view to
enable the 8th Respondent to submit scheme in
respect of the assets of the corporate debtor. Also
that the liquidator is in possession of the EMD of
the 8th Respondent and hence the 8th Respondent,
may be permitted to submit its proposal. In any
event, the instant Appeal, preferred by the
Appellant is 'not maintainable in Law and on
Facts'. In other respects, the 8th Respondent
adopts the arguments of Learned counsel for R2 to R6.
Appraisal
88. Before the Adjudicating Authority / NCLT, Chennai Bench the Petitioners / IDBI Bank Ltd. and 5 others had projected an IA 255/IB/2021 in IA 71/2021 in IA No. 819/IB/2020 and IA Company Appeal (AT) (CH) (Ins) No.302/2021 73 10/IB/2021 in CP/1307/IB/2018 (under Section 60(5) of the I&B Code, Rule 11 of NCLT Rules, 2016) and sought for the undermentioned reliefs:-
(i) To direct the 1st Respondent/Liquidator to take necessary steps and include, as part of the Liquidation Estate of the Corporate Debtor, the property/assets of the Corporate Debtor situated at Rayagada, Orissa/State and accordingly update the Asset Memorandum as per Regulation 34 of the IBBI (Liquidation Process) Regulations, 2016;
(ii) Set aside the valuation conducted on 30.09.2020 & 01.11.2020, it being notion compliance with Regulation 35 of the IBBI (Liquidation Process) Regulations, 2016;
Company Appeal (AT) (CH) (Ins) No.302/2021 74
(iii) In interest of maximising the value of the assets of the Corporate Debtor, to defer the negotiations with Respondent Nos. 2 and 3, or Respondent No. 4, if found eligible as ordered by this Hon'ble Tribunal vide order dated 12.02.2021 in IA No. 71 of 2021 in IA No. 819/IB/2020 & IA/10/2021 in CP/1307/IB/2018, until the compliance of the relief as prayed for above under prayer (a) by the Respondent No. 1/Liquidator and the relief granted by this Hon'ble Tribunal under prayer b).
(iv) Or in the alternate to prayer c), requirement of the Applicants/Secured Creditors to complete the negotiations and submit the final decision as prayed for by the 1st Respondent / Liquidator in prayer (iv) of IA No. 71 of 2021 in IA NO. Company Appeal (AT) (CH) (Ins) No.302/2021 75 819/IB/2020 & IA/10/IB/2021 in CP/1307/IB/2018, until the compliance of the relief as prayed for above under prayer a) by the Respondent No. 1/Liquidator and the relief granted by this Hon'ble Tribunal under prayer b).
89. It is evident from the Petitioners' IA 255/2021 in IA No. 71 of 2021 in IA No. 819/IB/2020 & IA/10/IB/2021 in CP/1307/IB/2018 that the Petitioners are the major stakeholders of the Corporate Debtor with a claim to an extent of 567.59 crore due and recoverable from the liquidation process, as compared to the total outstanding debts of the Corporate Debtor viz. Rs. 567.59 crore and were members of the Committee of Creditors of the Company Appeal (AT) (CH) (Ins) No.302/2021 76 Corporate Debtor during the CIRP process, holding a total voting share of 98.68%.
90. As a matter of fact, the liquidation of the Corporate Debtor was ordered by the Adjudicating Authority/NCLT, Chennai Bench on 29.05.2020 and the stakeholders consultation committee was constituted and secured creditors came to conduct the joint lender meeting from 21.09.2020.
91. In fact, the 1st Respondent / Liquidator called for the invitation, for proposing a scheme for compromise or arrangement as per section 230 of the Companies Act, 2013, to submit the Resolution Plans to the Liquidator on or before 25.08.2020. A revised valuation report was sought for by the 1st Respondent / Liquidator, with a view to reflect the Company Appeal (AT) (CH) (Ins) No.302/2021 77 financial position of the Corporate Debtor before the Committee of Creditors which was deliberated before the 1st meeting that took place on 26.08.2020. Before this, on 03.07.2020, an expression of interest was invited by the 1st Respondent / Liquidator from the interested Applicants to submit schemes of arrangement on the basis of the liquidation value arrived at by the revised valuation report for its revival. Later there were 9 Applicants who submitted a scheme by making a non-refundable deposit of a sum of Rs. 1,00,000/- as application fee.
92. In the second COC meeting, the four Applicants out of the nine who submitted their proposal scheme made their presentation, on their Company Appeal (AT) (CH) (Ins) No.302/2021 78 proposal before the stakeholders and they were subsequently asked by the stakeholders, to revise their respective schemes. Indeed, the liquidator filed CA 816/CAA/2020 in CP/1307/IB/2018 to which all the secured creditors had objected due to infirmities in the proposed application, which were brought to the attention of the liquidator by way of several e.mails.
93. When the aforesaid application was pending before the Adjudicating Authority/Tribunal, interalia applications were filed by the second and third Respondent, the 1st Respondent /Liquidator had filed an IA No. 71(CHE)/2021 in IA/819/IB/2021 & IA 101/IB/2021 in CP/1307/IB/2018 praying that Company Appeal (AT) (CH) (Ins) No.302/2021 79 Tribunal may be pleased to dismiss the application IA/10/IB/2021 filed by the 4th Respondent, on account of submitting fraudulent bank guarantee which was also admitted by him, further confirmed by the 6th Respondent that BG was not issued by them and the same was recorded in the minutes of the 4th SCC meeting, that took place on 02.02.2021 and as per the Letter IDBI/T/JSCL/JLM/2020- 21/02-01 of the 1st Respondent dated 02.02.2021 and for other reliefs.
94. According to the petitioners in IA 255/IB/2021 in CP/1307/IB/2018, the manner in which the revised valuation which was made by the registered valuers (i) Mr. Shanta Kumar and Mr.R. Chandran, who were appointed by the 1st Company Appeal (AT) (CH) (Ins) No.302/2021 80 Respondent/Liquidator on the assets of the Corporate Debtor, was not in accordance with the procedure specified under Regulation 35(3) of the Insolvency and Bankruptcy Board of India (liquidation process) Regulations 2016 which enjoins that the valuation of the Corporate Debtor shall be conducted by the two registered valuers, who shall conduct their valuation independently on the entire assets of the Corporate Debtor and the average of the two estimates received shall be taken as the value of the assets or business of the Corporate Debtor.
95. Although, the valuation of the assets of the Corporate Debtor was conducted by the two registered valuers, the valuation was conducted Company Appeal (AT) (CH) (Ins) No.302/2021 81 separately on the plant and machinery by Mr. Shanta Kumar, a registered valuer and on the land and building conducted by Mr. R. Chandran, instead of the same being conducted holistically on the entire assets of the Corporate Debtor. In reality, the revised valuation 'is in negation' to the established procedure under the I&B Code, 2016.
96. According to the 1st Respondent / IDBI Bank Ltd. & Ors. (petitioners in IA 255/IB/2021 in CP/1307/IB/2018, although the petitioners/secured creditors do not have any objection in negotiating with either the R2 and 3 or any other eligible Resolution Applicant and are solely interested in the maximising the value of the assets of the Corporate Debtor, in the event that the Company Appeal (AT) (CH) (Ins) No.302/2021 82 negotiations were to be taken forward with R2 and R3 or R4, if found eligible as directed by this Tribunal dated 12.2.2021, the petitioners in IA 255/IB/2021 in CP/1307/IB/2018 submit that the said negotiations would not yield much result, considering the fact any proposal presented by the R2 and 3 or R4, if found eligible, would be on the basis of imprecise valuation presented by the 1st Respondent/Liquidator and may not be feasible for the petitioners to accept. Also, this process would accordingly not result in producing and realising the 'best valuation of the assets' of the Corporate Debtor and resultantly, would be detrimental to the interests of all the 'stakeholders' including the IDBI Bank Ltd. (Applicant) and that of the Corporate Debtor as well. In the event of reliefs sought for in Company Appeal (AT) (CH) (Ins) No.302/2021 83 IA 255/IB/2021 in CP/1307/IB/2018 are not granted, it will finally result in delaying and frustrating the resolution process of the Corporate Debtor, besides leading to incurring of unnecessary cost and expenditure.
The pleas of Erstwhile Liquidator / 1st Respondent of M/s. Jeypore Sugar Company Ltd.
97. According to the erstwhile Liquidator of 1st Respondent / M/s. Jeypore Sugar Company Ltd., it was the decision of the Committee of Creditors led by the Petitioner/IDBI Bank Ltd. who wanted removal of the whole value of land situated at Raygada. In fact, the Respondent, as advised by the Committee of Creditors referred to the expert legal opinion, based on the said opinion, it was the Company Appeal (AT) (CH) (Ins) No.302/2021 84 valuers' who made the changes and the same was approved by the Committee of Creditors and also the Adjudicating Authority/Tribunal.
98. It is a version of the 1st Respondent / erstwhile Liquidator that the said property was not mortgaged or realisable because of Orissa Land Reforms Act Proceedings and they are reflected in the balance sheet of the Company, which was listed in the stock exchange and the money was lent by the Public Sector Undertakings Bank after knowing fully well about the facts. As a matter of fact, the 1st Respondent / Liquidator, who was earlier as Resolution Professional kept the 'Lenders' informed of all the proceedings on a day today basis and during the SCC meetings. Also that the lenders Company Appeal (AT) (CH) (Ins) No.302/2021 85 were in concurrence with all the acts / decisions of the Respondents never raised any objections.
99. The stand of the 1st Respondent / Liquidator is that from 1.6.2020 till 1.4.2021, the 'secured creditors' unanimously had concurred with all the decisions and in fact, directed the liquidator to negotiate with the Resolution Applicants, M/s Kineta Global Ltd. (H-1) Synergy Holdings (H2) after the dis-qualification of the other two Resolution Applicants M/s Kineta Global Ltd. was in the fray.
100. According to the 1st Respondent / erstwhile Liquidator the joint lenders forum led by the petitioner/bank had no grievance in regard to the present Resolution Applicant M/s. Kineta Global Ltd. when their offer at that time was only Company Appeal (AT) (CH) (Ins) No.302/2021 86 Rs. 159 Crores which was subsequently increased to Rs. 207 Crores (by Rs. 48 Crores) based on the negotiations Held by the liquidator.
101. The plea of the 1st Respondent / erstwhile Liquidator is that the efforts towards the scheme of compromise' began with the liquidation order passed by this Tribunal, on 29.05.2020 and from June, 2020 till April, 2021, for nearly ten months, the Petitioner was in complete approval and suddenly in April, 2021 when the matter was about to be concluded, filed IA 255/2021, thereby exposed to the 'Doctrine of Estoppel is based on the principle that it would unjust, if a person intentionally by conduct or in any other manner has induced other person to believe and act upon such a representation, neither he or those representing Company Appeal (AT) (CH) (Ins) No.302/2021 87 can in a subsequent Court proceedings deny the truth'.
102. It is projected by the 1st Respondent / erstwhile Liquidator that the Joint Lenders Forum lead by the Petitioner / IDBI Bank in their e.mail expressed their intention to exercise the option of selling the assets, secured by them u/s 52 of the Code, for exercising this option. The secured creditors must conduct 'fair valuation of theirs as per Section 52 of the I&B Code within 90 days. However, till date even after 360 days the IDBI Bank / Petitioner had not complied with the Regulations.
103. The 1st Respondent / erstwhile liquidator before the Adjudicating Authority / Tribunal had prayed for the dismissal of the IA 255 of 2021.
Company Appeal (AT) (CH) (Ins) No.302/2021 88
104. It is the stand of the 1st Respondent / erstwhile liquidator that the 'liquidation value' of the assets of the Corporate Debtor situated at Raygada Asset (782 acres) was initially determined that Rs. 763.186 crores and accordingly the liquidation value was decided. Subsequently, at the instance / direction of the Committee of Creditors, a legal opinion was secured, wherein it was revealed that the Rayagada asset, is in litigation and that the asset neither can be mortgaged nor can be sold. Going by the opinion of Advocates and ground situation the Resolution Professional had appointed during the Corporate Insolvency Resolution Process 'two valuers', based on the average of the valuation secured for the second time from the valuers. Company Appeal (AT) (CH) (Ins) No.302/2021 89
105. It is evident that the Resolution Professional had taken the average of the two liquidation values and decided the liquidation value of the Assets of the Corporate Debtor at Rs. 332.52 crores and the same was not objected or assailed by the same 'Çreditors' at any point of time, either during CIRP or after initiation of Liquidation, atleast until before the scheme application was filed, the IDBI/ Bank cannot newly question the liquidator over Raygada Asset issue.
106. The contention of the 1st Respondent / erstwhile Liquidator before the Adjudicating Authority / Tribunal is that if the IDBI Bank and other Creditors believe the 2nd valuation that came into picture by the persuasion of the same creditors was to go because the value of the Raygada Assets Company Appeal (AT) (CH) (Ins) No.302/2021 90 of Corporate Debtor was excluded, these Creditors should have assailed the second valuation decided during 'CIRP', but they had not done it because they themselves had got that Asset excluded from valuation.
107. According to the 1st Respondent / erstwhile Liquidator going by the legal opinions obtained suggesting that those Lands in Orissa are in Litigation before the Hon'ble High Court of Orissa, and 'Revenue Authorities' had clarified that those lands are not transferable ignoring all those historical facts, still on record, now the IDBI / Bank and other Creditors canvas that Corporate Debtor was put to a loss of around Rs. 1000 crore because of the fact that Raygada Asset Value is shown as nil in the fresh valuation ordered by the Liquidator. Company Appeal (AT) (CH) (Ins) No.302/2021 91
108. The version of the 1st Respondent / erstwhile Liquidator is that knowing pretty well that the average of two valuations is the mandate to decide the liquidation value, he had later requested another set of valuers to do the valuation independently and further that the second set of valuers had given their valuation, after inspecting the location of the Corporate Debtor. Apart from that the IDBI / Bank came out with IA 255/2021 in CP/1307/IB/2019 by looking at a 'draft valuation', not even on 'final Valuation Report'.
109. According to the 1st Respondent / erstwhile Liquidator, having ordered for two valuations to take the average of them as liquidation value, the grievance of the IDBI Bank that the procedure followed was an irregular one, had Company Appeal (AT) (CH) (Ins) No.302/2021 92 become an infructuous one and further the contention that two valuations were not taken into consideration to arrive at Liquidation value was not tenable any more, in as much the average taken was based on two independent values given by the two sets of the 'independent valuers'.
110. The erstwhile liquidator in IA 255/2021 took a stand that for discharging the functions as per Section 35(1) of the I&B Code, 2016 he was not under an obligation either to consult or abide by the suggestions of the stakeholders. As a matter of fact, the only obligation u/s 35(2) of the I&B Code, 2016 is that the liquidator, in case he consults any stakeholder he shall make that record available to other stakeholders, but he is not under Company Appeal (AT) (CH) (Ins) No.302/2021 93 any obligation to oblige the suggestion given by the Stakeholders.
111. The erstwhile liquidator had taken a stand that in respect of the scheme, the IDBI/Bank cannot call itself as an 'Aggrieved', because it does not need assistance to reject the 'scheme proposal'.
112. The version of the liquidator is that the IDBI /Bank cannot attribute malafides to him mentioning that he had omitted valuing the property situated at Rayagada. Further, the Committee of Creditors at its instance had asked for fresh valuation based on the legal opinion and that the valuation of the property, accordingly was shown as zero during CIRP. Also that now he as a liquidator cannot make the property valuable or count in the valuation of asset situated at Company Appeal (AT) (CH) (Ins) No.302/2021 94 Rayagada, which was earlier discarded by the 'Committee of Creditors'.
113. The erstwhile liquidator refers to the decision of the Hon'ble Supreme Court in Dr Renuka Datla (Mrs.) v. solvay Pharmaceuticals B.V. and Others (2004) 1 SCC 49).
114. According to the erstwhile liquidator it is the duty of the IDBI /Bank to point out how the valuation furnished by the valuers was fundamentally an erroneous one and the same was not explained by the Bank.
115. The erstwhile liquidator takes a plea that IDBI / Bank cannot be treated as an 'aggrieved person' either by the proposal of the scheme or by an order of Adjudicating Authority / Tribunal directing the 'Creditors' to negotiate with the plan Company Appeal (AT) (CH) (Ins) No.302/2021 95 applicants because neither the Liquidator saying the Creditors or under an obligation to approve the scheme nor was the 'Tribunal' stating that the Creditors to approve the 'scheme' so that the Creditors were not tied down either to approve the scheme or reject the same and viewed in that perspective the IA 255 of 2021 was to be dismissed.
116. At this juncture, the Appellant's Ld. Sr. Counsel points out that the IDBI / Bank has no Locus Standi, to contest the instant Appeal 302/2021, since it is not a part of the stakeholders consultation committee and further the proviso clause Regulation 31A of IBBI (liquidation process) Regulation, 2016 mandates that a secured Creditor who had not relinquished its security interest u/s 52 shall not be part of the consultation committee. Company Appeal (AT) (CH) (Ins) No.302/2021 96
117. Continuing further, the 3rd Respondent had wrote a letter dated 29.07.2020, addressed to the Liquidator had articulated to realise its security interest as per Section 52 of the I&B Code, 2016 and had categorically stated that IDBI / Bank had not relinquished the security interest under the 'Liquidation Estate'. As such, the IDBI Bank cannot be a part of stakeholders consultation committee and it has no 'Locus' to contest the instant 'Appeal'.
118. The Learned Counsel for the Appellant refers to the decision of Hon'ble Supreme Court in Vijay Kumar Jain Vs Standard Charted Bank 2019 20SCC 455 wherein in respect of the interpretation of Regulation 21 it was held that there was no specific provision which states not to Company Appeal (AT) (CH) (Ins) No.302/2021 97 share the 'valuation report' and in fact all the concerned persons should be given an access to the documents, which will be crucial for deciding the work of the 'Corporate Debtor'.
119. The Learned Counsel for the Appellant relies on the decision of the Hon'ble Supreme Court in Shiv Shakti Coop Housing Society, Nagpur Vs Swaraj Developers and Other (2003) 6 SCC 659 wherein it was held that an Appeal is an continuation of the original proceedings and the provisions applied at the time of institution are considered to be operative even in respect of the Appeals and this is because of the fact there is a 'vested right' in the litigant to avail the remedy of an Appeal.
Company Appeal (AT) (CH) (Ins) No.302/2021 98
120. The Learned Counsel for the Appellant points out that the decision in Essar Steel vs. Satish Kumar Gupta reported in 2020 8 SCC 531 inapplicable to the instant 'Appeal', since the observations so made were in regard to the 'unsuccessful Resolution Applicant', and further, it was held in the said judgement that the 'unsuccessful Resolution Applicant' had no right to challenge the rejection of its plan by a 'Resolution Professional' or even by the 'Committee of Creditors' when the Plan does not receive 66% of the 'Committee's votes'.
121. In the instant Appeal, this Tribunal is to look into as to whether the assets of the Corporate Debtor situated at Raygada, Orissa, would form part of the Liquidation state of the Corporate Company Appeal (AT) (CH) (Ins) No.302/2021 99 Debtor. Also that the valuation of the Raygada Property centres around the instant 'Appeal', in a 'primordial' manner.
122. The erstwhile liquidator (1st Respondent in IA 255/IB/2021) in CP 1307/IB/2018 had obtained a valuation from the IBBI registered valuer dated 25.09.2019 and the 'total valuation of the Corporate Debtor' is mentioned as under in a tabular form:-
S.No. LOCATION Value of Land Value of Total Value/ Remarks (Crore) Building FMV (Crore) (Crore) 1 Chagallu Sugars + 81.63 8.00 89.63 Yermaguderm Yermaguderm land for Agricultural use 2 Chagallu Distillery 49.25 1.75 51.00 - 3 Pothavaram 75.33 22.51 97.84 -
4. Jangareddigudam + 38.23 1.54 39.77 Narasannapalem Narasannapalem land for SSI use
5. Rayagada assets 1087.98 2.56 1090.54 -
(5 places) Total 1332.42 36.36 1368.78
123. In the instant case on hand it comes to light that the erstwhile liquidator had secured the Company Appeal (AT) (CH) (Ins) No.302/2021 100 legal opinion from Mr. Nrushinga Nath Panda which proceeds to the following effect:-
It is revealed from the records of J.S. Co. Ltd., that, the JS.Co. Ltd., is in possession of lands as per the R.O.R. to an extent of Ac. 784.90 in 13 numbers of Mouza (Revenue villages). But they are in physical possession of Ac. 565.75. They have already surrendered the lands to the State of Odisha to an extent of Ac. 117.96 and others (Rayagada People) have occupied to an extent of Ac. 101.19.
There are numbers of cases relating to the lands of J.S.Co. Ltd., from 1974. At present situation no Sugar Company and ferrow-manganese factory is running on the land of JS Co. Ltd., and no lands are used for raising of sugarcane for JS Co. Ltd., except few members to watch and ward the waste Company Appeal (AT) (CH) (Ins) No.302/2021 101 materials of J.S. Co. Ltd. Nobody are working for J.S. Co. (Sugar Factory) and ferrow manganese factory. There is a dispute between the State & J.S. Co. Ltd., for no cause. So it can be sorted out, if J.S. Co. Ltd. will take a decision to mitigate the litigation. I have gone through all the documents of the J.S. Co. Ltd., and found that except few lands there are recorded in Rayagada Nagar all are agricultural land. In view of that these lands cannot be enforceable under SARFAESI Act.
The lands are in dispute with the Government of Orissa. The Property is involved in OLR Proceedings with the Govt. under OLR Case No. 60/74 which is still pending before the Revenue Officer, Rayagada as the O.L.R. Proceedings are stayed by the Hon'ble High Court of Orissa in W.P.C. No. 4490/2015 by the Company Appeal (AT) (CH) (Ins) No.302/2021 102 J.S. Co. Ltd.) There is no record before me (supplied by the J.S. Co. Ltd.) about the present status of the case in W.P.C. No. 4490/2015 of Hon'ble High Court of Orissa.
It reveals from the records of the (supplied by the J.S. Co. Ltd., Rayagada) that the lands in question are indulged in OLR proceedings. So, it is not marketable and it cannot be disposed of. It cannot be mortgaged.
124. Resting upon the legal opinion tendered, Mr. R. Chandran had furnished the value for the property situated at Rayagada Orissa as zero and it is worth useful for this Tribunal for the purpose of better appreciation the relevant portion of the report is extracted as under:-
"During the process of valuation, I have asked for latest legal opinion about all land owned / Company Appeal (AT) (CH) (Ins) No.302/2021 103 possessed by ISCo. But I was provided with one, which the company seems to have received earlier for some other purpose. We did our valuation based on the information provided to us. But later, the NCLT Bench at Chennai declined to accept the valuation of assets in Odisa / Raygada, stating the legal dispute related to the land claimed to be owned by JSCo.
Hence, you have asked us to revisit the report and submit a revised report based on a new Legal opinion received from Advocate Nurshinga Nath Panda, of Rayagada. This Advocate has given a different opinion that the lands said to be owned by JSCo in Odisha can neither be sold nor be mortgaged now. This opinion completely changes the background and the values we have arrived at the earlier exercise. Company Appeal (AT) (CH) (Ins) No.302/2021 104 Hence, I have given you a new report on 28th oct 2019. According to the said report the Odisha assets (including Land & Buildings) were valued as zero. So, the new value I arrived for the L&B assets of JSCo have come down 278.24 crore (Fair Value) and the Liquidation value as 212.80 crore. Also, in the current exercise, which was done after the NCLT bench of Chennai accepted the JSCo case for Liquidation, the Odisha assets were not taken for valuation. Also, new situations like the COVID have emerged & impacted the market. Hence, the Realisable/Liquidation value of assets of JSCo currently stands as Rs. 1.66 crore."
125. The Erstwhile Liquidator, who had filed the Asset Memorandum on 21.09.2020, had not Company Appeal (AT) (CH) (Ins) No.302/2021 105 included the 'Raygada Property Assets' but arrived at a 'realisable value' of 217.52 crores.
126. The valuation of the Raygada Property with a market value of more than Rs. 1000 crore as mentioned by the Liquidator / 7th Respondent was valued at Rs. Zero by the erstwhile liquidator without adhering to the mandatory requirement of Regulation 35 of IBBI (liquidation process) Regulations, 2016. Even the second value report secured by the 7th Respondent / liquidator does not exhibit the compliance of the Regulations because of the fact that in the instant case the liquidator / 7th Respondent had only obtained one Report on the plant and machinery and another report on the land and building which is in negation of the procedure as specified under the Regulations. In short, the Company Appeal (AT) (CH) (Ins) No.302/2021 106 said valuation was made, without including a vital asset of the Corporate Debtor.
127. The Erstwhile Liquidator had shared the 'Draft Valuation Report' to the 'Resolution Applicants including the Appellant and Respondent No. 8 to 9.
128. In reality, the valuer in the initial report had assessed the value of Raygada lands to be Rs. 1087.98 crores later based on the information furnished by the 7th Respondent / liquidator and resting upon the opinion furnished by the Learned Advocate, the liquidator came to the conclusion that the value of the Raygada lands should be decided as zero. Resultantly, based on the opinion of advocate, coming to the zero valuation was not Company Appeal (AT) (CH) (Ins) No.302/2021 107 approved by the Committee of Creditors / Stakeholders Consultation Committee.
129. It is pertinently pointed out by this Tribunal that the requirement of Regulation 35 of the liquidation process Regulations is a separate one from the process mentioned under Section 230 of the Companies Act, 2013 and Section 230 of the Companies Act, 2013 which envisages 'one valuer' cannot be the basis to 'By pass' the Regulation 35 of liquidation process Regulations.
130. A cursory glance of Section 36(3)(e) of the Code clearly exhibit that the Assets subject to the determination of ownership by the Court or authority shall form part of the Liquidation Asset, meaning thereby inclusive of the 'Lands of the Corporate Debtor at Raygada'.
Company Appeal (AT) (CH) (Ins) No.302/2021 108
131. From the order passed by the Hon'ble Orissa High Court on 16.3.2022 in W.P. No. 4490 of 2015 that compensation is to be given which was affirmed by the 7th Respondent / liquidator through his e.mail dated 16.3.2022. Therefore, it implies that the valuation should be conducted afresh and fresh schemes to be called for.
132. The Appellant, who was declared as H1 bidder by the 7th Respondent was furnished with an offer of Rs. 207 crores and that the value of 223.21 crores, was arrived at by the 7th Respondent / Liquidator near to the Liquidation value.
133. It is not out of place for this Tribunal to make a pertinent mention that as per Regulation 34(4) of the Insolvency & Bankruptcy Board of India (Liquidation Process Regulations), the Liquidator / Company Appeal (AT) (CH) (Ins) No.302/2021 109 7th Respondent, ought to file the 'Asset Memorandum', together with the preliminary report to the Adjudicating Authority / Tribunal. More importantly, Regulation 34(2)(a) of the Insolvency & Bankruptcy Board of India (Liquidation Process Regulations) enjoins that the 'Asset Memorandum', will include the Value of the Asset, to be arrived at as per Regulation 35. Therefore, it is candidly quite clear that the Sharing of the Reports with the Potential Resolution Applicants by the 7th Respondent / Liquidator is quite contrary to the Regulation 34 (4) of the Insolvency & Bankruptcy Board of India (Liquidation Process Regulations), in the considered opinion of this Tribunal.
134. One cannot remain in oblivion of a prime fact that the aforesaid 'Regulations' read in Company Appeal (AT) (CH) (Ins) No.302/2021 110 conjunction with Regulation 21 of the Insolvency & Bankruptcy Board of India (Insolvency Professionals Regulations, 2016) unerringly points out that an Insolvency Professional is to ensure that information to be of confidentiality in character pertaining to the Insolvency Resolution Process, liquidation or bankruptcy process and the same is to be maintained at all points of time.
135. It is to be remembered that the Hon'ble High Court of Orissa in WP 4490/15 had passed an order to the effect that the Corporate Debtor as a right to compensation in respect of the 'ceiling surplus of Lands' after Raygada Property, to an extent of 506.690 acres. In fact, the Liquidator /7th Respondent in his e.mail on 16.3.22 addressed to R1 to R6 had mentioned that the Corporate Debtor Company Appeal (AT) (CH) (Ins) No.302/2021 111 is entitled to 281 acres whose guideline value is Rs. 600 crores with market value of more than Rs. 1000 crores(sic)''. Therefore, the 'Assets of the Corporate Debtor' are to be revalued by the 7th Respondent / Liquidator, in accordance with Regulation 35 of the Liquidation Process Regulations and the valuers are required to be appointed in terms of Regulations 35 and Rule 8 of the Companies (Regd.) valuers and valuation (Rules, 2017). No wonder, the 'valuation reports' are to be kept as confidential documents by the 7th Respondent / Liquidator.
136. It cannot be brushed aside that a fresh valuation is to be conducted with a view to benefit 'all the stakeholders' and then only, the Section 230 process under the Companies Act, 2013, is to be conducted afresh.
Company Appeal (AT) (CH) (Ins) No.302/2021 112
137. Continuing further, the 7th Respondent / Liquidator had not taken the approval of the secured creditors to bring effect to the section 230 scheme under the Companies Act, 2013. More than 75% of voting share mandatory approval of Creditors is a requirement under Section 230 (2) of the Companies Act, 2013 with a view to operate the scheme and to bring the same into effect.
138. To keep in line with the objective of the I&B Code, 2016, for 'maximisation of the value of assets of the Corporate Debtor', the Raygada Property has to be made a part of the Asset Memorandum and therefore a 'Fresh Valuation of the Assets of the Corporate Debtor', has to be done, in accordance with Law. As such, the 'Bid' of the Appellant is an exercise in futility and only after a fresh valuation Company Appeal (AT) (CH) (Ins) No.302/2021 113 process being conducted, the section 230 process under the Companies Act can start 'afresh' and to be placed for an Approval before the Stakeholders Consultation Committee.
139. The other contention to be looked at by this Tribunal, is that Section 36 (3)(e) of the I&B Code. 2016 points out that the 'Assets' which are subject to the determination of 'ownership' by the 'Court or Authority/Tribunal' will form part of the 'Liquidation Estate of the Corporate Debtor'. Hence, in respect of the Raygada Property specifying the value, as zero, on the premise that the said property was under 'lis', will render the ingredients of section 36 (3)(e) of the Code, a 'fruitless and useless one'.
Company Appeal (AT) (CH) (Ins) No.302/2021 114
140. To be noted, merely because in respect of the 'Title of the property', if a 'Corporate Debtor' has no valid or any marketable title, ipso facto, the 'value of the property' cannot be described as Zero. No wonder, the Liquidator, holding the 'Liquidation Estate', in the interest and for the benefit of 'stakeholders', is to take into consideration as to which/what are all the properties? do form part of the 'Liquidation Estate'. By adhering to the ingredients of Section 36(3) of the I&B Code, 2016, the 'Registered Valuers', are to 'value' the property.
141. In the instant case, the Erstwhile Liquidator had not obtained the valuation from the second valuer and that the liquidation value was arrived at only by one valuer. Also that the erstwhile liquidator had gone for a fresh valuation Company Appeal (AT) (CH) (Ins) No.302/2021 115 which clearly points out that Regulation 35(2) of IBBI (Liquidation Process) Regulations, 2016 was not followed. The stakeholders' plea/request to go for a fresh set of valuations was not acceded to by the Erstwhile liquidator.
142. Dealing with the aspect of that the plea of the Erstwhile Liquidator, that the IA 255/IB/2021 in CP/1307/IB/2018 is not maintainable, in 'view of the fact that that 'Secured Creditors'' are having an option/alternative to turn down the 'proposal' by 'voting against the scheme' cannot be countenanced, in the eye of law, because of the fact, that the 'Secured Creditors' had assailed the process in which the scheme was projected before the Adjudicating Authority/Tribunal, by not following the ingredients of the I&B Code, 2016 and Company Appeal (AT) (CH) (Ins) No.302/2021 116 there being 'no proper valuation of assets' being made in respect of the 'valuation of the assets', forming part and parcel of the 'liquidation estate'.
143. It is to be remembered in IA 255/IB/2021 in CP 1307/IB/2018, on the file of the Adjudicating Authority/NCLT, Division Bench II, Chennai, the 'Rayagada Property', is to be valued and to be included in the Liquidation Estate. Also that to find out the exact/precise price of the said property, the same is to be valued, and in the absence of the same, one can safely and securely come to a clear cut conclusion that the 'scheme' under Section 230 of the Companies Act, 2013, as projected by the Liquidator cannot be discussed by the 'Stakeholders'.
Company Appeal (AT) (CH) (Ins) No.302/2021 117
144. There is no two opinion of the vital fact that the Liquidator has not secured the 'Approval of the Creditors' to bring to an effect the 'scheme' under Section 230 of the Companies Act, 2013. In this connection, this Tribunal quite significantly points out that the procedure mentioned in Section 230(2) of the Companies Act, 2013 is to be adhered to and the same is not in exemption of any other Law, inclusive of the I&B Code, 2016.
145. A mere running of the eye of Section 230(2)
(c) of the Companies Act, 2013 clearly mentions of a need of an Approval of the Creditors with a voting share of not less than 75% of the Secured Creditors in value etc., so as to enable the scheme to be an operational one and the same being effect to, coupled with the other conditions to be fulfilled. Company Appeal (AT) (CH) (Ins) No.302/2021 118
146. In the instant case, on hand, this Tribunal, succinctly points out that the 'scheme' as per Section 230 of Companies Act, 2013 is to be followed in 'true letter and spirit' before the same being presented/projected before the Adjudicating Authority/Tribunal.
147. As far as the present case is concerned, the Rayagada Property, a 'Very Valuable Good Asset' of the 'Corporate Debtor', market value being more than Rs.1000 crores, according to Liquidator/7th Respondent, cannot by no stretch of imagination, be excluded, from the 'ambit of Valuation' in the considered opinion of this Tribunal, and that too detriment to the very ingredients of the I&B Code, 2016 is its Regulations.
Company Appeal (AT) (CH) (Ins) No.302/2021 119
148. Also, the 'Corporate Debtor' has a right to claim compensation in respect of the ceiling surplus land at 'Rayagada Property' considering the extent of 5096.69 acres, in the teeth of the order of the Hon'ble High Court of Orissa, in WP(C )4490/2015. Hence it is incumbent and on the part of the 7th Respondent/Liquidator to act in terms of the I&B Code, 2016 and Liquidation Regulation.
149. It can not be over emphasised, that the 'aim of the I&B Code, 2016' is for maximisation of the value of the assets of the Corporate Debtor and all endeavours ought to be taken, with a view to resurrect/revive the company. Viewed in that perspective, the 'Rayagada Property' is to made as a part and parcel of Asset Memorandum, and a Fresh Valuation of the Assets of the Corporate Debtor, has Company Appeal (AT) (CH) (Ins) No.302/2021 120 to be done, as per procedure, prescribed by law and looking at from this perspective, this Tribunal, unhesitatingly, holds that the Bid furnished by the Appellant remains as an exercise in futility.
150. As a logical corollary, the conduct of 'Fresh Valuation Process' is the 'fair', 'just' and 'inevitable one' and then only, the process under Section 230 of the Companies Act, 2013 can begin afresh and the same being placed for getting, an Approval from the 'Stakeholders Consultation Committee'.
151. Section 230 of the Companies Act, 2013 is quite broader and wider in its 'purview' and the I&B Code, 2016 and its Regulations are not to be 'brushed aside' and that the 'Scheme', under Section 230 of Companies Act, 2013 is to be read in an harmonious manner, without causing any Company Appeal (AT) (CH) (Ins) No.302/2021 121 volatile damage/harm, being caused to the language employed therein, as opined by this Tribunal.
152. Although the Appellant has come out with a plea that as per Section 61(1) of the I&B Code, 2016 any 'aggrieved person' has a right to prefer an Appeal before this Appellate Tribunal, and further that a Litigant has a 'vested right' to avail the remedy of an Appeal, this Tribunal is of the considered view that in the instant case it is the Secured Creditors, who are the Beneficiaries of the 'Scheme' under Section 230 of the Companies Act, 2013 who would have been affected by the impugned order passed by the Adjudicating Authority/NCLT, Division Bench II, Chennai in Company Appeal (AT) (CH) (Ins) No.302/2021 122 ordering the fresh valuation of the Assets of the Corporate Debtor.
153. The other crucial fact to be taken into consideration is that in the case on hand, the 'valuation' was not conducted in the teeth of the ingredients of I&B Code, 2016 and its Regulations. As such the Appellant, being a H1 Bidder (as declared by the erstwhile Liquidator) cannot be an 'Aggrieved Person' as per Section 61 of the I&B Code, 2016.
154. Added further, the Appellant, has 'no say' in respect of matters, pertaining to the valuation of assets of the Corporate Debtor. More importantly and to put it precisely, the point/issue, concerning the value of assets are only in the realm of the 'Stakeholders' of the 'Corporate Debtor' and that the Company Appeal (AT) (CH) (Ins) No.302/2021 123 'Appellant/Third Party/Prospective Bidder', is not entitled to prefer the instant Company Appeal (AT)(CH)(Ins) No.302/2021 concerning the fact, that the impugned order passed by the Adjudicating Authority/Tribunal does not affect, any of the rights of the Appellant, in any manner. Also that, the Appellant cannot be called as one, who has/had any legal grievance in respect of the impugned order dated 17.11.2021 passed by the Adjudicating Authority/Tribunal in IA 255/IB/2021 in CP/1307/IB/2018. The Appellant cannot, claim, a vested right, or any fundamental right to seek for an 'Approval of his Plan', and thereby claim to be a person 'Aggrieved' in respect of the impugned order.
Company Appeal (AT) (CH) (Ins) No.302/2021 124
155. Apart from the above, even though on behalf of the Appellant's side, it is projected that the Adjudicating Authority/Tribunal on 12.02.2021, had directed the 'Committee of Creditors', to negotiate with the Appellant, and further its Resolution Plan was neither put to vote nor it was declared as an 'unsuccessful applicant' and as such his rights have been greatly affected, this Tribunal, in an 'unequivocal term' comes to a cocksure conclusion that it is not a 'Stakeholder', and in any event, it is not an 'Aggrieved Person' as per Section 61 of I&B code, 2016. As such, the instant Company Appeal (AT)(CH)(Ins) No.302/2021 preferred by the Appellant is 'not maintainable, per se' in the 'eye of law', because it is not deprived of a Legal Company Appeal (AT) (CH) (Ins) No.302/2021 125 right or having not sustained any injury, as held by this Tribunal.
156. Be that as it may, on going through the impugned order dated 17.11.2021 passed by the Adjudicating Authority/NCLT, Division Bench II, Chennai in IA 255/IB/2021 in CP/1307/IB/2018, in directing a 'fresh valuation of the assets' of Corporate Debtor, including the 'Rayagada Property', as per Regulation 35(2) of the IBBI (Liquidation Process) Regulations, 2016 and consequently, to update the 'Asset Memorandum' and thereafter, to invite the 'Schemes', from the 'Prospective Scheme Proponents', as per Section 230 of the Companies Act, 2013, are free from any legal flaws. Resultantly the instant 'Appeal' sans merits.
Company Appeal (AT) (CH) (Ins) No.302/2021 126 DISPOSITION
157. In fine, the instant Company Appeal (AT)(CH)(Ins No.302/2021 is dismissed. No costs. The earlier Interim Order, if any, granted by this Tribunal shall stand vacated. The connected pending applications, if any, are closed.
[Justice M. Venugopal] Member (Judicial) [Shreesha Merla] Member (Technical) Date :16.01.2024 Place : New Delhi ss/bm Company Appeal (AT) (CH) (Ins) No.302/2021 127