2018 (7) TMI 1961 - AT - Companies Law

Expert bodies empowered in determining Resolution Applicants' eligibility criteria; Adjudicating Authority's limited interference jurisdiction clarified.

Kannan Tiruvengandam Versus M.K. Shah Exports Ltd. & Ors.

Kannan Tiruvengandam Versus M.K. Shah Exports Ltd. & Ors. - TMI Issues:1. Eligibility criteria regarding minimum tangible net worth for Resolution Applicants.2. Authority of the Adjudicating Authority in deciding eligibility criteria.3. Jurisdiction of expert bodies like Committee of Creditors in determining eligibility criteria.4. Withdrawal of a Resolution Applicant during the process.5. Directions for completing the Corporate Insolvency Resolution Process.Issue 1: Eligibility criteria regarding minimum tangible net worth for Resolution Applicants:The Corporate Insolvency Resolution Process was initiated against a company, and Resolution Plans were received by the Appellant-Resolution Professional. An application was filed to relax the eligibility criteria regarding the minimum tangible net worth requirement for Category-A prospective Resolution Applicants. The Resolution Professional opposed this application as the criteria were already approved by the Committee of Creditors.Issue 2: Authority of the Adjudicating Authority in deciding eligibility criteria:The Adjudicating Authority referred to an advertisement and observed that the Resolution Professional had left avenues for modification of terms and conditions. However, it was noted that the determination of minimum tangible net worth for Resolution Applicants is within the domain of expert bodies like the Committee of Creditors, and not the Adjudicating Authority.Issue 3: Jurisdiction of expert bodies like Committee of Creditors in determining eligibility criteria:The Tribunal held that the decision on eligibility criteria, including the requirement of minimum tangible net worth, is best left to expert bodies like the Committee of Creditors. The Adjudicating Authority was deemed to have no jurisdiction to sit in appeal over such decisions unless they are shown to be perverse or against the provisions of the Insolvency and Bankruptcy Code or existing law.Issue 4: Withdrawal of a Resolution Applicant during the process:Following a stay order by the Appellate Tribunal, it was informed that the Resolution Professional received four resolution plans not considered by the Committee of Creditors. The Resolution Applicant who filed the application for relaxation of eligibility criteria withdrew from the contest.Issue 5: Directions for completing the Corporate Insolvency Resolution Process:The impugned order was set aside, and the Resolution Professional and the Committee of Creditors were directed to complete the process immediately. The best Resolution Plan meeting the criteria was to be considered by the Committee of Creditors, with the Resolution Professional then placing it before the Adjudicating Authority for approval under Section 31. It was emphasized that all steps should be taken to ensure the successful completion of the Resolution Process within the prescribed period.The judgment highlights the importance of expert bodies like the Committee of Creditors in determining eligibility criteria for Resolution Applicants and emphasizes the limited jurisdiction of the Adjudicating Authority in such matters. It provides clarity on the process to be followed for approving Resolution Plans and underlines the need for adherence to the provisions of the Insolvency and Bankruptcy Code for a successful resolution process.