Tribunal orders independent valuation of Corporate Debtor assets amidst undervaluation concerns

The Tribunal allowed the Miscellaneous Application, directing the appointment of an independent valuer for a fresh valuation of the Corporate Debtor (CD). Concerns were raised about undervaluation of assets and potential collusion. However, there was a split judgment, with one member supporting the fresh valuation while the other emphasized adherence to the Insolvency and Bankruptcy Code process and the CoC's commercial wisdom, dismissing the need for a new valuation.

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Issues Involved:
1. Challenge to the Resolution Plan and Addendum Resolution Plan.
2. Alleged undervaluation of tangible and intangible assets during the CIRP process.
3. Discrepancy in the treatment of financial and operational creditors.
4. Request for appointment of new valuers for fresh valuation.
5. Allegations of collusion and fraud in the CIRP process.
6. Request for inter se bidding between resolution applicants.

Comprehensive, Issue-Wise Detailed Analysis:

1. Challenge to the Resolution Plan and Addendum Resolution Plan:
The Applicant, a dissenting financial creditor with 7.69% voting shares in the Committee of Creditors (CoC), challenged the Resolution Plan dated 21.12.2018 and the Addendum Resolution Plan dated 27.12.2018. The Applicant argued that the plans failed to maximize the assets of the Corporate Debtor (CD), thus not balancing the interests of all stakeholders and not aligning with the objectives of the Insolvency and Bankruptcy Code (IBC). The Applicant also highlighted that out of a total claim of Rs. 1073 Crores, they were only receiving Rs. 111 Crores, attributing this to the failure of valuers to properly assess the CD's assets.

2. Alleged Undervaluation of Tangible and Intangible Assets During the CIRP Process:
The Applicant pointed out significant discrepancies in asset valuations, particularly noting that intangible assets valued at Rs. 241.63 Crores (Gross Block) and Rs. 205.65 Crores (Net Block) as of 31.03.2018 were assigned a value of zero in the CIRP valuations. Additionally, there was a substantial undervaluation of tangible assets, with a difference of over Rs. 200 Crores compared to the audited balance sheets.

3. Discrepancy in the Treatment of Financial and Operational Creditors:
The Applicant argued that the Resolution Plans discriminated against operational creditors, who were offered only Rs. 6 Crores against an admitted claim of Rs. 99.64 Crores. In contrast, financial creditors received a more favorable treatment. The Applicant cited landmark judgments such as Binani Industries Ltd (NCLAT) and Bharat Defence & Infrastructure Ltd (NCLT, Mumbai) to support their claim of unfair differentiation.

4. Request for Appointment of New Valuers for Fresh Valuation:
The Applicant sought the appointment of two new valuers with extensive knowledge and expertise in valuing pharmaceutical companies to reassess the tangible and intangible assets of the CD. The Tribunal, after hearing the arguments, acknowledged the merit in the Applicant's objections, highlighting the undervaluation of significant assets like the 'Balva' and 'Vapi' units. The Tribunal directed the appointment of an independent valuer for a fresh valuation of the CD.

5. Allegations of Collusion and Fraud in the CIRP Process:
The Tribunal noted the Applicant's allegations of possible collusion and fraud among the supporters of the Resolution Plan, other CoC members, and the Resolution Professional. The Tribunal emphasized the need for a fresh valuation to ensure fairness and transparency, rejecting the Resolution Professional's arguments and expressing concerns about the conduct of the CIRP process.

6. Request for Inter Se Bidding Between Resolution Applicants:
The Applicant proposed inter se bidding between the ARCIL Consortium and the Omkara Consortium if the successful Resolution Applicant failed to improve their offer. However, the Tribunal did not address this request directly, focusing instead on the need for a fresh valuation.

Separate Judgments Delivered by the Judges:

Judgment by Bhaskara Pantula Mohan, Member (J):
The Tribunal allowed the Miscellaneous Application, directing the appointment of an independent valuer for a fresh valuation of the CD. The Tribunal expressed concerns about the undervaluation of assets and potential collusion, emphasizing the need for an accurate and fair assessment before making a final decision.

Judgment by V. Nallasenapathy, Member (T):
V. Nallasenapathy, Member (T), respectfully disagreed with the decision to appoint an independent valuer for fresh valuation. He highlighted the procedural adherence to the IBC and the commercial wisdom of the CoC, emphasizing that the CIRP process should not be restarted based on the dissenting financial creditor's objections. He dismissed MA 1406 of 2019, stating that no fresh valuation was required.

Conclusion:
The Tribunal's decision reflects a split judgment, with one member allowing the appointment of an independent valuer for fresh valuation, while the other member dismissed the application, emphasizing adherence to the IBC process and the commercial wisdom of the CoC.

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