Tribunal rejects Resolution Plan, orders liquidation under IBC Section 33.

The Tribunal quashed the impugned order and rejected the Resolution Plan approved by the Adjudicating Authority, directing the matter to be remitted back for liquidation under Section 33 of the IBC. Additionally, the Tribunal set aside the order allowing Financial Creditors to execute Tripartite Agreements on behalf of the Appellants, emphasizing that personal guarantees should be enforced through separate legal proceedings.

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Issues Involved:
1. Inclusion of personal properties of the Appellants in the Resolution Plan.
2. Compliance with CIRP Regulations and Information Memorandum.
3. Validity of the Resolution Plan approval by the Adjudicating Authority.
4. Legal proceedings against Personal Guarantors.
5. Commercial decision by the Committee of Creditors.
6. Validity of the Adjudicating Authority's directions for Tripartite Agreements.
7. Applicability of Part-III of the IBC.
8. Reliance on Supreme Court judgments.

Issue-wise Detailed Analysis:

1. Inclusion of Personal Properties in the Resolution Plan:
The Appellants argued that the Resolution Plan included provisions to transfer their personal properties, which were given as security for the Corporate Debtor's loan. They contended that personal properties of shareholders/directors cannot be part of the Resolution Plan under Regulation 37 of the CIRP Regulations. The Resolution Plan should only concern the Corporate Debtor's properties and cannot enforce actions against shareholders' or guarantors' properties without separate proceedings.

2. Compliance with CIRP Regulations and Information Memorandum:
The Appellants claimed that the Information Memorandum published by the Resolution Professional did not list their personal properties as assets of the Corporate Debtor. The valuation of the Corporate Debtor's assets was shown as Rs. 1,19,785 against an outstanding debt of Rs. 6,88,80,539, while the personal properties were valued at Rs. 11-12 Crores. The Resolution Professional did not get the personal properties valued during the CIRP, which was a procedural lapse.

3. Validity of the Resolution Plan Approval:
The Adjudicating Authority approved the Resolution Plan without addressing the Appellants' objections. The Appellants alleged collusion between the Resolution Professional and the Successful Resolution Applicant, as earlier Resolution Plans were withdrawn in favor of the latter. The Tribunal found that the Resolution Plan's approval included procedural irregularities and was in contravention of the law.

4. Legal Proceedings Against Personal Guarantors:
The Tribunal noted that at the time of the Resolution Plan's approval, Part-III of the IBC, which deals with personal guarantors, was not notified. Therefore, any action against personal guarantors should have been taken under existing laws like the SARFAESI Act, Indian Contract Act, or Recovery of Debts Due to Banks and Financial Institutions Act. The Tribunal emphasized that personal properties of guarantors cannot be transferred in the CIRP of the Corporate Debtor without appropriate legal proceedings.

5. Commercial Decision by the Committee of Creditors:
The Resolution Professional and Financial Creditors argued that the Adjudicating Authority had limited judicial review over the commercial decisions of the Committee of Creditors. However, the Tribunal found that the inclusion of personal properties in the Resolution Plan without proper valuation and legal proceedings was a material irregularity.

6. Validity of the Adjudicating Authority's Directions for Tripartite Agreements:
The Adjudicating Authority directed the Appellants to enter into Tripartite Agreements for transferring their properties to the Successful Resolution Applicant. The Tribunal found this direction to be an irregular exercise of power, as it bypassed the need for separate legal proceedings against personal guarantors.

7. Applicability of Part-III of the IBC:
Part-III of the IBC, which deals with personal guarantors, was notified after the approval of the Resolution Plan. The Tribunal held that the provisions of Part-III were not applicable at the time of the Resolution Plan's approval, and thus, the personal properties of guarantors could not be included without following the appropriate legal process.

8. Reliance on Supreme Court Judgments:
The Respondents relied on the Supreme Court judgment in "State Bank of India v. V. Ramakrishnan & Anr." to argue that personal guarantors' properties could be included in the Resolution Plan. However, the Tribunal clarified that the judgment did not support the inclusion of personal properties in the Resolution Plan without legal proceedings. The Tribunal also referred to the "Committee of Creditors of Essar Steel India Limited Through Authorised Signatory vs. Satish Kumar Gupta & Ors." judgment, emphasizing that personal guarantees should be enforced through separate legal proceedings.

Conclusion:
The Tribunal quashed the impugned order and rejected the Resolution Plan approved by the Adjudicating Authority. It directed the matter to be remitted back for liquidation under Section 33 of the IBC. The Tribunal also set aside the order in M.A. 919/2020, which allowed Financial Creditors to execute Tripartite Agreements on behalf of the Appellants. The Tribunal clarified that the Financial Creditors could take appropriate steps under the law to invoke and enforce personal guarantees given by the Appellants.

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