2019 (8) TMI 1875 - AT - Insolvency and Bankruptcy

NCLAT criticizes resolution process, underscores compliance, orders new valuation.

Ilam Chand Kamboj Versus M/s ANG Industries Ltd.

The National Company Law Appellate Tribunal ruled against the Resolution Professional in an appeal concerning non-compliance with Adjudicating Authority's ... Initiation of proceeding by Insolvency and Bankruptcy Board of India (IBBI) - HELD THAT:- Normally, the Adjudicating Authority is not supposed to pass any adverse observations, even prima facie, against the ‘Resolution Professional’, without giving an opportunity to the ‘Resolution Professional’ as to why in view of certain Act, the matter be not referred to ‘IBBI’ - the matter has been taken cognizance by the IBBI which has initiated the proceedings against the Appellant – ‘Resolution Professional’, no opinion expressed on the merit of the observations. However, the ‘IBBI’ cannot treat observations as made by the Adjudicating Authority, as referred to above, as final decision against the Appellant, as the observation made, without granting any opportunity to the Appellant. Therefore, the ‘IBBI’ will hear the proceedings and decide on merit after hearing the ‘Resolution Professional’ and taking into consideration reply as may be submitted by the Appellant, uninfluenced by the observations made by the Adjudicating Authority. Appeal disposed off. Issues:1. Compliance with directions of the Adjudicating Authority2. Submission of resolution plan by a consortium of resolution applicants3. Valuation of assets of the Corporate Debtor4. Approval for private sale of assets5. Proper filing of details of complete voting6. Actions of the Resolution Professional and appointment of Liquidator7. Proceedings initiated by the Insolvency and Bankruptcy Board of India (IBBI)Compliance with directions of the Adjudicating Authority:The appeal was filed by the Resolution Professional against certain observations made by the Adjudicating Authority regarding non-compliance with directions. The Adjudicating Authority noted that the Resolution Professional did not comply with specific directions, including the submission of a fresh valuation report by an IBBI-approved valuer. The court did not find merit in the argument that the Committee of Creditors (COC) could not afford another valuation, disagreeing with the Resolution Professional.Submission of resolution plan by a consortium of resolution applicants:The Adjudicating Authority highlighted that the resolution plan was submitted by five different entities without a formal agreement or consortium formation document, which did not align with the definition under the Insolvency and Bankruptcy Code. The lack of individual or joint submission by resolution applicants raised concerns regarding the plan's compliance with legal provisions.Valuation of assets of the Corporate Debtor:The court determined that the assets of the Corporate Debtor were not properly valued and required an independent valuation. The Resolution Professional was criticized for not submitting a resolution plan in compliance with the Code and avoiding orders for independent asset valuation. The recommendation to appoint the current Resolution Professional as a liquidator was not approved, and the matter was referred to the IBBI for further action, including appointing a new Liquidator for fresh asset valuation.Approval for private sale of assets:Concerns were raised regarding the private sale of assets, specifically the lack of details and formal voting approval from certain creditors. The court emphasized the need for transparency and proper documentation in the process of approving private sales of the Corporate Debtor's assets.Proper filing of details of complete voting:The court noted discrepancies in the filing of complete voting details, particularly regarding the approval for private sales. The absence of formal voting communication from some creditors and the lack of accompanying affidavits raised procedural concerns, highlighting the importance of accurate and complete documentation in insolvency proceedings.Actions of the Resolution Professional and appointment of Liquidator:The Resolution Professional's actions, including non-compliance with court orders and submission of relief prayers without clarity, were scrutinized. The court recommended IBBI to examine the Resolution Professional's actions and suggested appointing a new Liquidator for proper asset valuation and handling of creditor claims. The decision aimed to ensure compliance with legal requirements and enhance the resolution process's integrity.Proceedings initiated by the Insolvency and Bankruptcy Board of India (IBBI):The IBBI initiated proceedings against the Resolution Professional based on the Adjudicating Authority's observations. The court emphasized that IBBI should conduct a fair enquiry, independently from the previous observations, and decide on the merit of the case after hearing the Resolution Professional. The timeline for completing the enquiry was set at three months to expedite the resolution process.The judgment by the National Company Law Appellate Tribunal addressed various issues related to compliance, submission of resolution plans, asset valuation, private sales approval, Resolution Professional's actions, and IBBI proceedings. It emphasized the importance of adherence to legal provisions, transparency in processes, and the need for independent valuation to ensure the integrity of insolvency proceedings.