2018 (2) TMI 1222 - Tri - Insolvency and Bankruptcy

Tribunal upholds Committee of Creditors' decision to reject Resolution Plan due to non-compliance.

Vivek Vijay Gupta Versus Steel Konnect (India) Pvt. Ltd., M/s. Steel Konnect India Pvt. Ltd., M/s. Hero Fincorp Limited, Shri R.D. Chaudhary, Rare Asst Reconstruction Company, Bank of India And State Bank of India

The Tribunal dismissed the application, stating it lacks authority to interfere with the Committee of Creditors' decision to reject the Resolution Plan. ... Corporate Insolvency Resolution Process - Duties of resolution professional - non-compliance of the requirements of the Code - Held that:- Non-issuance of the notice of the Meeting of the COC held on 4.1.2018 to the Resolution Applicant in this case is not fatal which requires interference of this Adjudicating Authority with the decision of the COC. Here, the COC rejected the Resolution Plan not on the ground that it is not a viable Resolution Plan, but on the ground that it is not in conformity with the requirements of the Code. On the ground that the Resolution Plan is not rejected by the Resolution Professional on the basis that it does not confirm to the requirements of the Code and Regulations, it cannot be concluded that the Resolution Plan is in accordance with the requirements. When the information is there before the COC regarding the non-compliance of the requirements of the Code and Regulations, Committee of Creditors is perfectly justified in rejecting the Resolution Plan. Therefore, there are no facts and circumstances that warrant interference by this Adjudicating Authority in the rejection of the Resolution Plan dated 3.1.2018 submitted by the Resolution Applicant, even assuming that this Adjudicating Authority has got jurisdiction to decide the validity or otherwise of the rejection of the Resolution Plan submitted by the Resolution Applicant. Application dismissed. Issues Involved1. Direction for the Committee of Creditors (COC) to consider the Resolution Plan.2. Authority of the Adjudicating Authority to quash the COC's decision.3. Compliance with Insolvency and Bankruptcy Code (IBC) and related regulations.4. Validity of the COC's rejection of the Resolution Plan.5. Procedural fairness regarding the notice of COC meetings.Detailed Analysis1. Direction for the Committee of Creditors (COC) to consider the Resolution PlanThe Promoter/Director of the Corporate Debtor filed an application seeking a direction for the Respondents to ensure that the COC meeting is held and the Resolution Plan submitted by Respondent No.4/ARC is considered. The COC had previously rejected the Resolution Plan submitted by Respondent No.4/ARC on 4.1.2018. The Promoter/Director requested the Tribunal to quash the minutes of the COC meeting and take the Resolution Plan on record.2. Authority of the Adjudicating Authority to quash the COC's decisionThe Tribunal examined whether it has the authority to overturn the COC's decision. It was noted that there is no express provision in the Insolvency and Bankruptcy Code, 2016 that allows the Adjudicating Authority to sit over the judgment of the COC in rejecting a Resolution Plan. Section 31(1) of the Code permits the Adjudicating Authority to approve a Resolution Plan approved by the COC, and Section 31(2) allows it to reject a Resolution Plan if it does not conform to the requirements of Section 30(2). However, the Code does not provide the authority to the Adjudicating Authority to accept a Resolution Plan that the COC has rejected.3. Compliance with Insolvency and Bankruptcy Code (IBC) and related regulationsThe Promoter/Director argued that the Resolution Professional had placed the Resolution Plan before the COC, indicating it met the requirements of Section 30(2) and Regulation 37. However, the COC rejected the Plan without providing specific reasons. The Tribunal noted that the Resolution Professional had informed the COC that the Resolution Plan did not meet the criteria specified in the IBC, 2016. The Resolution Plan was submitted without obtaining the Information Memorandum and signing a Non-disclosure Agreement (NDA), which was a procedural lapse.4. Validity of the COC's rejection of the Resolution PlanThe Tribunal observed that the Resolution Plan was filed on 3.1.2018, just before the COC meeting on 4.1.2018. The Resolution Professional had obtained a legal opinion and informed the COC that the Plan did not conform to the mandatory criteria. The Tribunal found that the COC was justified in rejecting the Plan based on the Resolution Professional's assessment and the lack of compliance with the Code and Regulations. The Tribunal concluded that it does not have the jurisdiction to interfere with the COC's business decision to reject the Resolution Plan.5. Procedural fairness regarding the notice of COC meetingsThe Promoter/Director contended that the Resolution Applicant was not given notice of the COC meeting. The Tribunal acknowledged that while Section 30(5) of the Code allows the Resolution Applicant to attend the COC meeting, it does not obligate the Resolution Professional to inform the Applicant of the meeting date. However, the Tribunal noted that the short time gap between the submission of the Resolution Plan and the COC meeting might have contributed to the lack of notice. Despite this, the Tribunal held that the non-issuance of the notice was not fatal to the COC's decision, as the Plan was rejected based on non-compliance with the Code.ConclusionThe Tribunal dismissed the application, stating that it lacks the authority to interfere with the COC's decision to reject the Resolution Plan. The COC's rejection was found to be justified based on the Resolution Professional's assessment and the Plan's non-compliance with the IBC and related regulations. The application was dismissed with no order as to costs.