2019 (1) TMI 523 - Tri - Insolvency and Bankruptcy

Tribunal orders CoC to review resolution plan, stresses transparency & applicant's rights.

Nitrex Chemicals India Ltd. Versus Ravindra Beleyur

The tribunal allowed the applicant's request and directed the Committee of Creditors (CoC) to reconsider the resolution plan within two weeks, emphasizing ... Rejection of resolution plan of Acme Chem Ltd. Approved by the committee of creditors - Resolution Applicant has submitted that it is evident from the minutes of the meeting held on 12.09.2018 that the said request of applicant was not placed before CoC for consideration and the Resolution Professional was keen to proceed in the absence of the applicant for obvious reasons - principles of natural justice - Held that:- At is worth to be noted that the Resolution Applicant had expressed his inability to attend the CoC's meeting scheduled on 12.09.2018 due to religious constrains and requested the RP to fix any other date after 14.09.2018 for meeting of the CoC. However, the Resolution Professional refused to re-schedule the meeting. Therefore, a reasonable opportunity of being heard is not given to the applicant and the same is in violation of the principle of natural justice. As per Section 30 (5) of the I&B Code, 2016, the resolution applicant is entitled to attend the meeting of the CoC in which the resolution plan of the applicant is to be considered. It is clear that though the resolution applicant has no voting right in the CoC; and it is the CoC to approve or reject the resolution plan, an opportunity ought to have been provided to the resolution applicant to attend the meeting of the CoC in which the Resolution Plan is to be considered, to make his representation and to express his view point on the Resolution Plan submitted to the CoC. The application of the Resolution Applicant is allowed - the CoC is directed to consider the plan afresh submitted by the Applicant by providing it reasonable opportunity of being heard within two weeks from the date of passing this order and RP is directed to file status report within two working days thereafter. Issues Involved:1. Rejection of the resolution plan of Acme Chem Ltd.2. Revision of the Resolution Professional's report.3. Conducting open competitive bidding.4. Violation of the principle of natural justice.5. Allegations of favoritism and non-transparency.6. Consideration of the viability and feasibility of the resolution plan.7. Compliance with statutory provisions and regulations.Issue-wise Detailed Analysis:1. Rejection of the resolution plan of Acme Chem Ltd.:The applicant requested the tribunal to reject the resolution plan of Acme Chem Ltd., which was approved by the Committee of Creditors (CoC) on 12.09.2018. The applicant argued that the plan was approved without considering the full and true facts and figures, and alleged that the process was not transparent.2. Revision of the Resolution Professional's report:The applicant sought a directive for the Resolution Professional (RP) to revise his report, taking into account the applicant's resolution plan and resubmitting it to the CoC for further consideration. The applicant contended that the RP did not fully disclose the applicant's offer, including additional financial benefits to creditors.3. Conducting open competitive bidding:The applicant requested the tribunal to direct the RP to conduct open competitive bidding to ensure transparency and maximization of the value of assets for the benefit of all creditors.4. Violation of the principle of natural justice:The applicant argued that the RP and CoC violated the principle of natural justice by not granting the applicant an opportunity to be heard. The applicant cited the NCLT Kolkata's order in Binani Cement Ltd. v. Mr. Vijaykumar V Iyer and the NCLAT's decision in Rajputana Properties (P.) Ltd. v. Ultratech Cement Ltd., emphasizing that the resolution applicant should be allowed to participate in the CoC meeting where their resolution plan is considered.5. Allegations of favoritism and non-transparency:The applicant alleged that the RP favored Acme Chem Ltd. by reducing the eligibility threshold for resolution applicants and not disclosing the applicant's additional financial offers to the CoC. The applicant contended that Acme Chem Ltd. did not meet the revised eligibility criteria and that the RP's actions were biased.6. Consideration of the viability and feasibility of the resolution plan:The applicant argued that the CoC did not record its satisfaction with the viability and feasibility of Acme Chem Ltd.'s resolution plan, as required under Section 30(4) of the Insolvency and Bankruptcy Code (IBC), 2016. The applicant contended that the CoC's decision lacked reasoning and was liable to be declared null and void.7. Compliance with statutory provisions and regulations:The applicant contended that the RP did not comply with Regulation 39(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which requires the RP to submit all resolution plans that meet the requirements of the Code and regulations. The applicant argued that the entire procedure adopted in ranking the resolution applicants was vitiated and discriminatory.Tribunal's Decision:The tribunal noted that the applicant was not given a reasonable opportunity to attend the CoC meeting on 12.09.2018 due to religious constraints, which violated the principle of natural justice. The tribunal emphasized that under Section 30(5) of the IBC, 2016, the resolution applicant is entitled to attend the CoC meeting where their resolution plan is considered. The tribunal relied on the NCLAT's judgment in ANG Industries Ltd. v. Shah Brothers Ispat Pvt. Ltd. and observed that the CoC should follow a transparent procedure and allow resolution applicants to express their views.The tribunal allowed the applicant's request and directed the CoC to reconsider the applicant's resolution plan by providing a reasonable opportunity of being heard within two weeks. The RP was instructed to file a status report within two working days thereafter. The application was disposed of accordingly.Conclusion:The tribunal found that the applicant was not given a fair opportunity to present their case, which violated the principle of natural justice. The CoC was directed to reconsider the applicant's resolution plan with due consideration and transparency, ensuring compliance with statutory provisions and regulations.