2019 (8) TMI 877 - AT - Insolvency and Bankruptcy

Appeals disposed with directions for liquidation. Tribunal allows application under Companies Act for investigation.

The appeals were disposed of with directions for the Adjudicating Authority to pass an appropriate order of liquidation. The Tribunal set aside the ... Approval of Revised Resolution Plan - revised plan has not been approved by the ‘Committee of Creditors’ - whether a case has been made out to exclude any period for the purpose of counting 270 days of the ‘Corporate Insolvency Resolution Process’? - HELD THAT:- In absence of any extraordinary situation and the fact that more than 270 days have already been passed, we find no ground to exclude any period. Further, once a plan is approved by the Adjudicating Authority under Section 31, if it is not implemented, that cannot be a ground to exclude any period - If a plan is approved under Section 31 within 180 days or much before completion of 270 days, one may request the Adjudicating Authority to allow the ‘Committee of Creditors’ to consider the other ‘Resolution Plans’, if the ‘Resolution Applicant’ is not ineligible and such plans were not rejected on merit but were not approved because best of the plan was approved by the ‘Committee of Creditors’. However, we are not inclined to decide such issue in view of the provisions of Section 33(3) and mandate under Section 12 of the ‘I&B Code’. In the present case, it is argued that none of the persons’ interests are prejudicially affected because of contravention, made any application to the Adjudicating Authority for liquidation order under sub-section (3) of Section 33, therefore, according to the counsel for the ‘Committee of Creditors’ and the ‘Resolution Professional’, no order could have been passed under Section 33(3) of the ‘I&B Code’ - in case where the ‘Resolution Plan’ earlier approved within a reasonable period of 180 days or much before completion of 270 days, one may request the Adjudicating Authority to allow the ‘Resolution Professional’/ ‘Committee of Creditors’ to consider the pending ‘Resolution Plan (s)’ or to call for fresh ‘Resolution Plan’/ ‘Revised Resolution Plan’, in absence of any application under Section 33(3) filed by any person whose interest is prejudicially affected by contravention of the plan by the ‘Corporate Debtor’. In the present case, more than 270 days have been completed much earlier and no case is made out to exclude any period, we hold that the Adjudicating Authority has no other option but to pass order of liquidation. The ‘I&B Code’ is silent on the issue as to whether the Adjudicating Authority has any jurisdiction to pass any order referring the matter to the Central Government or the Insolvency and Bankruptcy Board of India for action under Section 74(3) of the ‘I&B Code’ or under any of the provisions ‘for punishment’ as prescribed under Chapter VII of Part II of the ‘I&B Code’ - From sub-section (2) of Section 236, it is clear that no Special Court can take cognizance of any offence punishable under the ‘I&B Code’, including punishment prescribed under Section 74(3) of Chapter VII of Part II, save on a compliant made by the Insolvency and Bankruptcy Board of India or the Central Government or any person authorised by the Central Government in this behalf. It is the Adjudicating Authority who is required to refer such matter to the Insolvency and Bankruptcy Board of India or the Central Government to take up the matter to the Special Court if on investigation, if any case of offence under Chapter VII, including Section 74(3) is made out - we are not inclined to give any direction as was sought for by the ‘Committee of Creditors’ nor inclined to exclude any period calling for fresh ‘Resolution Plan’. More than 270 days having passed, the Adjudicating Authority will pass appropriate order of liquidation, which will be in accordance with law. The impugned order dated 13th February, 2019 so far it relates to grant of liberty to the ‘Resolution Professional’ and the ‘Committee of Creditors’ to move before the Insolvency and Bankruptcy Board of India or the Central Government is set aside - Appeal disposed off. Issues Involved:1. Initiation and approval of the Corporate Insolvency Resolution Process (CIRP).2. Withdrawal and non-implementation of the Resolution Plan by Liberty House Group.3. Alleged discrepancies and misrepresentations in the Information Memorandum and Valuation Reports.4. Application for exclusion of the period for CIRP.5. Liquidation process and adherence to the timeline.6. Jurisdiction and procedural aspects for referring matters to the Insolvency and Bankruptcy Board of India (IBBI) or Central Government for action under Section 74(3) of the I&B Code.Detailed Analysis:1. Initiation and Approval of CIRP:The Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor was initiated on 24th July 2017 under Section 7 of the Insolvency and Bankruptcy Code (I&B Code) 2016. The Resolution Professional invited prospective Resolution Applicants to submit a Resolution Plan by 31st August 2017. The Committee of Creditors (CoC) approved the revised plan of Liberty House Group Pte Ltd. on 2nd April 2018 with a majority voting share of 94.20%. The Adjudicating Authority (National Company Law Tribunal, Chandigarh Bench) approved the Resolution Plan on 25th July 2018.2. Withdrawal and Non-Implementation of the Resolution Plan:Despite repeated reminders, Liberty House Group Pte Ltd. failed to furnish the performance guarantee and open an escrow account as per the terms of the Resolution Plan. Liberty House sought to delete material conditions under the Process Note, which was rejected by the CoC. Consequently, the CoC invoked the Bid Bond Guarantee of Rs. 50 Crores, which was rejected by Barclays Bank due to non-compliance with the prescribed format. Liberty House filed a suit for injunction before the Delhi High Court, seeking to prevent the encashment of the Bid Bond Guarantee.3. Alleged Discrepancies and Misrepresentations:Liberty House Group claimed that they discovered discrepancies in the condition of machineries, valuations, and representations made in the Information Memorandum and Valuation Reports. They alleged that the financial statements of the Corporate Debtor were unaudited and standalone, and the investment was overvalued in the Liquidation Reports. Liberty House contended that the projected capacity of the plants was not achievable based on the actual estimations, which were significantly lower.4. Application for Exclusion of the Period for CIRP:The CoC and Financial Creditors sought exclusion of the period for counting the total period of 270 days of CIRP. The Adjudicating Authority held that there is no scope for granting an extension beyond 270 days under any circumstances. The Tribunal emphasized that the process should not be restarted as it would defeat the binding timelines provided under the I&B Code.5. Liquidation Process and Adherence to the Timeline:The Tribunal noted that more than 270 days had already passed, and there was no ground to exclude any period. It was held that once a plan is approved under Section 31, if it is not implemented, that cannot be a ground to exclude any period. The Tribunal directed that the Adjudicating Authority has no other option but to pass an order of liquidation.6. Jurisdiction and Procedural Aspects:The Tribunal observed that the I&B Code is silent on whether the Adjudicating Authority has jurisdiction to refer matters to the IBBI or Central Government for action under Section 74(3). It was clarified that the Adjudicating Authority must follow the principles of natural justice and provide an opportunity of hearing before referring the matter. The Tribunal held that the Adjudicating Authority should refer the matter to IBBI or Central Government if it is satisfied that there are circumstances suggesting fraudulent conduct.Conclusion:The appeals were disposed of with directions for the Adjudicating Authority to pass an appropriate order of liquidation. The Tribunal set aside the impugned order granting liberty to the Resolution Professional and CoC to move before IBBI or Central Government. However, liberty was given to move an application under Section 213 of the Companies Act, 2013, read with Section 74(3) of the I&B Code, before the Adjudicating Authority to decide on referring the matter for investigation and possible action.