2020 (6) TMI 393 - AT - Insolvency and Bankruptcy

Appellate Tribunal affirms rejection of Resolution Plan for non-compliance, allows liquidation as going concern.

First Global Finance Pvt Ltd. Versus IVRCL Limited

The Appellate Tribunal upheld the NCLT Hyderabad Bench's decision, affirming the Committee of Creditors' rejection of the Resolution Plan due to ... Rejection of Resolution Plan - the reason for the dismissal of the Resolution Plan by the Committee of creditors were on account of Expression of Interest (EOI) deviation, and non-fulfillment of other eligibility criteria - HELD THAT:- The Appellant has strictly not complied with the terms and conditions of Expression of Interest (EOI) dated 14.08.2018 and non-submission of EMD along with submission of Resolution plan dated 4.10.2018 as required by the Bid Process Memorandum. They have also deviated on other parameters. And hence CoC after deliberation has rejected the plan and accordingly the Resolution Professional has communicated to the Resolution Applicant. Since, liquidation proceedings as a going concern is already on from July 2019 and there is always scope for Resolution Applicants to opt for Arrangements under Section 230-232 of the Companies Act, 2013, if they are eligible in accordance with provisions of Insolvency and Bankruptcy Code, 2016 along with relevant Rules. There is no merit in the case to consider the relief of setting aside the impugned order of NCLT, Hyderabad Bench - the order of NCLT Hyderabad Bench upheld. Issues Involved:1. Arbitrary rejection of the Resolution Plan by the Committee of Creditors (CoC).2. Compliance with the Expression of Interest (EOI) criteria.3. Submission and waiver of Earnest Money Deposit (EMD).4. Constitution of the Resolution Applicants.5. Commercial acceptability of the Resolution Plan.6. Liquidation proceedings and applicability of Section 230 of the Companies Act, 2013.Detailed Analysis:1. Arbitrary Rejection of the Resolution Plan by the Committee of Creditors (CoC):The Appellant contested the rejection of their Resolution Plan by the CoC, which was dismissed due to deviations in the EOI and non-fulfillment of eligibility criteria. The CoC's decision was based on the commercial wisdom of its members, which was upheld by the Adjudicating Authority.2. Compliance with the Expression of Interest (EOI) Criteria:The Appellant argued that their consortium met the eligibility criteria, including turnover and net worth requirements, as certified by a Chartered Accountant. However, the CoC found deviations in the EOI process, including the reconstitution of the consortium, which was against the EOI provisions.3. Submission and Waiver of Earnest Money Deposit (EMD):The Appellant requested a waiver for the EMD, which was initially not accepted by the CoC. Despite eventually depositing the EMD in parts, the CoC cited non-compliance with the EOI requirements as a reason for rejecting the Resolution Plan. The Appellant argued that the CoC's acceptance of the EMD deposit extension implied a waiver, but this was not upheld.4. Constitution of the Resolution Applicants:The Appellant's consortium included Phoenix ARC as a financial sponsor rather than a Resolution Applicant, which led to objections from the CoC. The Appellant proposed alternative consortium members to meet eligibility criteria, but these proposals were not accepted by the CoC.5. Commercial Acceptability of the Resolution Plan:The CoC found the Resolution Plan commercially unacceptable despite multiple requests for improvement. The Appellant's inability to enhance the commercial and technical aspects of the plan led to its rejection. The CoC's decision was based on business and commercial considerations, supported by Supreme Court judgments emphasizing the CoC's commercial wisdom.6. Liquidation Proceedings and Applicability of Section 230 of the Companies Act, 2013:The liquidation proceedings were initiated as a going concern, with the possibility of arrangements under Section 230-232 of the Companies Act, 2013, if the applicants met the eligibility criteria under the Insolvency and Bankruptcy Code, 2016. The Appellant's relief for setting aside the NCLT order was denied, and the liquidation process continued.Conclusion:The Appellate Tribunal upheld the NCLT Hyderabad Bench's order, finding no merit in the Appellant's case. The CoC's rejection of the Resolution Plan was based on non-compliance with EOI criteria, EMD submission issues, and commercial unacceptability. The liquidation proceedings as a going concern were deemed appropriate, with potential arrangements under Section 230-232 of the Companies Act, 2013, if eligibility criteria were met. No order as to costs was made.