2020 (6) TMI 650 - AT - Insolvency and Bankruptcy

Tribunal Upholds COC Decision Rejecting Resolution Plan, Appellant Found Ineligible under Section 29A

The Tribunal upheld the decision of the Committee of Creditors (COC) to reject the Resolution Plan submitted by the appellant due to its terms and the ... Rejection of Resolution Plan - CIRP process - time limitation - HELD THAT:- The appellant has also admitted that the innova car owned by the corporate debtor was purchased by the appellant and the appellant is also using the brand name 'Double Bull Basmati' which the brand name of the corporate debtor. This also establishes that the appellant is related party and is not eligible as per section 29A of the Insolvency & Bankruptcy Code, 2016. The Resolution Plan has been duly considered by the Committee of Creditors. In their commercial wisdom, COC have decided not to accept the Resolution Plan with conditions contained therein. Also, the process cannot be kept pending endlessly that revision of a plan after plan may be considered by the Committee of Creditors without considering the mandatory period within which the insolvency resolution is completed as per the provisions of Insolvency & Bankruptcy Code. Even though the suspended Board of Directors has a right to attend the meeting and may offer any suggestion but they cannot force their decision on their terms to Committee of Creditors especially when the suspended Board of Directors has no right to vote on the Resolution Plan. Impugned order upheld - appeal dismissed. Issues Involved:1. Rejection of Resolution Plan by the Committee of Creditors (COC).2. Eligibility of the Resolution Applicant under Section 29A of the Insolvency & Bankruptcy Code (IBC), 2016.3. Alleged non-invitation to the COC meeting.4. Alleged related party transactions between the Resolution Applicant and Corporate Debtor.5. Request for exclusion of time period from the Corporate Insolvency Resolution Process (CIRP).Issue-wise Detailed Analysis:1. Rejection of Resolution Plan by the Committee of Creditors:The appellant sought to set aside the orders dated 1-11-2018 and 30-11-2018 passed by the Adjudicating Authority, which rejected the resolution plan submitted by the appellant. The COC, in its commercial wisdom, decided not to accept the Resolution Plan due to its terms, particularly the inclusion of properties of the corporate debtor and guarantors, and the discharge of individual guarantees. The Tribunal upheld the COC's decision, noting that the process cannot be kept pending endlessly and emphasizing the mandatory period for completing the insolvency resolution process.2. Eligibility of the Resolution Applicant under Section 29A of IBC:The Resolution Professional argued that the appellant was ineligible under Section 29A of the IBC due to its connections with the suspended director of the Corporate Debtor, Mr. Vikramjit Singh, who operated the appellant's bank accounts as an authorized signatory. The Tribunal found that the appellant was a related party to the suspended director and thus ineligible to submit a resolution plan. The Tribunal also noted the appellant's admission of transactions with the Corporate Debtor, including the purchase of an Innova car and the use of the brand name 'Double Bull Basmati,' further establishing the appellant as a related party.3. Alleged Non-invitation to the COC Meeting:The appellant claimed it was never invited to attend the COC meeting where its Resolution Plan was considered, allegedly violating Section 30(5) of the IBC. However, the Tribunal noted that the suspended director, Mr. Vikramjit Singh, attended the 7th COC meeting, and since he was an authorized signatory for the appellant, the appellant was aware of the proceedings. Thus, the Tribunal dismissed the appellant's claim of non-invitation.4. Alleged Related Party Transactions:The Resolution Professional and the Financial Creditor highlighted several transactions between the appellant and the Corporate Debtor, including the transfer of assets, sales of goods, and rental income. The Tribunal found these transactions indicative of a related party relationship, further supporting the appellant's ineligibility under Section 29A of the IBC. The Tribunal also noted the appellant's vested interest in bailing out the guarantors of the Corporate Debtor, as evidenced by the terms of the Resolution Plan seeking the release of personal guarantees and collateral securities.5. Request for Exclusion of Time Period from CIRP:The appellant sought to exclude the time period during which the dispute was pending before the Adjudicating Authority and the Appellate Tribunal from the total time period of the CIRP. However, the Tribunal did not find merit in this request, emphasizing the need to adhere to the statutory period for completing the insolvency resolution process.Conclusion:The Tribunal upheld the impugned orders, finding no merit to interfere with the COC's decision to reject the Resolution Plan. The appellant was deemed ineligible under Section 29A of the IBC due to its related party status with the suspended director of the Corporate Debtor. The Tribunal also dismissed the appellant's claims of non-invitation to the COC meeting and found no grounds to exclude the time period from the CIRP. The appeal was dismissed with no order as to costs.