Tribunal Directs Scheme Revision to Protect Financial Creditors' Rights

In the Intervention Application (IA No.904/MB.IV/2020), the Tribunal directed that the Scheme would only apply to Operational Creditors, not Financial Creditors. The Respondent Company was instructed to revise the Scheme, ensuring it does not impact Financial Creditors, and objections would be considered at a later stage. The Applicant Bank's rights were safeguarded, and Financial Creditors were advised to independently assess any Resolution Plan. In the Recall of Order (IA No.1002/MB.IV/2020), the Tribunal restricted meetings to Operational Creditors, set a timeline for the meetings, appointed officials, and mandated compliance reporting.

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Issues Involved:
1. Intervention Application (IA No.904/MB.IV/2020)
2. Recall of Order (IA No.1002/MB.IV/2020)

Issue-wise Detailed Analysis:

1. Intervention Application (IA No.904/MB.IV/2020):

1.1 Background:
The Applicant Bank (ICICI Bank Limited) filed an application seeking to intervene in CA (CAA) No.401/MB.IV/2020 and to reject the said Company Application (CA).

1.2 Applicant Bank's Contentions:
(a) The Company Application did not conform to the statutory requirements of section 230(2)(a) and (c) as the proposed Scheme lacked consent from 75% of the Secured Creditors.
(b) The Creditors Responsibility Statement was not attached.
(c) No statement regarding safeguards for protection of other secured and unsecured creditors was included.
(d) The auditor's report on the company's fund requirements post-Corporate Debt Restructuring (CDR) was missing.
(e) The requisite statement on adopting the CDR guidelines specified by the RBI was absent.
(f) The valuation report by a registered valuer was not attached.
(g) The Scheme contemplated debt restructuring for financial creditors in addition to Operational Creditors.

1.3 Respondent Company's Defense:
(a) The Applicant Bank held less than five percent of the total debt, making the IA not maintainable under section 230 of the Companies Act, 2013.
(b) Objections should be considered at the final hearing for sanction of the Scheme, not at the Application Stage.
(c) The Applicant Bank was holding out against signing the Inter Creditor Agreement (ICA), while other financial creditors had signed.
(d) The Scheme had the requisite approval from 75% of the creditors as per the RBI Circular dated 07.06.2019.

1.4 Tribunal's Observations:
The Tribunal noted that the Scheme applied only to Operational Creditors and not to Financial Creditors. The Applicant Bank, being a Financial Creditor, was protected by a consent order from the Hon'ble Bombay High Court.

1.5 Resolution:
(a) The Scheme shall apply only to Operational Creditors and not to Financial Creditors.
(b) The Respondent Company shall revise the Scheme to remove any references affecting Financial Creditors and circulate the revised Scheme to all stakeholders for objections.
(c) The Applicant Bank's rights and interests shall remain unaffected by the Scheme.
(d) Objections to the Scheme will be considered at the final hearing.
(e) Financial Creditors shall consider any Resolution Plan under the RBI circular independently of the present Scheme.

1.6 Conclusion:
IA No.904/MB.IV/2020 was disposed of with the above directions.

2. Recall of Order (IA No.1002/MB.IV/2020):

2.1 Background:
The Applicant Bank sought recall of the order dated 12.06.2020, which allowed the Respondent Company to conduct meetings of its Operational Creditors.

2.2 Applicant Bank's Contentions:
(a) IA No.904/MB.IV/2020 was filed and served on the Respondent Company, but the Respondent Company failed to inform the Tribunal about the pending IA.
(b) The Respondent Company's Authorised Representative, Mr. Vijay Tiwari, did not inform the Tribunal about the pending IA despite being reminded via email.

2.3 Respondent Company's Defense:
Mr. Vijay Tiwari claimed he forgot about the intervention application and did not inform the Tribunal due to this oversight. He apologized for the inadvertent mistake.

2.4 Tribunal's Observations:
The Tribunal found the explanations unconvincing, noting that Mr. Tiwari had seen and replied to the email before the hearing. The Tribunal concluded that the actions amounted to obtaining orders behind the Applicant Bank's back, which could not be encouraged.

2.5 Resolution:
(a) The meetings shall be confined to Operational Creditors alone.
(b) The sixty-day time limit for conducting the meetings shall start from 27.07.2020.
(c) The Respondent Company must ensure the preservation of unedited raw footage of the meeting if conducted via videoconferencing.
(d) Mr. Avdhesh Bairwa was appointed as the Chairman for the meeting of Operational Creditors.
(e) Mr. Yogesh Choudhary was appointed as the Scrutiniser for the meeting.
(f) Notices for the meeting shall be published and sent to relevant authorities and hosted on the company's website.
(g) Compliance with the directions shall be reported to the Tribunal.

2.6 Conclusion:
IA No.1002/MB.IV/2020 was disposed of, with interim orders vacated and further directions provided for conducting the meetings of Operational Creditors.

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