2021 (11) TMI 952 - AT - Insolvency and Bankruptcy

Tribunal upholds rejection of EOI, approves liquidation. CoC's decision confirmed.

Innovative Construventures Private Ltd, Innovative Agro Estates Private Ltd Versus Brainer Trade and Fin-Tech Private Ltd, Pune People's Co-Opposite Party Bank Ltd, Jamaseva Sahkari Bank Ltd

The Tribunal upheld the Committee of Creditors' decision to reject the Expression of Interest (EOI) and proceed with liquidation, finding that the ... Seeking direction against the Resolution Professional to receive the Resolution Plan they proposed to submit and to place the same before the Committee of Creditors for their consideration under Section 30 of I&B Code - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The explanation attached to Sub-section (2), of Section 33, of the Insolvency and Bankruptcy Code, empowers the Committee of Creditors to decide to liquidate the Corporate Debtor, any time after its constitution under sub-section (1) of Section 21 and before the confirmation of Resolution Plan, including at any time before the preparation of the Information Memorandum - it cannot be said that the Committee of Creditors has taken steps in haste and was premature, as there was still a possibility for the Resolution of the Corporate Debtor. The learned Counsel for the Appellant argued that the Corporate Insolvency Resolution Process of the Corporate Debtor commenced on 25 July 2080. Thus, the initial 180 days set out under Section 12 of the IBC expired on 24 January 2019. However, even when the CIRP period was not close to over, the Committee of Creditors chose to liquidate it. Since the COC was authorised to exercise its power under the explanation attached to Sub-section (2) of Section 33 of the I&B Code, its action cannot be questioned. The Resolution Applicant has no vested right that his Resolution Plan is considered. No challenge can be preferred to the Adjudicating Authority at this stage. The Resolution Professional is only authorised to examine and confirm that the Resolution Plan conforms to the Code provided under Section 30 (2). It is also clarified that the Resolution Professional is required to examine that the Resolution Plan submitted by the various applicants is complete in all respects before submitting it to the Committee of Creditors - In the instant case, the Resolution Professional preferred an Application before the Adjudicating Authority under Section 33 (2) of the Code prays for a liquidation order of the Corporate Debtor. The RP had brought to the notice of the Adjudicating Authority that an amount of about ₹ 21 crores is receiveable to the corporate debtor from two partnership/proprietors firms, i.e. M/s Innovative Enterprises and Innovative Trading Company. They were interested persons for submitting the expression of interest (EOI). These are group entities of the Appellants. On perusal of the Minutes of the COC, it appears that the RP called the COC Meeting on 15 January 2019 wherein the Expression of Interest (EOI) as submitted by the Appellant was placed before the COC members along with the evaluation by the RP After discussion, it was decided by the COC members that the Appellant's do not fulfil the eligibility criteria. Therefore, the COC has reiterated its decision to put the Corporate Debtor into liquidation. However, the COC has rejected the expression of interest submitted by the Appellant's and has not allowed additional time to submit a Resolution Plan. The COC was fully empowered to take such a decision under its commercial wisdom. Under the explanation attached to Sub-section (2) of Section 33 of the I&B Code, 2016, the COC, at any stage after its formation and before the approval of the Resolution, was empowered to resolve to liquidate the Corporate Debtor. Application dismissed. Issues Involved:1. Can the Committee of Creditors reject the opportunity to submit the Resolution Plan based on the contents of the Expression of Interest (EOI)Rs.2. Whether the Committee of Creditors can reject the EOI without a formal meetingRs.3. Whether the application seeking direction against the Resolution Professional to receive and place the Resolution Plan before the Committee of Creditors was maintainableRs.4. Whether the Committee of Creditors was authorized to close the Corporate Insolvency Resolution Process before the expiry of the statutory period and resolve to liquidate the Corporate DebtorRs.Issue-Wise Detailed Analysis:1. Rejection of Resolution Plan Based on EOI Contents:The Appellants argued that the Committee of Creditors (CoC) rejected their Expression of Interest (EOI) hastily and prematurely. The CoC decided to apply for liquidation despite the Appellants submitting a complete EOI on January 5, 2019, before the expiry of the 180-day period under Section 12 of the Insolvency and Bankruptcy Code (IBC). The Appellants contended that the EOI should be analyzed based on criteria laid down under Section 25(2)(h) read with Regulation 36A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Tribunal found that the CoC was within its rights to reject the EOI if it did not meet the eligibility criteria, and the CoC's decision to liquidate was not premature as it was taken within the statutory framework.2. Rejection of EOI Without Formal Meeting:The Appellants claimed that the CoC rejected their EOI summarily without a formal meeting. The Tribunal noted that the CoC had discussed the EOI in its meetings and found that the Appellants did not submit the required documents despite reminders. The CoC's decision to reject the EOI and proceed with liquidation was based on commercial wisdom and was within their powers under Section 33(2) of the IBC.3. Maintainability of Application Against Resolution Professional:The Appellants filed an application seeking direction against the Resolution Professional to receive and place their Resolution Plan before the CoC. The Tribunal referred to the Supreme Court's ruling in ArcelorMittal India (P) Ltd. v. Satish Kumar Gupta, which clarified that a Resolution Professional's role is to examine and confirm that the Resolution Plan conforms to the Code and present it to the CoC. The Resolution Professional is not required to take any decision but to ensure the completeness of the Resolution Plan. The Tribunal found that the application was not maintainable as the Resolution Professional had acted within his duties.4. Authorization to Close CIRP and Resolve to Liquidate:The Appellants argued that the CoC acted in haste by resolving to liquidate the Corporate Debtor before the expiry of the 180-day CIRP period. The Tribunal highlighted that under Section 33(2) of the IBC, the CoC is empowered to decide to liquidate the Corporate Debtor at any time after its constitution and before the confirmation of the Resolution Plan. The Tribunal found that the CoC's decision to liquidate was within its statutory powers and commercial wisdom.Conclusion:The Tribunal dismissed both appeals, finding no merit in the Appellants' arguments. The CoC's decisions were within the statutory framework and commercial wisdom, and the Resolution Professional had acted within his duties. The Tribunal emphasized that the Resolution Applicant has no vested right for their Resolution Plan to be considered, and the CoC's decision to liquidate was justified.