2022 (9) TMI 951 - AT - Insolvency and Bankruptcy

Tribunal Upholds CoC's Decision on Resolution Plan Timing

The Tribunal set aside the Adjudicating Authority's direction to consider a resolution plan submitted after the CIRP period, emphasizing the plan's ... Consideration of Resolution plan - Validity of order of NCLT excluding and extending CIRP period - whether the resolution plan submitted for approval of the Adjudicating Authority under Section 31 of I&B Code, 2016 is binding on the CoC and Successful Resolution Applicant? - HELD THAT:- It is a settled position of the law that once the CoC has approved a resolution plan which has been submitted for approval under Section 31 of the Code, whether the same is binding on the CoC. It is unequivocal that Section 31 of the Code deal with approval of resolution plan and if the Adjudicating Authority is satisfied that the resolution plan as approved by the Committee of Creditors under sub-section (4) of Section 30 meets the requirement as referred to in sub-section (30), it shall by order approve the resolution plan which shall be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government any State Government or any Local Authority etc. In the present case, the Adjudicating Authority vide impugned order directed the 1st Respondent to place the resolution plan before the CoC for its consideration by excluding and extending the CIRP period, when an application is pending for approval of resolution plan, which is completely illegal and against the law laid down by the Hon’ble Supreme Court in Ebix Singapore [2021 (9) TMI 672 - SUPREME COURT] - This Tribunal in the facts of the present case, is of the opinion that there are no reasons for extending and excluding the CIRP period by the Adjudicating Authority. It is not the case that no PRAs received in the CIRP process and to afford an opportunity to call for PRAs with an aim to avoid liquidation of the Corporate Debtor. In the present case, the plan is pending for approval before the same Adjudicating Authority and the Adjudicating Authority for reasons best known to it allowed the application filed by the Respondents No. 5 to 7 is arbitrary and against all canons of law. Whether the Adjudicating Authority can overlook the decision of CoC which was taken in their commercial wisdom? - HELD THAT:- The commercial wisdom of the CoC has been given paramount status without any judicial intervention for ensuring completion of the stated process within the time lines prescribed by the I&B Code - reliance can be placed in the case of Hon’ble Supreme Court in K. Shashidhar Vs. Indian Overseas Bank & Ors. [2019 (2) TMI 1043 - SUPREME COURT]. The Adjudicating Authority is not authorised to pass any orders which would circumvent and attempt to frustrate the resolution plan pending before it for consideration under Section 31 of the Code. The bitter truth remains that the Respondents No. 5 to 7 are completely standing outside of the CIRP and once evinced their EoI and backed out from participating in resolution process and now after completion of the CIR period their application cannot be considered. The reason given by the Adjudicating Authority that the 1st Respondent has not provided the documents to the Respondents No. 5 to 7 is concerned from the records, it is seen that the audited balance sheet up to a period of financial year 2014-15 was available from the data room which was accessible by all the PRAs including the Respondents No. 5 to 7. Further the financial statements for years 2015-16, 2016-17 and 2017-18 were also made available in the data room - This Tribunal does not go into the oblique motive of these Respondents in submitting the resolution plan belatedly. This Tribunal is of the view that the resolution plan submitted by the Respondents No. 5 to 7 on 27.05.2020 after expiry of CIRP period is illegal and this Tribunal upholds the decision taken by the 1st Respondent in rejecting the plan of the Respondents No. 5 to 7 vide its communication dated 18.06.2020 is legal and valid - Impugned order is unsustainable and the same is set aside. Appeal allowed. Issues Involved:1. Legality of the Adjudicating Authority's direction to consider a resolution plan submitted after the CIRP period.2. Validity of the extension of the CIRP period beyond 330 days.3. Authority of the Adjudicating Authority to interfere with the CoC's commercial decisions.4. Binding nature of a CoC-approved resolution plan pending before the Adjudicating Authority.Issue-wise Detailed Analysis:1. Legality of the Adjudicating Authority's direction to consider a resolution plan submitted after the CIRP period:The Appellant contended that the Adjudicating Authority erred in directing the Resolution Professional (RP) and the Committee of Creditors (CoC) to consider a resolution plan submitted by Respondents No. 5 to 7 after the CIRP period had concluded. The Appellant argued that the CoC had already unanimously approved its resolution plan on 06.03.2020, and the CIRP period had expired on 16.03.2020. The Tribunal held that the Respondents No. 5 to 7 withdrew from the resolution process on 06.11.2019 and did not submit any resolution plan within the specified period. The Tribunal found the Adjudicating Authority's direction to consider a plan submitted after the CIRP period as non-est and without judicial application of mind. The Tribunal upheld the RP's rejection of the late submission, emphasizing that the Respondents No. 5 to 7 were not part of the CIRP.2. Validity of the extension of the CIRP period beyond 330 days:The Tribunal noted that the CIRP should be completed within 330 days, and extensions beyond this period are permissible only in exceptional circumstances. The Tribunal referred to the Supreme Court's judgment in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors., which held that the 330-day period could be extended only in exceptional cases. The Tribunal found that the Adjudicating Authority's decision to extend the CIRP period to consider a late submission was arbitrary and against the law. The Tribunal emphasized that the CIRP period had already expired, and the extension granted by the Adjudicating Authority was unjustified.3. Authority of the Adjudicating Authority to interfere with the CoC's commercial decisions:The Tribunal reiterated that the commercial wisdom of the CoC is paramount and should not be interfered with by the Adjudicating Authority. The Tribunal cited the Supreme Court's judgments in K. Shashidhar Vs. Indian Overseas Bank & Ors. and Kalpraj Dharamshi Vs. Kotak Investment, which held that the Adjudicating Authority does not have the jurisdiction to analyze or evaluate the commercial decisions of the CoC. The Tribunal found that the Adjudicating Authority had overstepped its jurisdiction by directing the CoC to consider a resolution plan submitted after the CIRP period.4. Binding nature of a CoC-approved resolution plan pending before the Adjudicating Authority:The Tribunal emphasized that once a resolution plan is approved by the CoC and submitted to the Adjudicating Authority under Section 31 of the IBC, it becomes binding on all stakeholders, including the CoC and the Successful Resolution Applicant. The Tribunal referred to the Supreme Court's judgment in Ebix Singapore Pvt. Ltd. Vs. Committee of Creditors of Educomp Solution Ltd. & Anr., which held that a resolution plan is binding and irrevocable once approved by the CoC and submitted to the Adjudicating Authority. The Tribunal found that the Adjudicating Authority's direction to consider another plan was illegal and against the binding nature of the CoC-approved plan.Conclusion:The Tribunal concluded that the Appellant had made a prima facie case for interference with the order passed by the Adjudicating Authority. The Tribunal set aside the impugned order dated 28.05.2021, finding it unsustainable. The Tribunal allowed the appeal and made the interim order dated 03.08.2021 absolute, with no orders as to costs.