Tribunal dismisses appeal, upholds CoC decisions on CIRP, Section 29A, penal interest. MSME not entitled to preferential treatment.

The appeal was dismissed, and the Tribunal upheld the commercial decisions of the CoC. The Tribunal found no errors in the project-wise CIRP, the disqualification of the consortium under Section 29A, or the charging of penal interest by Kotak Bank. The Tribunal also noted that being an MSME did not entitle the Appellant to preferential treatment in the resolution process. The appeal was rejected, and all related applications were closed.

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Issues Involved:
1. Project-wise CIRP and Wrong Constitution of CoC
2. Disqualification of the SRA Consortium under Section 29A of the Code
3. Charging of Penal Interest by Kotak Bank against the Provisions of Section 30(2) of the Code
4. Preference to MSME Promoter in Resolution Plan

Summary:

ISSUE: PROJECT-WISE CIRP & WRONG CONSTITUTION OF COC

The first issue raised by the Appellant was that the IRP had wrongly constituted the CoC to consist of only the Financial Creditors pertaining to the project 'Arun Auroville'. The Appellant contended that the IRP received several claims in respect of other projects like 'Arun Kaustubh' and should have included all creditors of the Corporate Debtor. The 'Adjudicating Authority' had earlier allowed Kotak Bank's application to set aside the IRP's decision to reconstitute the CoC, confirming project-wise CIRP. This decision was not challenged by the Appellant, and thus, project-wise CIRP attained finality. The Tribunal found no merit in the Appellant's claim that the CoC was erroneously constituted.

ISSUE: DISQUALIFICATION OF THE SRA CONSORTIUM UNDER SECTION 29A OF THE CODE

The Appellant argued that the Consortium of Resolution Applicants was disqualified under Section 29A of the Code due to their disqualification as directors of other companies. The Tribunal noted that the Hon'ble High Court of Karnataka had restored the DIN of the Resolution Applicants, and the order had attained finality. The RP's due diligence confirmed that the DIN status was active as of the date of submission of the Resolution Plan. Therefore, the Consortium was not disqualified under Section 29A.

ISSUE: IS CHARGING OF PENAL INTEREST BY KOTAK BANK AGAINST THE PROVISIONS OF SECTION 30(2) OF THE CODE

The Appellant contended that Kotak Bank was unjustified in charging penal interest and capitalizing on the same. The Tribunal held that the terms of the Settlement Agreement, which included penal interest, bound the Appellant. Section 14 of the Code does not specify any 'interest waiver' during the moratorium period. The role of the RP is to collate claims, and the CoC's commercial wisdom in accepting the penal interest was upheld. The Tribunal found no illegality in the CoC's decision to collect penal interest.

ISSUE: BEING AN MSME, THE APPELLANT OUGHT TO HAVE BEEN GIVEN SUFFICIENT OPPORTUNITY AND DUE PREFERENCE WITH RESPECT TO 'THE PLAN'

The Appellant, an MSME, argued that his plan was not accepted despite being a promoter. The Tribunal noted that the Appellant did not provide the net worth statement, deposit the EMD amount, or submit a Resolution Plan despite attending CoC meetings. The Appellant's offer of settlement was rejected by the Bank, and no 12A Application was filed. The Code does not mandate preference to MSME promoters. The CoC, in its commercial wisdom, approved the Resolution Plan, and the Tribunal found no merit in the Appellant's claim for preference.

Conclusion:

The appeal was dismissed, and the connected pending interlocutory applications were closed. The Tribunal upheld the commercial wisdom of the CoC and found no violations of the provisions of the Code.

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