2023 (8) TMI 1694 - Tri - IBC

Recall of insolvency admission by shareholders/third parties held impermissible; 89.25% CoC-approved resolution plan sanctioned under s31

Whether shareholders/third parties may seek recall of Adjudicating Authority's admission order: Held that a party who has availed statutory appeals and ... Locus standi of shareholders to challenge admission of CIRP - power of Adjudicating Authority to recall/rectify its admission order - bar under Section 10A of the Insolvency and Bankruptcy Code - principles of natural justice and limited notice at admission under Section 7 - non-justiciability of the commercial wisdom of the Committee of Creditors - evaluation matrix and challenge mechanism for scoring resolution plans - approval of resolution plan and binding effect under Section 31 - National Company Law Tribunal - doctrine of merger - HELD THAT:- Admittedly statutory appeal was filed by the Applicant i.e., Adisri Commercial Private Limited before the Hon'ble NCLAT in November 2021 and the Hon'ble Supreme Court. And after having availed the remedy of appeal and failed therein, applicant now cannot seek recalling of same order already appealed against. Allegation of collusion, fraud by Reserve Bank of India raised now, are in a casual way, without laying any foundation for same, and therefore deserves to be rejected outrightly as baseless. And other applicant i.e., Mr. Manoj Kumar Gupta, not having filed the appeal, cannot be now permitted to file application seeking recalling of an order that attained finality and subsequently resolution plan approved by Committee of Creditors and filed before this Adjudicating Authority. Such IAs, which are otherwise impermissible in law, cause unnecessary delay in time bound resolution process under the Code and have a deleterious effect in achieving the object of the Code i.e. maximisation of value of assets in time bound manner. After disallowing these IAs, we now proceed to consider objection applications to Resolution plan filed before this Adjudicating authority. On hearing the submissions made by the Administrator, and perusing the record, we find that the Resolution Plan filed by National Asset Reconstruction Company Limited has been approved with 89.25% voting share. As per the CoC, the plan meets the requirement of being viable and feasible for revival of the Corporate Debtor. It is pertinent to note that NARCL along with India Debt Resolution Company Limited have proposed to carry out the compliances envisaged in the Resolution Plan filed by NARCL. By and large, all the compliances have been done by the Administrator and the Resolution Applicant for making the plan effective after approval by this Bench. We are satisfied that the Resolution Plan is in accordance with sections 30 and 31 of the IBC and also complies with regulations 38 and 39 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Further, it is evident as recorded in Paragraphs 26 and 27 above that the Successful Resolution Applicant has received approval from the Reserve Bank of India and the Competition Commission of India. We have perused the reliefs, waivers and concessions as sought and as given in Section 10 at Pages 105-115 of the Resolution Plan. While some of the reliefs, waivers and concessions sought by the Resolution Applicant come within the purview of the Code while many others fall under the power and jurisdiction of different government authorities/departments. This Adjudicating Authority has power to grant reliefs, waivers and concessions only in relation to the Code and the Companies Act 2013 (within the powers of the NCLT) for achieving the objective of the Code. No reliefs, waivers and concessions that fall within the domain of other government department/authorities are granted. The reliefs, waivers and concessions that pertain to other governmental authorities/departments shall be dealt with the respective competent authorities/forums/offices, Government or Semi Government of the State or Central Government with regard to the respective reliefs, waivers and concessions. The competent authorities including the Appellate authorities may consider grant such reliefs, waivers and concessions keeping in view the spirit of the Code. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan. The Hon'ble Supreme Court also held that all the dues including the statutory dues owed to the Central Govt, any State Govt or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under section 31 could be continued. With respect to the reliefs and waivers sought for all inquiries, litigations, investigations and proceedings shall be granted strictly as per the section 32A of the Code and the provisions of the law as may be applicable. As far as the question of granting time to comply with the statutory obligations or seeking approvals from authorities is concerned, the Resolution Applicant is directed to do so within one year from the date of this order, as prescribed under section 31(4) of the Code. In case of non-compliance of this order or withdrawal of Resolution Plan, the payments already made by the Resolution Applicant shall be liable for forfeiture. The Moratorium imposed under section 14 of the Code shall cease to have effect from the date of this order. In view of the approval of the Resolution Plan, has been rendered infructuous and is disposed of accordingly. Issues: (i) Whether the shareholder-applicants have locus to maintain applications seeking recall/rectification of admission orders and to challenge the initiation of CIRP; (ii) Whether the admission orders dated 08.10.2021 (and pleas based on Section 10A of IBC and related jurisdictional objections) can be recalled/rectified by the Adjudicating Authority in these IAs after appellate remedies; (iii) Whether objections to the Resolution Plan (including alleged deviation from the Evaluation Matrix, grant of clarifications/relaxations, classification and discounting of instruments and viability/feasibility) are maintainable and whether the Resolution Plan complies with statutory requirements under Section 30/31 and applicable Regulations.Issue (i): Whether shareholders (the applicants) have locus to file the instant IAs challenging admission of CIRP and seeking recall/rectification of admission orders.Analysis: The Tribunal examined authorities and statutory framework distinguishing rights of shareholders/investors from the corporate debtor and the role of authorised representatives and classes of creditors under the Code and CIRP Regulations. The record shows prior appeals by the same parties and participation (or delegated representation) in CoC processes. NCLAT and Supreme Court jurisprudence and principles concerning who is an 'aggrieved person' and the role of authorised representatives were considered.Conclusion: The applicants (shareholders/debenture holders) lack maintainable locus to bring these recall/rectification IAs against the admission orders; the IAs are not maintainable and are disallowed.Issue (ii): Whether the Adjudicating Authority can recall/rectify the admission order dated 08.10.2021 on grounds including bar under Section 10A and alleged procedural infirmities after appellate proceedings and/or in the present applications.Analysis: The Tribunal analysed the factual matrix, the history of appeals to NCLAT and Supreme Court (which were dismissed), the availability of statutory appellate remedy under Section 61, and authorities on recall/review/rectification powers of the Tribunal. The Tribunal applied precedent limiting recall/reopening when the ground was available earlier or when appeal remedies were not availed or were exhausted; it also considered jurisprudence on jurisdictional nullities and the consequences of final appellate orders.Conclusion: The Tribunal held that the applicants cannot reopen matters already raised/decided in appeals and have not established grounds (fresh fraud/procedural infirmity within narrow limits) warranting recall; accordingly the recall/rectification pleas (including Section 10A challenge insofar as already adjudicated on appeal) are rejected and the IAs are disallowed.Issue (iii): Whether the objections to the Resolution Plan (alleging deviation from the Evaluation Matrix, improper discounting/valuation of instruments, unfair clarifications/relaxations, lack of transparency, and non-compliance with Section 30/Regulations) are maintainable and whether the Resolution Plan may be rejected.Analysis: The Tribunal reviewed the RFRP, the Evaluation Matrix, the Challenge Process note, chronology of bid submissions, addenda and clarifications, CoC deliberations, expert/advisor inputs, voting results (89.25% in favour) and statutory requirements under Section 30(2), Regulation 36/36B/39. The Tribunal considered the non-justiciability principle of CoC's commercial wisdom established by higher courts, the confined scope of NCLT under Section 31 to test statutory compliance (feasibility, viability and legal contravention), and whether any material breach of the evaluation procedure or illegality that would invalidate the plan was shown.Conclusion: The Tribunal found no material contravention warranting rejection; the Evaluation Matrix and Challenge Process were applied in the exercise of the CoC's commercial wisdom, clarifications/considerations were part of the documented process, and the plan met statutory requirements. The objections to the Resolution Plan are rejected.Final Conclusion: The interlocutory applications seeking recall/rectification of admission orders are disallowed as not maintainable; objections to the Resolution Plan are rejected; the Resolution Plan dated 18 January 2023 with addendum dated 24 January 2023 submitted by National Asset Reconstruction Company Limited (with implementation by the Resolution Applicant and partners) is approved under Section 31 of the IBC subject to the observations in the order and applicable statutory limits. The moratorium ceases on approval and the Administrator is discharged save for implementation duties in the Plan.Ratio Decidendi: The Adjudicating Authority will not reopen or recall admission orders where statutory appeal remedies were available and/or exhausted and no narrow exceptional grounds (freshly proven fraud or procedural nullity) exist; challenges to a duly approved resolution plan are permissible only to test statutory compliance (Section 30/31 and applicable Regulations), while the commercial wisdom of the Committee of Creditors in evaluating and selecting a resolution plan is non-justiciable and binding when the plan satisfies statutory requirements.