TaxTMI 
TaxTMI 
2018 (3) TMI 1267
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....under Sub-Section 5 of Section 60 of Insolvency and Bankruptcy Code 2016. 2. Briefly, stating the facts as follows: Facts relating to CA (IB) No.202/KB/2018: 3. This application has been filed by a Resolution Applicant namely Renaissance Steel India Private Limited challenging the decision of the Resolution Professional in not considering the objections raised by the applicant as against one another Resolution Applicant namely Tata Steel Limited. The applicant contends that the Resolution Applicant namely Tata Steel Limited not eligible to submit the Resolution Plan since it is in ineligible under clause (d) read with clause (i) and (j) of Section 29 A of the Insolvency and Bankruptcy Code,2016 (In short the I & B, Code) and disregards the objections submitted to the Resolution Professional the Resolution Professional qualified the Tata Steel Limited. Challenging the said decision the applicant filed this application. 4. The applicant contends that said decision is in violation of Section 30(2)(e) of I&B Code. The applicant contends that the information regarding the disqualification of Tata Steel Limited though submitted to the Resolution Professional who is bound to e....
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....idiary of Vedanta Resources Pic which holds 50.13% equity in Vedanta Limited as per the Annual Report of Vedanta Resources Pic for the year 2017. Vedanta Resources Pic has another subsidiary. Konkola Copper Mines (in short KCM) which is undertaking mining operations in Zambia's Copper belt and Central Provinces. 8. The applicant further contends that Vedanta Limited is to be disqualified to submit Resolution Plan under Clause (d) read with Clause (i) and (j) of Section 29A of the Code. Government of Zambia brought a successful prosecution against KCM for pollution and harm caused. The Zambian Government charged KCM with the following offences relating to the pollution:- (i) 'Polluting the environment contrary to Section 91(1) of the Environment Protection and Pollution Control Act No. 12 of 1990 Cap 204 of the Laws of Zambia; (ii) Discharging poisonous, toxic. Eco-toxic, obnoxious or obstruction matter. radiation or other pollutant into the aquatic environment contrary to Section 24 and 91(1) of the Environmental Protection and Pollution Control Act No. 12 of 1990 Cap 204 of the Laws of Zambia: (iii) Wilfully failing to report an act or incident of pol....
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....e Vedanta Resources of the holding Company Vedanta Limited, it is disqualified to submit an application read with Clause (d) read with clause (i) and 0) of Section 29A of Code and, therefore, the decision, if any. taken by the Resolution Professional that Vedanta is qualified for submission of a Resolution Plan is contrary to the law as provided under Sub-Section 2(e) of Section 30 of the code and, therefore. the decision of resolution applicant is not legal and direction is to be issued for considering the above said objections by the resolution professional if he did not take any decision as to its eligibility or pass appropriate order holding that Vedanta Limited is ineligible under the provisions of section 29A of the I&B code. 11. The first respondent in both the application is the Resolution Professional. He raised similar objections to the applications mainly challenging the jurisdiction of this adjudicating authority in entertaining an application of this nature under section 60 of Insolvency & Bankruptcy Code. 2016. He contends that a Resolution Plan has not attained its finality and finality of a Resolution Plan submitted to him would be attained by approving the Resol....
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....e CoC on February 27,2018 for its consideration and approval. 12. Similar objection has been raised by the Resolution Professional in CA No.203 of 2018. According to him, in regards the allegations levelled against Vedanta Ltd. is also considered by him in detail and on the basis of legal opinion obtained from Legal Advisors and information from Law Firm of Zambia he arrived at a decision on the eligibility of Vedanta Ltd. under section 29A of the Code. He has considered the Resolution Plan submitted by Vedanta Ltd. under section 29A of the Code and submitted the Plan before the CoC on February 27,2018 for its consideration and approval. 13. Tata Steel Ltd. is the Resolution Applicant. The resolution plan submitted by Tata Steel Ltd. is under challenge in CA 202 of 2018. Tata Steel filed reply denying the allegations levelled by the applicant and contends that the Resolution Professional is an expert in his or her domain of work and has been entrusted under sub section (2) of section 30 of the Code with the responsibility to inter alia examine and confirm that the Resolution Plan received by him or her do not contravene any of the provisions of the law for the time being in f....
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....e Resolution Professional and has addressed all the concerns raised by the Resolution Professional from time to time and therefore there cannot be any ground for grievance against Vedanta. It further contends that various legal proceedings in the application against Konkola Copper Mines (KCM) has no relevance and that the allegations have been made with mala fide intention and the sole objection to stall the resolution process. The plan submitted by Vedanta may be better than the plan submitted by the applicant and therefore is trying to obstruct the resolution process. There is no bona fide in filing the application. The application filed is premature. The applicant cannot challenge the Resolution Plan unless it comes before the Adjudicating Authority. Upon the said contentions, this respondent also prays for dismissal of the application. 15. Heard the Ld. Sr. Counsel appearing on the side of the applicant in CA Nos. 202 and 203, Ld. Sr. Counsel appearing on the side of the Resolution Professional and the Ld. Sr. Counsel appearing on the side of the Tata Steel Ltd. and Vedanta who are the second respondent in the respective application and perused the documents. 16. In conne....
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....So what is to be considered is not the approval or rejection of any one resolution plan submitted by the 2nd respondents. In the above said view it appears to me that this applications are maintainable. 18. Upon hearing the arguments on both sides and considering the averments in the applications and the contentions of the respondents the point that arises for determination is whether the Resolution Professional has to take a decision regarding the Resolution applicants eligibility in considering the resolution plan before submission of the Resolution Plan to the CoC and if he has taken a decision whether he is bound to communicate his decision as to eligibility of resolution applicants to the objectors who are not strangers but one among the resolution applicants. In the alternative whether the Adjudicating Authority has to pass an order that the Tata Steel Ltd and Vedanta Ltd is ineligible to be resolution applicant in view of application of section 29A of the Code?. 19. It is pertinent to take note that the Ld. Resolution profession has not turned up when this applications were taken up for hearing and Ld. Sr.Counsel appearing for and on behalf of the resolution profession....
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....the Ld. Sr. Counsel for the RP that he has taken a decision already regarding the challenges raised in the case in hand and all the four plans were submitted before the CoC for its consideration. However, from the above said submission and the averment in para 19 of the reply affidavit what I understood is that RP had any knowledge about the resolution applicants and their connected persons" (the last line in para 19 of reply affidavit of RP in CA 202 of 2018) involvement in an offence with in the jurisdiction of Court in outside India as provided under clause (j) of section 29A. 22. Here in the instant case the applicants succeeds in proving that Tata Steel UK Limited is a subsidiary of Tata Steels Limited. Tata Steel UK Limited admittedly faced multiple prosecutions and has been convicted for breaching statutory provisions of UK's Holding and Safety at Work of 1974 (in short, HSW). A copy of the order of Royal Courts of Justices, Strand London, WC2 2LL dated 07.06.2017 was brought to my notice to show that Tata Steels UK Limited was convicted imposing following fines:- (i) We allow the appeal an offence thereto and substitute a fine of GBP1315 million; (ii) W....
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....0,000. (ii) In Count 2. the Court ordered KCM to pay a penalty of ZMK 10,800,000. (iii) In Count 3, the Court ordered KCM to pay a penalty of ZMKK270,000. (iv) In Count 4, the Court ordered KCM to pay a penalty of ZMK100,000. 27. The total fine for all 4 counts was in the sum of ZMK 21.970 Million payable by 29th November 2010. in default 3 years imprisonment. No subsequent appeal has been filed against this case by any party. 28. As per Regulation 12 of the Environmental Protection and Pollution Control (Water Pollution [Effluent and Wastewater)] Regulation Statutory Instrument F.No. 172 of 1993 any person who wilfully failed to make a report required under the Section 86 shall be guilty of an offence and liable upon conviction to a fine not exceeding 1500 penalty unit or imprisonment for a period not exceeding six months or both. 29. As per Section 91 - Offences and Penalties - A person who pollutes the environment or contravenes any provision of this Act for which no penalty is provided shall be guilty of an offence and liable upon conviction to a fine not exceeding sixty thousand penalty units or to imprisonment for a term not exceeding three....
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....us standi to demand such information from the RP. He also attempted to stress his argument on the strength of clause 21 of the Code of Conduct appended to the first schedule to the IBBI (Insolvency Professionals) Regulations,2016. It appears to me that Ld.RP without updating his knowledge regarding the confidentiality to be uphold by him did not inform the decision he has taken in respect of the objections raised by the applicant in respect of eligibility of the resolution applicants. According to the Ld. Sr. Counsel for RP communication of decision regarding eligibility of Tata Steal ltd and Vedanta Ltd amount to giving information relating to the insolvency resolution process. How it amounts to information of any personal data of the resolution applicant or any particulars regarding the bid amount no explanation forthcoming. Applicants here in are also competent bidders. Passing of information to RP by any one competent resolution applicant shall not be kept unheard by an RP in a case of this nature. If he took a wrong decision upon any incorrect materials submitted by interested resolution applicant and CoC had occasion to approve the plan relying on a wrong decision of an RP an....
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....er, or orders of the Adjudicating Authority". 35. A reading of the above said clause made it clear that the RP has to record his reasons for taking any decisions he has to take in the process of finding out a resolution applicant, that he has to record all information and evidence he has collected for enabling to take a decision so as to see that a reasonable prudent person to take a view on the appropriateness of his decisions. What is prohibited is only in making any private communication with any of the stake holders. Even if he wishes to make such communication in the interest of finding out a reputable resolution applicant he can with prior permission of the Adjudicating Authority. Here in this case he neither produced any proof in support of his decisions along with the reply affidavit nor able to submit any materials for the perusal of the Bench at the time of hearing the applications. The lame excuse is that if he is given time he will produce it later. This request for further time also shows latches on the side of the RP in dealing with the matter in dispute. In view of the above said discussion it appears to me that information in respect of decision taken by the RP i....
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....dinance aims at putting in place safeguards to prevent unscrupulous, undesirable persons from misusing or vitiating the provisions of the Code. The amendments aim to keep out such persons who have wilfully defaulted, are associated with non-performing assets, or are habitually no complaint and, therefore, are likely to be a risk to successful resolution of insolvency of a company addition to putting in place restrictions for such persons to participate in the resolution or liquidation process, the amendment also provides such check by specifying that the Committee of Creditors ensure the viability and feasibility of the resolution plan before approving it. The insolvency and Bankruptcy Board of India (IBBI) has also been given additional powers." 38. From a reading of the object, it is certain that the legislative intention behind introduction of section 29A and proviso to section 30 of the Code is with an object to prevent any tainted stakeholders or any stake holders whose related or connected parties or persons is a defaulter or a convict as per the provisions of section 29A and no such stake holders cannot in any way become a resolution applicant for participating in the bid....