TaxTMI 
TaxTMI 
2018 (7) TMI 633
X X X X Extracts X X X X
X X X X Extracts X X X X
....inimum net worth criteria of INR 400 crores or Proof of availability of Cash and Cash Eguivalent of at least INR 50 crores duly certified by statutory Auditor as on March 31, 2018" (d) Pending the hearing and disposal of the present application, any steps already taken and all further actions in pursuance of the advertisement dated April 11, 2018 published by the RP, be stayed; (e) Pass such further order/orders and direction/directions as necessary in the circumstances of the present case." 2. Reappraised the arguments advanced by Mr J. Chowdhury, learned Advocate for the applicant. Also heard Mr K. Goswami, learned Advocate for the non-applicant/Corporate Debtor. 3. The parties to this proceeding have also filed written synopsis of their arguments. The applicant also filed an additional written synopsis on argument on 25.04.2018 4. It may be stated here that an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short, Code of 2016) was filed before this Bench by SREI Infrastructure Pvt. Ltd. (hereinafter, referred to as Financial Creditor) in the year 2017 seeking initiation of Corporate Insolvency Resolution Process (in short, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....non-refundable process participation fees of INR 10,00,000(Rupees Ten Lakhs only) plus applicable taxes (i.e. GST @ 18%) along with the EOI application. Bank Name Allahabad Bank Account Name Assam Company India Limited Branch Address IFB Branch A/c. No. 20013707028 IFSC ALLA0211501 b. A Refundable Earnest Money Deposit of INR 5.00 crores (Rupees Five Crores only), must be paid through Demand Draft drawn in favour of "Assam Company India Limited - CIRP Escrow Account", payable at Kolkata. c. Shortlisted Prospective Resolution Applicants based on the eligibility criteria shall be provided with the evaluation matrix and other relevant documents on signing of Non-Disclosure Agreement, which shall be shared separately. 8. The applicant has submitted that it is a major tea company of India which owns at the moment 5 (five) tea gardens in Assam and one in the Democratic Republic of Congo, Africa. The annual tea production of the company is more than 7,000,000 (seven million) kilograms. Its annual Net Tangible Worth (NTW) of INR approximately 200 crores. More importantly, it is a completely debt free company and has consistently been in pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he eligibility criterion, fixed for the PRAs, appears to be 1: 3.5. This ratio is severely disproportionate as well as heavily and arbitrarily skewered against prospective resolution applicants. The other criteria, so enumerated in the notice inviting Eol are equally burdensome and harsh. The details of such alleged arbitrariness, on the part of the RP /CoC, have been incorporated in paragraphs 10 and 11 of the application. For ready reference, paragraph 10 of the application is also reproduced below: - 10. The applicant herein also submits that the eligibility criteria with regard to minimum tangible net worth of prospective resolution applicants has been set arbitrarily high when compared to the same for other major companies undergoing CIRP. The total admitted debt of the Corporat4e Debtor herein is approximately Rs. 1453.03 crores and the net worth of eligible resolution applicants has been set at 400 crores. This ratio is severely disproportionate as well as heavily and arbitrarily skewered against prospective resolution applicants when compared to that in other major CIRPs that are underway, such as that of Alok Industries Ltd. (eligibility criteria being consolidate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to ensure that all the major players in the tea industry are kept out process aimed at securing the best of resolution plan to revive the ailing CD. The fact that Net Tangible Worth of all the major tea companies, operating in the country, hover between 150---200 crores ---although---- in the notice under consideration, the minimum NTW for the corporate for participating in CIRP was set at Rs. 400 crores---makes such a conclusion inevitable. 18. Now, a question would automatically arise as to why such illusory, arbitrary and unreasonable criteria are being incorporated in the notice inviting Eol from PRAs. The reason, according to the applicant, is not far to find. A careful survey of various notices inviting Eol from PRAs qua companies which are undergoing CIRP would reveal that the terms and conditions, incorporated in notice inviting Eol from PRAs in the present case and such terms and conditions in the notice inviting Eol from PRAs qua companies (which are undergoing CIRP) are found to be strikingly similar. 19. In that connection, my attention has been drawn to "the notice inviting Eol from the PRAs" in respect of ABC Shipyard Ltd against whom CIRP already been initiated....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... nature which are incorporated in the prayer part of the application. However, the applicant has miserably failed to make out even a simple case --leave alone---- its establishing an extraordinary situation requiring this Authority to direct the RP/CoC to reconsider at least the clause 1 (a) of the Category (A) of the notice inviting Eol from PRAs. 25. This is because of the fact that a notice inviting EoI from PRAs was so designed that while it encourages the genuine and serious players ----having sufficient capabilities in all the fields including their possessing necessary logistic --- to come forward and to participate in the process that aims at securing the best of resolution plans so that the CD could be brought back to life once again -- it ---also--tries to discourage and eliminate from the fray all those entities which are not at all serious in their endeavour. 26. In regard to the allegation that the minimum NTW, prescribed for corporate for participation in the CIRP was quite high and arbitrary (which was also alleged to have been so designed to ensure restricted participation, presumably to accommodate some favoured party), it has been submitted that such an alle....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs, present in the meeting, approved the Format, worked out by the RP, subject to certain modifications which were made in compliance of directions in section 25(h) of the Code r/w Regulation 36A of the Regulation of 2018. 31. Therefore, it is wholly incorrect to say that notice inviting Eol from the prospective PRAs was copied from the notice inviting Eol from the prospective PRAs in respect of companies which are already undergoing CIRP. Such a revelation also demonstrates that the allegation that there was no application of mind in preparing the notice inviting Eol from the prospective PRAs under consideration is equally away from the truth. 32. In regard to the allegation that despite receipt of the letter dated nil seeking a reconsideration of the eligibility criteria, more particularly, the criterion in 1(a) of category (A) of the notice dated 11.04.2018, the RP/CoC, had never responded to such letter, it has been pointed out that such an anonymous letter suffers from several infirmities of extremely serious nature. In that connection, it has been submitted that the letter was not addressed properly either to RP or to CoC. A perusal of the same would make it very clear.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of tea industry with those industries is unfair and unjust. 38. It has also been contended from the side of the CD/CoC that the decision relied on by the applicant to justify the invocation of extraordinary power of this Authority has no bearing on the case under consideration. It is a settled law that in contractual matters, the Writ Court has very limited jurisdiction. Therefore, unless it is shown that decision-making process in the allotment of a particular contract suffers from arbitrariness and unreasonableness, it would not be open for the Writ Court to interfere with the decision of the Executive Authority in settling the contract. 39. In Tata Cellular v. Union of India [1994)] 6 SCC 651), Hon'ble Supreme Court held as follows: - "the terms of invitation of tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract". 40. In Raunag International Ltd. v. IBI [1991] 1 SCC 492, the Hon'ble Supreme Court has reiterated the principle governing principles of judicial review and held that Writ Court would not be justified in interfering commercial transaction in which the State is one of the parties except where there....
X X X X Extracts X X X X
X X X X Extracts X X X X
....44. A bare perusal of Section 60 of the Code, Section 60 (5) (c) of the said Code in particular, would reveal that this authority has limited jurisdiction to entertain certain matters arising out of or in relation to insolvency resolution or liquidation proceeding of the corporate debtor or corporate person under the Code. In that view of the matter, in my considered view, it is not correct to say that this Authority has no jurisdiction at all under the Code to entertain the application under consideration. 45. However, it needs to be remembered here that in a proceeding under IBC, the jurisdiction of this Authority, being supervisory in nature, needs to be invoked only sparingly, and that too, when it is decisively established that an extraordinary situation has arisen requiring the Adjudicating Authority to invoke its extraordinary power conferred on it under the Code. This is more so because of the fact that under the IBC, several statutory authorities having expert and specialized knowledge are put in place to aid the Adjudicating Authority in executing various schemes under the Code and the Rules framed thereunder. 46. Therefore, the actions/deeds of those authorities---....
X X X X Extracts X X X X
X X X X Extracts X X X X
....D was party) to operate as a player in the oil sector has now been lapsed and the possibility of renewal of such a license is a distant dream at the moment. 51. Since the basic business of the CD now confines to the tea industry, some conditions requiring some experience or expertise in the tea industry ought to have been incorporated in 1 (a) of the category (A) of the eligibility criteria. Unfortunately, despite the CD being a player doing business in the tea industry having as many as 14 gardens in its fold in the State of Assam, no criterion specifying experience and expertise in the field of tea industry has been incorporated in the notice inviting Eol from the prospective ARPs. 52. Such failure to include the experience and expertise as one of the criteria in the notice inviting Eol from the PRAs---according to the applicant --- is suicidal since anyone who wants to participate in the CIRP as ARP must have such experience and expertise otherwise it would be a well-nigh impossibility to turn the CD around to a profitable enterprise in days to come. This is more so since tea industry is a labour intensive industry susceptible to various uncertainties of enormous size and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en doing such business over a long period of time with great success. However, it has unsuccessfully entered into the oil sector only to suffer serious setback. 58. What is worse is that the CD along with Canoro Resources Limited (CRL), a Canadian based Company, entered into a consortium arrangement to venture into oil exploration. But then, the Govt, of India had granted the license in that regard in name of CRL. However, such a license has lapsed in the meantime. Therefore, according to the applicant it is not correct to say that the CD had also been in the business in oil sector too. 59. In support of such contention, my attention has been drawn to the additional written argument filed on behalf of the applicant during the course of arguments. The information in the additional affidavit had strongly supported such contention, which requires me to conclude that the CD no longer doing exploration activities. For ready reference, the relevant part of the additional affidavit is reproduced below: - "1. To indicate the extent of the Assam Company Limited's ventures into the oil sector, documents nos. 1 and 2 are appended herewith. The same are Annual Reports of the Ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s that none of the major players in the tea industry in India would be able to participate in CIRP in question, although the CD ---which is sought to be revived---is basically a tea company, now reeling under plethora of problems of awful dimension. Therefore, the exclusion of the major tea companies perhaps may not be in the best interest of the CD awaiting revival on the basis of best of resolution plant to be submitted by prospective resolution applicants. 63. Coming back to the contention that the ratio between the debts incurred by the CD and the minimum NTW fixed corporate for participating in CIRP is absurd and illogical, I have found that such contention too cannot be easily brushed aside. The comparative chart of eligibility criteria for major companies undergoing CIRP, which was annexed as Exhibit - H to the application reveals that in most of the cases where CDs are undergoing CIRP, the ratios between the minimum NTW fixed for corporate and the debts incurred by the company range between 1: 15 to 1: 60. 64. However, in the case in hand, such ratio appears to be 1: 3.5. Therefore, when one compares the ratio between the debts and the minimum NTW for corporates in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oner than later. 69. It is worth noting here that referring to the note of the 1(a) of the category A of eligibility criteria for resolution applicant (vide Annexure-A), it has been submitted for and on behalf of the RP/CoC that said eligibility criteria allows two or more companies to form a SPV and to participate in the bidding. Therefore, it is not correct say that any company whose minimum NTW is less than 400 crores is not allowed to participate in the CIRP. 70. On considering such submission in the light of material on record, it is found that such an argument too is found unequal to the task, assigned. It is for the reason that I have already found that fixation of minimum NTW for corporate for participating in the CIRP at Rs. 400 crores is found to be quite arbitrary and unreasonable. My discussion hereinbefore makes such position very clear and same needs no further restatement 71. Since the very fixation of minimum NTW for corporate for participating in the CIRP at Rs. 400 crores is held to be arbitrary and consequently illegal, it is irrelevant to argue that two or more companies may come together to form a SPV to attain such qualification in order to participat....