TaxTMI 
TaxTMI 
2018 (11) TMI 803
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....Amit Sibal, Senior Advocate with Mr. Nakul Sachdeva, Mr. Somesh Dhawan, Mr. Pranshu Paul, Mr. Soham Kumar and Mr. Avinash Amarnath, Advocates for the RP with Mr. Vijay Iyer, RP in person For The Respondents : Mr. Arun Kathpalia and Mr. Gopal Subramanium, Senior Advocates with Ms. Misha, Mr. Manu Nair, Mr. Siddhant Kant, Ms. Bani Brar, Ms. Shantanu Chaturwedi, Ms. Srishti Khare and Ms. Jasveen Kaur, Advocates for Rajputana Properties Pvt. Ltd. Mr. Sanjiv Sen and Mr. Tushar Mehta, Senior Advocates along with Mr. R. Sudhinder, Mr. Soorjya Ganguli, Ms. Nimita Kaul, Ms. Amita Sarkar and Mr. Sumant Batra, Advocates for Committee of Creditors. Mr. Amit Sibal, Senior Advocate with Mr. Nakul Sachdeva, Mr. Somesh Dhawan, Mr. Pranshu Paul, Mr. Soham Kumar and Mr. Avinash Amarnath, Advocates for the RP with Mr. Vijay Iyer, RP in person. Mr. Ashish Rana and Mr. Surekh Baxy, Advocates for Export Import Bank. Mr. P.V. Dinesh and Mr. Rajendra Beniwal, Advocates for R-5- SBI. JUDGMENT SUDHANSU JYOTI MUKHOPADHAYA, J. As all these appeals arise out of the order(s) passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata, in 'Corporate Insolvency Resolution....
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....the said order. 8. Mr. Vijay Kumar Iyer, who is the 'Resolution Professional' has preferred Company Appeal (AT) (Insolvency) No. 234 of 2018 against the order dated 2nd May, 2018 in so far it relates to adverse observations made by the Adjudicating Authority against the said 'Resolution Professional'. 9. In the aforesaid background, all the appeals were heard together for disposal. 10. For deciding the issue, it is necessary to discuss all the relevant facts, as detailed below. 11. Mr. Vijay Kumar Iyer- 'Resolution Professional' filed an application under Sections 30 and 31 of the Insolvency and Bankruptcy Code, 2016 ('I&B Code' for short) read with Regulation 39 of the 'Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulations, 2016' for approval of the 'Resolution Plan' for 'Binani Cement Limited'. It was informed that the application is within time and the 'Committee of Creditors' by majority vote approved the 'Resolution Plan' submitted by 'Rajputana Properties Private Limited'. 12. As noticed, number of objections were filed by the Respondents including, 'Binani Industries Limited', a group company of 'Binani Ceme....
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....er for maximisation of value of assets of such persons to promote entrepreneurship, availability of credit, and balance the interests of all stakeholders. The recent Ordinance explicitly aims to promote resolution over liquidation. 2. The objective of the 'I&B Code' is Resolution. The Purpose of Resolution is for maximisation of value of assets of the 'Corporate Debtor' and thereby for all creditors. It is not maximisation of value for a 'stakeholder' or 'a set of stakeholders' such as Creditors and to promote entrepreneurship, availability of credit and balance the interests. The first order objective is "resolution". The second order objective is "maximisation of value of assets of the 'Corporate Debtor'' and the third order objective is "promoting entrepreneurship, availability of credit and balancing the interests". This order of objective is sacrosanct. In the matter of "Arcelor Mittal India Pvt. Ltd. v. Satish Kumar Gupta and Ors.", the Hon'ble Supreme Court observed that "the 'Corporate Debtor' consists of several employees and workmen whose daily bread is dependent on the outcome of the CIRP. If there is a resolution applicant who can continue to ....
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....rporate persons, ....for maximisation of value of assets of such persons to.... balance interests of all stakeholders. It is possible to balance interests of all stakeholders if the resolution maximises the value of assets of the 'Corporate Debtor'. One cannot balance interest of all stakeholders, if resolution maximises the value for a or a set of stakeholder such as 'Financial Creditors'. One or a set of stakeholders cannot benefit unduly stakeholder at the cost of another. d. The 'I&B Code' prohibits any action to foreclose, recover or enforce any security interest during resolution period and thereby prevents a creditor from maximising his interests. e. It follows from the above: i. The liabilities of all creditors who are not part of 'Committee of Creditors' must also be met in the resolution. ii. The 'Financial Creditors can modify the terms of existing liabilities, while other creditors cannot take risk of postponing payment for better future prospectus. That is, 'Financial Creditors' can take haircut and can take their dues in future, while 'Operational Creditors' need to be paid immediately. iii. A creditor cannot maximise his o....
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....n of additional resources in cash or kind over time; etc. Each plan has a different likelihood of turnaround depending on credibility and track record of 'Resolution Applicant' and feasibility and viability of a 'Resolution Plan' are not amenable to bidding or auction. It requires application of mind by the 'Financial Creditors' who understand the business well. It is not recovery: Recovery is an individual effort by a creditor to recover its dues through a process that has debtor and creditor on opposite sides. When creditors recover their dues - one after another or simultaneously- from the available assets of the firm, nothing may be left in due course. Thus, while recovery bleeds the 'Corporate Debtor' to death, resolution endeavors to keep the 'Corporate Debtor' alive. In fact, the 'I&B Code' prohibits and discourages recovery in several ways. It is not liquidation: Liquidation brings the life of a corporate to an end. It destroys organisational capital and renders resources idle till reallocation to alternate uses. Further, it is inequitable as it considers the claims of a set of stakeholders only if there is any surplus after satisfying the claims of a prio....
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....Creditors' such as, 'Edelweiss Asset Reconstruction Company Limited', 'IDBI Bank Limited', 'Bank of Baroda', 'Canara Bank', 'Bank of India' and 'State Bank of India' has been provided with 100% of their verified claim, the 'Resolution Applicant' ('Rajputana Properties Private Limited') has given lesser percentage to Export-Import Bank of India (72.59%) and State Bank of India-Hong Kong (10%). Discrimination has been made on the ground that some of the 'Financial Creditors' are direct exposure to the 'Corporate Debtor' or some of the 'Financial Creditors' to whom the 'Corporate Debtor' was guarantor. Even the guarantors who are treated to be the 'Financial Creditors', such as 'IDBI Bank Limited (Dubai Branch)', 'Bank of Baroda (London)', 'State Bank of India (Bahrain)', 'Syndicate Bank' have been provided with 100% proposed payment of their verified claim but the 'Export-Import Bank of India' and the 'State Bank of India (Hong Kong)' who are similarly situated have been discriminated. 20. Learned Senior Counsel appearing on behalf of the 'Rajputana Properties Private Limited' submitted that the 'Exim Bank' has been allotted 72.59% as the principal borrower is 'Binani Industries L....
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....olution Plan' were forced to vote in favour to ensure that the liquidation value is not paid to one or other 'Financial Creditors', which is almost "Nil". 26. Plea taken by Mr. Arun Kathpalia, learned Senior Counsel for 'Rajputana Properties Private Limited' that the intent of the legislature is to bind 'minority Financial Creditors' with the decision of the 'majority Financial Creditors' is not based on basic principle of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulations, 2016. 27. In "Central Bank of India Vs. Resolution Professional of the Sirpur Paper Mills Ltd. & Ors.─ Company Appeal (AT) (Insolvency) No. 526 of 2018", this Appellate Tribunal while noticed the provisions of Regulation 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulations, 2016, observed and held as follows: "8. From the aforesaid provisions of I&B Code it is clear that the Board may make regulation but it should be consistent with the I&B Code and rules made therein (by Central Government) to carry out the provisions of the Code. Therefore, we hold that the provisions....
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....ed that the 'Committee of Creditors' had extensive negotiations and consultations with the 'Rajputana Properties Private Limited' on the ground that it was the highest 'Resolution Applicant' and also obtained certain clarification; after due deliberation voted in favour of the 'Resolution Plan' of the 'Rajputana Properties Private Limited' in its meeting held on 14th March, 2018. At the same time the 'Committee of Creditors' discriminated with the other 'Resolution Applicants' which will be evident from the fact that the proposal for negotiation and better proposal given by the 'Ultratech Cement Limited' was not at all considered though it was submitted on 8th March, 2018 i.e. much prior to the approval of the plan (14th March, 2018). The 'Committee of Creditors' have taken plea that the revised offer given by 'Ultratech Cement Limited' was merely an e-mail with an offer. The other plea taken was that the offer was not made in accordance with the 'process document' and if it is considered then it would be a deviation of the process laid down in the 'process document' by the 'Committee of Creditors'. Third objection was that the offer was beyond the time as stipulated under the 'I&B....
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....utana Properties Private Limited' on 7th March, 2018 but refused to notice the revised offer submitted by 'Ultratech Cement Limited' on 8th March, 2018 i.e., much prior to the decision of the 'Committee of Creditors' (14th March, 2018). 35. The clarification matrix is based on the terms in the process documents. The PREFACE of the Clarifications to 'Resolution Applicants' read as follows:- 1. This document is being issued to provide certain clarifications on the illustrative list of parameters set out in Annexure 1 to the Process Document dated December 20,2017 ("Process Document") that may be considered for the purpose of evaluation of the Compliant 'Resolution Plan' submitted by the Resolution Application ("RA"). Please note that the clarifications mentioned herein are not meant to be exhaustive. The CoC reserves the right, in its sole discretion, to provide further clarifications or delete or modify the same. 2. All terms of the Process Document shall continue to apply and be effective. Therefore, it is evident that the aforesaid clause provides that the 'Committee of Creditors' can delete or modify the clarification at any time before 'Resolution P....
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....ion Professional' can review the 'Resolution Plan' and the 'Committee of Creditors' is entitled to negotiate and modify with consent of the 'Resolution Applicant'. To apply this clause there is no time limit prescribed except that the 'Resolution Process' should be completed within the stipulated period of 180 days or maximum 270 days. 40. The 'Committee of Creditors' have failed to notice the aforesaid 'process document' and the provision of the 'I&B Code'. Only considering one of the 'Resolution Plan' of 'Rajputana Properties Private Limited' and ignoring the other 'Resolution Plans' including that of the 'Ultratech Cement Limited' which are in consonance with Section 30(2) for the purpose of negotiation and for maximization of the value of the assets. Non-application of mind by the 'Committee of Creditors' and discriminatory behavior in approving the plan submitted by the 'Rajputana Properties Private Limited' is apparent. 41. It is desirable to notice the financial terms of the 'Resolution Plan' of 'Ultratech Cement Limited', relevant of which are as follows: "FINANCIAL TERMS OF THE RESOLUTION PLAN OF ULTRATECH CEMENT LTD. S. No. Particulars Ver....
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....ancial Creditors' and the 'Operational Creditors' have been paid 100% of dues except the related parties. In the 'Resolution Plan', the 'Ultratech Cement Limited' agreed to pay further interest @10% per annum quarterly to rest of the 'Financial Creditors' for the entire resolution period till the date of payment. In the aforesaid background, interest has been calculated to the 'Corporate Debtor' as on 30th April, 2018. 43. From the two 'Resolution Plans', it will be clear that the 'Rajputana Properties Private Limited' in its 'Resolution Plan' has discriminated some of the 'Financial Creditors' who are equally situated and not balanced the other stakeholders, such as 'Operational Creditors'. Therefore, the Adjudicating Authority has rightly held the 'Resolution Plan' submitted by 'Rajputana Properties Private Limited' to be discriminatory. Resolution Plan of the 'Ultratech Cement Limited' 44. Mr. Gopal Subramanium, learned Senior Counsel appearing on behalf of the 'Rajputana Properties Private Limited' while requested to accept the 'Resolution Plan' as approved by the 'Committee of Creditors' submitted that the process of Insolvency Resolution is in the domain of 'Committe....
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....solution Plan' submitted by the 'Resolution Professional' on 7th March, 2018 before the 'Committee of Creditors' was made known to the 'Ultratech Cement Limited' who submitted its revised plan on 8th March, 2018. 50. From the record it will be evident that 'Ultratech Cement Limited' always offered for revision of its 'Resolution Plan' and having noticed that an opportunity given to the 'Rajputana Properties Private Limited' on 7th March, 2018, it submitted the revised offer on 8th March, 2018. The revised offer of 'Ultratech Cement Limited' is Rs. 2,427 Crores as against the offer of the 'Rajputana Properties Private Limited' which is Rs. 2,224 Crores. Thereby there is a gap of Rs. 203.1 Crores. 51. It was submitted that on 13th March, 2018, the 'Resolution Professional' was furnished the forensic report submitted by M/s. HariBhakti & Co., a well-known forensic auditor appointed by the 'Resolution Professional' to carry on forensic audit to identify preferential, undervalued, fraudulent and suspect transactions. However, such issue cannot be decided in this appeal, in absence of specific pleading of relevant facts. 52. It is alleged that the 'Ultratech Cement Limited' to b....
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....Solicitor General appeared on behalf of the 'Committee of Creditors' highlighted the general framework and objective of the 'I&B Code', which we have already discussed in the preceding paragraphs. 57. Learned Solicitor General referred to date of advertisement dated 13th October, 2017 inviting prospective lenders, investors and other person(s) to put forward the 'Resolution Plans' for the 'Committee of Creditors' to consider. It was submitted that the 'Committee of Creditors' always followed a fair and transparent procedure to select the 'Resolution Plan' pursuant to the object of the 'I&B Code' i.e., the maximization of value of assets of the 'Corporate Debtor'. 58. It was submitted that despite two proceedings before two different authorities i.e., the Adjudicating Authority and this Appellate Tribunal, the 'Committee of Creditors' continued to follow the same procedure. 59. Mr. Tushar Mehta, learned Solicitor General submitted that pursuant to the Adjudicating Authority order dated 4th May, 2018 and this Appellate Tribunal's order dated 15th May, 2018, the 'Committee of Creditors' complied with the directions passed by the Hon'ble Tribunals and held negotiations with bo....
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....nbsp; XXX XXX (h) invite prospective resolution applicants, who fulfil such criteria as may be laid down by him with the approval of committee of creditors, having regard to the complexity and scale of operations of the business of the corporate debtor and such other conditions as may be specified by the Board, to submit a resolution plan or plans." "36B. Request for resolution plans. (1) The resolution professional shall issue the information memorandum, evaluation matrix and a request for resolution plans, within five days of the date of issue of the provisional list under sub-regulation (10) of regulation 36A to- (a) Every prospective resolution applicant in the provisional list; and (b) Every prospective resolution applicant who has contested the decision of the reso....
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.... can be set aside except for illegality to be shown or if it is without jurisdiction or for some other valid reason. Merely because the promoter wants to pay all dues including the default amount cannot be a ground to set aside the 'Corporate Insolvency Resolution Process'. 67. In many cases, the Hon'ble Supreme Court exercised its power under Article 142 of the Constitution of India taking into consideration the settlement reached between the parties. In one of the case, the Hon'ble Supreme Court observed that the Competent Authority may make provision under their Rules for withdrawal instead of allowing the parties to move before the Hon'ble Supreme Court under Article 142 of the Constitution of India. In view of such observation of the Hon'ble Supreme Court, the Parliament amended the 'I&B Code' and inserted the provision of 12A, which reads as follows: "12A. Withdrawal of application admitted under section 7, 9 or 10.─ The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety per cent voting share of the committee of creditors, in such ma....
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....al'. iv. The approval of the 'Resolution Plan' is in the domain of the 'Committee of Creditors' and not that of 'Resolution Professional' and, therefore, if the 'Resolution Plan' provides for the mandatory contents and is in accordance with the 'I&B Code' even if in case a 'Resolution Plan' does not provide for full satisfaction of claims of 'Operational Creditors', in absence of any power of the 'Resolution Professional' to reject such 'Resolution Plan', the 'Resolution Professional' cannot be blamed. The Adjudicating Authority has failed to notice the aforesaid fact and made adverse comments against the 'Resolution Professional' by impugned order dated 2nd May, 2018 which are uncalled for. 70. The Hon'ble Supreme Court vide its order dated 2nd July, 2018, while remitted the matter to this Appellate Tribunal, also directed to transfer the insolvency petition from the Adjudicating Authority to this Appellate Tribunal for passing appropriate order in accordance with law. 71. After decision of the Adjudicating Authority by impugned order dated 2nd May, 2018, the 'Committee of Creditors' held its 17th Meeting on 28th May, 2018 and considered the revised plan submitted b....