TaxTMI 
TaxTMI 
TaxTMI 
2019 (9) TMI 1304
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.... Resolution Professional (for brevity 'RP?) under Sections 30(6) & 31(1) of the Insolvency and Bankruptcy Code, 2016 (for brevity 'the Code') read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation, 2016 (for brevity 'Regulations, 2016) with a principal prayer of accepting the resolution plan approved by the Committee of Creditors (for brevity 'CoC') submitted by JSW Steel Limited who is regarded as 'H1 Resolution Applicant' (for brevity 'JSW'). A further relief has also been sought to grant various concessions as envisaged in the resolution plan and approved by the CoC. These concessions have been duly extracted under List B of Section 1.12 of Part B of the resolution plan. (ii) C.A. No. 286(PB)/2019 filed by the Ex-Management of the Corporate Debtor prays for supply of copies of resolution plan, amendment submitted till date (application was filed on 20.02.2019) for issuance of direction to the Resolution Professional to provide all documents which have been furnished to Members of Committee of Creditors till date along with the valuation report. (iii) T....
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....ents, data and information in relation to the Corporate Debtor and the ongoing CIR process were provided to potential resolution applicants. The RP claims that he prepared an Information Memorandum in accordance with the provisions of the Code and uploaded the same on the VDR, for ready reference. 4. The RP has further disclosed that in obedience to Regulation 35 of the CIRP Regulations, he appointed two registered valuers, namely (i) Duff and Phelps India Private Limited, and (ii) Price Waterhouse Co. LLP, to ascertain the liquidation value & fair value of the Corporate Debtor. 5. Eventually Tata Steel Limited and JSW Steel Limited submitted their resolution plans. Liberty House Petition And Order Passed By The Adjudicating Authority-NCLT 6. The CoC refused even to open the resolution plan submitted by the Liberty House Group Pte. Ltd. (for brevity 'Liberty House'). The reason for rejection of Resolution Plan as conveyed by the RP on 22.02.2018 to the Liberty House was that its resolution plan had been filed after the deadline set-up by CoC which had expired on 08.02.2018. However, the last date conveyed to Liberty House was based on unamended provisions of Section 25 ....
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....onal Creditor' or their representative. While accepting the Resolution Plan, the 'Committee of Creditors' will consider whether the Resolution Applicant(s) have made any provision with regard to other creditors such as 'secured creditors', 'unsecured creditors', 'employees' and 'Government dues'. Though the 'Committee of Creditors' may approve the same with prior permission of this Appellate Tribunal, but not place the same before the Adjudicating Authority and keep it in a sealed cover. It is made clear, as we have passed an interim order of stay, the total period, during which appeal will remain pending before this Appellate Tribunal, will be excluded for the purpose of counting the total period of Corporate Insolvency Resolution Process." The proceedings continued and on 24.05.2018, the Hon'ble Appellate Tribunal issued direction to CoC and stated that the Committee of Creditors and others would follow interim order dated 09.05.2018 and the Committee of Creditors on approval of one or other resolution plan would keep it in seal cover for presentation before the Hon'ble Appellate Tribunal. In view of the interim orde....
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....m. In such case additional plans will be treated to be the part of their respective 'original resolution plans'. IA. No. 1154 stands disposed of. Dasti service is permitted.'" 9. The appeal was finally disposed of by the Hon'ble Appellate Tribunal vide its order dated 04.02.2019. The following directions have been issued by the Hon'ble Appellate Tribunal and the same reads as under:- '47. For the reasons aforesaid, while we are not inclined to interfere with the substantive part of the impugned order dated 23rd April, 2018, set aside part of the order whereby adverse observation has been made against Mr. Mahender Kumar Khandelwal ('Resolution Professional'). 48. The case is remitted to the Adjudicating Authority (National Company Law Tribunal), Principal Bench, New Delhi, for passing appropriate order under Section 31. The 'Resolution Professional' will immediately place the 'approved Resolution Plan' before the Adjudicating Authority for its order. 49. The Adjudicating Authority at the time of consideration of the approved 'Resolution Plan' of 'JSW Steel' will only ensure that all the stakeholders, particul....
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....ide its order dated 01.08.2018 (as quoted in preceding Para No. 8) observed that the issue was to be decided at the time of disposal of the appeal and left it for that stage. 12. However, instead of submitting an 'improved financial offer', 'TSL' chose to file a statutory appeal before the Hon'ble Supreme Court challenging the order dated 1st August, 2018 passed by the Hon'ble Appellate Tribunal. The 'TSL' simultaneously also approached the Hon'ble Appellate Tribunal on 3rd August, 2018 by way of mentioning and sought extension of the timeline for submission of 'revised financial offers'. The Hon'ble Appellate Tribunal orally observed that TSL' may file an application showing its intention to file a 'revised financial offer' and for modification of the order dated 1st August, 2018. Thereafter the 'TSL' filed an IA. No. 1154 of 2018 on 3rd August, 2018 before the Hon'ble Appellate Tribunal seeking extension of two weeks' time for submitting its 'revised financial offer'. 13. Hon'ble the Supreme Court in the meantime dismissed the appeal preferred by 'TSL' on 10th August, 2018. In view o....
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....cument. The plan submitted by 'JSW' emerged as the highest evaluated plan after discussion by CoC on the basis of the evaluation matrix formulated in accordance with Section 25(2) (h) of the Code r/w Regulation 36A of the CIRP Regulations and negotiations were then held with JSW being the highest bidder. The CoC vide its additional affidavit dated 16 August 2018 submitted the scores of the resolution plans to the Appellate Tribunal under a sealed cover. 17. On 03.10.2018 RP received consolidated resolution plan of JSW which was submitted pursuant to negotiation between the 'Core Committee' comprising of small group of lenders formed on the basis of decision taken in the 9th CoC meeting held on 21.02.2018. It was then circulated by him to the members of the CoC on 05.10.2018 and uploaded on the VDR. RP vide its email dated 07.10.2018 along with the notice and agenda, called for a meeting of CoC which was to be held on 10.10.2018 for consideration and approval of the Consolidated Resolution Plan. In meeting of CoC (Exhibit 2) held on 10.10.2018 the consolidated resolution plan was considered wherein further negotiations were held with JSW regarding modifications as p....
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....itors was to be given priority in payment over Financial Creditors. It also claimed compliance with Section 30 of the Code. 21. The RP has further disclosed that in obedience to Regulation 35 of the CIRP Regulations, he appointed two registered valuers, namely (i) Duff and Phelps India Private Limited, and (ii) Price Waterhouse Co. LLP, to ascertain the liquidation value of the Corporate Debtor. Both aforesaid valuers determined the liquidation value of the Corporate Debtor at Rs. 9707 crores and Rs. 9320 crores respectively. As per RP the liquidation value of the Corporate Debtor by averaging the above two values is stated to be Rs. 9,513.63 crores. 22. The RP has then prepared a table at page 17 of the application which contains details relating to various compliances made by him in respect of the Code and CIRP Regulations. The said table is set out verbatim:- SECTION/REGULATION REQUIREMENT CLAUSE OF THE RESOLUTION PLAN Section 29A of the Code The disqualification under Section 29A of the Code should not apply. Annexure 12 of the Approved Resolution Plan Section 30(2)(a) of the Code The Resolution Plan provides for the payment of insolvency resolution process costs in a....
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....same Section 13 of Part A of the Approved Resolution Plan Section 38(3)(e) of the Code The Resolution Plan shall provide that the resolution applicant has the capability to implement the resolution plan Section 1 of Part A read with Schedule 3 and Annexure 1 of the Approved Resolution Plan and Net-Worth Certificate of the Successful Resolution Plan 23. The RP has also highlighted that under List-B of Section 1.12 of Part B of the CoC approved resolution plan, the Resolution Applicant has sought certain reliefs and concessions and submissions have been made that this Tribunal may approve and direct the grant of the reliefs and concessions envisaged in the CoC approved resolution plan (Exhibit 3). 24. The RP has then (at pgs. 19-24) highlighted salient features of the CoC approved resolution plan, which are subject of consideration in these proceedings. 25. Notice of the application being C.A. No. 254(PB)/2019 filed under Section 30 (6) read with Section 31(1) of the Code was issued on 05.03.2019 and three days time was granted to file reply by the Non-Applicant/Respondents. 26. Replies have been filed by the Ex-Management namely Mr. Sanjay Singhal and Ms. Aarti Singhal, Oper....
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....learned senior counsel for the CoC after obtaining instruction from Ms. Srideepa, has stated that a copy of the resolution plan shall be handed over to the erstwhile promoter and the court appointed representative of the operational creditor in good-faith so that hearing may be concluded in a time bound manner. It has also been stated that the resolution plan is not required to be furnished to the operational creditor who do not cross the threshold of 10 per cent and therefore, copy shall be given only to the court appointed representative namely Mr. A.S Chadha, learned senior counsel for operational creditor. It is needless to say that furnishing of the resolution plan is not to constitute any admission on the part of the CoC. The approval of the plan by the CoC was in a manner complied with the law existing on the date of approval and it shall not give rise to any future claim/objections from any other stakeholder on the ground that they were not provided a copy of the resolution plan. 3. However. Mr. Rajiv Nayyar, learned senior counsel for the successful resolution plan applicant has stated that it would not be possible to share the proprietary information which constitutes a....
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....) and 1.13 (vi) respectively. The status of claims under the caption 'TREATMENT OF CLAIMS' in para 2 of the Executive Summary has also been highlighted. The mandatory contents of the resolution plan as given in para 1 under the caption 'PART B. FINANCIAL PROPOSAL' have also been shown to us with the emphasis that the Operational Creditors other than workmen have been treated fairly and attempt has been made to pay them 50% of their admitted claims with a maximum cap of 350 crores. Para 1.4 has been read out to us which shows that total claim filed by the Operational Creditors (excluding workmen) aggregated to INR 2323.32 crores as on 18.09.2018 as per the data room. The claims aggregating to INR 770.35 crores (now 733 crores) have been verified and admitted by the RP. In that regard our attention has been drawn to para 42(h) of the application. Mr. Vashisht submitted that there is detail provided in respect of the contingent liabilities in clause 2.2 (f) under the caption 'Treatment of Creditors' and the same is to be excluded from the list of Operational Creditors. In other words, Operational Creditors are to be a category different than the 'Identified....
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....lution plan(s)', the 'Committee of creditor's may also indicate which is the second best 'resolution plan', that may also be approved if first successful approved plan is not approved by the Adjudicating Authority. (c) The 'Resolution Professional' after approval of the 'resolution plan' will place the same before the Adjudicating Authority for its approval, which may pass appropriate order in accordance with law but not give effect to the approval without prior permission of the Appellate Tribunal. (d) Any decision taken by the 'Committee of Creditors' or the Adjudicating Authority shall be subject to the decision of this Appellate Tribunal." 32. Mr. Vashisht has also pointed out that the plans were submitted to the Hon'ble Appellate Tribunal on 17.08.2018 in a sealed cover along with the voting results showing approval by voting share of 97.12% and the Hon'ble Appellate Tribunal has passed an order on 04.02.2019 issuing direction to the Adjudicating Authority-NCLT. According to Mr. Vashisht the Hon'ble Appellate Tribunal has imposed restriction on the parties not to reagitate such arguments before the Adjudicating Autho....
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....en. Notices were also sent to the Operational Creditors participants. Our attention has also been drawn to agenda for the 14th meeting particularly Items No. 11 & 12 concerning Evaluation of Resolution Plans by CoC, Discussions and declaration of H-1 Resolution Applicant; and decision on modalities of negotiation with H-l Resolution Applicant. 34. The RP also sent an e-mail on 15.06.2018 to all the stakeholders including the promoters along with the minutes of 14th meeting of the CoC held on 11.06.2018 and apprised them that presentation made by SBI Caps, Liberty House Group and JSW Steel Ltd. are hereby enclosed for your reference and the password for Liberty House presentation is Ihgconfidential 1506. The e-mail reads as under:- 'Please find attached herewith the minutes of the 14th meeting of committee of creditors of Bhushan Power & Steel Ltd. held on 11th June, 2018. Please note that the presentations made by SBI Caps, Liberty House Group and JSW Steel Limited are hereby enclosed for your reference and the password for Liberty House presentation is: Ihgconfidential 1506 Also, despite several reminders, Tata Steel Limited is yet to share their presentation. Hence, it....
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....y Liberty House and JSW had already been provided vide e-mail dated 15.06.2018 and the presentation made by TATA has been provided on 09.07.2018 with a object of seeking suggestions. The RP requested them to depute one of their representatives to visit the offices of the legal counsel of the RP and to peruse the resolution plans and to give their suggestions relevant to them. It was pointed out that the resolution plan would remain available for their perusal at Shardul Amarchand Mangaldas ('SAM'), Amarchand Towers, 216, Okhla Phase III, Okhla Industrial Estate, New Delhi. A request was made to them to send a signed (duly stamped) confidentiality undertaking as per draft attached by an e-mail and to bring signed original at the time of visit. In response to the e-mail Mr. R.P. Goyal has sent the reply e-mail which reads as under:- 'Reference to E-mail dated 21.07.2018, with regard to inspection of Resolution Plans. It is to inform you that the undersigned, due to some unavoidable circumstances' is unable to attend the office of Shardul Amar Chand Mangal Dass today. This is for your kind information please. However, the detailed response to your e-mail is being....
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....nder Section 31 deals with matters at the stage of approval of the Resolution Plan whereas under Section 60(5)(c), the Tribunal enjoys jurisdiction to entertain or dispose of any question of priorities or any question of law or facts, arising out of or in relation to the Insolvency Resolution or liquidation proceedings of the corporate debtor or corporate person under this Code. 39. According to the learned counsel the facts of present case are entirely distinguishable in material particular than that of Vijay Kumar Jain's case (supra). Therefore, the said decision would not apply to the case in hand, because "substantial compliance" has already been made and no prejudice has either been caused or pleaded. 40. Learned Counsel further submitted that Mr. Singhal, the Ex-Director has filed his affidavit that the Resolution plans were discussed by all the members of the CoC. He maintained that once he is aware of it and solemnly affirms so, then why he did not attend a single meeting. It is submitted that copies of the presentations were given to them. Their representatives attended the meetings. It is submitted that if some objection had been raised as regards supply of some doc....
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....d all documents, have no right to comment on 'Viability or feasibility'. The law would not permit them. 45. Learned counsel has cited various authorities, to prove that substantial compliance has been made in this case. He placed reliance on the following judgments: CCE v. Hari Chand Shri Gopal [2011] 1 SCC 236, M.C. Mehta v. UOI [2000] 23 SCL 258 (SC) and Dharampal Satyapal Ltd. v. Dy CCE [2015] 8 SCC 519. Arguments on Behalf of Jsw Steel Ltd,- H1 Applicant 46. Mr. Rajiv Nayar, learned Senior counsel on behalf of JSW Steel Ltd. has supported C.A. No. 254(PB)/2019 filed by RP under Sections 30 and 31 of the Code, 2016. Highlighting the credentials of JSW Group, Mr. Nayar has submitted that it has turnover of USD 13 billion, and has diversified interests in mining, carbon steel, power, industrial gases, port facilities and cement businesses. In support of the resolution plan, Mr. Nayar has pointed out that initially JSW submitted its resolution plan on 08.02.2018 and improved the financial proposal on 31.07.2018 and 13.08.2018 pursuant to the directions of the Hon'ble National Company Law Appellate Tribunal in the appeal titled as Tata Steel Ltd. v. Liberty House Grou....
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....lows are insufficient to pay CIRP Costs, then JSW has undertaken to pay the CIRP Costs. The Workmen's dues are to be paid 100 per cent of the admitted claims amounting to Rs. 9.86 crores in priority to the Financial Creditors in the same fashion. The Financial Creditors are to be paid upfront a sum of Rs. 19,350 crores on a pro rata basis against their admitted claims of Rs. 47,157.99 crores. All the uninvoked bank guarantees issued by the financial creditors are to be counter-guaranteed in full. Accordingly, the Resolution Plan provides for a recovery of 41.03 per cent to the financial creditors. 48. In so far as Operational creditors are concerned the Resolution Plan provides for the payment of 50 per cent of the admitted claims of the operational creditors other than (i) workmen and (ii) such creditors whose liabilities have been identified as 'contingent liabilities' in the books of account of the Corporate Debtor it is subject to maximum of Rs. 350 crores, in proportion to their admitted claims. The total admitted claims of the Operational Creditors as submitted by RP amounted to Rs. 733.76 crores and the payment to such Operational Creditors is to be made within ....
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....oving Financial Creditors which have the largest share in the Admitted Financial Debt are to constitute the "Steering Committee" which shall have the sole obligation to recommend independent persons, to the Reconstituted Board. On the date of approval by the Adjudicating Authority-NCLT the existing board of directors of the Corporate Debtor would be deemed to have resigned and the board would stand vacated; and the persons recommended by the Steering Committee are to be inducted as directors of the Corporate Debtor. During the period between the date of approval and the effective date, the RP is to act as a monitoring professional and perform the duties as were discharged by the RP. 52. Mr. Nayar then made submissions with regard to the supply of a copy of the Resolution Plan to Sanjay Singal and Ms. Aarti Singal who have filed C.A. No. 286/2019. Mr. Nayar has reiterated in sum and substance the submissions made by the counsel for the CoC and the RP and has highlighted the lists of dates and events. 53. Mr. Nayar has also raised very pertinent issues and has argued that in Vijay Kumar Jain's case the directions were issued to supply a copy of the Resolution Plan to a stakehol....
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....e filed an application seeking consideration of such proposals. [C.A. 327 of 2019 filed by the Promoter Applicants. 2. Further, at the hearing dated 05.03.2019 in the present proceedings, a submission was made on behalf of the Promoter Applicants that they be given a copy of the Resolution Applicant's Resolution Plan so that the Promoter Applicants can further improve their settlement proposal if required, on the basis of such Resolution Plan. 3. The Promoter Applicants were always seeking to compete with the Resolution Applicant. In this regard, it is submitted that on 05.07.2018 the Promoter Applicant No. 1 wrote to the RP seeking a copy of the copy of the information memorandum, and Process Document since he intended to submit a resolution plan. [See letter dated 05.07.2018 from Sanjay Singal to the RP] It is relevant to note that, the Hon'ble Appellate Tribunal has Rajputana Properties (P.) Ltd. v. Ultratech Cement Ltd. [2019] 108 taxmann.com 88 (NCL -AT) held that the copy of the resolution plan cannot be given to another resolution applicant. (Para 9) 4. It is submitted that the Promoter Applicants impugned Section 29A before the Hon....
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....pportunity to inspect the Resolution Plan and provide suggestions in a satisfactory manner. 2. In fact, CA 327/2019 filed by the Promoter Applicants contains a comparison (although misleading) of the amounts offered in the settlement proposal and Resolution Plan. From this, it is evident that Promoter Applicants were well aware of the Resolution Plan. 3. Incidentally, in the case of the insolvency resolution process of Essar Steel India Limited ("Essar Steel") wherein the Hon'ble Adjudicating Authority, Ahmedabad Bench, vide its order dated 08.03.2019 in C.P. (IB) Nos. 39 & 40 of 2017, rejected the applications filed on behalf of the members of the suspended board of directors of Essar Steel and the operational creditors of Essar Steel, noting that it was evident from the comparison provided between the resolution plan and the settlement proposal that the suspended board was already well aware of the contents of the resolution plan. [Please see NCLT, Ahmedabad Bench order dated 08.03.2019 in C.P. (IB) Nos. 39&40 of 2017 - Para 3@Pg 57] 4. At no point of time prior to filing of the application CA 286/2019 have the Promoter Applicants approached an....
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....hareholders. [Para 31]. Therefore, the Supreme Court, in its judgment, records that members of the erstwhile Board of Directors, are vitally interested in a resolution plan, as they are often also directors, as such resolution plan then binds them. Therefore, such directors need to see the impact of the Resolution Plan on themselves in their capacity as shareholders and guarantors. [Para 12 @ Pg. 34-35 of V.K Jain] 1. The sections of the Resolution Plan relevant to the erstwhile Board of Directors, in their capacity of being guarantors/shareholders had been given the inspection of to the Promoter Applicants. Further, all discussions on the financials of the Resolution Plan happened in the presence of the suspended Board of Directors/their representatives. The suspended Board of Directors were also given powerpoint presentations on the Resolution Plan. 2. Even at the time of inspection pursuant to the order dated 20.07.2018 passed by the Appellate Tribunal, inspection was given without showing the pages containing proprietary information [page 10, RP's Reply in CA 286/2019 - It is submitted that during the visit of the members of the Board of Directors for inspection of t....
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....Jain's case has come later on, they cannot now turn a volte-face and reopen the concluded issue and they are deemed to have waived their rights. The Promoter Applicants have kept quiet and did not ask for the RP for a copy of the Resolution Plan until 07.02.2019. They did not choose to litigate. 55. Mr. Nayar has submitted that no reliance could be placed on the judgment of Hon'ble Supreme Court in the case Corona Ltd. v. Parvathy Swaminathan [2007] 8 SCC 559, that non-furnishing of Resolution Plan is a jurisdictional fact. A resolution plan which has not been approved by the CoC, if placed before the Adjudicating Authority, goes to the root of the jurisdiction of the Adjudicating Authority. Moreover, no prejudice has been suffered or caused. Mr. Nayar has also submitted with regard to C.A. No. 327/2019 filed by Sanjay Singal and Aarti Singal under Section 60(5) read with Section 12A of the Code wherein a direction has been sought to the RP to place that proposal for settlement dated 20.02.2019 by the Promoter before the CoC for their acceptance and termination of the CIR Process. According to the learned counsel it is a self-serving application and not maintainable, and i....
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.... such information could be withheld and in the absence of complete copy of the resolution plan no effective discussion could have taken place. The compliance as suggested by the counsel for the RP is no compliance in the eye of law and as there is non-compliance with the provisions under Section 31 of the ' Code and approval by the Adjudicating Authority-NCLT must be declined. 3.4 Mr. Chandhiok also submitted that Regulation 39 (3) of the Insolvency Process Regulation stand violated. According to the provisions of Regulation the CoC is obliged to record reasons for approving or rejecting the resolution plan after considering its 'feasibility and viability' and such other factors which may be specified by the IBBI. The CoC has failed to record reasons recording their satisfaction before approving the resolution plan. 3.5. It was then submitted that a revised offer was made by the JSW after 25.07.2018 which got evaluated by the CoC. It shows that suggestions were made by CoC to amend the resolution plan of JSW. Some negotiations in the Core Committee were held on 27.08.2018. This resulted in a consolidated resolution plan dated 3.10.2018. Learned counsel has also argu....
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....ons 31 and 34(4) of the Code. It is submitted that no part of the plan has been furnished to them. It is however candidly admitted by the counsel that the Resolution Plan was only shown to them as it was before the approval and their suggestions had been obtained but it was not brought to their knowledge as to whether their suggestions have been duly incorporated and their interests have been safeguarded or not. It is submitted that the stage of securing an "undertaking" as ruled by the Hon'ble Supreme Court was only at the initial stage when it was not sure how many resolution plans would be submitted, and that at this stage there was no confidentiality involved. It has been further submitted that the copy of the plan should be given in advance to the Operational Creditors to make their suggestions as regards safeguarding their interest and also be given to them to see whether the suggestions made by them have been given effect to or not and to safeguard their interests. Learned counsel however admitted that to protect the sanctity of the CIR process, this information is confidential but at the stage of Section 31, this will not affect the process adversely in any manner. As r....
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....by adding specific invoices. 62. Having heard the learned counsels for all the stakeholders at great length and having perused the record with their able assistance and the minutes of meetings of the CoC we find that various issues emerge for determination by this Tribunal. It is also pertinent to mention that the Resolution Professional has filed Form-H showing substantial compliance with various provisions of the Code, Rules and Regulations. These are the correct dates and events. The same is also set out below for facility of reference. 25 .07.2018 The RP wrote to the members of the suspended board of directors and their representatives inviting them to see the resolution plans at the offices of the legal counsel for the RP. (CoC's compilation, p. 159) 25.07.2018 RP Goyal confirming that he shall come for inspection of the resolution plans on 26.07.2018. He also sought a copy of the resolution plans and all accompanying documents filed by the resolution applicants. (Promoter Applicants' reply to CA 254, p. 67) 25.07.2018 RP sent the notice for the CoC meeting dated 27.07.2018, along with the agenda and explanatory notes, to the CoC and the members of the suspended....
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....rs, the individual resolution applicants and the suspended Board of Directors at the CoC meeting on 14.08.2018. The Promoter Applicants (Sanjay Singal and Aarti Singal) did not attend such meeting. Two other members of the suspended board of directors (Ram Naresh Yadav through authorised representative and Hardev Chand Verma) attended such meeting. The effective part of the offer made by JSW Steel was read out (see pages 424-425 of CoC's compilation). Further, at such meeting, the CoC's legal counsel raised the following query for clarification from JSW re-personal and corporate guarantees: The legal counsel of CoC then raised the following queries for clarification from Resolution Applicant: "(d) With regard to enforcement of personal and corporate guarantees, the Committee wanted to be very clear that in their Resolution Plan, the financial creditors shall continue to have the right to recover from personal and corporate guarantees which were executed by existing promoters. It was further stated that the Committee duly noted the safeguard that JSW seeks and they are ready to provide for subrogation rights to be extinguished in the same clause ..." Further, Resolut....
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....e suspended board of directors during or after the meeting to such voting; and (2) No objection taken before the Hon'ble Almellate Tribunal or Hon'ble Adjudicating Authority against conduct of such voting. (2) the Promoter Applicants, i.e. Sanjay Singal and Aarti Singal chose to remain absent, despite the specific invitation from the RP. Only Ram Naresh Yadav (present through authorised representative) and Hardev Chand Sharma present from the suspended board of directors. 11.10.2018 Addendum Letter was circulated by the RP by e-mail to the suspended board of directors. (CoC's compilation, pp. 518-519) No objection raised to the Addendum Letter. 63. We may proceed to discuss the issues: RE-SUPPLY OF A COPY OF RESOLUTION PLAN TO THE ERSTWHILE MEMBERS OF BOARD OF DIRECTORS 64. The first and foremost issue raised before us pertains to supply of a copy of a resolution plan to the erstwhile members of Board of Directors. In order to find out whether substantial compliance has been made of this requirement as per the law laid down in Vijay Kumar Jain's case (supra) or not. In that few facts may first be seen. 65. In accordance with the provisions of Section 24(2) t....
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....Sanjay Singal through representative MR. Arun Kumar Agarwal Mr. Ravi Prakash Goyal Mr. Ram Naresh Yadav through representative Mr Amarjeet Singh 18. Email dated 10.8.2018 14.8.2018 Present Mr. Ram Naresh Yadav through representative MR. Arun Kumar Agarwal Mr. Hardev Chand Verma 19. Email dated 7.10.2018 10.10.2018 Present Mr. Ram Naresh Yadav through representative MR. Arun Kumar Agarwal 20. Email dated 27.12.2018 3.1.2019 Present Mr. Ravi Prakash Goyal Mr. Ram Naresh Yadav through representative MR. Arun Kumar Agarwal Mr. Hardev Chand Verma Mr. Dinesh Kumar Yadav through representative Mr. Amarjeet Sharma 21. Email dated 5.2.2018 8.2.2019 Present Mr. Ravi Prakash Goyal Mr. Ram Naresh Yadav through representative MR. Arun Kumar Agarwal Mr. Hardev Chand Verma through representative Mr V.P. Chhabra Mr. Dinesh Kumar Yadav through representative Mr. Amarjeet Sharma 22. Email dated 16.3.2018 19.3.2019 Present Mr. Ravi Prakash Goyal Mr. Hardev Chand Verma Mr. Dinesh Kumar Yadav through representative Mr. Amarjeet Sharma 23. 23.5.2019 Present Mr. Sanjay Singal through authorised representative Mr. Arvind Kumar Gupta Mr. Ram Na....
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....the directions issued by the Hon'ble NCLAT. 70. It is further clear from the 17th meeting of CoC that the views of the erstwhile members of Board of Directors were solicited by the RP and they made the following observations: "The Legal Counsel of RP sought views of the suspended Board of Directors as per the resolution plans. The Representative of suspended BoD pointed out the following:- i. The Resolution Plan was shown to them a day before the meeting however, certain pages of the Resolution Plan were not shown to them. ii. In one of the Resolution Plans, it was mentioned that the employees on roll of the Company shall be retained, however, there are more than 10,000 employees on Contractual basis. He suggested that all the employees shall be retained in the Company irrespective of whether they are Contractual or permanent. iii. He enquired as to how is the preference share capital is being taken care of; whether Companies Act, 2013 is being complied with or not; and whether the Process is being run as per Companies Act, 2013; to which the Legal Counsel of the RP responded that since it is an implementation aspect, it shall be in compliance with law. iv. He enquir....
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....nts of the resolution plan by 9:00 am on 31st July, 2018 (Tuesday), then those offers will be evaluated at the CoC meeting on Tuesday itself and the outcome will be submitted to the Adjudicating Authority for approval after voting. The representative of Andhra Bank further stated that opportunity must be given to the representative of operational creditors as well as to see the Resolution Plans on that day to which the legal counsel of RP responded that the representative of operational creditors has already seen the plans, it is only the increased number that needs to be shown and the same can be shown on the same day. Further, the representative of JSW Steel Limited stated that they have no objection to the opportunity provided to revise offers by Tuesday, however, they raised an objection with regard to sharing the offers with other Resolution Applicants to which the legal counsel of CoC responded that the offers will be shared with the members of the Committee, operational creditors and suspended Board of Directors only and not with the other Resolution Applicants." (emphasis added) 73. A perusal of the aforesaid extracted minutes would show that the CoC has been a vibrant h....
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....meeting under Item No. 5 and the same reads as under: "The legal counsel of RP requested JSW to consider the request of CoC, a body with fiduciary duty, to make the payment to operational creditors upfront so that the operational creditors could also be benefitted or clarification could be sought from Adjudicating Authority at the time of submission of JSW resolution plan. The representative of operational creditors requested the representatives of JSW to consider the payment of amount offered in the resolution plan to be paid upfront prior to financial creditors as a part of the amendment under Regulation 38 and further requested JSW to pay full amount to the operational creditors. The representative of JSW responded that the resolution plan was very fair to all the stakeholders involved in the process and they had deliberated the matter earlier as well amongst its internal management and also negotiated on the same and would rather stick to the payment plan as proposed in the resolution plan, however, if the laws requires the operational creditors to be paid upfront then they shall follow the procedure as prescribed under law. The representative of JSW stated that the amount ....
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....added) The representative of JSW stated that this is the very reason why the CoC had negotiated with respect to the payment of operational creditors and as a part of the negotiation, they have considered the request of CoC and have made a fair proposal to the operational creditors which complies with law including the CIRP Regulation amendment dated October 5, 2018. The representative of SBI also stated that the operational creditors are getting paid more than financial creditors in terms of percentage and hence it is a fair Resolution Plan. Subsequently, he requested the representative of JSW to consider upfront payment to the operational creditors to which the representative of JSW responded that they have considered the request of CoC and reiterated that their Resolution Plan is fair and in compliance with law however they also stated that the law is new and there may be an ambiguity in interpretation. He also seconded the observation of the legal counsel of RP and stated that if Hon'ble NCLT, while considering the Resolution Plan, does believe that the law means that all amounts payable under the Resolution Plan are considered as 'amount due' and needs to be cleare....
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....discussed earlier in the meeting and the Compliance Certificate under Section 30(2) of IBC shall be circulated by RP along with the Minutes: "RESOLVED THAT pursuant to Section 30(4) of Insolvency & Bankruptcy Code, 2016 and in accordance with rules and regulations made thereunder, the approval of Committee of Creditors be and is hereby accorded to the Resolution Plan submitted by JSW Steel Limited on October 3, 2018 (as modified by the Letter dated October 10, 2008 from JSW Steel Limited to the Regulation Professional) as per the requirements of the Code and CIRP Regulations (including with such modifications that members of CoC deem fit). RESOLVED FURTHER THAT the select group of members, constituting State Bank of India, Punjab National Bank, Bank of India, Bank of Baroda and Axis Bank are authorized to finalize the Letter of intent, and the Resolution Professional is authorized to issue the Letter of intent, as finalized by the select group of members, to JSW Steel Limited. FURTHER RESOLVED THAT the Resolution Professional is hereby authorized to apply to National Company law Tribunal (NCLT), New Delhi for approval of the above said Resolution Plan." There were no furthe....
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.... other matters. There is a stay directed by the Hon'ble Supreme Court on the consideration of the approval application by Hon'ble National Company Law Tribunal ('NCLT'). The legal counsel of RP then requested the legal counsel of CoC to apprise the members on the action taken by them to get the stay removed. Subsequently, the legal counsel of CoC stated the following: * In the matter before Hon'ble NCLAT, the order has been reserved and that it is expected to come in the first half of January, 2018. All the parties have submitted their written submissions post the hearing held on December 20, 2018 and subsequently, circulated to the members wherein the CoC's position on each of the points along with corrections in factual inaccuracies which Tata had put across in their oral pleadings have been stated. The written submissions of other parties are not available since they have been handed over to the Tribunal directly; however, if they receive a copy, the same will be circulated to the members. If the Hon'ble NCLAT passes the order in favour of CoC (given its recent decisions in the case of Binani Cement and others), subject to any appeal being filed b....
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....read out the letter dated 29.01.2019 sent by Mr. Sanjay Singal and Ms. Aarti Singal. The settlement proposal made by erstwhile members of Board of Directors was rejected by Punjab National Bank and State Bank of India who were the largest lenders of the Committee. It is appropriate to mention that Section 12A of the Code requires approval of the 90% of the voting share of the CoC and accordingly, the settlement proposal did not meet the threshold and was rejected. Under the agenda Item No. 9 (ii) discussion took place on the letter of intent and proposal performance guarantee in respect of JSW Steel Ltd. The deliberation with core committee in the meeting held on 05.02.2019 was brought to the notice of the CoC which shows that JSW has scored highest marks in the evaluation criteria thereby declaring them as successful Resolution Applicant. Accordingly, JSW was required to submit performance bank guarantee of INR 100 crores post which LOI was to be issued in favour of JSW. Keeping in view the urgency JSW was given time until 07.01.2019 for submission of the PBG. The concluding para on the aforesaid agenda item reads thus: "The representative of IDBI asked the Legal Counsel of RP o....
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....onal Creditors as well as their authorized representatives for their perusal and each one of them also gave acknowledgement in writing and their comments were noted in the meetings of CoC. It was specifically highlighted that Mr. Amarjeet Sharma, authorized representative of Mr. Sanjay Singal had reviewed all the three resolution plans on 26.07.2018 and has given an acknowledgement to RP. Therefore, adequate opportunity to peruse the resolution plans was given and he had also recorded his suggestion. Obviously, the aforesaid letter by Mr. Sanjay Singal and Ms. Aarti Singal was written after the judgment in the case of Vijay Kumar Jain's (supra) which was pronounced on 31.01.2019. In terms the CoC noted the letter with the observation that there is substantive compliance of principles of natural justice which amounts to giving a copy of the each of the resolution plan to the erstwhile members of Board of Directors. 82. The 22nd meeting of CoC held on 19.03.2019 in agenda Item No. 7 took notice of the proceeding before this Tribunal and the factum of filing application under Section 31 of the Code seeking approval of the resolution plan approved by the CoC submitted by JSW. It a....
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....ion plan to the erstwhile members of Board of Directors which included the resolution plans submitted by JSW Steel Ltd. Tata Steel Ltd. and Liberty House Group. He further acknowledged and confirmed that he was given adequate opportunity to peruse the resolution plan and record his suggestion in respect of the same. A similar acknowledgement and confirmation has been filed by one Ravi Hamirbasiya on behalf of M/s. Jaldi Overseas, Mr. Sumant Batra as authorized representative of Operational Creditor, Ms. Shristi Kapoor, Mr. Kshitsraj and Mr. Nikhil Agarwal on behalf of Operational Creditors and many others on behalf of Operational Creditors filed the acknowledgement and confirmation on 26.07.2018. It is also significant to note that Mr. R.P. Goyal as erstwhile members of Board of Directors also filed similar acknowledgement which is duly signed. All the aforesaid acknowledgement and confirmation show grant of wholesome opportunity which has been availed without a demur and even suggestions have been given by active participation in the CoC as has been noticed in the preceding paras while reading the various minutes of the meetings. 87. It has also come on record that Mr. Sanjay Sin....
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....quire any great elaboration and various citations of Hon'ble the Supreme Court that these principles have stood test of time and even in these proceeding must be followed and applied. We may further observe that technicalities of law must be applied if the object of a statute is advanced namely resolution of stressed assets. The Courts may refuse to apply technicalities to defeat justice or to defect the object of a statute. Accordingly for that reason also the demand for supply of a copy is wholly unwarranted. 89. The conduct of the erstwhile members of Board of Directors is not praiseworthy. The application for obtaining a copy of the resolution was filed before CoC which came as a shot from the blue. It was after availing every opportunity of examining and inspecting resolution plan and, discussing it in CoC in details that the application has been filed merely because the judgment in Vijay Kumar Jain's case (supra) was pronounced on 31.01.2019. Therefore, we find that it is like having your cake and eat it too. Moreover, resolution plan was supplied to them also by Court order dated 29.03.2019. 90. We are further of the view that even the rules of natural justice are ....
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....ned to hold that the erstwhile members of Board of Directors had accepted the position of access to the resolution plan, its close perusal and filing of objection. This was considered as a satisfactory procedure which is as good as supply of a resolution plan and the principles of constructive res judicata explicit from the reading of explanation IV to Section 11 read with Order II Rule 2 CPC are attracted. We are also firmly of the view that no prejudice has been caused to erstwhile members of Board of Directors as the minutes of the meetings of CoC adequately demonstrate their complete participation by raising objections and suggestions. We may also refer to the proviso to Section 24(4) which say that absence of any Director or their representative is not to invalidate proceeding of any such meeting. It is needless to add that notice of each and every meeting has been given and many a time the erstwhile members of Board of Directors have remained absent as is evident from a bare glance on the table extracted above. The process undertaken by the RP and minutes of meetings of CoC conducted by him do not leave any manner of doubt that the process is fair and transparent. Therefore, ....
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....August, 2018 improving the 'financial offer' without compromising the basic para-meters of the 'resolution plans' already submitted by them. In such case additional plans will be treated to the part of their respective 'original resolution plans'." 94. Mr. Nayar also rightly highlighted that the decision taken by the Core Committee were discussed in the CoC meeting which have been noted in the preceding para and were never concealed from the erstwhile members of Board of Directors. 95. As a sequel to the above discussion we are satisfied that the access provided to the erstwhile Members of the Board of Directors to examine the resolution plan and various opportunities furnished to them as discussed in the preceding paras is sufficient compliance with the law laid down in V.K. Jain's case. Accordingly, the aforesaid issue stand decided against the Ex-Directors/Promoters of the Corporate Debtor. CA NO. 327(PB)/2019 96. The erstwhile Board of Directors filed CA No. 327(PB)/2019 through Mr. Sanjay Singhal and Mrs. Aarti Singhal under Section 60(5) read with Section 12A of the Code and a direction has been sought to the resolution professional to place th....
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....erstwhile directors would be maintainable and nor the same could be considered. Moreover, the Hon'ble Appellate Tribunal in its order dated 04.02.2019 passed in Company Appeal (AT) (Insolvency) No. 198 of 2018 by directing in para 48 that the Adjudicating Authority-NCLT was to pass appropriate order under Section 31 and the resolution professional was to immediately place the approved resolution plan before it for its order. In para 49, it was to ensure that all the stakeholders particularly the operational creditors are treated similarly and no discrimination is being made between the financial creditors or the operational creditors as held by this Appellate Tribunal in "Binani Industries Limited". Therefore, there is no room to entertain any other application left by the Hon'ble Appellate Tribunal. 101. On merit also the requirements of Regulation 33A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2018 remains unfulfilled. Regulation 30A (1) in categorical terms states that an application for withdrawal under Section 12A has to be filed before the issuance of invitation for expression of interest under R....
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....nder Section 30 (2) (e) of the Code. We further find that the primary focus of the Legislation is to ensure revival and continuation of the Corporate Debtor by protecting the Corporate Debtor from its own management and from a Corporate Death by Liquidation. The erstwhile members of Board of Directors have made every effort to thwart any attempt of the CoC and other stakeholder for revival and they have ensured continuation of the Corporate Debtor. Therefore, acceptance of the resolution plan would fulfil the object of the Code as observed by Hon'ble the Supreme Court in the case of Swiss Ribbons (supra) and the relevant para reads as under: "It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is....
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....en admitted by the RP but the resolution plan categorises its claim has an identified contingent liability. It was contended that it is operational creditor and its claim as a contingent liability then it cannot be dealt with in the resolution plan. 107. Before embarking upon the aforesaid contention, it may appropriate to first capture the treatment given to the operational creditors in the resolution plan of 'JSW'. The resolution plan provides for payment of Rs. 50 % of the admitted claims of the operational creditors other than (I) Workmen and (II) such creditors whose liabilities have been identified as contingent liabilities in the books of account of the corporate debtor. It is subject to maximum of Rs. 350 crores in proportion to their admitted claims. The total admitted claim of operational creditors amounts to Rs. 733.76 crores to the payment to such operational creditor is to be made within a period of 12 months from the effective date thus the resolution plan provide for recovery of 47.69 % to the operational creditor under Section 2.2 (f) executive summary of the resolution plan. 108. The Resolution Plan provides for the payment of government dues and taxes th....
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....ly situated must be considered as contingent creditor is ex facie unsustainable as in para 9 of the limited reply filed by Jaldhi, it has been stated that Jaldhi is the largest operational creditor of the corporate debtor. It is again repeated in para 18 with the emphasis that it is an operational debt is defined under Section 5(20) read with Section 5 (21), para 19, 27 read with 'Annexure 8' Jaldhi has always attended the meetings of the CoC as representative of the Operational Creditor and it was never its case that the debt owe to it by the corporate debtor should be kept outside the resolution process. Even in its email dated 07.06.2019 (Annexure 8 of Jaldhi's reply) their consent has been expressed to attend the meeting of the CoC on behalf of the operational creditors. The argument raised on behalf of Jaldhi that it is sui generis class of creditor and their claims be kept outside the insolvency resolution process is not borne out of the pleadings. Even the definition of 'operational debt' in Section 5(21) is very wide and it means a claim in respect of provisions of Goods or Services. The definition of expression 'claim' in Section 3 (6) is also v....
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.... the Insolvency and Bankruptcy Code (Amendment) Act, 2019. Sub-section 2 (b) has not been substituted which reads as under:- '(a) in sub-section (2), for clause (b), the following shall be substituted, namely:- (b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than- (i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the corporate debtor. Explanation 1.- For the removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shal....
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....are unable to find any substance in the argument that the CoC was required to record reasons for approving or rejecting a resolution plan and their failure vitiate the CIR Process. In that regard reliance has been placed on Section 30 of the Code read with Section 25 and proviso to regulation 39(3) from the perusal of minutes of meeting of the CoC, it becomes patent that in 16, 17, 18 & 19 meetings a detailed discussion took place and the aforesaid discussion must be recorded as sufficient reasons for approval of resolution plan of the 'JSW and a copy of the minutes is provided to all the stakeholders. It is in the aforesaid background that Hon'ble the Supreme Court made the following observations in para 73 of the judgment rendered in the case of K. Sashidhar (supra) which read as under:- '73....The dispensation provided in the I & B Code is entirely different. In terms of Section 30 of the I & B Code, the decision is taken collectively after due negotiations between the financial creditors who are constituents of the CoC and they express their opinion on the proposed resolution plan in the form of votes, as per their voting share. In the meeting of CoC, finally proc....
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....gly relied upon by the Respondents. This Section only states that once a Resolution Plan, as approved by the Committee of Creditors, takes effect, it shall be binding on the corporate debtor as well as the guarantor. This is for the reason that otherwise, under Section 133 of the Indian Contract Act, 1872, any change made to the debt owed by the corporate debtor, without the surety's consent, would relieve the guarantor from payment. Section 31(1), in fact, makes it clear that the guarantor cannot escape payment as the Resolution Plan, which has been approved, may well include provisions as to payments to be made by such guarantor. This is perhaps the reason that Annexure VI(e) to Form 6 contained in the Rules and Regulation 36(2) referred to above, require information as to personal guarantees that have been given in relation to the debts of the corporate debtor. Far from supporting the stand of the Respondents, it is clear that in point of fact, Section 31 is one more factor in favour of a personal guarantor having to pay for debts due without any moratorium applying to save him." 116. Therefore, objections raised on the time of hearing would not stand judicial scrutiny and ....
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....we find that the contingent claims belong to entirely a different class of creditors. They are in the nature of un-liquidated and disputed claims and the bankruptcy proceedings are like a premature termination of a going concern. If the concern continuous to go on contingent claims it may become disputed claims. It may be settled and un-liquidated damages may get quantified yet bankruptcy proceedings cannot afford to wait for the indefinite time. On the one hand it is necessary to quantify such claims yet they may be kept under a category different than the other claims. It is also evident that the Code has not made explicit references to contingent or un-liquidated claims which can however be inferred from the reading of Sections 3(6), 3(11), 5(20) & 5(21) of the Code. As a matter of fact, the Code seeks to amend Section 343 of the Companies Act whereby the Liquidator in case of a company is entitled to settle contingent claims. Therefore, we are of the considered view that there is no violation of any law or hostile treatment given to the contingent creditors which constitute a category distinct from the Operational Creditors. Other Issues 121. The prayer for grant of various c....
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....us. However, an order dated 03.05.2019 of Hon'ble the Supreme Court was also placed before us on 09.05.2019 whereby the Special Leave Petition filed by the aforesaid Director was dismissed as withdrawn. According to the directions issued by the Division Bench of Punjab and Haryana High Court we were required to treat the issue of providing a resolution plan and thereafter we were to direct convening of the meeting of CoC afresh as a preliminary issue before considering any other application or before approval of the Resolution plan. It was also directed that in that regard the Tribunal was to be guided by the judgment of Hon'ble the Supreme Court in Vijay Kumar Jain's case (supra) and was not to take into consideration any other past practice, procedure, directions, judgments or orders of Adjudicating Authority/NCLAT which are in contravention of the directions of the Hon'ble Supreme Court in the matter of Vijay Kumar Jain's case (supra). The direction to the Adjudicating Authority-NCLT went to the extent of holding that preliminary issue was to be kept inoperative for two weeks to enable the affected parties to avail the appellate remedies in accordance with la....
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....el of the above discussion, CA No. 254(PB)/2019 is allowed and the resolution plan of JSW-H1 Resolution Plan Applicant is accepted. The objections raised by the Ex-Directors cum Promoters of the Corporate Debtor and Operational Creditors are hereby over-ruled. However, the acceptance and approval of the resolution plan shall be subject to the following; (a) The amount due to the operational creditors under the resolution plan must be paid in accordance with the amended Section 30 (2) of the Code as the amendment expressly provides that it would be applicable to all applications pending for approval of the resolution plan like the one in hand. (b) C.A. No. 327(PB)/2019 with a prayer for placing the settlement proposal dated 20.02.2019 before the CoC is hereby rejected. (c) CA No. 286(PB)/2019 filed by the erstwhile directors Mr. Sanjay Singhal and Mrs. Aarti Singhal seeking copies of the resolution plan is dismissed with a cost of Rs. 1/- lac to be paid personally by Mr. Sanjay Singal and Ms. Aarti Singal in equal share. (d) The resolution plan would be binding on the corporate debtor, its creditors, guarantors, members, employees and other stakeholders. The reduction of sha....