TaxTMI 
TaxTMI 
2019 (9) TMI 1304
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....;s: (i) C.A. No. 254(PB)/2019 filed by 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 Creditor....
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....orporate Debtor. A Virtual Data Room (VDR) was set-up wherein relevant documents, 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 ....
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....ing one or other Resolution Plan and also record the suggestions, if any, given by the Board of Directors or the 'Operational 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 othe....
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....39; by 13th 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 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 Authorit....
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....gued by TSL before the Hon'ble Appellate Tribunal that the 'revised financial offers' cannot be allowed to be submitted even for maximization of the assets of the 'Corporate Debtor' and the Appellate Tribunal vide 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 Tr....
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....ere evaluated extensively by the CoC with the consultation of representatives of operational creditors, the individual of resolution applicants and the directors of the Corporate Debtor on the evaluation criteria set forth in the Process Document. 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....
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....e contents of the Approved Resolution Plan and has confirmed that the Approved Resolution Plan comply with the requirements as envisaged under Regulation 38 (as then existed) of the CIRP Regulations in as much the amount due to the Operational Creditors 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 ....
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....8(3)(c) of the Code The Resolution Plan shall have provisions for its effective implementation. Schedule 2 of the Approved Resolution Plan providing for Steps for Implementation of Resolution Plan Section 38(3)(d) of the Code The Resolution Plan shall have provisions for approvals required and the timeline for the 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 pro....
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....nd Mr. Rajiv Nayyar, learned senior counsel for JSW-H-1 Applicant showed inclination to supply the copies. However, Mr. Nayyar stated that it was not possible to share the proprietary information which constitutes a separate part of the resolution plan. Accordingly, on 29.03.2019 after noticing the order dated 28.03.2019 we passed the following orders:- "2. Mr. Srinivasan, 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 exi....
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....orate Debtor under Section 53 of the Code. It provides for the management of the affairs of the Corporate Debtor after approval of the resolution plan and its implementation under the supervision. According to the learned counsel the resolution plan does not contravene any of the provisions of law for the time being in force. In that regard our attention has been drawn to clauses 1.2, 1.4, 1.5, 1.6, 1.7, 1.13 (iii) 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....
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....he three 'resolution plans' which are in consonance of Section 30(2) are viable, feasible and fulfil other matrix may be accepted by the majority vote of shares of the 'Committee of Creditors'. They may intimate to all the parties by Speed Post, e-mail or telephonically. All the parties will remain in-touch with the 'Resolution Professional' to know the date of meeting. (b) While approving such 'resolution 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 ....
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....rd assumes significance which is also evident from the reply filed by the RP to the application being C.A. No. 286(PB)/2019. Our attention has been drawn to the notices sent to various stakeholders and under caption 'B. Corporate Debtor (Without Voting Right) (i)' notices were issued to Mr. Sanjay Singal and Ms. Aarti Singal, R.P. Goyal, Dinesh Kumar Yadav, R.N. Yadav, H.C. Verma and Dinesh Kumar Behal on their respective e-mails addresses as given. 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:....
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....ial parameters of each of the resolution plans and there was no impediment for the Directors to provide their suggestions. In the context of the aforesaid factual position Mr. Vashisht has argued that there is substantial compliance. The Ex- Promoters/Directors were again sent a communication apprising the Promoters/Directors that the resolution plans of TATA, Liberty House and JSW are likely to be considered by the CoC in a convened meeting and a copy of the presentation made by 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 ....
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....iance has been placed on the judgment of Hon'ble the Supreme Court rendered in the case of Managing Director ECIL Hyderabad v. B. Karunakar [1993] 4 SCC 727. ARGUMENTS ON BEHALF OF COC 38. Mr. Ramji Srinivasan, learned Senior Counsel has vehemently opposed the submissions advanced on behalf of the Ex-Board of Directors and Operational Creditors, and submitted that this Tribunal exercises jurisdiction under Section 60(5) of the IBC, which is wider than that of Section 31 of the Code. Jurisdiction of the Tribunal under 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 a....
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....he facts of Vijay Kumar Jain, they were aware of everything but he voluntarily opted not to attend the meetings. Had he attended, he would have been aware what all the resolution plan is but he himself opted not to attend. It is important to note that even before the judgment passed in Vijay Kumar Jain, he had been invited by the RP. Learned counsel thus argues that these facts are altogether different from Vijay Kumar Jain's case (supra). 44. It is further argued that the operational creditors who are claiming participation and 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....
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....V), which is to be in accordance with the provisions of the Resolution Plan, and is to merge with the Corporate Debtor on the effective date. The sources of funds for the implementation of the Resolution Plan has been provided in Schedule 3 of the Resolution Plan and the JSW had provided firm commitment letters from scheduled banks at the time of evaluation of the Resolution Plan. The CIRP Costs which have remained unpaid is to be paid in full and in priority over other payments, from the cash flows of the Corporate Debtor. In case the cash flows 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 a....
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....mined by the CoC and rendered the Resolution Plan unfeasible and unviable. Reliefs and concessions have also been sought by banking upon the power of the Adjudicating Authority-NCLT under Sections 31(1) and 60(5) of the Code read with Regulation 37 of the CIRP Regulations and Section 238 of the Code. 51. The Resolution Plan provides that pursuant to the approval of the Resolution Plan by the Adjudicating Authority-NCLT the Corporate Debtor would continue to be managed and controlled by the Reconstituted Board. The representatives of 3 (three) approving 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 p....
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....dicating Authority/Appellate Tribunal or the Supreme Court. 3. The Promoter Applicants have approached the Hon'ble Adjudicating Authority in a belated manner with the intent to delay and drag the proceedings in order to frustrate the Resolution Applicant so that it withdraws the plan. In V.K. Jain, the director had no conflict of interest as he was not submitting a resolution plan or a settlement offer. 1. In this case there is a clear conflict of interest as the Promoter Applicants have made two proposals to PNB under Section 12A of the Code and have 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 Ap....
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....directors who were not even allowed in the meetings thus, V.K. Jain was given in a context where there was no effective participation on account of non-access to copies of resolution plan. [Paras 2-3 of order dated 01.08.2018 passed in Vijay Kumar jain v. Resolution Professional [2018] 97 taxmann.com 55 (NCLT - Mum), by Adjudicating Authority, Mumbai] 1. The Promoters Applicants had complete visibility on the Resolution Plan, which is evident from the acknowledgements, signed by the suspended directors (including Sanjay Singal's nominee), that they were given adequate opportunity 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 &....
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....y of the proceedings initiated by the directors, [paras 2 and 3 of V.K. Jain] In the present case, the CoC voting had concluded on 16.10.2018, i.e. much before directors sought copies of the plan by filing the application CA 286/2019 before the Hon'ble Adjudicating Authority. The order dated 01.08.2018 passed in Vijay Kumar Jain (supra), by Adjudicating Authority, Mumbai observes that non-disclosure of the Resolution Plan does not affect the interest of the directors as the debts owed to Secured Creditors are more than the Liquidation value so in any case nothing is payable to Directors/shareholders. [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 t....
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....18 that the Resolution Plan are to be shared with the Operational Creditors and Suspended Board for their comments but no copy was to be provided. Having acted upon and having taken the benefit of the order passed by the Appellate Tribunal the Ex-Directors/Promoters cannot agitate the issue of non-provision of a copy of plan. The order passed by the Appellate Tribunal have attained finality which are binding on the Ex-Directors/Promoters as they have acted upon the orders by obtaining inspection without objecting to them at any stage. Merely because a judgment of Hon'ble Supreme Court in Vijay Kumar 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....
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....pplied to the Ex-Directors/Promoters is incomplete in material particular and pages 12 to 16, 40 to 41, 61 and 25 to 151 have been illegally blackened. Learned counsel submits that the Ex-Directors being entitled to participate in every CoC meeting were firstly deprived of a copy of the resolution plan and then even before this Tribunal an incomplete copy has been furnished which might cause prejudice to their rights. 3.3 The argument is that the confidentiality which is being claimed by Resolution applicant or RP/CoC had never been claimed before the CoC. It is maintained that the Code does not provide in any of the provision under which any 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 Regulati....
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....itors and referred to the remand order issued by the Hon'ble Appellate Tribunal remanding the case back to the Adjudicating Authority-NCLT. Mr. Chadha, learned Senior Counsel as per the directions of the Hon'ble Appellate Tribunal has been authorized by us with the consent of other Operational Creditors to put across the point of view of all operational creditors. 58. Mr. Chadha has initially submitted that the non-supply of the Resolution Plan by the RP, has caused serious prejudice to their rights of being heard in violation of the rules and principles of natural justice especially at this stage of hearing to see compliance with the provisions, inter alia, of Sections 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 Co....
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....sition to keep a watch and check on the financial conditions of the operational debtors as they get balance sheets and get evaluation of their assets done while giving them loans and ensure that the company is not defaulting. 61. Mr. A.S. Chadha, further argued that 68 per cent of the total amount of admitted claims of the operational creditors stand paid 100% and this has resulted into discrimination towards the remaining operational creditors who would be paid merely 50% of their admitted claim under the Resolution Plan. It is submitted that the payments made by the RP were sanctioned towards invoices that were raised prior to CIRP because the amounts sanctioned were arrived at 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 ....
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....ntative) were present Comments given by the suspended directors on each resolution plan were noted, and resolution applicants responded to each such comment. 13.08.2018 Resolution Applicant-submitted a further improved financial proposal pursuant to the order dated 06.08.2018 passed by the Hon'ble Appellate Tribunal in the Tata Steel Appeal permitting the resolution applicants to file additional unconditional ' resolution plans' by 13.08.2018 improving the financial offer. 14.08.2018 At the CoC meeting, the revised resolution plans submitted by the resolution applicants on 13.08.2018, including JSW Steel's resolution plan, were discussed between the CoC, the representatives of the operational creditors, 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....
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....and vote upon the Consolidated Resolution Plan. At such meeting, further negotiations were held between the CoC and Resolution Plan regarding certain modifications required to the Consolidated Resolution Plan on account of the amendments made to the CIRP Regulations on 05.10.2018. Based on the same, Resolution Applicant submitted a letter dated 10.10.2018 ("Addendum Letter") clarifying and modifying certain terms of its resolution plan to ensure compliance of the amended CIRP Regulations. At such meeting, the CoC resolved to put the Consolidated Resolution Plan as amended by the Addendum Letter for vote through e-voting between 15.10.2018, 5 p.m. and 16.10.2018, 5 p.m. (1) No objection (as is now sought to be taken) raised by the members of the 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 Shar....
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....r. Hardev Chand Verma 8. Email dated 29.1.2018 2.2.2018 Absent 9. Email dated 15.2.2018 21.2.2018 Absent 10. Email dated 9.3.2018 14.3.2018 Absent 11. Email dated 14.4.2018 17.4.2018 Present Mr. Hardev Chand Verma 12. Email dated 24.4.2018 27.4.2018 Absent 13. Email dated 25.5.2018 29.5.2018 Absent 14. Email dated 6.6.2018 11.6.2018 Present Ravi Prakash Goyal Mr. Hardev Chand Verma through representative MR. Arun Kumar Agarwal Mr. Dinesh Kumar Yadav through representative Mr. V.P. Chhabra 15. Email dated 6.7.2018 9.7.2018 Present Mr. Ravi Prakash Goyal Mr. Ram Naresh Yadav through representative MR. Arun Kumar Agarwal 16. Email dated 11.7.2018 16.7.2018 Present Mr. Ram Naresh Yadav through representative MR. Arun Kumar Agarwal 17. Email dated 25.7.2018 27.7.2018 Present Mr. 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 Agarw....
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....he RP has received a letter from the JSW Steel Limited which is marked to the Resolution Professional and one of the financial creditors, along with its revised financial proposal. He further clarified that, as a matter of fact, since the details of the Resolution Plans had only been disclosed to the members of the CoC, Operational Creditors and to the suspended Board of Corporate Debtor and not disclosed to Resolution Applicants, therefore the RP is not disclosing the details of the revised financial proposal received from the JSW Steel Limited in the meeting (in the presence of other resolution applicants)." (emphasis added) 69. A perusal of the aforesaid minutes would show that the details of the resolution plan submitted by JSW were shared with the CoC, Operational Creditors and the erstwhile members of Board of Directors. It was not however disclosed to the Resolution Applicant for obvious reasons. It is also obvious that JSW had revised the financial proposal which was obviously in pursuance of 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 ....
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.... the Resolution Applicant for taking a decision to revise and send the improvement concerning the financial component by 31.07.2018 which was to be evaluated by the CoC on that very day. The aforesaid part of the minutes of meeting of CoC reads as under: "The Representative of Operational Creditors enquired from the RP as to whether they are going to invite suggestions from the participants on the Resolution Plan already submitted by JSW, Tata Steel and Liberty House or they are going to ask the Resolution Applicants if they are willing to come up with a revised offer and match the offer made by JSW. He added that he had a lot of suggestions on all the Resolution Plans however, he shall raise them only after finalization of Plans. He further requested the RP to make the offer of JSW public for the information of all entitled to the same. The Legal counsel of CoC further stated that some time needs to be given to Resolution Applicants and suggested that if the Resolution Applicants decide to revise and send their improvements to the financial components of the resolution plan by 9:00 am on 31st July, 2018 (Tuesday), then those offers will be evaluated at the CoC me....
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....ata Steel Ltd, Liberty House Group and JSW Steel Limited and the revisions/improvements made by each one of them. Various Financial Creditors raised issues which have been answered by the legal counsel of the RP or the RP himself. As the matter was pending before the Hon'ble NCLAT the CoC decided to keep the scores of the Resolution Applicants in a sealed envelope which was to be submitted to the Hon'ble NCLAT. 75. In the 19th meeting of the CoC held on 10.10.2018 the meeting was only attended by the representatives of Mr. Ram Naresh Yadav; and Mr. Hari Chand Verma attended the meeting in person and erstwhile directors Mr. Sanjay Singal, Mr. Ravi Prakash Goyal, Ms. Aarti Singal and Mr. Dinesh Kumar Yadav were absent. Under the agenda Item No. 5 the final evaluation of the resolution plan submitted by JSW Steel Ltd. and the changes that the Members of the CoC desired to make in the resolution plan of JSW were discussed. With regard to claim of the Operational Creditors clarification were sought and given by JSW. A discussion on that score is evident from the minutes of meeting under Item No. 5 and the same reads as under: "The legal counsel of RP requested JSW to....
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....perational creditor, which is not the purpose of the Code. He further stated that with that purpose in mind, in their option, the 'amount due under Resolution Plan' has to be the amount which the law prescribes to be due and Section 30 of the Code provides for such amount. He further opined that Regulation 38 is just a regulation which is delegated legislation and it flows from the Code and the Code itself prescribes the liquidation amount as the minimum due amount, for which they have agreed to make payment before any payment to financial creditor. The representative of operational creditor stated that such a stance will definitely be challenged in Hon'ble NCLT on the submission and discussion of the Resolution Plan. He further stated that the incentive mentioned by the representative of JSW has been clarified on many platforms that every stakeholders must be taken care of and it is not just the liquidation value which the operational creditor must be given. He further stated that it is also the onus of the CoC to ensure that all stakeholders are being treated fairly. (emphasis added) The representative of JSW stated that this is the very reason why the CoC....
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....tent feasible in their perspective. He further requested that the Committee to go ahead with the commercial aspect already submitted by them unless there is a peculiar situation where a question of law is involved. Subsequently, it was agreed that the legal counsel of CoC will discuss and finalize all the points from the language perspective with the representative of JSW while the Committee continues the deliberations with the rest of the agenda items. The Chairman thanked the representatives of JSW." (emphasis added) 76. Under Item No. 8 the resolution plan submitted by JSW on 03.10.2018 was discussed and the erstwhile members of Board of Directors raised the issue that the resolution proposal was conditional and hence it would be difficult for the Members of the CoC to vote on the proposed resolution. All Members opted to vote through e-voting and the modified resolution plan was to be circulated by the RP along with the minutes. The concluding part of Item No. 8 concerning the resolution plan of JSW reads as under: 'Hence, the Legal counsel of RP stated that the Resolution shall be modified as discussed earlier in the meeting and the Compliance Certificate un....
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.... noted that the aforesaid petition was tagged with other matters which eventually culminated in passing the judgment in the case of Swiss Ribbons .v Union of India [2019] 101 taxmann.com 389/152 SCL 365 (SC). It is appropriate to mention that Mr. Sanjay Singal, erstwhile Member of Board of Directors had filed Writ Petition (C) No. 822/2018 and the judgment was pronounced by Hon'ble the Supreme Court upholding validity of Section 29A of the Code on 25.01.2019 with the lead case in Swiss Ribbons (supra). The aforesaid paras from the minutes of meeting are extracted below which read as under: "The Chairman requested the legal counsel of RP and CoC to apprise the members on the legal developments. The legal counsel of RP apprised the members of the Committee with the following legal updates: * In the matter of 'Tata Steel Ltd. v. Liberty House Group Pte. Ltd. and Ors.' before Hon'ble National Company Law Appellate Tribunal ('NCLAT'), the order has been reserved on December -20, 2018. * In the matter of 'Sanjay Singal v. Union of India and Ors' before the Hon'ble Supreme Court, the matter has been tagged along with ....
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.... by the Hon'ble Supreme Court by mentioning the same four times in the Hon'ble Supreme Court, however, the Court was not keen on it. Hence, the vacation of stay is not expected to be removed before the judgment and no further applications on vacation of stay will also be entertained further." 78. It is thus patent that the CoC was fully apprised of the legal proceedings pending before one fora or the other and erstwhile members of Board of Directors, their representatives as well as the Operational Creditors and their representatives were fully aware of the legal developments. 79. In the 21st meeting of CoC held on 08.02.2019 again the erstwhile members of Board of Directors, Mr. Ravi Prakash Goyal in person was present and Mr. Ram Naresh Yadav, Mr. Hardev Chand Verma and Mr. Dinesh Kumar Yadav were represented by their representatives. Ms. Aarti Singal and Mr. Dinesh Kumar Bahal were absent. This meeting is significant as in agenda Item No. 7 the settlement proposal given by Mr. Sanjay Singal and Ms. Aarti Singal under Section 12A of the Code received on 30.01.2019 and circulated to CoC on 31.01.2019 was under consideration. After apprising the Members about the sett....
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.... that after reviewing the Resolution Plans the Suspended Board of Directors. Operational Creditor and their Authorised Representatives had also given an acknowledgement and their comments in the meeting of the CoC. Mr. Amarjeet Sharma, who had been authorized by Mr. Sanjay Singal had reviewed all the 3 (Three) Resolution Plans on 26th July 2018 and after reviewing he had given an acknowledgement to RP that he was given an adequate opportunity to peruse the Resolution Plans and had recorded his suggestion in a satisfactory manner. The Legal Counsel of RP also stated that in the subsequent CoC's meetings where the Resolution Plans were considered, the RP and CoC had always sought suggestions from the Operational Creditors, Suspended Board of Directors and from their representatives who had attended the meeting, the same were duly recorded in the minutes of the meetings and the copies of the minutes of CoC meetings were also circulated to the Suspended Board of Directors. The participants took note of the same." 81. A perusal of the aforesaid para would show the reiteration of the earlier minutes that all the three resolution plans were made available to the erstwhile ....
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....irectors have been kept in picture in all proceedings and have also been shown the resolution plan. They have submitted their comments and have filed the affidavits showing complete compliance without any demur. On 26.07.2018 one Mr. Amarjeet Sharma representing Mr. Sanjay Singal filed an acknowledgement and confirmation which makes interesting reading and the same reads as under: 'ACKNOWLEDGEMENT AND CONFIRMATION I, Amarjeet Sharma, son of Late Shri Harichand, resident of 707, Sector 16, Panchkula, in my capacity as a member of the erstwhile Board of Directors of Bhushan Power and Steel Limited ("BPSL"), acknowledge and confirm that the resolution professional of BPSL has provided to me, access to view the resolution plans submitted by the resolution applicants, i.e. JSW Steel Limited, Tata Steel Limited and Liberty House Group, pursuant to the corporate insolvency resolution process of BPSL ("Resolution Plans"). I further acknowledge and confirm, that I have been given adequate opportunity to peruse the Resolution Plans and record my suggestions in respect of the same in a satisfactory manner.' (emphasis added) 86. A perusal of the a....
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....ich is part of public policy." Moreover, the erstwhile members of Board of Directors are not entitled to audit a resolution plan with regard to its 'feasibility and viability' which is within the domain of CoC alone. In that regard the commercial wisdom of the CoC has to be respected. In support of the aforesaid proposition we place reliance on paras 33, 39, 42, 44, 47, 48 and 61 of the judgment of Hon'ble the Supreme Court rendered in the case of K. Sashidhar v. Indian Overseas Bank [2019] 102 taxmann.com 139/152 SCL 312 (SC) which lays down that the commercial wisdom of the CoC is paramount and neither the Adjudicating Authority nor the Appellate Tribunal have the power to reopen the same. 88. The Code of Civil Procedure (for brevity 'CPC') as such may not apply sub-silentio to the proceeding before us yet rudiment principles governing the public policy of law are attracted. It is well settled principles of law that a plea which was available to the litigant in a pending litigation, if not taken, is deemed to have been taken and decided against him. This is policy of law which is all pervasive to avoid multiplicity of litigation and the principles are expli....
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....ntentions raised to the contrary are rejected. 91. We are also inclined to accept the submission made by Mr. Rajiv Nayar, learned Senior Counsel that once the erstwhile members of Board of Directors had shown keen interest in submitting a plan for settlement under Section 12A of the Code then they would be standing in the capacity of another Resolution Plan Applicant because then they would become a competitor and any plan divulged to them would prejudice the rights of other Resolution Plan Applicants. It is evident from the perusal of minutes of 21st meeting of CoC held on 08.02.2019 that the erstwhile members of Board of Directors made a proposal for settlement under Section 12A of the Code and were not able to muster adequate support of 90% of voting and their proposal was rejected. It is in the same meeting that they requested for supply of a copy of the resolution plan. The judgment rendered in V.K. Jain's case would not thus be applicable and attracted as it would have no application when the resolution plan is sought by a Resolution Applicant who is a competitor with the other Resolution Applicant which include the erstwhile Members of the Board of Directors who were ....
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....udicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the "essence" or the "substance" of the requirements....if the requirements are procedural or directory in that they are not of the "essence" of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance.' 93. Mr. Rajiv Nayar, learned Senior Counsel has rightly argued that the changes made in the resolution plan were restricted only to financial offer without any change regarding 'feasibility and viability' and the same were carried in response to the directions issued by the Hon'ble NCLAT in its order dated 01.08.2018 and 06.08.2018 in the case of Tata Steel Limited (supra). (Company Appeal (Insolvency) No. 198/2018) which allowed revision to be made only to the financial offer. It would be appropriate to refer to the aforesaid orders which are as under: "on the oral request of the learned counsel for the appellant, we allow the 'Appellant'....
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.... No. 254(PB)/2019. It is therefore, evident that the settlement proposal did not meet the requirement of Section 12A of the Code read with Regulation 30A and Form-FA of the CIRP Regulations and the same has not in any been accepted by the Punjab National Bank and the State Bank of India who constitute 30.18 % of the voting share in the CoC and any settlement proposal is required to be carried with 90 % or more than 90 % of the voting share. 99. At the outset we may observe that the instant application under Section 12A of the Code has been preferred without complying with the provisions of the Code and the Regulations. It is appropriate to mention that Section 12A was added to the Code on 06.06.2018 and it has been held to be prospective in nature by Hon'ble the Supreme Court in the case of Shipra Hotels Ltd. v. Value Line Interiors (P.) Ltd. [Civil Appeal No. 7405 of 2018, dated 3-8-2018) decided on 03.08.2018, it has been held in that case that "Since the admission of the petition was on 01.06.2018, Section 12A, the Insolvency and Bankruptcy Code, 2016 enacted with effect from 06.06.2018 will not come into the picture." 100. In the present case the petition was admitted....
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....tion of the approved 'Resolution Plan' of 'JSW Steel' will only ensure that all the stakeholders, particularly the 'Operational Creditors' are treated similarly. It should ensure that no discrimination is being made between the 'Financial Creditors' or the 'Operational Creditors' as held by this Appellate Tribunal in "Binani Industries Limited". 50. In case, the Adjudicating Authority is of the opinion that the discrimination has been made between the 'Financial Creditors' and the 'Operational Creditors'. It may give opportunity to the 'JSW Steel' to improve its plan and thereby, by substituting the approved 'Resolution Plan' with such improvement..." 103. A perusal of the aforesaid para shows that we have to ensure that all the stakeholders particularly the Operational Creditors are treated similarly and without any discrimination made between the Financial Creditors or the Operational Creditors as per the view taken by the Hon'ble NCLAT in Binani Industries case (supra). 104. We may state that view of the Hon'ble NCL-AT in Binani Industries case (supra) did not meet the Legislative appr....
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.... by Mr. A.S Chadha, learned senior counsel appointed by the Adjudicating Authority-NCLT to represent the cause of Operational Creditors, have been that the resolution plan has illegally classified 'Jaldhi' as contingent creditor entitling to be paid only 10 % of its claim subject to a cap of Rs. 35 crores, if it crystalized within two years from the date of approval of the resolution plan by the CoC. It is evident that Jaldhi is an operational creditor and its claim has been admitted by Resolution Professional to the extent of Rs. 151.3 crores. Jaldhi has been maintaining that it has made a claim of Rs. 151.9 crores on the basis of 3 Arbitration Awards in its favour and against the corporate debtor and that it has initiated execution proceeding by filing 3 execution petitions before Hon'ble High Court of Calcutta. Those proceedings were pending when the CIR Process was initiated on 26.07.2017. Later on, different submissions were made and it was claimed that its claim is contingent liability but not an operational debt and that contingent liability can never be resolved under a resolution plan. It was thus argued that the resolution applicant has to assume a risk to con....
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....h crystallise within a period of 2 years from the date of approval of the Resolution Plan by the CoC, subject to a maximum of Rs. 35 Crores. Such payment shall be made within 90 days from the expiry of 2 years from the date of approval of the Resolution Plan by this Hon'ble Tribunal. [See Section 2.2(h), Executive Summary read with Section 1.7, Part B of the Resolution Plan] The Resolution Plan also provides that all claims shall stand extinguished upon approval of the Resolution Plan, except for contingent government dues/statutory dues and the other identified contingent liabilities set out in Annexure 2 of the Resolution Plan, in respect of which the maximum liability of the Resolution Applicant/Corporate Debtor would be limited to the extent of 10% of the principal amount subject to an aggregate of Rs. 150 crores and Rs. 35 crores, respectively (on a pro rata basis), as set out above. To the extent any such contingent government dues/statutory dues and the other identified contingent liabilities set out in Annexure 2 of the Resolution Plan, remain contingent at the end of 2 years from the approval of resolution plan by CoC, the same would stand extinguished by virtue of ....
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....view that the resolution plan complied with the law laid down by Hon'ble the Supreme Court in the case of Binani Industries Ltd. (supra) as there is no discrimination made between the Operational Creditors or between the Financial Creditors. As a matter of fact, the recovery to the Operational Creditors is at higher percentage than the recovery made for the financial creditors which is 41.3 % and 47.69 % respectively. The total figure is Rs. 19,350 crores out of Rs. 47,157.99 crores for the financial creditors and Rs. 350 crores out of Rs. 733.76 crores. We are unable to persuade ourselves with the submissions made by Mr. Chadha on behalf of the operational creditor and also other operational creditors like Jaldhi Overseas PTE Ltd., Medi Carrier Ltd., Jai Mahakal India Logistics Ltd. etc. The argument of Mr. Chadha that there is discrimination emerging from treating the operational creditor as contingent and non-contingent or crystallize creditor has not persuaded us as all the categories are separate and distinct. Moreover, the resolution applicant is obliged to pay under Section 30(2) (b) & (d) an amount which would have been payable had there been liquidation. Applying the a....
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....st creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interest of a secured creditor" shall be inserted.' 111. A perusal of the aforesaid provision makes it evident that the amount to be paid to operational creditor shall not be less than the amount payable to such creditor in the event of liquidation of the corporate debtor under Section 53. It further clarifies that the amount would have been paid to such creditors if the amount is to be distributed under the resolution plan then the same had been distributed in accordance with the order of priority and sub-section (1) of Section 53. The water fall providing for the priority has been now incorporated and the position of law has been clarified. It is further appropriate to mention that explanation '2' it has been clarified that the amendment is to apply to all those resolution plans which approved or rejected by the Adjudicating Authority -NCLT or even at the stage of appeal etc. Therefore, we are of form opinion that the legislative intent has to be given effect and the resolution plan must be read to mean that it will release the amount of the operational cred....
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....cted in the present case round litigation as it is hit by the principle of constructive res judicata. 114. Another objections raised to the resolution plan was based on the argument that the resolution plan result in termination of proceedings before Hon'ble the Supreme Court and Hon'ble High Court and other forums. (Page 44 of the resolution plan). As a matter of fact, the contents of List B are not an operative part of the resolution plan and the resolution professional in CA No. 254(PB)/2019 has not sought any of these reliefs or prayer and therefore, it cannot constitute a ground of objection. Accordingly, if the aforesaid relief has not granted then it is not to affect adversely the implementation of the resolution plan as it is not contended to any such implementation. Similar rationale would apply to the argument emerging from fixing a moratorium period which again is part of List B. The other objection with regard to the waiver of Stamp Duty and Registration Fee would also be covered as the relief has been claimed in List B. 115. We are further of the view that resolution plan can provide for continuous of rights of financial creditor against the guarantors as....
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....be noted that there are various legal situations in which the right of subrogation is not exercisable against the company - for example, if the principal borrower is in liquidation, after distribution of the liquidation estate, the lender may recover the outstanding amounts from the guarantor without the guarantor being able to exercise the right of subrogation." 118. Another argument of Mr. Chadha, learned counsel for the Operational Creditors is that an artificial division has been created amongst the Operational Creditors by dividing them in two categories of Contingent Creditors and other Operational Creditors. It is true that Operational Creditors who are to get 50% of their admitted claims with a maximum cap of 350 crores has been kept as a category separate then the Contingent Operational Creditors who are to get 10% payment of their claims subject to maximum cap of INR 35 crores. The argument is based on the definition of word 'claim' defined in Section 3 (6) and the word 'debt' defined in Section 3 (11) read with the definition of 'Operational debt' defined in Section 5 (20) & (21) of the Code. 119. Mr. Chadha has argued that a claim could be ....
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....viding all aforesaid documents and thereafter to convene a meeting of the CoC "afresh" to deliberate and consider the suggestions and objections of the erstwhile Board of Directors before passing any Resolution Plan (including CA No. 286 of 2019) (P-19) would be treated as a preliminary issue. (ii) The preliminary issue would be decided by the Adjudicating Authority-NCLT (Principal Bench, Delhi) before considering other Applications or before approval of any Resolution Plan (CA No.254 of 2019). (iii) In deciding the said preliminary issue, Adjudicating Authority would be guided by the judgment of Hon'ble Supreme Court in Vijay Kumar Jain's case (supra) and shall not take into consideration any other past practice, procedure, directions, judgments or orders of Adjudicating Authority/NCLAT which are in contravention, contradiction or derogation of the directions of the Hon'ble Supreme Court in the matter of Vijay Kumar Jain's case (supra). (iv) Any judgment and order passed by the Adjudicating Authority on the aforesaid preliminary issue is directed to be kept inoperative for two weeks enabling the affected parties to exercise their appellat....
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....ade before us without noticing the directions. 126. It appears to us that the Ex-Management and Promoters were moving places to delay the conclusion of proceedings before us. Accordingly, another set of written submissions was filed by Mr. Virendra Ganda, learned Senior Counsel by urging that the judgment of the Hon'ble Appellate Tribunal rendered in the case of Standard Chartered Bank v. Satish Kumar Gupta [2019] 107 taxmann.com 110/154 SCL 584 (NCL - AT), R.P. concerning Essar Steel Limited in CA. Nos. 287/2019, 288/2019, 289/19 and 295/2019 decided on 04.07.2019 was placed before us. Numerous other applications have been filed after the order was reserved which have delayed and interrupted the pronouncement of the order and those applications are as under: Sl. No. CA No. Filed by Dates of filing 1 CA 1297(PB)/2019 Becquerel Industries Pvt. Ltd. 03.05.2019 2 CA973(PB)/2019 Sanjay Singal 21.05.2019 3 CA 1055(PB)/2019 Resolution Professional 30.05.2019 4 CA 1056(PB)/2019 Sanjay Singal 30.05.2019 5 CA 1296(PB)/2019 PNB 11.06.2019 6 CA 1295(PB)/2019 JSW 10.07.2019 127. However, the Appellate....