TaxTMI 
TaxTMI 
2019 (7) TMI 1634
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....ord "as going concern" is inserted. b) 25(viii) of the order in page no.32, the name of the Resolution Professional is corrected as Mr. Sutanu Sinha instead of Mr. 'R. Ramakrishna Gupta'. 4. Rest of the contents of the order dated 26.07.2019 remain the same. This Corrigendum Order to be read along with the original Order. Hon'ble Shri K Anantha Padmanabha Swamy - Member Judicial Nirav Shah, Alay Rizvi, R. Raghunandan Rao and G. Kalyan Chakravarthy, Advs. for the Applicant. K.V. Srinivas. Adv. for the Respondent. Dr. K.V. Srinivas, Advocate for the COC. COMMON ORDER IA No.544/2018: 1. Application bearing IA No.544/2018 is filed by Resolution Professional U/s 33 of the IB Code, 2016, against which Application bearing IA No.680/2018 in IA No.544/2018 is filed seeking intervention and other prayers as against the decision of the COC in rejection of the Resolution Plan submitted by the Prospective Resolution Applicant. As both the Applications are filed on same set of facts, therefore, same are disposed of by this common order. 2. The Application bearing IA No.544/2018 in cp (IB) No.294/7/HDB/2017 is filed seeking following prayers:- ....
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....First Global Finance Private Limited along with others as group of persons.However, none of the qualified Resolution Applicants submitted their Resolution Plans before the last day of the submission of the Resolution Plan. Hence, the members of the COC had agreed for the issuance of 2nd process of EOI. 8. It is stated that, the Resolution Professional issued a second invitation for EOI to submit Resolution Plan for the Corporate Debtor on August 14, 2018. Second EOI specified that the qualified Resolution Applicants during the First EOI process were entitled to submit their Resolution Plan in the Second EOI process. The Resolution Professional states that no Resolution Plan was submitted by First Global Finance Private Limited independently, however, they intended to submit a Resolution Plan in the Second EOI Process. Therefore, a Resolution Plan was submitted by First Global Finance Private Limited, Mr. Shankar Sharma, Ms. Devina Mehra along with Phoenix ARC Private Limited ("Original Consortium"). First Global Finance Private Limited, Mr. Shankar Sharma, Ms. Devina Mehra are collectively referred to as ("First Global") and Phoenix ARC Private Limited is referred to as ("Phoeni....
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....s unable to do so. 14. It is stated that the 270 days for the completion of the CIRP Period was initially ending on November 20, 2018. Thereafter, the Applicant applied for exclusion of the period and the CIRP Period was extended for 7 days viz., the CIRP ended on November 27, 2018 ("CIRP End Date"). 15. It is stated that due to the reasons mentioned hereinabove and in absence of any Resolution Applicant meeting with the criteria of the EOI and the Bid Process Memorandum documents, no valid Resolution Plan is accepted by the members of COC, present Application under Section 33(1) of the Code is filed inter-alia seeking directions for allowing the initiation of liquidation process of the Corporate Debtor and for directing the appointment of the Applicant as the liquidator of the Corporate Debtor. 16. It is further stated that in the 16th COC meeting a representative of lender informed the RP that in certain cases the Bank Guarantees of the Corporate Debtor were renewed because of the orders passed by various courts. It was further informed that the Courts have also directed to renew the BG's until final judgement is passed by the said Courts However, the members discuss....
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....the EOI dated 14.08.2018 issued by the RP of the Corporate Debtor, or f) In the alternative direct the Respondents to take steps for fresh assessment of the eligibility criteria of the Applicant for submission of a Resolution Plan for the Corporate Debtor taking into consideration any individual/company/partnership/any other entity that the Applicant may propose to be a part of the consortium, including First Global Stockbroking Pvt. Ltd., the holding company of the Applicant, and if that be so, the turnover of First Global Stockbroking Pvt. Ltd. shall be taken into consideration for assessment of the eligibility criteria, and g) After granting the prayer (e) or (f) above, as the case may be, direct the COC to objectively consider the 5th Resolution Plan submitted by the Applicant on 16.11.2018, in accordance with the provisions of the Code, and h) Exclude the time period between 21.11.2018 and the date when the 5th Resolution Plan submitted by the Applicant herein is considered/voted upon by the COC, from the 270 day time period specified under the Code for completion of the CIRP process of the Corporate Debtor, and/or 20. Brief facts of the Applicati....
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....sions of section 29A of IBC As per the Code. ii. It is stated that pursuant to the submissions of the 1 st Resolution Plan and the 2nd Resolution Plan by the Resolution Applicant, the BPA vide the e-mail, sent a query to the Resolution Applicant regarding qualification of the EOI conditions by the Consortium. Vide e-mail dated 30.10.2018, it was submitted/declared to the BPA by the Resolution Applicant on behalf of the Consortium that: a. As per the last audited financial statements, duly certified by the Chartered Accountant, the turnover for the consortium was Rs. 2081.63 crores. Thus, the Business Capacity Eligibility Criteria was fulfilled. b. As certified by the Chartered Accountant, the net worth of the Consortium was Rs. 463.83 crores and the total Assets Under Management (AUM) was Rs. 6788.00 crores. Thus, the Net worth Eligibility Criteria was also duly fulfilled. c. Resolution Applicant further stated in the e-mail that the Consortium had already submitted the details pertaining to compliance with Section 29A of the Code. iii. It is stated that the COC however subsequently insisted on 06.11.2018 in the meeting that in the ev....
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....een held on the 5th Resolution Plan submitted on 16.11.2018. As per the 5th Resolution Plan submitted by the Applicant, the eligibility criteria was shown to be fulfilled as under: Name NW Rs. Cr Proposed shareholding among Consortium % Wtd Avg Net worth of Consortium Rs. Cr FGFPL 20.00 10.00% 2.00 Mr. Shankar Sharma 43.81 40.00% 17.52 Ms. Devina Mehra 34.00 34.00% 11.56 Mr. Ravindra Deol 464.00 16.00% 74.24 Total 561.81 100.00% 105.32 vi. It is stated that as per the above table, the Applicants were totally eligible as per the conditions laid down in the EOI document and even met the weighted average net worth criteria. vii. It is stated that the BPA are the authorized consultants / advisors to the RP, for the evaluation of the expression of interest /Resolution Plans submitted by the Resolution Applicants in the CIRP of the Corporate Debtor and therefore, the email dated September 04, 2018 tantamount to a deemed acceptance of the EOI submitted to the RP, as per the terms and conditions of the fresh 'Invitation for EOI' issued/published on 14.08.2018. Therefore, the rejection of the R....
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....icant, one of the grounds that had been cited by the RP for rejection of the Resolution Plan was that EMD had not been deposited along with it. b. It is stated that the instant ground for rejection is thus completely baseless and non-existent as it is apparent from the e-mails exchanged between the Applicant and the RP, that the deposit of EMD was not a condition in the original Invitation for EOI but was subsequently introduced in the 'Bid Process Memorandum' and hence could not be insisted upon in any case. c. It is stated that on 01.11.2018, the RP also sent an e-mail to the Applicant stating that the COC on 31.10.2018 in its meeting inter-alia permitted the Applicant to deposit the balance EMD of Rs. 3 crores by 05.11.2018. That before the submission of the 3rd Resolution Plan, the payment of the balance EMD (Rs. 3 crores) was also duly made by the Applicant. It is further stated that, the email dated 01.11.2018 by the RP for extension of the timelines for submission of the balance EMD tantamount to a waiver and acceptance on the part of the RP and the COC in case the balance EMD is submitted prior to the expiry of such revised timelines and such groun....
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....h EOI application. In the EOI submitted by the Applicant, as a part of the Consortium, on 03.06.2018, the constitution of the members of the consortium included Phoenix ARC. ii. That subsequent to the Applicant submitting the 1 st Resolution Plan with the RP on 04.10.2018, discussions were held on various aspects of the said plan in the COC meetings held on 10.10.2018, 16.10.2018 and 23.10.2018 which were attended by the Applicant and Phoenix ARC. The said discussions included the role to be played by Phoenix ARC as a 'Financial Sponsor'. Thereafter, the Applicant submitted the 2nd Resolution Plan on 26.10.2018 and pursuant to that the Applicant received an e-mail from the RP on 27.10.2018 seeking completion of pending actions, including inclusion of Phoenix ARC as a Resolution Applicant in the proposal. In response to the said e-mail dated 27.10.2018, the Applicant inter-alia reiterated vide the e-mail dated 31.10.2018 that Phoenix ARC was fully supporting the consortium as a 'financial sponsor' and will accordingly be putting in Rs. 200 crores as a loan in the Corporate Debtor besides arranging Rs. 100 crores as a priority loan in the new company to be fo....
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....l did not find any favour with the COC on 06.11.2018 and the Applicant was informed that the COC might be voting on the eligibility criteria. vi. That on 12.11.2018, the Resolution Applicant however received further e-mails from the RP requiring the Resolution Applicant to incorporate the suggested changes in the updated Resolution Plan. None of the changes that were suggested therein, were related to any of the eligibility criteria discussed in the COC meeting held on 06.11.2018 leaving the Resolution Applicant with a notion that the COC was still actively considering the 3rd Resolution Plan submitted on 05.11.2018 and was merely asking for the updates. The updated Resolution Plan (4th Resolution Plan) was accordingly submitted to the RP by the Applicant on 13.11.2018. However, subsequently, the Applicant learnt that in the e-voting held between 09.11.2018 and 11.11.2018, the COC had voted against the eligibility criteria. vii. That, in line with the discussions held with the COC on 13.11.2018, the Resolution Applicant submitted the final Resolution Plan ("5th Resolution Plan") to the BPA through email on 16.11.2018. In less than a week however, the Applica....
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....n several occasions. The COC however lost sight of the objectives of the Code at the last moment and rejected the Resolution Plan on erroneous and baseless reasoning. 7. It is stated that the CoC's actions in the present case are not at all in consonance with the objectives of the Code. The COC has rejected a viable and feasible Resolution Plan purely on technical grounds without adequate application of mind and have blatantly breached their fiduciary duty to uphold the overall objectives of the Code. It is further stated that in the recent case of Binani Industries Limited vs. Bank of Baroda and Another, Company Appeal (AT) (Insolvency) No. 82 of 2018, the Hon\ble NCLAT inter alia opined that the objectives of the Code are firstly, insolvency resolution of a corporate debtor; secondly, the maximization of the value of the assets of the corporate debtor; and lastly, to promote entrepreneurship, availability of credit and to balance interests of all stakeholders. The COC in the present case thus failed to consider that the primary objective of the Code is to promote resolution of the Corporate Debtor over liquidation and not vice versa. The COC also failed in ensuring that th....
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....ated that moreover, liquidation may also result in immediate additional liability of Rs. 1140 crores to the secured financial creditors on account of likely invocation of outstanding Bank Guarantees (BGs) as the Corporate Debtor shall loose its "on- going concern" status and therefore increase the overall outstanding debt position of the Corporate Debtor even when there is a financially viable insolvency Resolution Plan being available to the COC. 10. It is stated that as such it is necessary fit and appropriate that the Resolution Plan which was submitted by the Applicant by e-mail on 16.11.2018 may be taken on record and be placed before the members of COC by the RP for their kind consideration in accordance with law. It is also pertinent to note that the corporate insolvency resolution process period has been extended by the Adjudicating Authority vide its order dated 21.08.2018 in accordance with the requirements of Section 12 of the Code and therefore the liquidation proceedings are sought to be commenced only due to the rejection of the Resolution Plan on the aforementioned technical grounds. It is further stated that if reliefs prayed for by the Resolution Applicant are g....
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....l, as per the instructions of the members of COC, had filed the Liquidation Application for seeking directions from this Adjudicating Authority for allowing the initiation of liquidation process of the Corporate Debtor. d. The Resolution Professional had acted as per the directions and the instructions of the members of the COC in rejecting the Resolution Plan submitted by the Intervenor and had taken rightful decision in relation to the eligibility criteria set out in EOI and he Bid Process memorandum documents. e. Therefore, the allegations raised by the Intervenor in the Intervention Application are baseless and are made to delay the liquidation process of the Corporate Debtor. 14. State Bank of India has filed its written submissions on behalf of the Committee of Creditors and inter-alia stated as under: a) It is stated that the Resolution Plan submitted by Reconstituted Consortium was not commercially acceptable to the members of COC and despite various requests made by the members of the COC to the 'Reconstituted Consortium' to improve the commercial and technical aspects of the Resolution Plan, Reconstituted Consortium did not do so. The....
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....iginal Consortium submitted an updated Resolution Plan with Phoenix ARC Private Ltd as a financial sponsor. It was informed to COC that Phoenix did not wanted it to be categorized as a Resolution Applicant along with the original Consortium. Consequently, according to the COC, the original Consortium did not qualify under the criteria contained in the process Memorandum. At the 14th COC meeting held on 6th November, 2018, pursuant to e-voting, the COC directed the Resolution Professional to file an Application for liquidation before this Adjudicating Authority. On 16th November, 2018, the Resolution Applicant/ First Global Finance Pvt Ltd submitted a Revised Resolution Plan along with Mr. Ravindra Deol, Mr. Shankar Sharma and Ms. Devina Mehra as Resolution Applicants. At the 16th COC Meeting held on 20th November, 2018, the members of the COC rejected the Revised Resolution Plan submitted by the Reconstituted Consortium citing that there is an EOI deviation, nonfulfilment of eligibility criteria and also it was not commercially acceptable to the members of the COC and also that the original Consortium has not placed the EMD of Rs. 5 crores along with the Resolution Plan on 4th Octo....
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....the eligibility criteria and consequently issued direction to the Resolution Professional to file an Application before the Adjudicating Authority for passing an order of liquidation, the Adjudicating Authority is bound to pass an order of liquidation unless it is shown that the decision of the COC in seeking liquidation is arbitrary and contrary to the extant provisions of the Insolvency and Bankruptcy Code and the Regulations made thereunder. In view of the aforesaid, IA No.680/2018 is dismissed. 23. On a combined reading of Sections 12, 31 and 33 of the Code, it is clear that if the Adjudicating Authority does not receive a Resolution Plan approved by the COC within 180 days or 270 days, as the case may be, or where the COC resolves to refer the Corporate Debtor into liquidation, the Adjudicating Authority shall accordingly pass an order liquidating the assets of the Corporate Debtor. 24. Further, in Application bearing IA No. 544/2018 RP along with prayer of order of Liquidation has prayed to pass an order restraining the invocation of any bank guarantees which have been extended by the Corporate Debtor. However this Adjudicating Authority is not inclined to grant any suc....