TaxTMI 
TaxTMI 
2019 (7) TMI 1634
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.... 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:- (a) To pass an order under section 33 (1) of the Code allowing the liquidation of the Corp....
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....pplicants 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 ("Phoenix"). 9. It is stated that subsequently the Resolution Professional issued a Bid Process Memorandum and Evaluation Matri....
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....ant 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 discussed in the meeting that assuming but not admitting that this Adjudicating Authority does not pass an order for refraining any third party from invoking the outstandi....
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....sion 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 Application bearing IA No. 680/2018 regarding rejection of Resolution Plan are as follows: 21. It is stated that the Resolution Plan submitted on 04.10.2018 (and as amended from time to time on the basis of discussions with the COC) has b....
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....d 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 event that Phoenix ARC would not agree to be described as a Resolution Applicant formally (though it would continue to a 'financial sponsor'), the Applicant would fall short of the eligibility criteria stipulated in the EOI. Though not in concurrence with the view of the COC, the Applicant again put forth the suggestion to consider the Applicant along with it....
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....61.81 100.00% 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 Resolution Plan submitted by the Applicant on such technical grounds is a mere afterthought. B. NON-SUBMISSION OF THE EMD ALONG WITH THE SUBMISSION OF THE RESOLUTION PLAN DATED 04.10.2018 AS REQUIRED BY THE BID PROCESS MEMORANDUM. a. It is stated that while the discussions were taking place with the RP in respect to the submission of the Resolution Plan, the Resolution Applicant, which was the only shortlisted and qualified RA, on behalf of the Consortium had put in a specific request through ....
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.... 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 ground for rejection of the Resolution Plan submitted by the Applicant at a later date, is a mere afterthought. C. Constitution of the Resolution Applicants as per the Resolution Plans being different from the constitution of the Resolution Applicants as per the EOI submitted earlier. a. It is stated that the Resolution Applicant has not mentioned different constitution of the consortium in the EOI and the Resolution Plans submitted. All the constituents of the consortium continue to remain associated with the consortium even as on d....
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....eafter, 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 formed for taking over the non-core assets and investments of the Corporate Debtor. Vide e-mails dated 01.11.2018, the RP proceeded to inform the Applicant that the COC had permitted the balance EMD to be deposited by 05.11.2018. iii. It is stated that after making the balance payment of Rs. 3 crores towards the EMD, the Applicant on 05.11.2018 submitted the 3 rd Resolution Plan, (signed by Phoenix ARC) with the RP reiterating that Phoenix ARC, a member of the consortium, submitting the said plan, was acting as a 'Financial Sponsor' for the said plan. ....
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....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 Applicant received the e-mail dated 21.11.2018 from the RP informing that the Resolution Plan submitted on 04.102018 along with the Resolution Plans submitted on 05.11.2018 and 16.11..2018 were rejected. viii. It is stated that on 06.11.2018, in the meeting of the COC, the members of the COC sought certain clarifications from the Applicant and insisted that if Phoenix ARC would not be a Resolution Applicant formally and would insist on being a 'financial sponsor, its credentials could not be accounted for ruling upon the eligibility criteria of the consortium. On the basis of the aforementioned d....
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....her, 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 the interest of all stakeholders who are not members of the COC and hence do not have any voting power are also duly protected and balanced. D. VIABILITY OF THE RESOLUTION PLAN (S) SUBMITTED BY THE APPLICANT AND INTEREST OF STAKEHOLDERS a. It is stated that the 5th Resolution Plan submitted by the Applicant, which was prepared and submitted after considerable negotiations and modifications to accommodate the demands of the COC, it is apparent that the said plan was not only commercially attractive for the creditors but it had successfully managed to balance the interest of all the stakeholders in the CIRP pr....
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....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 granted, the overall insolvency resolution of the Corporate Debtor within the timelines specified under Section 12 of the Code are still feasible and viable and this in turn, will ensure that the overall objectives of the Code i.e., balancing the interests of all stakeholders / creditors (even those creditors who are not members of the COC), 'value maximization' of the stakeholders of the Corporate Debtor and giving priority to insolvency resolution vis-å-vis liquidation of the Corporate Debtor, will be duly protected. 11. It is further stated that the above facts evince that the present Applicant has a prima facie case for intervent....
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....e 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. Therefore, the Financial Creditor submitted that the decision of the COC was a well-informed, well thought of business and commercial decision taken considering all the options available to it in the interest of all the stake holders and was taken keeping in view the spirit of the Insolvency and Bankruptcy Code, 2016. It is further stated that the position of the law is that the decision of the COC is final and should not be subjected to judicial scrutiny. b) The Financial Creditor stating above, relied on the case of K.Sashidhar Vs. Indian Overseas Bank and Ors, [2019] 148 LA 497 (SC) or MANU/SC/0189/2019, that Othe Apex Court has ruled that, in par 33: 33. Upon receipt of a "rejected" resolution plan, the adjudica....
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....lution 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 October, 2018. 18. The Resolution Applicant in the Application bearing IA No.680/2018 on the contrary has submitted that the EMD of Rs. 5 crores has been eventually paid on 5.11.2018 by depositing the balance EMD of Rs. 3 crores in addition to the sum ofRs. 2 crores which was paid on 31.10.2018 in the designated account and that the eligibility criteria as laid down in the EOI and Process Memorandum has also been fulfilled. 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. R....
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....ll 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 such prayer as the same would affect the rights and interest of the various stake holders of Corporate Debtor. 25. Therefore, in exercise of powers conferred under Sub-Clauses (i), (ii) and (iii) of Clause (b) of Sub-Section (1) of Section 33 of the I&B Code, 2016, I proceed to pass Order as follows:- (i) I hereby order for Liquidation of M/S. IYTRCL Limited, which shall be conducted in the manner as laid down in Chapter Ill of part Il of the code, 2016; (ii) Written consent in Form-AA is filed by Resolution Professional vide separate memo, thus Adjudicating Authority in accordance with Sec.34 r/w relevant Regulations, this Adjudicating Authority deems it fit to appoint Resolution Professional as the Liquidator of the present Corporate Debtor. (iii) This Adjudicating Authority hereby Appoint Mr. Sutanu Sinha, as L....