TaxTMI 
TaxTMI 
2020 (8) TMI 338
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....dated 2.1.2020 in C.A. No.1816(PB) of 2018 from paragraph 23 to 30 had observed the following: - "23. Section 30(2)(d) of the Code mandates the Adjudicating Authority to ensure that there are effective means of enforcement and implementation of the Resolution Plan. Similarly, the proviso to sub-section (1) of Section 31 of the Code mandates Adjudicating Authority to ensure effective implementation of the resolution plan. The object in approval of the resolution plan is to save the corporate debtor and to put it back on its feet. An unwilling and reluctant resolution applicant, who has withdrawn his resolution plan, neither can put the corporate debtor back to its feet nor the effective implementation of its resolution plan can be ensured. 24. No doubt the withdrawal of the resolution plan at this advance stage has caused great prejudice to the creditors/stake holders and legal consequences on the withdrawal of the resolution plan shall follow as per law. The Resolution Professional and CoC are free to take action as per law consequent upon withdrawal of the resolution plan by resolution applicant including on the issue of refund of the earnest money deposited by t....
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....n relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal, the delay or a large part thereof being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for the Adjudicating Authority and/or Appellate 132 Tribunal to extend time beyond 330 days. Likewise, even under the newly added proviso to Section 12, if by reason of all the aforesaid factors the grace period of 90 days fr....
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....d oRs. 2018 17 SCC page 421 and Gujarat Urja Vikas Nigam Limited v. Solar Semiconductor Power Company (India) Private Limited and Ors. (2017)16 SCC 498. Therefore, the stand of the Appellant is that the Adjudicating Authority had wrongly allowed the plea of withdrawal of 'Resolution Plan' beyond its jurisdiction. 6. The Learned Counsel for the Appellant comes out with a plea that it is within the exclusive ambit of the 'Committee of Creditors' to examine and determine the feasibility and viability of the approved 'Resolution Plan' and the Impugned Order is an erroneous one because of the reason that the Adjudicating Authority could not permit a 1st Respondent / 'Resolution Applicant' to withdraw from the commitment made before the 'Committee of Creditors' which had crystallized into a concluded contract. 7. The plea of the Appellant is that the reasoning of the Adjudicating Authority in the Impugned Order about the impracticability to implement a plan by an unwilling 'Resolution Applicant' has conferred sanctity to an unlawful conduct of the 1st Respondent and also defeated the objective of the Code. 8. The Learned Counsel for the Appellant to lend support to its contentio....
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....tor' had submitted its 'Resolution Plan' to the 'Committee of Creditor' which was after extensive negotiations approved by 75.36% majority. Also that it is the stand of the Appellant that the 1st Respondent / 'Successful Resolution Applicant' continues to be interested in the 'Corporate Debtor', as is evident from the letter sent by it on 1.6.2020, having seen interest in the 'Corporate Debtor' and emphasizing that the software licences granted by the 'Corporate Debtor' have become more relevant in the current circumstances where online education appears to be only viable medium of education. 14. The Learned Counsel for the Appellant submits that the reliance placed on the side of 1st Respondent / 'Successful Resolution Applicant' in regard to the applications filed by Creditors seeking investigations is misconceived because of the reason that said applications were filed in May, 2018 and the said applications were disposed of on 9.8.2018(viz. before the orders were reserved on the approval application). 15. The Learned Counsel for the Appellant brings it to the notice of this Tribunal that Section 32A of the 'I&B' Code grants immunity to a 'Resolution Applicant' from any off....
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....ds that the Adjudicating Authority firstly had allowed the withdrawal of the 'Approved Resolution Plan' and later granted only 42 days, when the Insolvency and Bankruptcy Board of India(Insolvency Resolution Process for Corporate Persons) Regulations, 2016 envisages a minimum period of 105 days to complete the entire process, demoralizes the interests of 'Committee of Creditors' and other stakeholders of the 'Corporate Debtor' but also places the 'Corporate Debtor' at the brim of liquidation. 19. The Learned Counsel for the Appellant submits that upon the 'Approved Resolution Plan' being put to vote, 74.16% of 'Committee of Creditors' voted in favour of the 'Approved Resolution Plan'. Later, the 'Chhatisgarh State Electricity Board Gratuity and Pension Trust' and 'Chhatisgarh State Electricity Board Provident Fund Trust'(collectively CSEB)(having a vote share of 1.195%) vide e.mail dated 23.3.2018 requested its vote to be treated as 'yes' for having not participated in lieu of a technical error. 20. On behalf of the Appellant, it is brought to the notice of this Tribunal that as the voting share in favour of the 'Approved Resolution Plan' would be 75.36%, the 'Resolution Prof....
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....laimed but not granted necessarily gets denied in judicial or quasi-judicial proceedings as per decision 'State Bank of India' Vs. 'Ram Chandra Dubey', (2001) 1 SCC Page 73, reiterated in the decision of Hon'ble Supreme Court A.P.S.R.T.C. and Ors. Vs. 'B.S. David Paul', (2006) 2 SCC page 282. 25. The Learned Counsel for the Appellant points out that Rule 11 of the 'National Company Law Appellate Rules, 2016' has recognised the inherent powers in regard to the matters relating to the court for meeting the ends of justice. 26. The Learned Counsel for the Appellant relies on the decision of Hon'ble Supreme Court in 'Arcelor Mittal India Pvt. Ltd.' Vs. 'Satish Kumar Gupta' (2019)2 SCC page 1 at special page wherein at paragraph 86 it is observed 'that the act of the Court shall harm no man'. 27. The Learned Counsel for the Appellant refers to the decision of the Hon'ble Supreme Court 'Swiss Ribbon' Vs. 'Union of India'; (2019)4 SCC at page 17 wherein at paragraph 11 and 12 it is observed that the intent of the Code is to ensure revival and continuation of the 'Corporate Debtor' as a going concern and Liquidation is to be only a last resort. 28. The Learned Counsel for the A....
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....cant and hence, the consequent relief of 'revaluation of the Plan' are indeed 'withdrawal' thereof was not dealt with. c) The cause of action for CA No. 1816/2019 was completely different, as it was premised on an acceptance of the unavailability of information, and on account of various factors including the erosion of commercial substratum of the 'Corporate Debtor' sought withdrawal of the 'Resolution Plan' simpliciter. d) No reasons were furnished and there was no bar for the 'Resolution Applicant' later exercising his right and entitlement to withdraw the 'Resolution Plan' on the basis that its validity had expired and he was no longer interested in pursuing the same. e) The Adjudicating Authority had not consciously adjudicated the issue of 'withdrawal of 'Resolution Plan' filed by the 1st Respondent which is evident from the order dated 10.07.2019 in CA 1252 of 2019 and confirmed by the express findings of the Adjudicating Authority in the impugned order. f) The order dated 10.07.2019 in CA 1252/2019(disentitling the 'Resolution Applicant' to financial information of the 'Corporate Debtor') cannot act as a bar to the 'Resolution Applicant' ....
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....he IB Code and other Applicable Law". 34. The Learned Counsel for the 1st Respondent refers to Clause 1 of the covering letter for submission of 'Resolution Plan' (format 1, Annexure III to the RFRP) which runs as follows: - "We, the undersigned Resolution Applicant having read and examined in detail the RFRP and the Information Memorandum, set out the offer and the related information in relation to the resolution of Educomp Solutions Ltd." 35. In pith and substance, the stand of the 1st Respondent is that 'RFRP' issued by the Appellant is an invitation to offer' and that the 'Resolution Plan' is an 'offer' submitted by the 1st Respondent pursuant to the 'RFRP' in short such an offer being a qualified one, it binds the offer or / promise or i.e. the 'Resolution Applicant' only when such an offer is accepted as per its term. 36. The other contention advanced on behalf of the 1st Respondent is that the covering letter for submission of 'Resolution Plan' explicitly points out that all the terms and conditions of the 'Resolution Plan' would be valid for acceptance for a period of six months from the date of submission of the Plan and as such the 'Resolution Plan' sub....
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....th a direction to the 'Resolution Professional' to continue to discharge all its functions as 'Resolution Professional' under the code till further orders. Later, on 7.3.2018, an application was filed by the 'Resolution Professional' before the Adjudicating Authority for approval of 'Resolution Plan'. 40. The Learned Counsel for the 1st Respondent brings it to the notice of this Tribunal that on 2.7.2018 the 'Resolution Applicant' addressed a letter to the 'Resolution Professional' noting that the validity of the 'Resolution Plan' as expiring in August and that it would be Perforced to among other things, withdraw the 'Resolution Plan' on account of complete erosion of the commercial substratum of the 'Corporate Debtor'. However, no reply was received by the 1st Respondent to the said letter which points out the fact that after August, 2018, the 'Resolution Applicant' was at full liberty to withdraw its plan and upon such withdrawal, it would follow that such plan would be not capable of being implemented. Moreover, after lapse of more than 18 months from the date of submission of 'Resolution Plan' viz. 19.2.2018 and 27 months from the CIRP commencement date, the application for....
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....s for 'implementation and supervision of the 'Resolution Plan' and this position is well supported by the decisions of Hon'ble Supreme Court 'K.Shashidhar' V. 'Indian Oil Corporation' 2019 SCC online 257 para 42 and the 'Committee of Creditors' of 'Essar Steel' V. 'Satish Kumar Gupta and Ors.' 2019 SCC online 1478 at para no. 47. 45. The Learned Counsel for the 1st Respondent takes a plea that it is well within the powers of the Adjudicating Authority and also this Tribunal to withhold approval to the Plan and / or allow the withdrawal thereof as per 'Inherent powers'. 46. In regard to the plea of 'Res Judicata', the Learned Counsel for the 1st Respondent contends that the 'Resolution Applicant' could not have sought withdrawal of the 'Resolution Plan' in CA 1252/2019 without having been provided with a information and material sought and in view of this aspect alone, the applicability of the doctrine of 'Res Judicata' or constructive 'Res Judicata' ought to be ruled out. In fact, the relief prayed for in C.A. 1252/2019 clearly shows that the 'Resolution Applicant' was seeking information and details relating to the various events and sought to ascertain the financial pos....
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....' v. 'Hanifa' AIR 1976 SC 1569 wherein one of the essential requirements for applicability of the doctrine of 'Res Judicata' is observed that "The matter directly and substantially in issue in the subsequent suit must have been heard and finally decided by the court in the first suit....." 50. The Learned Counsel for the 1st Respondent relies on the decision of Hon'ble Supreme Court 'Kaushik Cooperative Building Society' v. N.Parvathamma (2017) 13 SCC 138' whereby and whereunder it is observed as follows:- "To constitute matter resjudicata, the conditions to be proved are that the litigating parties are the same, that the subject matter is also identical and the matter has been finally decided between the parties by a court of competed jurisdiction". 51. The Learned Counsel for the 1st Respondent contends that there was no conscious adjudication on merits of the issues arising in C.A. 1816/2019 in the earlier order dated 10.9.2019 arising out of CA 1252/2019 and in fact the order dated 10.9.2019 is not a 'reasoned order' with a view to attract the application of the doctrine of 'Res Judicata'. 52. The Learned Counsel for the 1st Respondent cites the following Supreme....
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.... error in dislodging the order leave by the learned Company Judge to file a fresh suit." iii) In Ferro Alloys Corpn.Ltd. & Anr. V. Union of India (1999) 4 SCC 149 it is observed as follows: - "24. It is obvious that in the aforesaid proceedings no issue arose for consideration as to whether ....Consequently whatever observations might have been made by this Court while dealing with Issue 4, cannot be said to be an express decision on the vexed question as to whether the assessment of the need for chrome ore, so far as the appellant is concerned.. It is therefore difficult to agree with the contention of the learned Senior Counsel for the respondents that such an issue was expressly adjudicated upon by this court in the aforesaid decision and the findings thereon, therefore, could not be made the subject matter of fresh proceedings between the parties. Not only were the contesting parties not heard on the issue but also there was no final decision thereon inter se these parties...." iv) and the observations in Daryo v. State of UP (1962) 1 SCR 574, 591 were supported by the decision of Hon'ble Supreme Court in Kunhayammed v. State of Kerala (2000) 6 SCC at page 359. ....
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.... into the affairs / certain transactions entered into prior to the 'CIRP' and that 'Financial Creditor' and 'COC' Members had filed CA 358/2018(IFC applications) on 3.5.2018, Axis Bank ('Financial Creditor'/COC Member) filed CA 448(PB) of 2018 on 31.5.2018 and State Bank of India preferred CA 639(PB) of 2018 around July, 2018 seeking investigation of the affairs / transactions of the 'Corporate Debtor' with respect to the statements / irregularities in the affairs of 'Corporate Debtor' in its Annual Accounts on the basis of certain articles / Media Reports published in a publication 'the Wire'. 57. According to the 2nd Respondent the aforesaid applications along with the plan approval application were heard by the 'Adjudicating Authority' and that the 'Resolution Professional' was directed to convene COC meeting to discuss about these applications and pursuant to the directions in terms of the order dated 9.8.2018, the 13th COC meeting of the 'Corporate Debtor' took place on 13.8.2018 and a 'Resolution' for conducting special investigation audit of the 'Corporate Debtor' by an independent agency was approved by the 'Committee of Creditors' by voting share of 77.85%. Also, it was....
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.... no audit was conducted, the question of not providing the report as contended by the 1st Respondent / 'Resolution Applicant' does not arise. 61. On behalf of the 2nd Respondent, it is brought to the notice of this Tribunal that the Central Bureau of Investigation had conducted search at the Corporate Office of the 'Corporate Debtor' on 11.2.2020 and that the said search was conducted on the basis of 'First Information Report' lodged by the State Bank of India on 10.2.2020 on its behalf and various 'Consortium Banks'. Also, that the CBI team took numerous documents from the Corporate Office of the 'Corporate Debtor' and that the list of documents' taken by the Central Bureau of Investigation was circulated to the members by way of email dated 29.3.2020 prior to the holding of 16th COC meeting dated 30.3.2020. 62. The Learned Counsel for the 2nd Respondent points out that later on numerous occasions the CBI team had visited the corporate office of the 'Corporate Debtor' and remained there for 15 days and requisitioned the customer agreements relating to financial year 2011-2012 and an intimation of search conducted by the Central Bureau of Investigation as well as list of docu....
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....sought in the application was made out. 66. Again, the 1st Respondent / 'Resolution Applicant' filed CA No. 1310 of 2019 and sought the following reliefs:- i. Allow the Resolution Applicant to withdraw the Resolution Plan dated 19.02.2018 (along with the Addendum/Financial Proposal dated 21.02.2019) submitted by it, and as approved by the Committee of Creditors; ii. Direct the Ld. Resolution Professional and/or Educomp Solutions Limited and the Committee of Creditors to refund the Earnest Money Deposit of Rs. 2,00,00,000/- furnished by the Resolution Applicant in respect of the Resolution Plan; iii. Withhold approval of the Resolution Plan sanctioned by the Committee of Creditors of the Corporate Debtor, as filed before this Hon'ble Tribunal on 07.03.2018 and recorded vide order dated 11.04.2018, pending detailed consideration of the same by the Resolution Applicant; iv. Pass any other order(s), and/ or any other consequential reliefs as deemed fit and proper by this Hon'ble Tribunal in the facts and circumstances of the case. 67. The Adjudicating Authority in CA 1310(PB)/2019 on 5.9.2019 had observed the following: - "In para 'B(x....
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....is the plea of the 1st Respondent / 'Resolution Applicant' in CA No. 1252 of 2019 that it is to be furnished with full details as to the financial position of the 'Corporate Debtor' and also information as to various illegal and fraudulent transactions conducted by it and the failure to furnish the necessary details amounts to a denial of material information, which is in negation of Section 29 of the 'I&B' Code. Furthermore, the 1st Respondent would have to take on extreme financial positions on the basis of 'Resolution Plan' and substantial changes in the financial position of the 'Corporate Debtor' would in law and in equity deserve reconsideration. Moreover, to protect the interests of shareholders, the copy of the special investigation audit may be made available to the 'Resolution Applicant'. That apart, the 'Resolution Professional' prayed for the supply of certificates u/s 43,45,50 and 66 of the 'I&B' Code to the 'Resolution Professional' forthwith. 70. It comes to be known that no audit was conducted in respect of the (i) relief prayed for by the 1st Respondent /'Resolution Applicant' in CA 1252/2019 and as such it is held by this Tribunal that the question of non-suppl....
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.... Resolution Plan' made in CA No.1252(PB)/2019 was again claimed by the 1st Respondent /'Resolution Applicant' in CA No.1310/2019 as iiird relief. The relief prayed for in CA 1310/2019 by the 1st Respondent/'Resolution Applicant' to allow him to withdraw the 'Resolution Plan' dated 19.2.2018 etc. was not claimed in CA 1252 of 2019 similarly, the iind relief in CA 1310 of 2019 claiming refund of earnest money deposit of Rs. 2/- crores from the 'Resolution Professional' and/or 'Educomp Solutions Ltd.' furnished by the 'Resolution Applicant' in respect of 'Resolution Plan' was not claimed in CA 1252 of 2019. 74. It is evident that the Adjudicating Authority while dismissing the CA No. 1310(PB)/2019 on 5.9.2019 with certain observations made against the 1st Respondent had granted to it, to file fresh one on the same cause of action, if so advised and resting on the said liberty, the 1st Respondent/Applicant had filed yet another CA 1816 of 2019 wherein the impugned order was passed by the Adjudicating Authority on 2.1.2020. Res Judicata 75. In regard to the principle of 'Res Judicata' it is to be pointed out that the said principle is a prohibition against the Court / Tribunal.....
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....rmit him to withdraw the 'Resolution Plan' dated 19.2.2018 and the claim of seeking refund of earnest money deposit of Rs. 2/- crores furnished by it in respect of the 'Resolution Plan' in CA 1252 of 2019 and as such it is precluded from suing for it (by way of filing CA 1310/2019) even though such omission may be either an intentional or accidental or involuntary one. 82. Although the iiird relief of withholding of approval of 'Resolution Plan' sanctioned by the 'Committee of Creditors' is very same one claimed in CA No. 1252 of 2019 is the very same one as iiird relief in CA 1310/2019 and notwithstanding the fact the same was not dealt with in CA 1252 of 2019 order dated 10.7.2019, in view of the dismissal of said CA 1252(PB)/2019 by the Adjudicating Authority and the said order which had attained finality and more so in the absence of any 'Appeal' being filed against the said order, then the dismissal order of CA 1252 of 2019 order dated 10.7.2019 binds the 1st Respondent/'Resolution Applicant' as an 'Inter-se' party. 83. In so far as the plea of the 1st Respondent / 'Resolution Applicant' that it was constrained to file CA 1310(PB)/2019 based on the suggestion of the Adju....
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....was neither considered nor was ever dealt with. The issue of withdrawal of 'Resolution Plan' by the Applicant has never been considered consciously on merit and / or adjudicated upon in CA No. 1252(PB)/2019 and proceeded to mention that 'doctrine of constructing 'Res Judicata' does not apply to the issues/points, or any 'lis' between the parties that was not decided previously and despite been pleaded was not considered by court/Tribunal and expressly dealt with in the order so passed etc., this Tribunal is of the considered view that these observations are not legally tenable because of the latent and patent fact that the grounds raised by the 1st Respondent / 'Successful Resolution Applicant' in CA 1816(PB)2018 (withdrawal application) were projected earlier and rejected in CA No. 1252(PB)/2019 through an order dated 10.7.2019. Furthermore, the plea of the 1st Respondent / 'Successful Resolution Applicant' and the finding of the Adjudicating Authority that the prayer for withdrawal was not considered while disposing of CA No. 1252(PB)/2019 is quite in tune with the very principle of 'Res Judicata' which means that the reliefs should be deemed to have been denied when what were cl....
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....nt that the reliance placed by the 1st Respondent / 'Resolution Applicant' in respect of clause 1.8.3 of 'RFRP' read along with Clause 7 of the 'Approved Resolution Plan' to claim the validity of the 'Approved Resolution Plan' was only six months is an incorrect one because of the reason the said six months period in clause 1.8.3 of 'RFRP' is the minimum validity period. Further, Clause 7 of the 'Approved Resolution Plan' read in the context of 'RFRP' is only a reference to the 'Resolution Plan' being valid for six months for acceptance of the 'Committee of Creditors' and in short post 'Committee of Creditors' approval the 'Resolution Plan' is a statutory binding contract only conditional to the approval of Adjudicating Authority which can be refused only on account of non-compliance of the conditions mentioned in Section 30(2) of the Code which is conspicuously absent in the present case. Therefore, it is submitted on behalf of the Appellant that the 1st Respondent / 'Resolution Applicant' is bound by the 'Approved Resolution Plan' duly accepted by the 'Committee of Creditors'. On behalf of the Appellant, a reliance is placed upon the judgement of this Tribunal in Apollo Jyoti LIC....
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.... case, notwithstanding the fact only upon the approval of the 'Adjudicating Authority' the 'Resolution Plan' of the 'Resolution Applicant' would be binding on all the parties and further that the application for withdrawal was filed by the 1st Respondent/'Resolution Applicant' was filed earlier to the stage of 'Approval' by the 'Adjudicating Authority' yet this Court comes to an cocksure conclusion that the 'Adjudicating Authority', in law cannot enter into the arena of the majority decision of the 'Committee of Creditors' other than the grounds mentioned in Section 32(a to e) of the 'I&B' Code. Moreover, after due deliberations, when the 1st Respondent/'Resolution Applicant' had accepted the conditions of the 'Resolution Plan' especially keeping in mind the ingredients of Section 25(2)(h) of the 'Code' to the effect that 'no change or supplementary information to the 'Resolution Plan' shall be accepted after the submission date of 'Resolution Plan' then it is not open to the 1st Respondent/'Resolution Applicant' to take a 'topsy turvy' stance and is not to be allowed to withdraw the approved 'Resolution Plan'. 96. Coming to the aspect of there being a delay in completion of 'Co....