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2020 (9) TMI 172
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....a direction to have the Resolution Plan resubmitted before the Committee of Creditors, the financial creditor and the Resolution Professional have come up with these appeals. 2. We have heard learned counsel appearing on both sides. 3. The Karad Urban Cooperative Bank Ltd., which is the financial creditor, filed an application on 04.09.2017 under Section 7 of the IBC before the NCLT against M/s. Khandoba Prasanna Sakhar Karkhana Limited, which is the corporate debtor. NCLT admitted the application on 01.01.2018 and an Interim Resolution Professional was appointed. The first meeting of the Committee of Creditors (hereinafter referred to as 'CoC') took place on 02.03.2018. As per the decision taken therein, one Mr. Jitendra Palande was appointed by the NCLT, by an order dated 06.03.2018, as Resolution Professional. 4. Pursuant to the second meeting of the Committee of Creditors held on 27.03.2018, the Resolution Professional issued an advertisement on 30.03.2018 inviting Expression of Interest. In the meantime, a Director/Promoter of the corporate debtor moved the High Court of Judicature at Bombay by way of a writ petition in Writ Petition No.4746 of 2018, challenging the orders ....
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.... laid down by the Hon'ble Supreme Court and IBC. Further incidental Orders may also be passed. On resubmission of the Resolution Plan, the Adjudicating Authority will deal with the same in accordance with law. The Appeal is disposed accordingly. No costs." 8. It is against the aforesaid order of remand passed by NCLAT that the financial creditor has come up with one appeal and the Resolution Professional has come up with another appeal. 9. It is seen from the order of the NCLAT that the Appellate Tribunal was convinced to interfere with the order of NCLT granting approval of the Resolution Plan, on four grounds. They are: (i) That the Resolution Plan suffers from issues of viability and feasibility; (ii) That in as much as the liquidation value mentioned by the Successful Resolution Applicant in its Resolution Plan tallied exactly with the liquidation value obtained by the Resolution Professional, there appears to have been a breach of confidentiality, violating Regulation 35(2); (iii) That the Resolution Plan does not take note of one important fact namely, that the ethanol plant and machinery shown as part of the assets of the corporate debtor, actually belonged ....
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....dustries Pvt. Ltd. and its banker, Janata Sahkari Bank Ltd. and hence, this machinery could not have formed part of the assets of the corporate debtor to enable the Successful Resolution Applicant to take over the corporate debtor as a going concern and run it; and (iv) that the very fact that the Successful Resolution Applicant was the only person who submitted a bid in response to the advertisement and the fact that the Resolution Plan was approved within 23 hours in the 8th meeting of the CoC in a hasty manner, would show that the Resolution Plan was tainted, and that therefore, NCLAT was justified in setting aside the approval granted by the NCLT to the Resolution Plan. 12. We have carefully considered the rival submissions. On the first question regarding the viability and feasibility of a resolution plan, the law is now wellsettled. In K. Sashidhar (supra), it was held as follows: (i) "There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan...The opinion on the subject matter expressed by them after due deliberations in the CoC meetings through voting, as per vo....
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....ew available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of." (paragraph 54) 13. The principles laid down in the aforesaid decisions, make one thing very clear. If all the factors that need to be taken into account for determining whether or not the corporate debtor can be kept running as a going concern have been placed before the Committee of Creditors and the CoC has taken a conscious decision to approve the resolution plan, then the adjudicating authority will have to switch over to the hands off mode. It is not the case of the corporate debtor or its promoter/Director or anyone else that some of the factors which are crucial for taking a decision regarding the viability and feasibility, were not placed before the CoC or the Resolution Professional. The only basis for the corporate debtor to raise the issue of viability and feasibility is that the ownership and possession of the ethanol plant and m....
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....he fact that there was an issue with regard to the ethanol plant and machinery, had been taken note of by the Resolution Professional, the Committee of Creditors and the Successful Resolution Applicant. Once all these three parties have taken note of the said fact and taken a conscious decision to go ahead with the Resolution Plan, it cannot be stated that the question of viability and feasibility was not examined in the proper perspective. 17. Therefore, the first ground and actually the main ground on which NCLAT interfered with the decision of the NCLT to approve the Resolution Plan, is wholly untenable, misconceived and unjustified. 18. In fact, our discussion could have ended here without going into the other grounds, for one simple reason. Though the Director/Promoter of the corporate debtor, who was the appellant before the NCLAT, raised other grounds apart from viability and feasibility, NCLAT issued limited notice in the appeal, on 12.09.2019, only with regard to viability and feasibility. Even in the impugned order dated 02.06.2020, it is made clear in the last sentence of paragraph 1 that "this appeal on 12.09.2019 was admitted to limited extent of examining viability ....
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....ebtor seeking to submit a resolution plan. But it was obviously filed after 270 days and also after the approval of the Resolution Plan by the CoC. (iii) The third application, MA No.662/2019, was by the Resolution Professional for the approval of the Resolution Plan which was accepted by the CoC. 22. By its common order dated 01.08.2019, the NCLT dismissed MA Nos.1509 and 2104 of 2019, filed respectively by the operational creditor (lessor of the ethanol plant) and the Promoter/Director of the corporate debtor. But the application filed by the Resolution Professional was allowed. 23. But the Director/Promoter of the corporate debtor filed only one appeal and the Memorandum of Appeal suggests that the Director/Promoter of the corporate debtor prayed for two reliefs, namely (i) to set aside the approval of the Resolution Plan, and (ii) to consider his own resolution plan. 24. By the order impugned in the present Civil Appeals, the NCLAT granted only a limited relief, as can be seen from the operative portion of the order of NCLAT which we have extracted earlier. 25. Therefore, in the light of the above facts, the consideration of all other issues, such as breach of confident....
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.... Promoter/Director of the corporate debtor before the NCLAT. It was not his case at all that the Resolution Plan was submitted by the SRA after the last date, but the same was predated by the Resolution Professional acting in collusion. 32. It appears from the impugned order of NCLAT that only in the course of hearing of the appeal, the date "09th February 2019" typewritten at the bottom of the selfdeclaration (page 29 of the Resolution Plan) was sought to be taken advantage of. Since this was not raised as one of the grounds in the Memorandum of Appeal but raised in the course of arguments, the Resolution Professional could do no more than to file the printout of the email correspondence between him and the SRA dated 07.02.2019. In the first email dated 07.02.2019, the Resolution Professional had sought a clarification from the SRA as to how they discovered the liquidation value and the source for the same. In response to this mail, the SRA sent a reply email contending that they undertook a due diligence to know the current market value and liquidation value and that what was quoted by them in the Resolution Plan, was something that an independent agency provided to them. 33. U....
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....orate Debtor has tried to take advantage of two small mistakes on the part of the SRA, one of which was a typographical error mentioning the date "09th February 2019" at the bottom of the selfdeclaration and the other, which happened as a matter of coincidence. The NCLAT appears to have made a mountain out of a molehill and has recorded a finding even beyond the pleadings in the Memorandum of Appeal. Hence, the second ground on which the NCLAT was convinced to pass the impugned order, is legally and factually untenable. 40. The third ground on which NCLAT proceeded, related to the ethanol plant and machinery. We have already dealt with this issue in detail, while dealing with the first issue. As stated therein, the SRA admittedly did not make his Resolution Plan on the strength of the ethanol plant and machinery in question. The threat looming large over the availability of the ethanol plant and machinery has admittedly been taken note of by the SRA and the CoC. The Resolution Plan does not give an indication anywhere that without this plant and machinery the whole resolution plan will fail. In paragraph 8.04 of the Resolution Plan, the SRA has undertaken to continue the operation....
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....porate debtor came to adverse notice before the Bombay High Court. 45. Regulation 36A was inserted only with effect from 06.02.2018 under Notification No. IBBI/201718/ GN/REG024 dated 06.02.2018. It underwent a change under Notification No. IBBI/201819/ GN/REG031 dated 03.07.2018, with effect from 04.07.2018. Regulation 36A, as it stood during the period from 06.02.2018 to 04.07.2018, did not mandate the publication of the invitation of Resolution Plans, either in Form G or otherwise, in newspapers. It is only the amended Regulation 36A, which came into effect from 04.07.2018, that requires the publication of Form G in newspapers. Therefore, the publication in newspapers made by the Resolution Professional, in the case on hand, on 30.03.2018, was something that was statutorily not required of him and hence the Promoter/Director of the corporate debtor cannot take advantage of the amendment that came later, to attack the advertisement. The unamended and amended Regulation 36A are provided in a tabular column for easy comparison and appreciation. Regulation 36A before amendment Regulation 36A after amendment 36A. Invitation of Resolution Plans. - (1) The resolution professional s....
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.... obtained from, as the case may be; and (b) provide the last date for submission of expression of interest which shall not be less than fifteen days from the date of issue of detailed invitation. (4) The detailed invitation referred to in subregulation (3) shall( a) specify the criteria for prospective resolution applicants, as approved by the committee in accordance with clause (h) of subsection (2) of section 25; (b) state the ineligibility norms under section 29A to the extent applicable for prospective resolution applicants; (c) provide such basic information about the corporate debtor as may be required by a prospective resolution applicant for expression of interest; and (d) not require payment of any fee or any nonrefundable deposit for submission of expression of interest. (5) A prospective resolution applicant, who meet the requirements of the invitation for expression of interest, may submit expression of interest within the time specified in the invitation under clause (b) of subregulation (3). (6) The expression of interest received after the time specified in the invitation under clause (b) of subregulation (3) shall be rejected. (7) An expression of interest s....