TaxTMI 
TaxTMI 
2020 (9) TMI 386
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....ankruptcy Code', 2016 (for short 'I&B Code,' 2016) against the impugned order dated 06.05.2020 and 30.04.2020 in 'CP(IB)1830/MB/2018' & 'Miscellaneous Application No.1751/2019' passed by the Adjudicating Authority ('National Company Law Tribunal'), Principal Bench, New Delhi. 2. The Appellants pray for the following reliefs: Stay the operation of the Impugned orders dated 30.04.2020 and 06.05.2020 passed by the Ld. Principal Bench, NCLT for the aforementioned reasons till the disposal of the Appeal; Stay Carval/consortium of Carval/Nithia (in short 'Carval') and its Directors/managers/Officers/representatives/agents/affiliates/sis ter concerns/partners/assigns etc., by whatever name called from given effect to the Order dated 30.05.2020 and 06.05.2020 passed by the Ld. Principal bench, NCLT and refrain Carval and its directors/managers/Officers/representatives/agents/affiliates/sist er concerns/partners/assigns etc. by whatever name called from alienating, transferring, selling, encumbering, leasing or creating or any third party interest, whether directly or indirectly, in any moveable or immovable asset of the Corporate Debtor till the disposal of the Appeal; Set aside t....
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....ings and the decision to vote on the revised plan, yet the certain CoC Members at whose behest the 15th CoC Meeting was called decided to hold physical voting to approve the revised Plan. At the 15th CoC Meeting held on 21.04.2019, the CoC approved the revised Resolution Plan submitted by Carval by a majority of 81.29% without there being the prior CCI's mandatory approval. The CoC, therefore, on 21.04.2019 is guilty of approving a Resolution Plan that was contrary to the provision to Section 31(4) of the Code that required prior "mandatory" approval from the CCI, which is impermissible. It is well settled position of law decided by the Supreme Court that - When the statute prescribed a particular method for doing something, that thing can only be done by that method and if that thing is done in some other manner such action is null and void and nugatory, held in Para 42 and 43 of Mackinnon Mackenzie ltd Vs. Mackinnon Employees Union, (2015) 4 SCC 544; "Prior" permission cannot never be equated with subsequent permission. As such, the subsequent permission where the statute prescribes a prior permission is no permission in law at all, held in the judgment relied upon hereinabove....
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....r to 19.04.2019 and 15.05.2019 and was being falsely represented. As represented in Annexure-2 of the Resolution Plan, of the "Management Team" of Mr.Johannes Sittard and Mr.Jai Saraf, Mr.Johannes Sittard was the only person having any technical knowledge in the field of mining and metals and has prior work experience in Arcelor Mittal. Whereas, Mr.Jai Saraf is Chartered Accountant (CA) by profession and handles only finances. As such. Carval was only a financing partner of Carval Consortium who had provided the Standby Letter of Credit on behalf of Nithia Capital. After Mr. Johannes Sittard's resignation in 2018, the working partner of Nithia capital is a CA and CARVAL, being an investment fund, there is an absence of technical expert which raises a question on the running of the said plants slated to be taken over. The Books of Account of Nithia Capital make, it is evidenced that the total capital invested in Nithia since inception is only 1000 pounds i.e. Rs. 93,000 as on date and is being managed by persons having only financial knowledge i.e. Mr.Jai Saraf and his wife. Thus, Carval's Resolution Plan clearly violated the terms of Regulation 39(1) (c) of the CIRP Regulations. Th....
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....FRP. In event of a default in payment of the Upfront Payment Amount and/or any other default as per the terms of the RFRP, the creditors will not be in a position to invoke the Bank Guarantee for Rs. 250 Crores, but only in Rs. 50 Crores, causing loss to all creditors of the Corporate Debtor. In deliberate suppression of the aforesaid, during the hearing before the Adjudicating Authority on 27.04.2020, 28.04.2020 and 30.04.2020 for approval of the Resolution Plan, the Resolution Applicant, Resolution Professional and the "Financial Creditor" did not reveal the fact of reducing the Bank Guarantee before the Adjudicating Authority. The aforesaid facts were not revealed to the Adjudicating Authority in blatant and fraudulent suppression of facts. During the course of the entire hearing, the Resolution Applicant, Resolution Professional and the "Financial Creditors" led the Adjudicating Authority to believe that the Bank Guarantee of Rs. 250 Crores was being extended, in accordance with the RFRP. Moreover, the Resolution Professional had filed an application for an urged hearing of the MA No. 1751 of 2019 before the Adjudicating Authority, on the ground that the Bank Guarantee of Rs. 2....
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.... the Legislature has made amendments to the on account of the ongoing pandemic but no amendments have been providing any concessions in reduction/dilution of payments or guarantees etc. 4. The Resolution Professional/Respondent No.1 has submitted that : a) The issue of prior approval from the CCI under Proviso to Section 31(4) of the I&B Code, 2016 is incorrect and CCI approval is not a condition precedent for the approval of the Resolution Plan. The CCI Approval has been procured on June 4, 2019 in compliance with the provisions of the Code. It is submitted that condition requiring CCI Approval is "directory" and having obtained the same, the provisions Section 31 (4) have been complied with. The Law is amply clear from the judgment of this Appellate Tribunal in the matter of Arcelormittal India Pvt. Ltd. Vs. Abhijeet Guhathakurta & Ors. 2019 SCC Online NCLAT 920, which states as under: "15. We have noticed and hold that proviso to sub-section (4) of section 31 of the 'I&B Code' which relates to obtaining the approval from the 'Competition Commission of India' under the Competition Act, 2002 prior to the approval of such 'Resolution Plan' by the 'Committee of Creditor....
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....time bound process. Any delay in approval of the plan would have resulted in liquidation of the Corporate Debtor. It is pertinent to note that the Respondent No.2 had approved the said plan, subject to CCI's approval. Vide email dated June 4, 2019, the successful Resolution Applicant informed Respondent No.1 that the CCI approval has been obtained. It is submitted that the provisions of the Code are to be construed harmoniously with the intent of the legislature, which is definitely not to push the Corporate Debtor into liquidation. c) As far as Extension of Performance Bank Guarantee ('PBG') is concerned, the Respondent No.1/Resolution Professional has submitted that the 'Performance Bank Guarantee' ("PBG") was maintained by the Resolution Applicant/Respondent No.3 for almost a period of one year from approval of the Resolution Plan. In light of the financial crisis faced by several companies in view of the pandemic, COVID-19, Respondent No.3 requested for a reduction in the amount of the PBG. It is submitted that by this time, the contesting Resolution Applicant, the Consortium of Investment Opportunities IV Pte. Ltd., Singapore, Synergy Metals and Mining Fund LLP, Dubai and A....
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....SCC Online NCLAT 920 ("Arcelor decision"). In the said case, this Appellate Tribunal has categorically held that the proviso to Section 31(4) is "directory" and "not mandatory" in nature. The Appellate Tribunal has further clarified that as long as the approval from the CCI has been obtained, prior to approval of the Resolution Plan by the Adjudicating Authority, such an action would not be in contravention of the provisions of the Code. In the present case, the Successful Resolution Applicant had applied for the approval from CCI prior to the Resolution Plan having been put to vote by the CoC. The approval from CCI is dated 03.06.2019. the final orders in M.A 1751 of 2019 in CP(IB) No. 1830 of 2017 i.e. Resolution Plan approval application, were pronounced on 30.04.2020 and the judgment was made available on 06.05.2020. Thus, clearly, the Resolution Plan by the Adjudicating Authority has been approved only after the CCI approval and thus, the requirement of CCI approval for a combination under the Competition Act, 2002, is complied with, albeit after CoC approval of the Resolution Plan. This is however, permissible in terms of the Arcelor decision cited above. Even otherwise, it i....
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....red by unprecedented circumstances which were not contemplated at any stage by any of the stakeholders. As per the provisions of the Code, the entire CIRP including the approval of the Resolution Plan by the Adjudicating Authority should have concluded within a maximum period of 330 days. In fact, clause 3.4.2 of the RFRP itself contemplates that the initial validity period of PBG shall be six months (Approx. 180 days) and the same shall be renewed/extended for further periods are required, so that the same is valid uptil the payment of upfront payment amounts or payment of Rs. 250 Crores by the Successful Resolution Applicant, whichever is later. The CoC, however, in exercise of its right under Clause 6.4 of the RFRP (see page 157 of the Appeal), agreed to allow modification in the validity period of PBG i.e. allowing a validity period of one year till 30.04.2020. The said fact, alongwith the minutes of the 16th meeting of the CoC where decision to allow 1 year validity period was taken by the CoC and the copy of the PBG, were duly placed on record of the Adjudicating Authority as part of the Application for approval of the Resolution Plan. It is expressly denied that any unfair a....
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....stead of the initially contemplated Rs. 250 Crores. Such an action cannot be said to have provided undue advantage to the Respondent No.3. In any event, by this stage the only other resolution application in fray had expressly withdrawn their Resolution Plan, after having bitterly contested approval process and litigation thereto. c. On the issue of Resignation of Johannes Sittard, at the outset it is submitted that the Respondent No.3 has specifically clarified during their arguments that the understanding of the Appellants regarding resignation of Mr. Johannes Sittard is completely incorrect. Even otherwise, the understanding of the Appellants that Mr. Johannes Sittard is the only person who has the technical knowledge to implement the Resolution Plan is without basis or cause. The Resolution Plan neither contemplates that it would be technically not feasible to implement the Resolution Plan without Mr. Johannes Sittard nor had CoC made any such assumptions as the basis of the approval of the Resolution Plan. In any case, viability and feasibility of a Resolution Plan falls within the commercial domain of CoC and no ground of challenge on this count is within the limits of jud....
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.... Therefore, it is submitted that the Appellants have made false and misleading allegations that the Successful Resolution Applicant has given a false undertaking with respect to Dr. Sittard. 7. It seems that the Appellants are aggrieved with the allocation of tiny amount of 0.18% of the outstanding dues. The collective admitted operational Debt of the Appellant was Rs. 423.82 Crore which was 80.88% of the total Operational Debt of the Corporate Debtor total being Rs. 524 Crore (as per data submitted). The Appellant was also representative of the Operational Creditor in the meeting of CoC, being holder of more than 10% of the total admitted debt of Rs. 3003 Crores. They have also alleged that the Adjudicating Authority has approved the Resolution Plan, where the Appellant is getting hardly 0.18%/0.19% of its claims. The Appellant is logically upset that they are paid 0.19% whereas the Financial Creditors (CoC decision takers) are getting 41.75% of their claims. The figure cited by the Operational Creditor, that the Financial Creditor have got Rs. 1035 Crore from an admitted debt of Rs. 2479 Crore (41.75%). The details of amount admitted/amount provided under the plan etc. are avai....
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....orporate debtor; (b) provides for the repayment of the debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under section 53; (c) provides for the management of the affairs of the Corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; (e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be specified by the Board. (3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub-section (2). (4) The committee of creditors may approve a resolution plan by a vote of not less than seventy five per cent. of voting share of the financial creditors. (5) The resolution applicant may attend the meeting of the committee of creditors in which the resolution plan of the applicant is considered: Provided that the resolution applicant shall not have a right to vote at the meeting o....
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....to the committee all resolution plans which comply with the requirements of the Code and regulations made thereunder along with the details of following transactions, if any, observed, found or determined by him: - (a) preferential transactions under section 43; (b) undervalued transactions under section 45; (c) extortionate credit transactions under section 50; and (d) fraudulent transactions under section 66, and the orders, if any, of the adjudicating authority in respect of such transactions.] (3) The committee shall- (a) evaluate the resolution plans received under sub-regulation (2) as per evaluation matrix; (b) record its deliberations on the feasibility and viability of each resolution plan; and (c) vote on all such resolution plans simultaneously. (3A) Where only one resolution plan is put to vote, it shall be considered approved if it receives requisite votes. (3B) Where two or more resolution plans are put to vote simultaneously, the resolution plan, which receives the highest votes, but not less than requisite votes, shall be considered as approved: Provided that where two or more resolution plans receive equal votes, but not less than r....
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.... an application to the Adjudicating Authority for an order seeking the assistance of the local district administration in implementing the terms of a resolution plan. [(9) A creditor, who is aggrieved by non-implementation of a resolution plan approved under sub-section (1) of section 31, may apply to the Adjudicating Authority for directions.] 40. Extension of the corporate insolvency resolution process period- (1) The committee may instruct the resolution professional to make an application to the Adjudicating Authority under section 12 to extend the insolvency resolution process period. (2) The resolution professional shall, on receiving an instruction from the committee under this Regulation, make an application to the Adjudicating Authority for such extension. 10. Section 5 & Section 31 of the Competition Act, 2002 are enumerated below: Section 5 - Combination:-The acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises shall be a combination of such enterprises and persons or enterprises, if- (a) any acquisition where- (i) the parties to the acquisition, being the acquirer and the enterprise, whose control, sha....
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....value of more than rupees one thousand crore or turnover of more than rupees three thousand crore; or (B) in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars or turnover of more than fifteen hundred million US dollars; or (ii) the group, to which the enterprise remaining after the merger or the enterprise created as a result of the amalgamation, would belong after the merger or the amalgamation, as the case may be, have or would have,- (A) either in India, the assets of the value of more than rupees four thousand crore or turnover of more than rupees twelve thousand crore; or (B) in India or outside India, the assets of the value of more than two billion US dollars or turnover of more than six billion US dollars. Explanation.-For the purposes of this section,- (a) "control" includes controlling the affairs or management by- (i) one or more enterprises, either jointly or singly, over another enterprise or group; (ii) one or more groups, either jointly or singly, over another group or enterprise; (b) "group" means two or more enterprises which, directly or indirectly, are in a position to- (i) exe....
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....ot accept the modification proposed by the Commission under sub-section (3), such parties may, within thirty working days of the modification proposed by the Commission, submit amendment to the modification proposed by the Commission under that sub-section. (7) If the Commission agrees with the amendment submitted by the parties under sub-section (6), it shall, by order, approve the combination. (8) If the Commission does not accept the amendment submitted under sub-section (6), then, the parties shall be allowed a further period of thirty working days within which such parties shall accept the modification proposed by the Commission under sub-section (3). (9) If the parties fail to accept the modification proposed by the Commission within thirty working days referred to in sub-section (6) or within a further period of thirty working days referred to in sub-section (8), the combination shall be deemed to have an appreciable adverse effect on competition and be dealt with in accordance with the provisions of this Act. (10) Where the Commission has directed under sub-section (2) that the combination shall not take effect or the combination is deemed to have an apprecia....
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....mbination" as referred in Section 5 of the Competition Act, 2002 the requirement is the concerned Resolution Applicant shall obtain the approval of CCI prior to the approval of such Resolution plan by the CoC. The purpose is complied with in the present case, the approval from CCI has been obtained in June, 2019 and approval of the Resolution plan has been made by the Adjudicating Authority in April, 2020/May, 2020, this aspect has been taken care of by the Adjudicating Authority. The Adjudicating Authority, while approving the plan has also stated vide its order dated 30.04.2020 para 17(2) that wherever approval/ permissions are required the same is to be obtained within a period of one year from the date of the approval of the Resolution Plan. In Para 17 of the impugned order dated 30.04.2020, the Adjudicating Authority has provided various directions to various authorities to assist the Corporate Debtors, so that the Resolution Plan is operational. All this suggests that the Adjudicating Authority was conscious of CCI approval and hence, ignoring the fact that CCI approval has been obtained post CoC approval of the Resolution Plan is in order and is reiterating the view taken by....