TaxTMI 
TaxTMI 
2020 (9) TMI 386
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....nder Section 61 of the 'Insolvency and Bankruptcy 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....
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.... and various other CoC members objected this hijacking of the proceedings 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 i....
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....had resigned as a Director from Nithia with effect from 01.04.2018, which was much prior 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 Resolut....
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....in the amount of the Bank Guarantee is in complete breach of the conditions provided in the RFRP. 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. 1....
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....ere filed in April i.e. after the pandemic situation had already escalated in India. In fact, 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' un....
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....ction is without any merit or legal basis and must be rejected. Further, under the provisions of the I&B Code, 2016, the CIRP is a 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 ....
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....this issue is, no longer, res integra and has been settled by this Appellate Tribunal in Arcelor Mittal India Pvt. Ltd. Vs. Abjijit Guhathakurta, 2019 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 ....
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....ority. b. As far as the Variation to the terms of the Performance Bank Guarantee is concerned, it is submitted that the present process has been marred 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....
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....e financial creditors in exercise of their commercial wisdom considered it appropriate to accept PBG for an amount of Rs. 50 Crores, issued on 30.04.2020, instead 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 ....
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....at Dr. Sittard is the Non-Executive Chairman and Director of Nithia Capital Resources. In view of the aforesaid this statement was fully accurate and continues to be as on date. 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,....
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....m that each resolution plan- (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the repayment of other debts of the corporate 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. ....
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....o continue in the corporate insolvency resolution process, forfeit any refundable deposit, and attract penal action under the Code. (1A) A resolution plan which does not comply with the provisions of sub-regulation (1) shall be rejected.] (2) [The resolution professional shall submit 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 vot....
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....has not been obtained. (7)No proceedings shall be initiated against the interim resolution professional or the resolution professional, as the case may be, for any actions of the corporate debtor, prior to the insolvency commencement date. (8)A person in charge of the management or control of the business and operations of the corporate debtor after a resolution plan is approved by the Adjudicating Authority, may make 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 A....
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....ould jointly 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, in aggregate, the assets of the value of more than two billion US dollars or turnover of more than six billion US dollars; or (c) any merger or amalgamation in which- (i) the enterprise remaining after merger or the enterprise created as a result of the amalgamation, as the case may be, have,- (A) either in India, the assets of the 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 turno....
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....se appropriate modification to the combination, to the parties to such combination. (4) The parties, who accept the modification proposed by the Commission under sub-section (3), shall carry out such modification within the period specified by the Commission. (5) If the parties to the combination, who have accepted the modification under sub-section (4), fail to carry out the modification within the period specified by the Commission, such combination shall be deemed to have an appreciable adverse effect on competition and the Commission shall deal with such combination in accordance with the provisions of this Act. (6) If the parties to the combination do not 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,....
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....me being in force as if such acquisition or acquiring of control or merger or amalgamation had not taken place and the parties to the combination shall be dealt with accordingly. (14) Nothing contained in this Chapter shall affect any proceeding initiated or which may be initiated under any other law for the time being in force. 11. We have gone through the various submissions including citations made by the Appellants and Respondents and also the various orders of the Adjudicating Authority. On the issue of prior permission of the CCI was not obtained under Proviso to Section 31(4) is a material irregularity by the Respondents and contravention of Section 30 of the I&B Code, 2016; it seems that the purpose of the IBC is to ensure that wherever a "Combination" 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 asp....