TaxTMI 
TaxTMI 
2019 (5) TMI 1817
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....erential or undervalued transactions. b) To Direct the Respondent to carry out a forensic audit of the affairs of the Corporate Debtor including the Restaurant Sale and partial assignment of the Brand to examine whether the Restaurant Sale and partial assignment of the Brand are undervalued or preferential. c) To Direct the Respondent to provide the provisional financial statements for the current year made up to a date not earlier than fourteen days from the date of the application as required by Regulation 36(2)(c) of the CIRP Regulations, as well as other information statutorily required to be disclosed as part of the information Memorandum on an immediate basis. d) To Direct the Respondent to provide regular status updates, preferably weekly, to this Hon'ble Tribunal on the day today progress of the CIRP. e) To extend the last date for submission of resolution plans by a period of at least two weeks after the date of the aforementioned disclosure affidavit and financial audit (whichever is earlier). f) In the alternative, and in view of the various illegalities specified in this application, direct a change of Resolution Professi....
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....action and delay by the Respondent, the Applicant was constrained to raise strong objections to the CIRP being carried out by the Respondent by an email dated 1 February 2019. 4) It is alleged that the conduct of the Resolution Professional is also leading to justifiable apprehensions on the part of the Applicant as to his motives and interests qua the erstwhile management of the Corporate Debtor, one of whom is also a potential resolution applicant. 5) The total consideration for the Restaurant Sale and the partial assignment of the Brand in favour of the Promoter appears to be only INR 1,50,00,000. The assets and turnover of Maiyas Restaurants were INR 14,48,99,990 and INR 32,96,11,296 respectively for the financial year ending 31st March 2017 (which is the last financial year for which its audited financial statements are publicly available). The Applicant submits that the Promoter is also a potential resolution applicant interested in acquiring the Corporate Debtor by submitting a resolution plan. Accordingly, on one hand, while the Corporate Debtor has been forced into a CIRP due to its purported inability to pay its dues under the management of the Promoter,....
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....ibunal for confirmation. The Hon'ble Supreme Court further clarified that the non obstante clause in Section 60(5) is designed for a different purpose, that is to ensure that the Company Law Tribunal alone has jurisdiction when it comes to applications and proceedings by or against a corporate debtor covered by the Code, making it clear that no other forum has jurisdiction to entertain or dispose of such applications or proceedings. For the sake of convenience, Para 78, Para 79 and Para 84 of the above judgement is extracted below. "78. What has now to be determined is whether any challenge can be made at various stages of the corporate insolvency resolution process. Suppose a resolution plan is turned down at the threshold by a Resolution Professional under Section 30(2). At this stage is it open to the resolution applicant concerned to challenge the Resolution Professional's rejection? It is settled law that a statute is designed to be workable, and the interpretation thereof should be designed to make it so workable. In CIT v. S. Teja Singh [CIT v. S. Teja Singh, 1959 Supp (1) SCR 394 : AIR 1959 SC 352], this Court said: (SCR p. 403: AIR pp. 355-56, para 9) ....
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........................ 84. If, on the other hand, a resolution plan has been approved by the Committee of Creditors, and has passed muster before the adjudicating authority, this determination can be challenged before the appellate authority under Section 61, and may further be challenged before the Supreme Court under Section 62, if there is a question of law arising out of such order, within the time specified in Section 62. Section 64 also makes it clear that the timelines that are to be adhered to by the NCLT and NCLAT are of great importance, and that reasons must be recorded by either the NCLT or NCLAT if the matter is not disposed of within the time-limit specified. Section 60(5), when it speaks of the NCLT having jurisdiction to entertain or dispose of any application or proceeding by or against the Corporate Debtor or corporate person, does not invest the NCLT with the jurisdiction to interfere at an applicant's behest at a stage before the quasi judicial determination made by the adjudicating authority. The non obstante clauses in Section 60(5) is designed for a different purpose: to ensure that the NCLT alone has jurisdiction when it comes to applications and ....
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.... are denied as false. They have relied on the judgement of Hon'ble Supreme Court in the case of Arcelormittal India (P) Ltd. V. Satish Kumar Gupta, reported in (2019) 2 SCC 1, wherein it has clearly explained the scope of the powers of the National Company Law Tribunal under Section 60(5) and has held that the National Company Law Tribunal does not have the jurisdiction to interfere at an applicant's behest at a stage before the quasi-judicial determination made by the adjudicating authority, that is before the resolution plan is approved by the CoC and placed before the Tribunal for confirmation. The Hon'ble Supreme Court further held that the non obstante clause in Section 60(5) is designed for a different purpose: to ensure that the NCLT alone has jurisdiction when it comes to applications and proceedings by or against a Corporate Debtor covered by the Code, making it clear that no other forum has jurisdiction to entertain or dispose of such applications or proceedings. 2) It is stated that the Applicant is in the same line of business as that of the Corporate Debtor and it is is a competitor. The applicant expressed its interest to participate and Bid in th....
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....aseless and is made only with a mala fide intention of wiping out competition. It is further submitted that non-providing of certain proprietary information belonging to the Corporate Debtor, like recipe, etc., will not prejudice the Applicant in any manner. 4) Under the provisions of the Insolvency and Bankruptcy Code, 2016 ("Code"), the Resolution Applicant is responsible to conduct the resolution process in accordance with the provision of the Code and is answerable to the Committee of Creditors. The Resolution Applicant is not answerable to any third party, much less satisfy only one Resolution Applicant. In the present case, the Committee of Creditors has not raised any objection regarding the manner in which the resolution process is being conducted and the Applicant has not locus standi to question the Resolution Applicant. Further, a resolution applicant cannot direct the Resolution Professional on how to conduct the resolution process. The above application is a blatant abuse of the process of law and completely contrary to the objects of the Code. 5) It is further stated that the main contention of the Applicant is that the Restaurant Sale and the execut....
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....on of the Corporate Debtor and use it in its business, thereby drastically reducing the value of the Corporate Debtor. It is evident that the Applicant has no real intention to bid for or in any way submit any resolution plan. Being a competitor, it is definitely in the interest of the Applicant to reduce the value of the Corporate Debtor as much as possible so that the Applicant can increase its business and its market share. The Applicant is trying to misuse the corporate insolvency resolution process to unjustly enrich itself and reduce the value of the Corporate Debtor, thereby reducing the chances of revival of the Corporate Debtor. The Applicant has no right to seek any confidential information either from the resolution professional or by seeking an order/direction from this Hon'ble Tribunal. Filing an application seeking various direction/orders form this Hon'ble Court is an abuse of the process of law and has to be deprecated in strongest terms. 3) The Applicant's representatives have visited the factory of the Corporate Debtor an it is informed that even during the visit, the representatives of the Applicant have made attempts to collect all the confi....
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....asing on the facts of case, Resolution Professional is of also the opinion that these transactions do not merit being classified as preferential transactions under the IB Code. The Respondent further explained to the CoC circumstances in which the Information Memorandum does not capture the erstwhile Restaurant business which was earlier part and parcel of Corporate Debtor. That apart the Respondent also informed the CoC that before forming such an opinion, he also consulted MR. Udaya Holla, present Advocate General of Government of Karnataka as well as M/s. Veritas Legal, Advocate and Solicitors, Mumbai who are one of India's leading Corporate Advisory Firm specializing in NCLT proceedings and the CoC has taken note of the same and directed the Respondent to be guided by the legal opinions. 2) It is also pointed out that Sri Sadananda Maiyya, the Founder of Corporate Debtor is also the erstwhile Founder of the Applicant Company and remained in their Board until he started the Corporate Debtor Company and that both the Corporate Debtor and the Applicant Company are into the same line of business and are direct competitors to each other. 7. Heard Shri Sajan Poovayya,....
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....e required information. However, it is a case of the Applicant that it is having apprehensions about several issues concerning the affairs of Corporate Debtor and the conduct of CIRP and thus sought investigation into those allegations and also tried to elicit information which is confidential in nature. As stated supra, the Applicant was provided the required and eligible information to the Applicant on par with other Resolution Applicants so as to submit their respective plans. However, for the reasons best known to the applicant, it has not come with a competitive Resolution plan vis a vis with successful Resolution Applicant in all respects. So far as the allegations with regard to the disinvestment of Shares held by the Corporate Debtor in the erstwhile subsidiary M/s.Maiyas Restaurants Private Limited, as stated supra, the requisite information was already placed before 3rd CoC meetings held on 04.12.2018 at Agenda No.7. And thus duly considered and found that there was nothing illegal and irregular in those alleged transactions. 12. It is settled position of law that IRP/RP alone will conduct CIRP of Corporate Debtor with supervision and guidance of COC at the helm of aff....