TaxTMI 
TaxTMI 
2020 (11) TMI 439
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.... Sanjeev Singh, Mr. Sam Panna Pani, Mr. Prashant Tripathi, Advocates for R-4. Ms. Amrita Rana, Advocate for R-5. Mr. Gurmeet Bindra, Advocate for R-6. Ms. Amita, Mr. Sampurna Gupta, Advocate JUDGMENT A.I.S. Cheema, J. 1. This Appeal has been filed by the Appellant, Director of the Corporate Debtor (M/s. Newgen Speciality Plastics Ltd.). The Appeal has been filed against Impugned Order dated 06th January, 2020 passed by Adjudicating Authority (NCLT, New Delhi, Bench - III) at New Delhi in C.P.(IB) No. 1251/ND/2018, in the matter of "M/s. Dynamic Star Securities & Allied Services Vs. M/s Newgen Speciality Plastics Ltd." 2. By the Impugned Order, the Adjudicating Authority rejected the C.A. No. 962/C-III/ND/2019 filed by Oriental Bank of Commerce (Now, Punjab National Bank) and Others against Respondent No. 1, Amit Kumar (Resolution Professional), (Now, Liquidator). 3. By the same order, the Adjudicating Authority accepted C.A. No. 452/C-III/ND/2019 filed by the Resolution Professional (Now, Liquidator) seeking order of liquidation of the Corporate Debtor. 4. The Present Appeal has been filed by the Appellant Director of the Suspended Board of the Corporate Debtor se....
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....Corporate Debtor with the help of Ex-Director could have become profitable and was moving towards profitability but Respondent No. 1 suddenly stopped operations from April, 2019. Respondent No. 1 did not pay the suppliers, workers and employees on time intentionally and kept withdrawing his fees and expenses. The Information Memorandum prepared was also with wrong data. The CoC belatedly realized intention of Respondent No. 1 and conducted Joint Lenders' meeting on 25th November, 2019 and sought replacement of Respondent No. 1 as Resolution Professional. The Appellant has referred to Reply of Respondent No. 4 /Hero Fincorp, member of CoC to submit that Respondent No. 4 has supported the CoC for removal of Respondent No.1. 9. The Appellant has argued that the Appellant can still give Resolution Plan for revival of Corporate Debtor and has given a settlement proposal under Section 230 of the Companies Act, 2013 to the members of CoC as presently the Company is under Liquidation. The Appellant wants liquidation order to be set aside. The Appellant has referred section 27 of IBC and argued that CoC decided that the RP should be replaced. RP is required to be replaced. Case of Res....
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.... were to be taken, they might require prior approval of the concerned authorities of their organisation and insisted on e-voting. Respondent No. 1 has argued that accordingly e-Voting took place and reference is made to Summary of the decision taken by way of e-Voting Page 367. It is argued that CoC had no ground to claim before Adjudicating Authority that it had no idea of procedure or that Resolution dated 19.06.2019 was based on misrepresentation. 12. According to the Respondent No. 1 Minutes of 5thMeeting show that Resolution regarding liquidation was duly approved by the RP was approved by CoC. Case of other Respondents (Members of CoC) 13. The Respondent No. 2 OBC Bank (Now PNB) having 66.79 % voting share in the Committee of Creditor has filed written submissions and argued that the Corporate Debtor was a loss making entity and accumulated ever increasing losses since 2015-2016. It is argued that no Resolution Plan was received by CoC within stipulated time of 180 days which ended on 17th May, 2019. However, the consortium of two directors of the Corporate Debtor which included the Appellant along with a third party, assured CoC to grant sometime to submit Resolutio....
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.... Ltd. Subsequently, the first Resolution Applicant M/s. Prudent ARC Ltd. sent letter that they do not have any viable Resolution Plan. The Consortium consisting of the Appellant informed that they are yet to submit relevant information on the consortium and the queries raised. Respondent No. 3 has argued that CoC decided to give them chance by submitting relevant documents and Resolution Plan by 25th May 2019 and extension of time was sought from Adjudicating Authority under Section 12 of IBC. On 19th June 2019, the 5th CoC meeting was conducted wherein request for time for prospective Resolution Plan till 30th June 2019 was discussed. CoC was not inclined to grant extension but on persistent demand, CoC agreed to grant extension of time till 21st June 2019 to submit a Resolution Plan. Till the stipulated time, no Resolution Plan was received. As there was no resolution plan, CoC opined to initiate liquidation process of the Corporate Debtor and CoC passed Resolution dated 19th June, 2020 to take Corporate Debtor into Liquidation. The RP was directed to submit an appropriate Application for seeking liquidation of the Corporate Debtor. The Respondent No. 3 submitted that at the requ....
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....e instant matter should be published in all India edition of a widely circulated newspaper, keeping in mind the pan-India nature of clientele of CD. It was further noted that in view of nonavailability of working capital to run the CD, the RP put the proposal to raise Interim Finance before the CoC, but it did not get approved. The RP received two Expression of Interest (EOI) i.e. one from Mr.VK Singh and Mr. SK Singh (directors of CD) & M/s. Air Touch Technologies Pvt. Ltd and after this no further EoI(s) were received by the applicant. 5. In 3rd meeting of the CoC, held on 16.04.2019, the sole resolution applicant i.e. consortium of directors of CD and M/s. Air Touch Technologies Pvt. Ltd. sought extension for submitting their resolution plans. 6. In 4th meeting of the COC held on 13.05.2019, again the sole consortium sought extension of time for submitting their resolution plan. The minutes of COC clearly indicate the non-cooperation on the part of the suspended board of directors. 7. On 25.05.2019, Mr. SK Singh (Director) the proposed Resolution applicant of the CD sent email to RP requesting to further extend the time period for submitting a resoluti....
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....g down and thus it was possible to make corporate debtor profitable, the Resolution Professional (Respondent No. 1) has pointed out that keeping the Corporate Debtor as a going concern was incurring more losses. The Appellant wants to claim that Appellant procured fresh orders for supply. However, the Respondent No. 1 is pointing out that although the Corporate Debtor was incurring losses and the Appellant was aware that the working capital of the company were not sufficient to achieve the break even sales, still the Appellant took Orders. Reply filed shows that there are allegations of Respondent No. 1 against the Appellant and other promoters of the company regarding non-cooperation. The Appellant does not appear to have taken up these issues before the Adjudicating Authority when question of passing of liquidation order came up. In fifth CoC meeting dated 19.06.2019 (Page 340) these Minutes were approved. Once CIRP is initiated the management vests with the IRP/RP and under Section 20 the IRP/RP is to keep the company as a going concern. Thus, Appellant could not have acted in a manner not agreed to by the Resolution Professional and get Orders when Resolution Professional did n....
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....y the Directors which would have been sufficient to recover fixed cost of the CD, the company has continued to incur cash losses in the month. Similarly, in the month of April, 2019, only sales of Rs. 12,28,239/- have been achieved mainly due to nonavailability of working capital. In light of these circumstances, and the details mentioned in Item A 10 and Item A 11 below, the RP after taking required inputs from the Directors has taken a conscious business decision to temporarily suspending the operations of the Corporate Debtor Members so as to avoid. Restricting the involvement of the Directors in running the operations and entering the premises of the CD As explained above, the Directors have not been able to provide the satisfactory explanation, records and document with regard to past transactions and current operations of the company. It was felt that restricting the rights of the directors might bring effective control expedite submission of information and documents. Accordingly, the RP has restricted the role of the Directors in running the day to day operations of the CD by asserting that all decisions of purchase and sales would be tak....
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....ppellant and Consortium consisting of Appellant had failed to put up any resolution plan. 28. We do not find any error in the conclusion of Adjudicating Authority that the liquidation order was required to be passed as no resolution plan was submitted even in the extended period of time. Whether Resolution Professional/Prospective Liquidator should have been charged? 29. With regard to the Application filed by CoC having CA No. 962 of 2019 (Annexure A-12), we have seen the Application. The Application referred to Joint Lenders' Meeting dated 25th November, 2019 and the prayer was to replace Resolution Professional/Liquidator. The Adjudicating Authority just referred to the argument of the Counsel for CoC that CoC did not have idea about the procedure to be followed for conducting the CoC and the Resolution that came to be passed by CoC on 19 June, 2019 is based on the misrepresentation. Adjudicating Authority did not refer to the contents of Application or Minute. It would be appropriate to refer to Minutes of the Joint Lenders' Meeting in which the Respondent No. 1 also appears to have been present for some time. We are not referring to the Application as Minutes and cont....
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....less replaced by Adjudicating Authority under sub-section (4). 34. In the facts and circumstances of the present matter, it would have been more appropriate that the Adjudicating Authority should have considered appointing any other Professional as liquidator instead of appointing the Respondent No. 1 in the face of the Joint Lenders' Meeting Minutes reproduced above which claimed that the lenders were of the view that entire CIRP had not been conducted in desired way by the RP. Liquidation Order was yet to be passed and claim of CoC could not have been ignored under Section 27 of IBC. The interest of Financial Creditors and other Creditors is there even during Liquidation proceeding and it would not be appropriate if there are doubts regarding the manner in which the Liquidator is conducting the process. We are not sitting in judgment on the question whether the averments made in the Joint Lenders' Meeting by the Financial Creditors against the Respondent No. 1 are correct or not. We hold that though delayed, when CoC had conveyed that it wanted Resolution Professional changed and as Liquidation Order was yet not passed, Adjudicating Authority should have first replaced Resolut....
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.... that liquidation order has been reserved by the Hon'ble NCLT court and same is the status. However, he informed that as on 25.11.2019 there was hearing on the application of RP for Non Co-operation against the ex-director, in which advocate of CD raised the issue of liquidation order. For this, Hon'ble judge has Informed that at present file is missing and they ordered for search of file. The advocate has stated in court that in case of need fresh arguments may be heard. Subsequently, while on perusal of the order of Hon'ble NCLT on dated 25.11.2019, it is revealed that liquidation order which was heard on 05.08.2019, the order could not be uploaded and directed the registry to file a detailed report within a weeks' time and matter is posted on 12.12.2019, against CA/452/C-III/ND/2019 l.e. for liquidation order and the appointment of liquidator. It is further revealed that an application under section 9 from Dynamic Start Security Allied Services was also heard on dated 25.11.2019 and RP was directed to file reply within a week. The application bears CA/818/2019. The FCs could not understand that why full facts were not disclosed to the FC....
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....uld not be withdrawn from the lenders assets. The FCs were not satisfied that how security agency had suddenly withdrawn the security without any prior notice to RP and reduced the security coverage by informing the RP vide email dated 07.11.2019. After stating the above points, RP took the permission of the lenders to exit the meeting and left. The FCs discussed various concerns related to CIRP process and the losses incurred. The points of work performed by RP was discussed during the meeting and after summarizing it was concluded that, the FCs were not satisfied with the way the CIRP was handled during the period. All lenders, were of the view that the entire CIRP process has not been conducted in desired way by the RP, and were of the view that RP may be replaced and a new liquidator may be appointed to undertake the liquidation process. After discussions it was resolved that Mr. Sandeep Kr Bhatt, having registration no - IBBI/IPA- 003/IP- N00038/2017-18/10298 who is presently is working as RP in another case of Oriental Bank of Commerce may be proposed to undertake the work of liquidator, since his work as RP is satisfac....