2019 (10) TMI 1359

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....porate Debtor (Respondent No. 1), Arcelor Mittal India Private Limited (Respondent No. 2) - the Financial Creditor holding majority stake in the CoC and Karur Vysya Bank Limited (Respondent No. 3) - another Financial Creditor of the Corporate Debtor. The Applicant seeks the following reliefs in this application: i. To direct the RP to validly reconstitute a CoC under the terms of Section 21 of the Code and inter alia quash the decision of the CoC to reject the Final Resolution Plan filed by the Applicant; ii. To direct the newly constituted CoC to accept the Final Resolution Plan of the Applicant. 3. The Applicant submits that it had filed a Resolution Plan for the revival of the Corporate Debtor, which was rejected by CoC, thus leading the Corporate Debtor into Liquidation. The Applicant submits that it was the only Resolution Applicant who had approached the CoC with a resolution plan but was rejected in contravention of the intent of the Insolvency & Bankruptcy Code, 2016 (hereinafter referred to as "I&B Code"). The Applicant challenges the rejection of its resolution plan on the ground that the constitution of CoC of the Corporate Debtor is illegal and bad ....

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....in the overall benefit of the Corporate Debtor. 9. It is further submitted that the RP, by way of an e-mail dated 04.02.2019 addressed to the Applicant, stated that Respondents No. 2&3 had rejected the Final Resolution Plan submitted by the Applicant. The e-mail of the RP did not mention any reasons or justifications for rejection of the Final Resolution Plan. 10. The major contention of the Applicant is that the rejection of the Final Resolution Plan by the CoC is unsustainable in the eyes of law as the constitution of CoC itself is violative of the I&B Code. It is submitted that the Respondent No. 2, being a related-party of the Corporate Debtor is not entitled to be in the CoC and represent, participate or exercise its voting rights in the CoC. Section 21(2) of the I&B Code provides that "a financial creditor or the authorised representative of the financial creditor referred to in sub-section (6) or sub-section (6A) or sub-section (5) of section 24, if it is a related party of the corporate debtor shall not have any right of representation, participation or voting in a meeting of the committee of creditors". 11. The Applicant Further submits that as on the date of CIRP....

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....oint control of KSS Petron, if the corporate veil of all these companies is disregarded. Further, the Shareholders Agreement of 19.5.2011 makes it clear that the joint control of KSS Global would be between three entities, viz., KSS Holding, KSS Infra EALQ and Fraseli, each of whom had the right to appoint an equal number of directors on the board of directors of KSS Global. Not only this, but Fraseli was also granted affirmative voting rights as aforementioned, on certain important specified matters. There would be no doubt whatsoever that, just before presentation of the resolution plan of 12.2.2018, AMIPL would be hit by Section 29A(c), as a group company of Shri L.N. Mittal exercised positive control, by its shareholding, right to appoint directors and affirmative voting rights, over KSS Global, which in turn held 100% shareholding in KSS Petron. 13. Hence, the Applicant submits that it is an undisputed position that even as on 12.02.2018, the promoters of Respondent No. 2 exercised positive control over the Corporate Debtor. Admittedly, as on 09.02.2018, LN Mittal divested his shareholding (through Fraseli Investments) in KSS Global BV to meet the eligibility criteria to be....

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....nt further submits that the resolution plan filed by it envisages continuance of the Corporate debtor as a going concern as against liquidation of the Company. The plan also provides for retention of the employees of the Corporate Debtor and payment of their dues in full. The Applicant further contends that the resolution amount proposed in the plan is much higher than the estimated liquidation value of the Corporate Debtor. The act of rejection of the Applicant's resolution plan by the CoC has invariably lead to liquidation of the Corporate Debtor, wherein only the interest of the Respondent No. 2 is being served and of no one else. SUBMISSIONS BY THE RESOLUTION PROFESSIONAL 16. At the outset, the RP submits that this contention, that CoC has been wrongly constituted, has never been raised by the Applicant before or during the CIRP period when the negotiations on the resolution plan were going on. This application is in a way opportunistic in nature as the Applicant would have had no grievance in case its resolution plan was accepted by CoC. It is only when the plan is rejected, the Applicant seeks the opportunity to question the constitution of CoC. 17. The RP furthe....

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....t was not a related party of the Corporate Debtor. Hence, the constitution of CoC is valid as it has acquired the status of a financial creditor pursuant to all the financial creditors assigning their debts in favour of Respondent No. 2. 22. The Respondent No. 2 further submits that the Applicant has failed to provide any specific basis on which Respondent No. 2 would be a related party to the Corporate Debtor as defined under section 5(24) of the I&B Code. The Respondent No. 2 further contends that the resolution plan of the Applicant did not even stand the tests of feasibility and viability as reflected in the "Discussions held and actions taken in the 19th Meeting of CoC held on 04.02.2019", duly annexed by the Applicant in the application. The relevant extract of the discussion is reproduced herein below: "3. Further, the Resolution plan doesn't provide any detail of turnaround plan and its implementation strategy. The Business Plan consists of only 2-3 paras in the Plan without any detailed layout addressed for the growth path of the Corporate Debtor in the future. There are no detailed business projections along with basis/assumptions for arriving at the figur....