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TaxTMI 
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2020 (5) TMI 672
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....23/9/HDB/2018) under section 9 of the Insolvency and Bankruptcy Code, 2016 (the Code) against M/s. Veda Biofuel Ltd., Vishakhapatnam (hereinafter referred to as the corporate debtor) seeking corporate insolvency resolution process (CIRP). The National Company Law Tribunal, Hyderabad Bench (before which it was then pending) by order dated February 12, 2019 admitted the petition and appointed Mr. Gonugunta Murali as the IRP. The committee of creditors (CoC) in its meeting dated March 14, 2019 appointed him as the resolution professional (RP). The matter was transferred to this Authority upon its establishment on July 29, 2019. This Authority by order dated September 27, 2019 in I. A. No. 19 of 2019 appointed Mr. Sisir Kumar Applikatla as the RP replacing Mr. Murali. 3. The term of CIRP (180 days) was due to expire on August 11, 2019. The RP sought extension of the CIRP period as per the resolution of the CoC dated August 3, 2019. This Authority by order dated August 26, 2019 in I. A. No. 6 of 2019 extended the period of CIRP up to November 9, 2019. It was further extended by 60 days by order dated October 31, 2019 in I. A. No. 27 of 2019. Meanwhile, on February 25, 2019 one Mr. P. V....
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....sudhan withdrew the original resolution plan that he had submitted in response to the invitation of EoI dated November 8, 2019. The other resolution applicant M/s. Orion Ferro Alloys P. Ltd., also did not furnish any revised resolution plan. Meanwhile the expromoter P. Vijay Kumar and Madhusudhan (as first part) entered into a settlement agreement on February 6, 2020 with the operational creditor M/s. Priya Trading Co., (second part) for withdrawal of the application and the same was placed before the CoC in terms of section 12A of the Code. The CoC deliberated upon the materials placed before it in its meeting held on March 3, 2020. It approved the resolution plan in the nature of the restructuring plan submitted by Mr. Madhusudhan and approved the same as the successful resolution plan with 96.39 per cent. of voting share (all financial creditors). The CoC authorised the RP to make an application before this Authority for approval of the resolution plan. The RP accordingly filed. I. A. No. 64 of 2020 on March 12, 2020 under section 30(6) of the Code seeking approval. 5. The matter was heard on March 16, 2020 and was reserved for orders. Meanwhile the World Health Organisation ha....
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.... In this connection, the erudite observation of the hon'ble apex court in Innoventive Industries Ltd. v. ICICI Bank [2017] 205 Comp Cas 57 (SC) ; [2018] 1 SCC 407 may profitably be quoted (page 89 of 205 Comp Cas) : "Under section 17, the erstwhile management of the corporate debtor is vested in an interim resolution professional who is a trained person registered under Chapter IV of the Code. This interim resolution professional is now to manage the operations of the corporate debtor as a going concern under the directions of a committee of creditors appointed under section 21 of the Act. Decisions by this committee are to be taken by a vote of not less than 75 per cent. of the voting share of the financial creditors. Under section 28, a resolution professional, who is none other than an interim resolution professional who is appointed to carry out the resolution process, is then given wide powers to raise finances, create security interests, etc., subject to prior approval of the committee of creditors. XXX XXX XXX Under section 30, any person who is interested in putting the corporate body back on its feet may submit a resolution plan to the reso....
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....ately, the interests of all stakeholders are looked after as the corporate debtor itself becomes a beneficiary of the resolution scheme workers are paid, the creditors in the long run will be repaid in full, and shareholders/investors are able to maximize their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development of credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development of the Indian economy. What is interesting to note is that the preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern (see ArcelorMittal India P. Ltd. v. Satish Kumar Gupta [2018] 211 Comp Cas 369 (SC) at paragraph 83, footnote 3). XXX XXX XXX It can thus be seen that the primary focus of the legislation is to ensure revival and....
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.... of holding Mr. Vijay K. Penmetsa 1,75,33,095 45.32 Mr. Vijay Friends and Associates 58,11,400 15.02 Mr. Sriram and Family 1,01,57,893 26.26 Mr. M. V. Rama Raju and others 29,95,930 7.74 Other shareholders from US 21,91,000 5.66 Total shareholdings 3,86,89,318 100.00 New shareholding after the restructure : Name of the shareholder Category of shareholder No. of shares held before CIRP No. of shares held after the CIRP Voting share (%) held before CIRP Voting share (%) held after CIRP Madhu Sudhan Raju Ch. Equity Nil 4,02,68,456 Nil 51% Existing shareholders Equity 3,86,89,318 3,86,89,318 100% 49% 3,86,89,318 7,89,57,774 100% 100% 12. The agreement dated November 25, 2019 (filed in I. A. No. 15 of 2020) contains the new shareholding patterns as follows : "The new shareholding pattern of the Veda Biofuel Ltd., shall be in the manner following as below, and any changes can be allowed as agreed by both parties : Sl. No. Shareholder name No. of shares % of shareholding 1. Madhu Chintalapati 1,93,44,659 50.00 2. Vijay Penmetsa group 1,19,21,695 30.81 3. Ch. Ramaseetha group 18,38,000 4.75 4. P. V. Sujatha 33....
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.... as referred to by the hon'ble apex court in Chitra Sharma v. Union of India [2018] 210 Comp Cas 609 (SC) (W. P. (Civil) No. 744 of 2017 decided on August 9, 2018) is as follows (page 636 of 210 Comp Cas) : "The provisions for insolvency resolution and liquidation of a corporate person in the Code did not restrict or bar any person from submitting a resolution plan or participating in the acquisition process of the assets of a company at the time of liquidation. Concerns have been raised that persons who, with their misconduct contributed to defaults of companies or are otherwise undesirable, may misuse this situation due to lack of prohibition or restrictions to participate in the resolution or liquidation process, and gain or regain control of the corporate debtor. This may undermine the processes laid down in the Code as the unscrupulous person would be seen to be rewarded at the expense of creditors. In addition, in order to check that the undesirable persons who may have submitted their resolution plans in the absence of such a provision, responsibility is also being entrusted on the committee of creditors to give a reasonable period to repay overdue amounts and become e....
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....ing not been done in terms of section 12A of the Code, this authority would not be in a position to pass any comment in relation thereto. 17. The prerogative of the CoC in not considering the resolution plan submitted by M/s. Orion Ferro Alloys P. Ltd., and Mr. Madhusudhan Raju Chintalapati cannot be evaluated by the Authority. The commercial wisdom of the CoC in accepting a resolution plan needs to be respected by the Adjudicating Authority. The same has been held by the hon'ble apex court in K. Sashidhar v. Indian Overseas Bank [2019] 213 Comp Cas 356 (SC) (Civil Appeal No. 10673 of 2018 decided on February 5, 2019) and reiterated in the case of Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta [2020] 219 Comp Cas 97 (SC) (Civil Appeal No. 8766-67 of 2019 decided on November 15, 2019). Therefore, the non-acceptance of the plan submitted by M/s. Orion Ferro Alloys P. Ltd. (applicant in I. A. No. 66 of 2020) cannot be gone into by the Adjudicating Authority. Having said that it would not be out of place mention here that the Adjudicating Authority can evaluate a resolution plan if it conformed to terms of section 30(2) of the Code. As already indicated the....