TaxTMI 
TaxTMI 
2021 (7) TMI 416
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....o whether the applicant is eligible to get the reliefs to reject the Resolution Plan submitted by the Resolution Applicant M/s. Lissie Medical Institutions and also to reject the valuation report filed by Mr. R.K. Patel and to appoint another valuer convening another CoC.? 19. The bare reading of the history of the case mentioned above makes it crystal clear that the Resolution Professional took all steps as per the provisions of IBBI Regulations, before submitting the Resolution Plan to the CoC for its approval. Thereafter, only after the approval of CoC, the Resolution Professional filed the Resolution Plan for approval of this Adjudicating Authority. It is seen that wide publicity has been made inviting Expression of Interest for getting a prospective Resolution Applicant, so that the maximum value be received for the Corporate Debtor's properties. If the contention of the applicant is accepted, a question arises here why any other interested persons, who can offer a more valued Resolution Plan than the present one has not come forward to submit a Resolution Plan. The technical stags stated by the applicant that one of the valuer assessed a less value and other valuer h....
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....in Civil Appeal Nos. 8766-8767 of 2019 (2019 SCC Online SC 1478).) it was held that the scope of interference by the Adjudicating Authority is limited judicial review. The relevant portion of para 46 of the said judgement is quoted below: 46 This being the case, judicial review of the Adjudicating Authority that the resolution plan as approved by the Committee of Creditors has met the requirements referred to in Section 30(2) would include judicial review that is mentioned in Section 30(2)(e), as the provisions of the Code are also provisions of law for the time being in force. Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. If the Adjudicating Authority finds, on a given set of facts, that the aforesaid parameters have not been....
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....hat the 'Adjudicating Authority' had not appreciated the fact in a proper perspective to the effect that the 'Resolution Plan' prepared was based on 'faulty Valuation Report' with variance of 15.62% amounting to a difference of Rupees Seven Crores and is in violation of Section 30(2) of the Insolvency and Bankruptcy Code and 35(1)(a), 35(1)(b) and 35(1)(c) of the Regulations. 5. It is the version of the 'Appellant' that the 'Adjudicating Authority' had failed to take into account the important fact that by holding the 99.2% to the 'Employee Doctors' under the category of 'Operational Creditor' - Employees - 2.35% to 'Consultant Doctors' under 'Operational Creditor' - except employee), the balancing of interest as envisaged in the preamble of the Insolvency and Bankruptcy Code and guided in the decision of Hon'ble Supreme Court in 'Committee of Creditors' of Essar Steel India Ltd. v 'Satish Kumar Gupta' dated 15.11.2019 vide Civil Appeal No.9877-8767 of 2019 reported in 2019 SCC online SC 1478 was not followed. 6. The Learned Counsel for the Appellant points out that the 'Adjudicating Authority' had committed an error in considering that the 'Operational Creditor's were paid a....
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....sel for the Appellant brings it to the notice of this 'Tribunal' that the 'Valuation' was conducted during the period 30-01-2020 to 25-02-2020, when the 'Corporate Debtor' premises was in standstill and that of value of the property would have gone up exponentially due, resumption of business. Apart from that, the 'CIRP' was conducted during the lock down period and that only one eligible bidder and further that sufficient opportunity was not given for a better bid. 14. The Learned Counsel for the Appellant submits that during the 'CIRP' the enhancement of the 'Resolution Plan' amount from Rs. 80 Crores to Rs. 126 Crores is a mere eye-wash, as it was evaluated based on a faulty valuation and further taken into consideration without keeping the best interests of the 'Corporate Debtor'. 15. The Learned Counsel for the Appellant adverse to the Report of Valuer Mr.R.K.Patel who had mentioned in the report as under:- "It is submitted that the Report of R.K.Patel has mentions as follows: "...the matter was taken up at the instance of resolution Professional Mr.Bijoy Prabhakaran Pulipra ... In the matter of M/s. Galaxy Cotton & Textile Private Limited.." (vide Anne....
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....lant contends that the value report of Mr.Tom Thomas Panikulam cane be identified that the valuation is done in a method known as 'belt method' which is sub-categorized the land into separate sections to enable to identify the area of land based on its unique size and that the per cent value provided is in the value of Rs. 42 lakhs, 22.50 lakhs, 15 lakhs, 11.25 lakhs for the different survey numbers and for ease of calculation Rs. 42,00,000 can be identified as the value per cent (vide Annexure 7, Vol II, Page 299, 300). 18. The Learned Counsel for the Appellant refers to the Valuation Report of Mr.R.K. Patel which is in Tabular Form runs as under:- Valuation report of R K Patel Hospital Area 78.54 Ares 194,0765666 cents Annexure 6, Vol II, Pg 211 of Appellant Paper Books Per cent value 48,56,228 Fair Value for 194.07 cents 94,24,80,000 (A) Valuation report of Tom Panikulam Hospital Area 78.54 Ares 194,0765666 cents Annexure 7, Vol II, Pg 298 of Appellant Paper Books Per cent value 42,00,000 Fair Value for 194.07 cents ....
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....age 531 wherein it is observed as under: "40. What is left to the majority decision of the Committee of Creditors is the "feasibility and viability" of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution Applicant to the effect that such dues ought to be paid in full, so that the carrying on of the business of the corporate debtor does not become impossible for want of a most basic and essential element for the carrying on of such business, namely, electricity. This may, in turn, be accepted by the resolution Applicant with a consequent modification as to distribution of funds, payment being provided to a certain type of operational creditor, namely, the electricity distribution company, out of upfront payment offered by the proposed resolution Applicant which may also result in a consequent reduction of amounts payable to other financial and operationa....
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.... errors caused due to inadvertence. Further the Valuation was made by the two independent registered Valuers registered with the IBBI under the Companies (Registered Valuers and Valuation) Rules, 2017 and that the Fair Value and the Liquidation Value of the 'Corporate Debtor' was computed in accordance with internationally accepted valuation standards, after physical verification of the inventory and fixed assets of the 'Corporate Debtor'. In short, the inadvertent clerical errors crept in, while typesetting the 'Valuation Report' are not material in nature and had no material impact on the Fair Value as well as the Liquidation Value. Apart from this, the Fair Value and the Liquidation Value of the 'Corporate Debtor' arrived at by the groups of Registered Valuers were not significantly different and therefore there was no requirement to appoint another 'Registered Valuer' by the 'Resolution Professional' to submit an estimate of the value, computed in the same manner. 27. The Learned Counsel for the Respondent contends that the 'Valuation Report' is only an estimate to assist the 'Committee of Creditors to take a commercial decision and the same is not mandatory document to be r....
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.... (supra).We have quoted above the relevant passages from this judgment." "27.It appears to us that the object behind prescribing such valuation process is to assist the CoC to take decision on a resolution plan properly. Once, a resolution plan is approved by the CoC, the statutory mandate on the Adjudicating Authority under Section 31(1) of the Code is to ascertain that a resolution plan meets the requirement of Sub-sections (2) and (4) of Section 30 thereof. We, per se, do not find any breach of the said Provisions in the order of the Adjudicating Authority in approving the resolution plan. 28.The Appellant Authority has, in our opinion, proceeded on equitable perception rather than Commercial Wisdom. On the face of it, release of assets at a value 20% below its liquidation value arrived at by the valuers seems inequitable. Here, we feel the Court ought to cede ground to the Commercial Wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. Such is the scheme of the Code, Section 31(1) of the Code lays down in clear terms that for final approval of a resolution plan, the Adjudicating Authority has to be satisfied tha....
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....iss Ribbons Private Limited & Ors. Vs. Union Bank of India & Ors. [Writ Petition (Civil) No.99, 100, 115, 459, 598, 775, 822, 849, 1221 of 2018 (vide Special Leave Petition Civil No.28623 of 2018 and Writ Petition (Civil) No.37 of 2019] wherein at paragraph 20 and 54 it is observed as under: "20. The tests for violation of Articles 14 of the Constitution of India, when legislation is challenged as being violative of the principle of equality, have been settled by this Court time and again. Since equality is only among equals, no discrimination result if the Court can be shown that there is an intelligible differentia which separates two kinds of creditors so long as there is some rational relation between the creditors so differentiated, with the object sought to be achieved by the legislation. This aspect of Article 14 has been laid down in judgments too numerous to cite, from the very inception." "54. Indeed, if an "equality for all" approach recognizing the rights of different classes of creditors as part of an insolvency resolution process is adopted, secured financial creditors will, in many cases, be incentivized to vote for liquidation rather than ....
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....solution Applicant' was endeavored to scuttle the CIRP during COVID times with the 'Committee of Creditors' dancing to their tunes. 37. The real grievance of the Appellant/Applicant is that in terms of the 'Sanctioned Plan' the Employees of the 'Corporate Debtor' will get 99.29% of their admitted claim. However, the other 'Operational Creditor's [other than employees and workmen] is getting only 2.34% of the 'admitted claim' to an extent of Rs. 13,01,55,997 who had rendered 'Health Care Services' to the patients visiting the 'Corporate Debtor' on the 'Consultancy Basis'. 38. According to the 'Appellant' [he being the 'Power of Attorney' Holder of 46 Doctors] and they are qualified professional Doctors who attend the inpatients and outpatients on a daily basis like a normal employee would perform and the significant difference lies in 'finance and accounting' perspective viz. in respect of employees, there will be deduction in respect of 'Provident Fund' and 'Employees State Insurance', whereas in the case of a Consultant Doctor, there will be deduction towards tax at source. 39. The pith and substance of the contentions of the 'Appellant' is that in the 'Sanctioned Plan', ....
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....pting various methods of valuation by the two valuers had let to a difference in the value which necessitates the appointment of third Valuer as provided in Regulation 35(1)(a), (b) and (c) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Unfortunately, the 'Adjudicating Authority' had not appointed the third Valuer therefore an emphatic stand of the Appellant is that the CIRP was not conducted as per the Insolvency and Bankruptcy Code and Regulations and the 'Committee of Creditors' is not to 'waive' of any procedure enunciated under Code and the Regulations. 42. Repudiating the contentions of the 'Appellant', the Respondent has come out with a stand that except certain minor clerical errors there are no deviations/discrepancies in the final Valuation amounts and that the 'Valuers' had considered of the properties and assets of the 'Corporate Debtor' and for arriving at the Fair Value and Liquidation Value and in fact paragraph No.9 of the 'Valuation Report' of Mr.R.K. Patel (Valuer) under the heading Valuation Results reads as under: Sr.No. Asset Description Fair Market Value (Rs.) Liquidation Value (Rs.) 1 PVS HOSPITAL COM....
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....ble value of the assets of 'Corporate Debtor', if the 'Corporate Debtor' were to be liquidated on the Insolvency commencement date. Analysis 48. In the instant case, although on behalf of the 'Appellant' a strenuous endeavour is made before this 'Tribunal' that there is a variance of 15.62% in the 'Valuation' and in this regard this 'Tribunal' points out that the value made by the two registered Valuers are only 'estimates' and certainly there will be difference in each 'Valuers Report's and to put it precisely, the difference of 15.92% as regards the Valuation of Land in the two registered 'Valuers Reports' can be termed as minimal, in view of the fact that the 'Fair Value' and 'Liquidation Value' were made, taking into account variety of considerations. Besides this, one cannot brush aside a primordial fact that the Estimated Values as furnished by the two registered Valuers can at best be an aid to the 'Committee of Creditors', to take a call on 'Commercial Decision', which cannot anyway stifle them in any manner. As such, the contra plea taken on behalf of the Appellant is not acceded to by this 'Tribunal'. 49. In so far as the plea of the Appellant that third Valuer w....
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....Creditors' and other 'Stakeholders' involved in the 'Resolution Plan'. 52. It is well settled that it is not open to reopen the reasons for rejection of 'Resolution Plan' passed with 100% voting share s for adjudication. No wonder, approval for 'Resolution Plan' is to be judged with diligence and 'satisfaction' in regard to the 'Approval of plan' in writing with reasons to be recorded, of course, with due application of mind. 53. As far as the present case is concerned, the 'Resolution Plan', had not accepted the Valuation Report made by the Valuer Mr.R.K.Patel. Not resting with that, the 'Resolution Professional' had resorted to the agreed 'International Valuation Standards' and carried out the physical verification of the 'Corporate Debtor's fixed assets. Therefore, the question of appointing a 'third Valuer' on the purported ground of difference of 15.92% in the 'Fair Value' does not arise, in the considered opinion of this 'Tribunal'. 54. A cursory perusal of the 'impugned Order' dated 22.02.2021 in IA(IBC)No.46/KOB/2021 in IA(IBC)/13/KOB/2021 in TIBA No.11/KOB/2019 passed by the 'Adjudicating Authority' (National Company Law Tribunal, Kochi Bench) latently and abundan....
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....rt's Decision: 56. At this juncture, this Tribunal points out the judgment of Hon'ble Supreme Court in Maharashtra Seamless Limited V Padmanabhan Venkatesh and Ors. (vide Civil appeal Nos 4242 and 4967-4968 of 2019 reported in Manu/SC/0066/2020) wherein at Paragraph 19 it is observed as under: 19. "The manner in which the claims of the operational creditors shall be considered in a CIRP has been dealt with by a co-ordinate Bench of this Court (of which two of, us, Nariman J. and Ramasubramanian J. were members) in the case of Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, decided on 15th November, 2019 in Civil Appeal Nos. 8766-8767 of 2019 (MANU/SC/1577/2019). It has been held in paragraph 53 of this judgment in the said report: 53. However, as has been correctly argued on behalf of the operational creditors, the preamble of the Code does speak of maximisation of the value of assets of corporate debtors and the balancing of the interests of all stakeholders. There is no doubt that a key objective of the Code is to ensure that the corporate debtor keeps operating as a going concern during the insolvency resolution process and must th....
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....a long way to support the development or 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 or the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed or 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 [ArcelorMittal (India) (P) Ltd. v. Satish Kumar Gupta, MANU/SC/1123/2018: (2019) 2 SCC 1] at para 83, fn3). (emphasis supplied) 54. This is the reason why Regulation 38(1A) speaks of a resolution plan including a statement as to how it has dealt with the interests of all stakeholders, including operational creditors of the corporate debtor. Regulation 38(1) also states that the amount due to operational creditors under a resolution plan shall be given priority in payment over financial creditors. If nothing is to be paid to operational creditors, the minimum, being liqu....
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....n plan, other things being equal. 20. It has been further been held in the case of Essar Steel (supra): 124. The other argument of Shri Sibal that Section 53 of the Code would be applicable only during liquidation and not at the stage of resolving insolvency is correct. Section 30(2)(b) of the Code refers to Section 53 not in the context of priority of payment of creditors, but only to provide for a minimum payment to operational creditors. However, this again does not in creditors as any manner limit the Committee of Creditors from classifying creditors as financial or operational and as secured or unsecured. Full freedom and discretion has been given, as has been seen hereinabove, to the Committee of Creditors to so classify creditors and to pay secured creditors amounts which can be based upon the value of their security, which they would otherwise be able to realise outside the process of the Code, thereby stymying the corporate resolution process itself." 57. Suffice it for this 'Tribunal' to point out that neither the 'Adjudicating Authority' nor the 'Appellant Tribunal' can substitute its 'Wisdom' over the 'Commercial Wisdom' of the 'Committee of Credito....