TaxTMI 
TaxTMI 
2021 (9) TMI 983
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....ice A.I.S. Cheema] The Officiating Chairperson And [Dr. Alok Srivastava] Member (Technical) For the Appellant : Mr. Arun Kathpalia, Senior Advocate with Mr. Siddhant Kant, Ms. Charu Bansal, Mr. Prabh Simran Kaur, Mr. Anoop Rawat and Ms. Diksha Gupta, Advocates. For the Respondents : Mr. Abhinav Vashisht, Senior Advocate with Mr. Chitranshul A. Sinha, Ms. Priya Singh, Mr. Jaskaran Singh Bhatia, Advocates for R1-3 Mr. Sumant Batra, Mr. Sanjeev Sambasivan, Ms. Neha Naik, Advocates for R4 JUDGMENT A.I.S. Cheema, J. These three Appeals are arising out of the same impugned order passed in IA 439 of 2020 in IA 476 of 2018 in CP (IB) 14/7/NCLT/AHM/2018 passed by the Adjudicating Authority (National Company Law Tribunal), Ahmedabad Bench, Court-1. 2. Briefly put what has happened is that in the Corporate Insolvency Resolution Process ("CIRP" for short) relating to Corporate Debtor- 'Wind World (India) Ltd.' after the Resolution Plan was approved by the Committee of Creditors ("CoC" for short) and was placed before the Adjudicating Authority for approval under Section 30/31 of the Insolvency and Bankruptcy Code, 2016 ("IBC" for short), the Successful Resolution Applicant ("....
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....eyond the parameters/requirements prescribed under Section 30(2) of the Code. iv. Whether a resolution applicant can unilaterally seek to withdraw an approved Resolution Plan under Section 60(5) of the Code? v. Whether the process note as mandated under Section 25(2)(h) of the Code and its terms and conditions become binding on the resolution Applicant once the resolution applicant participates in a corporate insolvency resolution process?" 4. The prayer of CoC in the Appeal is:- "21. RELIEF SOUGHT In view of the facts and circumstances of the Appeal, the Appellant prays for the following relief(s):- (a) Allow the present appeal and set aside the Order dated 8 September 2020 of the National Company Law Tribunal, Ahmedabad Bench in I.A. No. 439 of 2020 in I.A. No. 476 of 2018 in C.P.(IB) No. 14 of 2018; (b) Direct the Ld. Adjudicating Authority to decide on I.A. No. 476 of 2018 in C.P. (IB) No. 14 of 2018 in accordance with Section 30/31 of the Code. (c) Pass any other order which this Hon'ble Tribunal may deem fit in eyes of equity, justice and good conscience." 5. Against the same impugned order, the Resolution P....
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....ion Plan which envisaged 80% (eighty per cent) hair-cut, the Resolution Applicant has submitted that Resolution Plan submitted by such applicants was twice the liquidation value, hence, fact of such hair-cut cannot go against the Resolution Applicant for withdrawal of such application. Be that as it may, we are of the view that this fact, as such, have got no relevance for determination of the issue of withdrawal because it is not the claim of the CoC that Resolution Applicant had made a wrong bargain, hence, it was seeking an exit opportunity nor such a case has been made out." 7. The material facts appearing from record relating to the matter now need to be referred. The Corporate Debtor was admitted into CIRP by the Adjudicating Authority on 20.02.2018. The Resolution Professional took necessary steps in terms of provisions of IBC and the CIRP was conducted. The initial period of 180 under the provisions of IBC was extended by 90 days on 01.08.2018. The SRA firstly filed plan on 20.08.2018 which was subsequently revised and final plan along with addendum was submitted on 13.11.2018. The Resolution Plan was approved by 69.87 per cent of voting share by CoC on 16.11.2018 one da....
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....C could not be relied on. The Resolution Professional claimed before the Adjudicating Authority that the delay in approval of the Resolution Plan was causing loss to the members of the CoC to the extent of 140 Crores. The various arguments raised by Resolution Professional have also been referred by the Adjudicating Authority. 11. The Adjudicating Authority in para 15 of the impugned order referred to the ground of delay in approval of the Resolution Plan raised by the SRA and referred to the scheme of IBC and judgment of the Hon'ble Supreme Court in the matter of "Arcelormittal India Pvt. Ltd. vs. Satish Kumar Gupta" and in para 22 of the judgement raised a question that if the approval doesn't come within a reasonable time which is essentially a matter of fact, then, can a Resolution Applicant claim that it is not bound by such Resolution Plan and, if it is so claimed, whether the Adjudicating Authority has got the requisite jurisdiction and power to dispose of such application for the purpose. The Adjudicating Authority then went into provisions of Section 60 of the IBC and relying on the same held in para 23 of the impugned order as under:- "23. In this regard, we a....
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....ly negotiated and considered by the CoC on parameters of feasibility and viability and it was approved by 93.63% of the members of the CoC. According to the CoC, it creates a binding contract between the SRA and CoC and after approval by CoC withdrawal of SRA is not contemplated. This is because of the provisions and scheme of the Code and that principles of predictability and finality of processes require that withdrawal cannot be allowed. It is argued that in the absence of provisions, withdrawal could not have been allowed by the Adjudicating Authority. It is also argued that the Adjudicating Authority erroneously passed the impugned order. The powers of the Adjudicating Authority under Section 31 are circumscribed by Section 30(2) of the Code. The Adjudicating Authority under Section 31 can either approve the Resolution Plan or reject the same on any of the grounds mentioned in Section 30(2) (a) to (f). It has no jurisdiction to entertain any such application from SRA to withdraw from the Resolution Plan. The CoC is relying on judgments of the Hon'ble Supreme Court in the matters of "Committee of Creditors of Essar Steel India Limited Through Authorised Signatory vs. Satish Kum....
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....d be allowed and the impugned order should be set aside and the Adjudicating Authority should take a decision on the approved Resolution Plan in terms of Section 31 of the IBC. 16. The Resolution Professional has raised similar grounds like the CoC to claim that the impugned order deserves to be set aside. The Resolution Professional has justified the Information Memorandum issued and the various steps required to be taken by him which according to the Resolution Professional were taken on time and expeditiously and it is claimed that SRA was now finding fault only because it wanted to back out from the Resolution Plan which was approved. 17. Against the above, the Counsel for SRA has justified the impugned order except for the challenge which SRA has raised in its Appeal- Company Appeal (AT) (Insolvency) No. 913 of 2020 with regard to portion of Para 58 of the impugned order. Counsel for SRA has argued that there was concealment and misrepresentations regarding status of active O&M Contracts. It is argued that the SRA misrepresented that the Corporate Debtor had 4870 Mega Watts contracts as on 06.04.2018 in the Information Memorandum, knowing very well that 174 MW of O&M con....
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....tee of Creditors of Educomp Solutions Limited and Anr." [2021 SCC OnLine SC 707]. 20. In the matter of 'Ebix Singapore', the NCLT had allowed the Third Withdrawal Application filed by Ebix under Section 60(5) of the IBC to withdraw its Resolution Plan submitted for Educomp. While reversing that order, this Tribunal - NCLAT had held that the application to withdraw from the Resolution Plan could not have been allowed as (i) it was barred by res judicata; and (ii) NCLT does not have jurisdiction to permit such a withdrawal. The correctness of the view of this Appellate Tribunal came for determination in Appeal before the Hon'ble Supreme Court. The Hon'ble Supreme Court heard the rival contentions of the parties and in Para 110 of the judgment proceeded to examine the raison d'etre of the IBC before analytical interpretation. For the purpose, Hon'ble Supreme Court observed that the aims and objects of the legislation were required to be considered and that the IBC was introduced as a water-shed moment for insolvency law in India which consolidated processes under several disparate statutes including SICA, SARFAESI, etc. The Hon'ble Supreme Court then proceeded to refer to UNCITRAL ....
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.... while reiterating the rationale of the IBC for ensuring timely resolution of stressed assets as a key factor, had to defer to the principles of actus curiae neminem gravabit, i.e., no person should suffer because of the fault of the court or the delay in the procedure. In spite of this Court's precedents which otherwise strike down provisions which interfere with a litigant's fundamental right to non-arbitrary treatment under Article 14 by mandatory conclusion of proceedings without providing for any exceptions, this Court refused to strike down the second proviso to Section 12(3) in its entirety. It noted that the previous statutory experiments for insolvency had failed because of delay as a result of extended legal proceedings and chose to only strike down the word 'mandatorily', keeping the rest of the provision intact. Therefore, the law as it stands, mandates the conclusion of the CIRP - including time taken in legal proceedings, within 330 days with a short extension to be granted only in exceptional cases." Then the Hon'ble Supreme Court referred to the warning noted by the Hon'ble Supreme Court in the matter of 'Essar Steel' in Para 127 of the said judgment. ....
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....envisaged by the statute, was explicitly affirmed by the Insolvency Law Committee Report dated March 2018101 which proceeded to suggest amendments to the IBC and recommended a ninety per cent voting threshold by the CoC for withdrawals of a CIRP and a specific amendment to Rule 8 of the then existing CIRP Rules to enable parties to file such applications. This report led to the insertion of Section 12A which vested the CoC with the power to withdraw the CIRP or vote on such withdrawal, if sought by the Corporate Debtor. This provision was introduced with retrospective effect on 6 June 2018. Significantly, no such exit routes have been contemplated for the Resolution Applicant. It is relevant to note that the newly inserted and then unamended Regulation 30A (w.e.f. 4 July 2018) of the CIRP Regulations stipulated that withdrawal under Section 12A can be allowed through submitting an application to the IRP or RP (as the case maybe) before the invitation for EOI is issued to the public. The CoC was to consider the application within seven days of its constitution and an approval for such application required approval of the ninety per cent of the voting share of the CoC. However, on 14....
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....ithdrawal has to be accompanied by a bank guarantee towards estimated expenses relating to costs of the IRP (in case of a withdrawal prior to constitution of the CoC) or insolvency resolution process costs (where withdrawal is after constitution of the CoC). It is clear that withdrawal of the CIRP is allowed only if it upholds the interests of the CoC, is time-bound, and takes into consideration how the expenses relating to the insolvency process up to withdrawal shall be borne. Thus, even the exit under Section 12A of the CoC, which is not available to the Resolution Applicant, is regulated by procedural provisions indicating that the legislature has applied its mind to the timelines and costs involved in the CIRP. Pertinently, the regulations do not provide for any costs that are payable to the prospective Resolution Applicants or a successful Resolution Applicant, who must have incurred a significant expense in participating in the process. This Court, in Maharashtra Seamless (supra) had denied relief to a Resolution Applicant who had sought to invoke Section 12A to resile from its Resolution Plan. The nature of the statute indicates the clarity of its purpose - primacy of the i....
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....the IBC, before exercising its powers of approval or rejection, as the case may be, under Section 31105. In Government of Andhra Pradesh v. P Laxmi Devi106, while determining the constitutionality of a statute, this Court observed that it should be wary of transgressing into the domain of the legislature, especially in matters relating to economic and regulatory legislation. This Court observed: "80. As regards economic and other regulatory legislation judicial restraint must be observed by the court and greater latitude must be given to the legislature while adjudging the constitutionality of the statute because the court does not consist of economic or administrative experts. It has no expertise in these matters, and in this age of specialisation when policies have to be laid down with great care after consulting the specialists in the field, it will be wholly unwise for the court to encroach into the domain of the executive or legislative (sic legislature) and try to enforce its own views and perceptions." (emphasis supplied)" [emphasis supplied] 24. In Para 170 of the judgment it has been held as under:- "170. The IBC is silent on whether a successful Resol....
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....gulation 40C on 20 April 2020, with effect from 29 March 2020, and excluded such delays for the purposes of adherence to the otherwise strict timeline. Recently, the IBC (Amendment) Ordinance 2021 was promulgated with effect from 04 April 2021 providing certain directions to preserve businesses of MSMEs and a fast-track insolvency process. There has been a clamor on behalf of successful Resolution Applicants who no longer wish to abide by the terms of their submitted Resolution Plans that are pending approval under Section 31, on account of the economic slowdown that impacted every business in the country. However, no legislative relief for enabling withdrawals or renegotiations has been provided, in the last eighteen months. In the absence of any provision under the IBC allowing for withdrawal of the Resolution Plan by a successful Resolution Applicant, vesting the Resolution Applicant with such a relief through a process of judicial interpretation would be impermissible. Such a judicial exercise would bring in the evils which the IBC sought to obviate through the back-door." [emphasis supplied] 26. In the conclusion drawn by the Hon'ble Supreme Court it has been observed in Pa....
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.... of the judgment the Resolution Applicant is deemed to be aware of the IBC and its mechanisms. The Resolution Applicant, after obtaining the financial information of the Corporate Debtor through the informational utilities and perusing the IM, is assumed to have analysed the risks in the business of the Corporate Debtor and submitted a considered proposal. After the plan has been approved, the SRA could not be heard making the complaints regarding incomplete information (which here is even otherwise not established) to withdraw from the Resolution Plan. The grievance appears to be made just to raise a petit ground. 28. The judgment in the matter of 'Ebix Singapore' has been passed by the Hon'ble Supreme Court on 13th September, 2021, after the arguments in these Appeals were over. The Hon'ble Supreme Court has taken conspectus of the complete law on the subject and although the Learned Counsel for parties have made various submissions whether or not the power under Section 60 of IBC could have been exercised; whether or not the SRA had a good ground to withdraw; whether or not there was mis-information in Information Memorandum, we need not go into these details to burden this j....