TaxTMI 
TaxTMI 
2022 (1) TMI 721
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....av Kanoria, Advocates for R-2. JUDGMENT DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER 1. The present appeals have been filed by the 'Appellants' under Section 61 of the 'Insolvency and Bankruptcy Code, 2016' (in short 'Code') against the impugned order dated 19.08.2020 passed by the 'Adjudicating Authority' (National Company Law Tribunal), Allahabad Bench in CA No.215/2019, CA No.73/2020 and I.A No. 160/2020 and CP(IB) No. 223/ALD/2018. 2. The Appeals as stated (supra) have been filed against the impugned order of Adjudicating Authority dated 19.08.2020. The relief sought in both the appeals primarily is asking for setting aside the said order dated 19.08.2020 apart from quashing the appointment of the Liquidator or restraining the Liquidator from discharging the employees etc. Since both these appeals are against the same impugned order and relief sought are common and requires same question of law against the same Corporate Debtor (CD), we have clubbed the appeals together during the course of the hearing and now being decided by the 'Common Judgment'. 3. While passing the impugned order on 19.08.2020 in CA No.215/2019, CA No.73/2020 and I.A No. 160/2020 and CP(IB) ....
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....Plan has been approved by the CoC. 18.At this juncture, it is pertinent to refer Section 33(1 )(a) of the IBC, which mandates that "where the Adjudicating Authority before the expiry of maximum period permitted for completion of the corporate insolvency resolution process under Section 12 or the fast track corporate insolvency resolution process under Section 56, as the case may be, does not receive a resolution plan under sub-section (6) of Section 30, it shall pass an order requiring the Corporate Debtor to be liquidated in the manner as laid down in the manner." 19. Therefore, the Tribunal observes that upon failure of the resolution process and no approved resolution plan and further on completion of statutory CIRP process, there is no alternative left but to order in conformity with the decision of the CoC liquidation has to follow under Section 33 of the Code. Adherence of the statutory requirement has to be done, as the language of the Code is clear that the adjudicating authority must give effect to it whatever may be consequences. 20. Thus, the application is allowed by ordering liquidation of Corporate Debtor i.e. ,JVL Agro Industries Ltd. in th....
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.... opposed to the receivables generated from a Successful Resolution through CIRP. In other words, the interest of SBI rank higher on liquidation as compared to a 'Successful Resolution Process'. Therefore, R1 in cohorts with SBI attempted to drive the CD into liquidation. It is also stated that that the CD is profit making entity which underwent distress temporarily. In fact, the CD was under the process of bouncing back from the same, when the CIRP was admitted by the Adjudicating Authority. But the CD soon overcame its financial difficulties and operated as a going concern throughout the CIRP on its own accruals. Importantly, the CoC did not have to pay for the costs of the CIRP and the entire costs were borne from the internal accruals of the CD. As would appear from the 'Annual Report' of the CD for the 'Financial Year 2018-19', the CD owns Rs. 578.27 Crore as liquid assets and properties apart from owning assets and properties in terms of property, plant and equipment worth Rs. 550.40 Crore. In fact, the value of the land is taken at a book value and the market value of such land shall be much higher. Particulars of these assets, properties and funds are given below: Sl No. ....
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....le the CIRP was ongoing, Section 12 of the Code was amended to extend the total period of CIRP to an upper limit of 330 days, allowing the CD the benefit of reconsidering RAs or issuing a fresh EOI. This would have made the liquidation application premature as even for CIRPs which were not completed by then, an additional 90 days' period was granted. But the RP disregarded to it the hilt and then blindsided the 'Adjudicating Authority' to obtain an order of liquidation on 19.08.2020. In this regard, the RP also disregarded two orders of the 'Adjudicating Authority' dated 30.04.2019 and 07.05.2019 which categorically provided that the CIRP should continue. f. In this regard, attention must be drawn at the intention and motive of the RP in the whole process. It has been brought to the notice of the Appellant that the RP was a former employee of the SBI, who is the lead banker of the consortium with a voting share of about 26%. In fact, he was appointed as the RP at the insistence of SBI and still manages to draw pension from it. In the circumstances, the motive of the RP is gravely impugned with malafides and, therefore, the RP should not be allowed to control the reigns of ....
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.... liquidation value of the company (Rs. 385 Crore), the RP has not even bothered to place the same before the CoC. Despite there being an order dated 14.02.2020 from the Adjudicating Authority granting liberty to the employees to place their plan before the CoC, the RP in his haste to liquidate the CD, did not even allow for the said process to take place. The Hon'ble Supreme Court in Innoventive Industries Vs. ICICI bank (2018) 1 SCC 407 identified the duty of the RP to be synonymous with acting as a conduit between the Creditors and the Debtor in the following words: "The law must appoint a resolution professional as the manager of the resolution period, so that the creditors can negotiate the assessment of viability with the confidence that the debtors will not take any action to erode the value of the enterprise. The professional will have the power and responsibility to monitor and manage the operations and assets of the enterprise. The professional will manage the resolution process of negotiation to ensure balance of power between the creditors and debtor, and protect the rights of all creditors. The professional will ensure the reduction of asymmetry of information ....
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....y by an order dated 10.09.2020 passed by the Adjudicating Authority, the Respondent No.1 herein had been appointed as the RP. On 05.10.2018 had issued the request for submitting the 'Expression of Interest' (EOI) were received from the potential/prospective 'Resolution Applicants' within the due date provided in the request for EOI. Thereafter, in the 5th CoC meeting held on 27.11.2018, it was decided to re-issue the request for EOI and a revised Request for EOI was published in the newspapers. Accordingly, in response to the said publication, 12 EOIs were received by the RP within the due date provided in the revised Request for EOI. Based on the examination of the EOI, the RP shortlisted all 12 potential Resolution Applicants and provided them access to the virtual data room and issued Information Memorandum as well as 'Request for Submission of the Resolution Plan' (RFRP) to the potential Resolution Applicants. The last date for submission of Resolution Plan as per the RFRP was 2nd February, 2019. However, no Resolution Plan was received by RP till the last date and therefore, the RP requested the CoC to extend the Resolution Plan submission date. The same was agreed upon the 7t....
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....espect of the CD. However, since SREI had submitted the Earnest Money Deposit (EMD) in the form of Bank Guarantee (BG) of INR 1,00,00,000 as against as amount of INR 10,00,00,000 required as per the RFRP, the CoC granted a time of 48 hours to SREI to revert on whether they would be in a position to submit the BG amount as per the RFRP and accordingly submit the BG as per the RFRP before 23.04.2019. However, the SREI submitted an additional BG of Rs. 4 Crore only towards the EMD. It was based on deliberations in the CoC meeting on 24.04.2019 Resolution Pan submitted by SREI was considered. However, the SREI financial commitment was below the liquidation value and EMD was below the required amount, on conclusion of voting process on 07.05.2019, the Resolution Plan so submitted by SREI was rejected by 98.18% of voting share. Again SREI convened to the Resolution Applicant to improve financial offer and revised the same from Rs. 395 Crore to Rs. 401 Crore. In any case, the RP forwarded the same to the members of the CoC. No CoC member shown interest in pursuing the new offer and CIRP period of 270 days was already over. Constraint to file the Application under Section 33(1) of the Code....
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....gned order and praying for identical reliefs and raising the same issues as raised by the Appellant herein. Thus, the present appeal filed by the Appellant is not maintainable as is liable to be dismissed in limine. b. It is also submitted by the Ld. Sr. Counsel for the CoC that the Code provides for time bound resolution of a company. There is no provision under the Code allowing a RA to wait for an indefinite period or till other RA(s) plans are rejected by the CoC or the Adjudicating Authority and then file a Resolution Plan. In this regard, emphasis is supplied on the following provisions of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016: "36A. Invitation for expression of interest ..(3) The Form G in the Schedule shall - ...(b) provide the last date for submission of expression of interest which shall not be less than fifteen days from the date of issue of detailed invitation. (5) A prospective resolution applicant, who meet the requirements of the invitation for expression of interest, may submit expression of interest within the time specified in the invitation under clause (b) of sub-regulation (3....
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....udicating Authority is satisfied that the subject matter of the case is such that CIRP cannot be completed within one hundred and eighty days, it may be order extend the duration of such process beyond one hundred and eighty days by such further period as it thinks fit, but not exceeding ninety days: ...Provided further that the CIRP shall mandatorily be completed within a period of three hundred and thirty days from the insolvency commencement date, including any extension of the period of CIRP granted under this section and the time taken in legal proceedings in relation to such resolution process of the CD." 30. Submission of resolution plan - The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (f) conforms to such other requirements as may be specified by the Board. (4)The committee of creditors may approve a resolution plan by a vote of not less than seventy-five sixty-six per cent, of voting share of the financial creditors, after considering its feasibility and viability the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid do....
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....fere at an applicant's behest at a stage before the quasi-judicial determination made by the Adjudicating Authority. The non-obstante clause in Section 60(5) is designed for a different purpose: to ensure that the NCLT alone has jurisdiction when it comes to applications and proceedings by or against a corporate debtor covered by the Code, making it clear that no other forum has jurisdiction to entertain or dispose of such applications or proceedings." f. Further, an Applicant who has not submitted an EOI or the Resolution Plan within the deadline, and whose eligibility under Section29A has not been confirmed by the RP, cannot file a Resolution Plan belatedly and directly before the Adjudicating Authority. No Resolution Applicant can be allowed herein to bypass and frustrate the prescribed mandatory and statutory procedure prescribed under the Code by attempting to slip in a Resolution Plan and make a backdoor entry. It is also stated by the CoC that under the proviso to Section 12 of the Code, for pending CIRP an additional period of ninety days has been given from the commencement of the Code (Amendment) Act, 2019, i.e. 06.08.2019. Thus, the CIRP period of the CD expires....
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....Bearing No. 10/36/2016- NCLT dated 07.12.2019, the Adjudicating Authority was reconstituted with Member (Judicial) as the only member. The constitution of the Bench was mentioned to be in accordance with Section 419(3) of the Companies Act, 2013. Furthermore, Section 5(1) of the Code defines 'Adjudicating Authority' as follows: "Adjudicating Authority for the purpose of this part (i..e Part II of the Code - Insolvency Resolution and Liquidation of Corporate persons), means National Company Law Tribunal constituted under Section 408 of the Companies Act, 2013 (18 of 2013)". Thus, the impugned order has been passed by the Adjudicating Authority having jurisdiction and constituted in accordance with the provisions of the Companies Act, 2013. j. It is also submitted by the Ld. Sr. Counsel for the CoC that the Appellant has made false allegations that the RP being an ex-employee of the SBI and is acting hand in glove with SBI to push the CD into liquidation as SBI would get a better value from its secured assets at the time of liquidation. However, the Appellant's band allegations in this regard are strongly denied. The RP is an independent professional and ha....
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....to the requirements under Section 30(2) of the Code which also includes being complaint with requirements under Section 29A. 7. Company Appeal (AT) (Ins) No. 846 of 2020 Submission of the Appellants a. The Appellants are employees of the CD and representing all the employees of the CD and they are stakeholders of the CD who are interested in the CIRP of the CD. The Appellants filed the Resolution Application for consideration and approval of the same under the provisions of the Code, a resolution plan for resolution of the CD thereby preventing a catastrophe of the CD going into liquidation. The CD was incorporated on 17.11.1989 as M/s. Jhunjhunwala Vansapati Ltd. The CD commenced its operations as a small scale industry for manufacturing of hydrogenated vegetable oil in 1989. Thereafter, the name of the CD was changed to M/s. JVL Agro Industries Limited on 21.10.2008. b. It is also stated that the CD is engaged in manufacturing of vegetables oil and fats (other than hydrogenated). Its products including Vasnaspati, refined oil, mustard oil, rice and bakery shortening. Its refined oil variants including olein, soyabean, cotton seed, palm and sunflower. Its m....
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.... Resolution Plan which is pending for consideration of CC and which proposes to payRs. 512 Crore when the liquidation value of the CD is Rs. 385 Crore? (2) Can an ongoing concern should be liquidated after closing down the company and deliberately put to the end its life in liquidation? (3) Can there be automatic Liquidation of CD even when there is plan which can keep it as a going concern? (4) Can a liquidation order be passed by a bench which is coram non judice and hence lacks jurisdiction? e. The Appellants have submitted that in the light of the order dated 03.02.2020 passed by the Adjudicating Authority, CIRP was going on and not concluded in interest of all stakeholders. The order dated 03.02.2020 is extracted below: "After the rejection of the resolution plan submitted by SREI, it would be equitable that the resolution process is open for all resolution applicants in order to maximize the recovery for the creditors of the CD" as there were interest resolution applicants (appearing at page No. 69 of the Appeal paper book in CA(AT) (Ins) No. 846 of 2020). f. It is also stated that the Resolution Plan never put before the CoC for it to apply its com....
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.... conducted by the RP. No such vote taken. h. It is also stated that the Adjudicating Authority completely misinterpreted the provisions of the Code insofar as they relate to the jurisdiction in respect of applications for liquidation under Section 43 of the Code. The Code itself provides that an application for liquidation must be considered by the Adjudicating Authority. Put differently, the Code provides for the justifiability of such application. Commercial wisdom has no role or connection justifiability. In the case of K.Shashidhar Vs. Indian Overseas Bank & Ors. (Civil Appeal No. 10673 of 2019) as and Essar Judgment, the Hon'ble Supreme Court did not lay down any law to the effect that matters which are otherwise justiciable under the Code can be made non-justiciable only because of a view taken by the CoC. The Application for liquidation was allowed by the Adjudicating Authority without considering and / or considering the objective of the Code as explained by the Hon'ble Supreme Court in several judgments including the following: Swiss Ribbons Pvt.Ltd Vs. Union of India (2019) 4 SCC 17 Committee of Creditors, Essar Steel India Ltd, through authoriz....
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....RP by the last date and therefore, the RP requested the CoC to extend the Resolution Plan submission date. The same was agreed upon in the 7th CoC meeting held on 31.01.2019 and accordingly, the last date for submission of Resolution Plan was extended till 02.03.2019. b. It is stated that the CoC in its meeting held on 06.09.2018 had requested the then IRP to file an application before the Adjudicating Authority for exclusion to time. Since immediately thereafter the R1 herein i.e. the RP had replaced the IRP (by an order dated 10.09.2018 of the Adjudicating Authority), the RP filed an application being CA 95 of 2019 in CP No. (IB) 223/ALD/2018 for exclusion of 18 days from CIRP period being the time between the 1st meeting of the CoC and the appointment of the present RP. The Application for exclusion of time was allowed by the Adjudicating Authority on 14.08.2019 thereby extending the CIRP period by a further period of 18 days i.e. till 09th May, 2019. It is pertinent to mention that the order dated 14.08.2019 passed by the Adjudicating Authority has intentionally been suppressed by the Appellant herein. c. It is also stated that in the CoC meeting held on 26.03....
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....n was in hand and two rounds of EOI did not yield any acceptable proposal to CoC and more than one year was getting lapsed. He has moved the Liquidation application. Thereafter, employee trust filed an application before the Adjudicating Authority on 06.02.2020 which included the CFO of the Company. CFO is disqualified under Section 29A of the Code. Based on the order of the Adjudicating Authority on 14.02.2020, the RP was asked to send the Resolution Plan to CoC. The RP, thereafter, send the Resolution Plan to the CoC for the purpose of information. However, he is categorically submitting that no positive response was received from CoC in this regard. As RP, he found several infirmity in the Resolution Plan submitted by the employees which includes non-existence of trust on the date of filing of the Resolution Plan and the employee who is filing the Resolution Plan, he himself disqualified and he also could not find out how a new trust can generate funding from different sources. 9. Submission of the Respondent No.2:- Committee of Creditors a. As far as the issue of order delivered by a single Judicial Member Bench of the Adjudicating Authority. It is clarified that Se....
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....f India). 2021 SCC OnLine SC 1044, Newtech Promoters and Developers Pct. Ltd Vs. State of UP and ors. b. It is also stated that the Appellant didn't raise any objections against the constitution of the Single Member Bench before the Adjudicating Authority and is thus estopped from raising the same at this belated stage. Cited Hon'ble Apex Court Judgment in Mahabal Ram (DR) Vs. Indian Council of Agricultural Research (1994) 2SCC 401 which requires either party before a single member to suggest to the member hearing the matter that it should go to a Bench of two members. Hence, raising such questions at this stage is impressible under the framework of law laid down. 10. After going through the submissions made by the learned Sr. Counsels for the parties and the available records submitted by the parties, we observed the followings: a. It is not in dispute that the CIRP commenced from 25.07.2018. b. It is also not in dispute that the RP published the request for EOI on 05.10.2018 and thereafter, again on 05.12.2018. c. It is also not in dispute that 12 Applications for EOI were responded to the RP. Only one M/s. SREI wish to participate in the Re....