TaxTMI 
TaxTMI 
2022 (2) TMI 674
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....cant/Appellant challenging the approval of the Resolution Plan. The Adjudicating Authority vide Order dated 05.10.2020 has allowed CA-417/2020 preferred by the Resolution Professional (RP) under Sections 31(1) and 60(5) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'The Code') seeking approval of the Resolution Plan approved by the Committee of Creditors (CoC). 2. The present Appeal has been filed by the Operational Creditor of the Corporate Debtor Company/M/s. Shree Bhomica International Ltd. 3. Submissions of the Learned Counsel for the Appellant: That the Resolution Professional never informed the Appellant regarding the Auction Proceedings whereby the Appellant lost an opportunity of participating in the Auction Proceedings. The entire claim of the Appellant stood admitted by the Resolution Professional, clearly indicating that the Resolution Applicant was aware of the total outstanding claim of Rs. 6,29,18,121/-. The Reserve Price for the land, building and machinery was valued at Rs. 918 lacs. The Appellant, being the sole Operational Creditor filed its claim under the prescribed Form amounting to Rs. 6,29,18,121/-, w....
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....per sq. mts. if the completion certificate for the building has been obtained, one-year advance lease rent as security money, one quarter advance lease rent and one quarter water charges in respect of plot statutorily payable by the Resolution Applicant, from which he cannot wriggle out. Stressed Assets Stabilisation Fund (SASF) in the year 2018 has fixed the Reserve Price for the land and building in the said plot at Rs. 902 lacs whereas the average fair value of the land and building calculated by the valuers appointed during the Corporate Insolvency Resolution Process (CIRP) comes to around Rs. 6.10 crores. In November, 2019, the valuation conducted by Mr. Deepak Bansal towards the fair value of plot and building was Rs. 6,21,60,000/- and liquidation value of the same was 4,31,55,000/-. The valuer fairly opined that the transaction with respect to plot can be carried out after complying with the norms of NSEZ. It is vehemently contended by the Learned Counsel that the valuer has not physically visited the property but only relied on documents and has recorded the same in the valuation report. On 03.12.2019, fair and liquidation valuation of th....
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....he Resolution Plan as it is not in contravention of the provisions under the Code. The Hon'ble Supreme Court in 'K. Shashidhar Vs. Indian Overseas Bank & Ors.' (2019 12 SCC 150) in paragraph 33 held that the Adjudicating Authority does not have jurisdiction to analyse or evaluate commercial wisdom of the CoC as the Financial Creditors are fully informed about the viability of the Corporate Debtor and feasibility of the proposed Resolution Plan. It is a well settled law that there cannot be any judicial review of the commercial decision of the CoC under the provisions of the Code. Valuation has been conducted in compliance of Regulation 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. In support of his contention, Learned Counsel placed reliance on the Judgment of Hon'ble Supreme Court in 'Maharashtra Seamless Limited Vs. Padmanabhan Venkatesh & Ors.', [(2020) 11 SCC 467], 'Duncan Industries Pvt Ltd. Vs. State of U.P. & Ors.' [(2000) 1 SCC 633] and 'Ghanashyam Mishra & Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company Limited & Ors.' [(2021) SCC OnLine SC 313]. The ....
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....Appellant herein is fair and equitable. Moreover, the commercial wisdom of the Committee of Creditors is not jusiticiable as laid down by the Hon'ble Supreme Court in the case of 'K. Shashidhar Vs. Indian Overseas Bank & Ors.' (supra). 6. Assessment: It is the main case of the Appellant that the approval of the Resolution Plan under Section 30 of the Code is in contravention of Section 30(2)(e) as the claim admitted is Rs. 6,29,18,121/- and the amount paid is only Rs. 50 lacs. It is the case of the Appellant that the Corporate Debtor has defaulted in paying the lease amount since 30.09.2019; that there are fixed charges and penalties for change in the pattern of the business model; that the Reserve Price for the land, building and machinery is Rs. 918 Lacs and that at the time of valuation, the valuer did not physically inspect the site but instead has based his valuation on the documents placed before him and in fact the valuer has admitted that the building plans were not given to him at the time of valuation. 7. It is seen from the record that the Resolution Plan was approved on 05.10.2020 and the Adjudicating Authority has dismissed the Application preferred by t....
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....ers after determining the average of the two closest estimates. VALUER FAIR VALUE (RS.) LIQUIDATION VALUE (RS.) Deepak Bansal 62,160,000 43,155,000 S.K. Singhal 59,905,409 41,933,786 12. In the present case as recorded by the Adjudicating Authority, the liquidation value of the Corporate Debtor as per the valuation report is 4.25 crores and the amount proposed in the Resolution Plan is Rs. 4.50 crores which is more than the liquidation value. We address to the contention raised by the Learned Counsel for the Appellant that the valuation itself is erroneous and therefore allotting Rs. 50 lacs when the claim is Rs. 6,29,18,121/- is unjustified. The Hon'ble Supreme Court in 'Duncan Industries Pvt Ltd. Vs. State of U.P. & Ors.' (Supra) has held that 'the question of valuation is basically question of facts and this Court is normally reluctant to interfere with the finding on such a question of fact if it is based on relevant material on record'. Be that as it may, the record shows that the average of two closest estimates given by the valuers was taken into consideration as a fair value and the liquidation value. 13. The present Appeal has to be analyse....
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....tion plan has not been approved or rejected by the Adjudicating Authority; (ii) where an appeal has been preferred under section 61 or section 62 or such an appeal is not time barred under any provision of law for the time being in force; or (iii) where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan;] (c) provides for the management of the affairs of the Corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; (e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be specified by the Board. [Explanation. - For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013 (18 of 2013) or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law.] (3) The resolution professional shall present to the commi....
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....of creditors to the Adjudicating Authority." "Section 31: Approval of resolution plan. 31. (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve3 the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, 1[including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed,] guarantors and other stakeholders involved in the resolution plan. [Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation.] (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan. (3) After the order o....
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....ar terms that for final approval of a resolution plan, the Adjudicating Authority has to be satisfied that the requirement of sub-section (2) of Section 30 of the Code has been complied with. The proviso to Section 31(1) of the Code stipulates the other point on which an Adjudicating Authority has to be satisfied. That factor is that the resolution plan has provisions for its implementation. The scope of interference by the Adjudicating Authority in limited judicial review has been laid down in the case of Essar Steel (supra), the relevant passage (para 54) of which we have reproduced in earlier part of this judgment. The case of MSL in their appeal is that they want to run the company and infuse more funds. In such circumstances, we do not think the Appellate Authority ought to have interfered with the order 35 of the Adjudicating Authority in directing the successful Resolution Applicant to enhance their fund inflow upfront." (Emphasis Supplied) 17. The Hon'ble Supreme Court in 'Ghanashyam Mishra & Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company Limited & Ors.' [(2021) SCC OnLine SC 313] has observed as follows: 71. Perusal of the SOR would reveal, ....
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.... will be no criminal proceedings against successful resolution applicant for fraud by previous promoters. So, I hope that is absolutely clear. I would want all the hon. Members to recognize this message and communicate further that this Code, therefore, gives that comfort to all new bidders. So now, they need not be scared that the taxman will come after them for the faults of the earlier promoters. No. Once the resolution plan is accepted, the earlier promoters will be dealt with as individuals for their criminality but not the new bidder who is trying to restore the company. So, that is very clear ................. (emphasis supplied)" ......... 77. It is clear, that the mischief, which was noticed prior to amendment of Section 31 of I&B Code was, that though the legislative intent was to extinguish all such debts owed to the Central Government, any State Government or any local authority, including the tax authorities once an approval was granted to the resolution plan by NCLT; on account of there being some ambiguity, 12 (2009) 12 SCC 209 the State/Central Government authorities continued with the proceedings in respect of the debts owed to them. In o....