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2022 (7) TMI 203
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....shree Chaudhary, Mr. Varun Kumar Tikmani and Mr. Somesh Srivastava, Advocates for R-3, NTPC. JUDGMENT ASHOK BHUSHAN, J. This Appeal has been filed against order dated 08.03.2022 passed by the National Company Law Tribunal, Kolkata Bench, Kolkata rejecting the IA (IB) No.537/KB/2021 filed by the Appellant seeking disqualification of the Successful Resolution Applicant under Section 29A of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "Code") and further praying to set-aside decision of the Committee of Creditors ("CoC") rejecting the proposal of the Appellant. 2. The Appellant No.1 Avantha Holdings Limited, is the Promoter and Shareholder of Avanta Power and Infrastructure Limited, which in turn hold 17.9% shares of Corporate Debtor (Jhabua Power Limited). The Appellants, Promoter of Corporate Debtor aggrieved by the order dated 08.03.2022 have come up in this Appeal. Brief facts of the case and sequence of events necessary to be noted for deciding this Appeal are: (i) On an Application filed by FLSmidth Private Limited under Section 9 of the Code, Adjudicating Authority vide its order dated 27.03.2019 initiated Corporate Insolvency Resolution Proces....
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....nt with the requirements of Section 29A. On 18.09.2020 Mazars filed a Final Report certifying that NTPC is eligible under Section 29A. The Report further mentioned that the lenders have confirmed about no due certificates issued by them with regard to RGPPL and KLL. (viii) On 30.11.2020, NTPC submitted a revised Resolution Plan (2nd Plan), which was lower than the initial Plan submitted on 30.12.2019. Second Plan was supported by an affidavit under Section 29A categorically stating that no due certificates in respect of KLL has been received and with regard to RGPPL, there was no overdue amount. (ix) On 21.12.2020, the Appellant made a proposal to the Members of CoC through Resolution Professional under Section 12A of the Code for settlement of debt owed by the Corporate Debtor. Further, a letter dated 26.12.2020 was written by the Appellant to the Resolution Professional containing the brief outline of the settlement proposal for the outstanding debt of the Corporate Debtor. (x) On 31.12.2020, RGPPL entered into a Term Debt Settlement Agreement dated 31.12.2020, Deed of Novation dated 31.12.2020, Amendment of CRPC Subscription Agreement dated 31.12.2020 and Share Purchase Ag....
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...., but has requested to withdraw the Plan and to return the Bank Guarantee, which was permitted by the CoC. The voting on the Plan took place on 26th and 27th June, 2021. The Plan was unanimously approved with 100% voting of the CoC. Thereafter, an I.A. No.586 of 2021 was filed by the Resolution Professional before the Adjudicating Authority for approval of the Resolution Plan. (xviii) Replies were filed to the disqualification application filed by the Appellant before the Adjudicating Authority and Adjudicating Authority vide its order dated 08.03.2021 rejected the I.A. No.537 of 2021 filed by the Appellant and held that the NTPC is not disqualified under Section 29A of the Code. Aggrieved by the order passed by the Adjudicating Authority, this Appeal has been filed. 3. We have heard Dr. Abhishek Manu Singhvi, learned Senior Counsel for the Appellant, Shri Ramji Srinivasan, learned Senior Counsel for NTPC (Successful Resolution Applicant), Shri Arun Kathpalia, learned Senior Counsel for CoC and Shri Abhinav Vashisht, learned Senior Counsel for Resolution Professional. 4. Dr. Abhishek Manu Singhvi, learned Senior Counsel for the Appellants submits that NTPC was not eligible to ....
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....ng field for others. The object of Section 29A is that all overdues are cleared by the Resolution Applicant. The Adjudicating Authority has given a very flexible interpretation, whereas Hon'ble Supreme Court in "ArcelorMittal India private Limited vs. Satish Kumar Gupta (2019) 2 SCC 1" has preferred a strict interpretation of Section 29A. The disqualification under Section 29A(c) continues throughout all the Plans submitted by NTPC. 5. Shri Ramji Srinivasan, learned Senior Counsel refuting the submissions of learned Senior Counsel for the Appellants submits that there is no disqualification attached to NTPC under Section 29A(c). It is submitted that, firstly the Canara has classified RGPPL and KLL as NPA on 21.05.2018 and by that time period of one year from the date of commencement of CIRP has not elapsed. CIRP having commenced on 27.03.2019, disqualification under Section 29A(c) was not attracted. The NTPC was not ineligible to submit its Resolution Plan on 30.12.2019 and when it was not ineligible at the time of submission of first Resolution Plan, there is no occasion of attaching any eligibility during submission of subsequent revised Plans. It is further submitted that entir....
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....ken by CoC needs no interference. The Resolution Professional has carried out review from the perspective of Section 29A from Mazars, who had shared Final Reports dated 14.06.2021, categorically observing that NTPC is not disqualified under Section 29A. With reference to RGPPL, no due certificates were issued by the lenders in January 2021, whereas as regard to KLL, no due certificates were issued by the lenders in March 2020. Thus, by virtue of proviso of Section 29A(c), the NTPC had become eligible to submit the Resolution Plan on the date when Resolution Plan dated 16.04.2021 was submitted as there were no dues on all connected entities, that is, RGPPL and KLL, hence, by virtue of proviso to Section 29A(c), NTPC was eligible and its Plan dated 16.04.2021, which was revised on 14.06.2021, which came for consideration and approval of the CoC was approved. The NTPC was thus fully eligible to submit the Plan. 7. Learned Counsel for Resolution Professional Shri Abhinav Vasisht also supported the submissions of Shri Ramji Srinivasan and Shri Arun Kathpalia. He submits that NTPC was eligible to submit the Plan and CoC with a due deliberations on the Resolution Plan, approved it with 1....
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....bers by RP upon receipt). The representatives of PFC submitted that the proposal submitted by the promoters does not conform with Sec 12A of the IBC and the same should be noted in the hearing on the next date of hearing. This was agreed to by other members of the CoC who voiced a unanimous view that they do not want to pursue any withdrawal under Section 12A or go ahead with the proposal submitted by the promoters. The same was take on record." 12. Further, in 14th CoC Meeting held on 21.04.2021 the CoC again examined the proposal of Settlement Plan submitted by Promoters in Agenda Item No.7. Following observations have been made by the CoC: "Agenda A7: To discuss the proposal submitted by the promoters of the corporate debtor RP team presented the contours of the restructuring proposal submitted by the promoters M/s Avantha Holdings Ltd. This proposal submitted by the promoters was discussed pursuant to NCLT directions, and after due consideration, the CoC members from PFC, SBI, Axis Bank, PNB and REC stated that they do not consider the plan submitted by promoters to be commercially viable as the upfront payment is only INR 100 Cr, which is significantly lower than NTPC....
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....e in the management of the company must not be allowed a back-door entry in the company and are hence, ineligible to participate during these stages. Proposing a scheme of compromise or arrangement under Section 230 of the 2013 Act, while the company is undergoing liquidation under the provisions of the IBC lies in a similar continuum. Thus, the prohibitions that apply in the former situations must naturally also attach to the latter to ensure that like situations are treated equally." 15. We are of the considered opinion that Section 12A proposal cannot be forced upon the lenders. The Promoters, who led to insolvency process of Corporate Debtor cannot claim to submit a Resolution Plan indirectly by way of proposal under Section 12A and ask the lenders to evaluate their Resolution Plan. Something which is not permissible directly by virtue of prohibition under Section 29A for submitting Resolution Plan by the Promoters, cannot be permitted to be done indirectly. Further, the commercial wisdom of the CoC, which is reflected in its Meeting dated 05.03.2021 and 21.04.2021 is not liable to be judicially reviewed. 16. We may also refer to the judgment of the Hon'ble Supreme Court in K....
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....he commercial decision of the CoC in I.A. No.537 of 2021 filed by the Appellants praying for setting aside the decision of the CoC rejecting their proposal. 18. Now we come to the submission of the parties regarding ineligibility of the NTPC to submit the Resolution Plan. As noted above, the submission, which has been advanced by Dr. Singhvi attracting the eligibility of NTPC is that eligibility of the Resolution Applicant has to be looked into at the time of submission of Resolution Plan on 30.12.2019, which is called as a First Plan. It is submitted that a Resolution Applicant, who is ineligible on the date, when he submits the Resolution Plan, all subsequent process regarding consideration of the Plan is vitiated and cannot enure to the benefit of Resolution Applicant. Shri Ramji Srinivasan, learned Senior Counsel appearing for Resolution Applicant has emphatically submitted that on the day when Resolution Applicant submitted the Resolution Plan, that is, on 30.12.2019, it was not ineligible under Section 29A, sub-clause (c). We, thus, proceed to examine the submission as to whether the Resolution Applicant was eligible on 30.12.2019 when it submitted the first Resolution Plan.....
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....e management or control of such person or of whom such person is a promoter, classified as non-performing asset and such account was acquired pursuant to a prior resolution plan approved under this Code, then, the provisions of this clause shall not apply to such resolution applicant for a period of three years from the date of approval of such resolution plan by the Adjudicating Authority under this Code; (j) has a connected person not eligible under clauses (a) to (i). Explanation[I]. - For the purposes of this clause, the expression "connected person" means- (i) any person who is the promoter or in the management or control of the resolution applicant; or (ii) any person who shall be the promoter or in management or control of the business of the corporate debtor during the implementation of the resolution plan; or (iii) the holding company, subsidiary company, associate company or related party of a person referred to in clauses (i) and (ii): Provided that nothing in clause (iii) of Explanation I shall apply to a resolution applicant where such applicant is a financial entity and is not a related party of the corporate debtor: Provided further that the expressi....
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....1) (Pg. 1594 Vol. VII of Mazars Report-CC @ Pg. 58) 01.04.2009 (Pg.1029 Vol.IV-Cc @ Pg.20; Pg.1388 Vol.VI-CC @ Pg.162) (Pg.1596 Vol.VII of Mazars Report-CC @ Pg.60) SBI 30.06.2014 (In July 2019) Pg.1595 Vol. VII of Mazars Report-CC @ Pg.59) (Sometime around September-October 2019) (Meeting of Lenders Meeting dated 18.10.2019 for KLL Page 187 NTPC Reply-CC @ Pg.160) IDBI Bank 01.05.2015 (On 30 June 2019) (Pg.1595 Vol. VII of Mazars Report-CC @ Pg.59) (Sometime around September-October 2019) (Meeting of Lenders dated 18.10.2019 for KLL Page 187 NTPC Reply-Cc @ Pg.160) 21. The classification of NPA date of RGPPL and KLL are reflected from the financial documents of both the entities, which were brought on record. In Financial Statement of 2018-19 of the RGPPL, which is brought on record along with the Appeal Vol.1, page 230, where in paragraph 26.2, following statement has been made "In the meantime, Canara Bank vide its letter dated 21st May, 2018, 20th July, 2018, 30th July, 2018 and 18th August, 2018 informed that they have downgraded RGPPL's Account from Standard Assets to NPA as per RBI Circular dated 12th February, 2018 withdrawing 5/25 scheme and that their participat....
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....r consideration and interpretation in this Appeal. 25. The Hon'ble Supreme Court in Swiss Ribbons Private Limited and another vs. Union of India and Others - (2019) 4 SCC 17 in paragraph 105 has noticed: "105. .....As a matter of legislative policy, therefore, quite apart from malfeasance, if a person is unable to repay a loan taken, in whole or in part, within this period of one year and three months (which, in any case, is after an earlier period where the corporate debtor and its financial creditors sit together to resolve defaults that continue), it is stated to be ineligible to become a resolution applicant. The reason is not far to see. A person who cannot service a debt for the aforesaid period is obviously a person who is ailing itself. The saying of Jesus comes to mind - "if the blind lead the blind, both shall fall into the ditch." The legislative policy, therefore, is that a person who is unable to service its own debt beyond the grace period referred to above, is unfit to be eligible to become a resolution applicant. This policy cannot be found fault with. Neither can the period of one year be found fault with, as this is a policy matter decided by RBI and which emer....
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.... be treated as 21.05.2018 and it cannot be taken as on 01.04.2009, which is the backdate, as has been given by the Canara Bank, with effect from which date NPA is declared. If the interpretation as put by learned Counsel for the Appellant is accepted, the purpose of statutory prescription under Section 29A(c) can be defeated by the Financial Institutions by declaring NPA on particular date and making it effective from back date, so that no Resolution Applicant can take the benefit of statutory provision as provided under Section 29A(c). We, thus, have to take the date of 21.05.2018, as the date of NPA classification by the Canara Bank. Similarly, the NPA classification by SBI and IDBI Bank are all subsequent to 21.05.2018, that is, in the year 2019. We, thus, have to take date of classification as 21.05.2018 on which date the Resolution Applicant was classified as NPA and the period of one year had not elapsed till 27.03.2019, when CIRP commenced. Since on the date of commencement of CIRP, period of one year has not elapsed, the disqualification under Section 29A(c) shall not attach to the NTPC, who was Resolution Applicant. We, thus, accept the submission of learned Senior Counsel....