TaxTMI 
TaxTMI 
2023 (1) TMI 550
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....Resolution Professional', under Section 60 (5) of the I & B Code, 2016, read with Rule 11 of NCLT Rules, 2016, seeking, 'Liquidation' of the 'Corporate Debtor / Company', in IA/(IBC)/1213/CHE/2021 in IBA/883/2019, passed by the 'Adjudicating Authority', ('National Company Law Tribunal', Division Bench - I, Chennai), in dismissing the 'Application'. 2. The 'Adjudicating Authority', ('National Company Law Tribunal', Division Bench - I, Chennai). while passing the 'impugned order' dated 09.12.2022 in IVN.P(IBC)/1(CHE)/2022 in IA/ (IBC)/1213/CHE/2021 in IBA/883/2019, wherein, inter alia at Paragraphs 12.1 to 12.5, had observed the following: 12.1. The main contention of the applicant is that if the liquidation of the Corporate Debtor is ordered, severe hardship and prejudice would be caused to the Applicant and the other members of the Suspended Board of Directors of the Corporate Debtor. 12.2. Further, it has been submitted by the applicant that as per Section 230(12) of the Companies Act, 2013, the Applicant is an aggrieved party and is entitled to file an application before this Tribunal in the event of any grievance with respect to the takeover offer of the Com....
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....is hereby dismissed. 12.5. Taking in to consideration above Judgement and since the CoC has unanimously passed a Resolution for Liquidation of the Corporate Debtor, we are left with no other option than to liquidate the Corporate Debtor in terms of Section 33 of IBC, 2016 and accordingly IVN.P(IBC)/1(CHE)/2022 stands dismissed." Appellant's Contentions: 3. Challenging the 'impugned order' dated 09.12.2022 in Ivn.P(IBC)/1(CHE)/2022 in IA/(IBC)/1213/CHE/2021 in IBA/883/2019, passed by the 'Adjudicating Authority', ('National Company Law Tribunal', Division Bench - I, Chennai, in 'dismissing', the 'Interlocutory Application', filed by the 'Appellant'/'Petitioner'/'Proposed Respondent', the Learned Senior Counsel for the 'Appellant', submits that the 'Appellant', was a 'Promoter / Shareholder' of the 'Respondent / Corporate Debtor', is a 'Member' of the 'Suspended Board of Directors', of the 'Corporate Debtor' / 'M/s. Kamachi Industries Limited' ('Respondent'), and further that the 'Appellant' held 413840 'Equity Shares' of Rs.10/- each per 'Equity Share' of the 'Corporate Debtor'. 4. According to the Appellant, the 'Corporate Debtor / Company', is primarily engaged i....
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....n', as per Section 29A of the I & B Code, 2016, for him, to be 'ineligible' to act as a 'Resolution Applicant', it is pointed out that none other than the 'Promoter', has a direct interest in the welfare and the development of the 'Corporate Debtor'. Moreover, the 'Appellant / Petitioner', can always submit a 'Scheme of Arrangement' / 'Settlement'. 10. Therefore, it is contended on behalf of the Appellant / Petitioner that Ivn.P(IBC)/1(CHE)/2022 (Intervening Application in IA/(IBC)/1213/CHE/2021 in IBA/883/2019), is to be 'allowed', so as to permit him to 'intervene' and to put forward his submissions in IA/(IBC)/1213/CHE/2021, filed by the 'Resolution Professional', praying for 'Liquidation' of the 'Corporate Debtor' / 'Company', and to reimburse the costs to him. 11. The Learned Counsel for the Appellant / Petitioner submits that on 09.12.2022, the impugned order came to be passed by the 'Adjudicating Authority', in and by which, the 'Application', to initiate 'Liquidation' of the 'Corporate Debtor', was 'admitted', without appreciating that an 'Appeal' in Comp App (AT) (INS.) No. 328 of 2020, assailing the initiation of 'Corporate Insolvency Resolution Process', is pending....
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....ed Counsel for the Committee of Creditors also stated that the confidentiality requirement would be breached if a copy of the resolution plan were to be given to the members of the suspended Board of Directors and added that it would be in the interest of some members of the suspended Board who may attempt to sabotage the corporate insolvency resolution process, for which reason also, resolution plans should be kept hidden from them. They argued that the "persons aggrieved" in Section 61 would necessarily refer to persons aggrieved for the purpose of Section 60(5) also, and as members of the ex-Board of Directors cannot be said to be persons aggrieved, they cannot possibly approach the Adjudicating Authority under Section 60(5) or the Appellate Tribunal under Section 61. 12. Having heard the learned counsel for all parties, it is important to first advert to the relevant provisions of the Code and the Regulations made thereunder. The relevant provisions of the Code are hereinbelow: "5. Definitions.-In this Part, unless the context otherwise requires,- (1)-(9) (10) "information memorandum" means a memorandum prepared by resolution professional under sub-se....
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....nancial debt extended as part of a consortium arrangement or syndicated facility provide for a single trustee or agent to act for all financial creditors, each financial creditor may- (a) authorise the trustee or agent to act on his behalf in the Committee of Creditors to the extent of his voting share; (b) represent himself in the Committee of Creditors to the extent of his voting share; (c) appoint an insolvency professional (other than the resolution professional) at his own cost to represent himself in the Committee of Creditors to the extent of his voting share; or (d) exercise his right to vote to the extent of his voting share with one or more financial creditors jointly or severally. (6-A) Where a financial debt- (a) is in the form of securities or deposits and the terms of the financial debt provide for appointment of a trustee or agent to act as authorised representative for all the financial creditors, such trustee or agent shall act on behalf of such financial creditors; (b) is owed to a class of creditors exceeding the number as may be specified, other than the creditors covered under clause (a) or subsecti....
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.... Creditors shall be conducted by the resolution professional. (3) The resolution professional shall give notice of each meeting of the Committee of Creditors to- (a) members of Committee of Creditors, including the authorised representatives referred to in sub-sections (6) and (6-A) of Section 21 and sub-section (5); (b) members of the suspended Board of Directors or the partners of the corporate persons, as the case may be; (c) operational creditors or their representatives if the amount of their aggregate dues is not less than ten per cent of the debt. (4) The Directors, partners and one representative of operational creditors, as referred to in sub-section (3), may attend the meetings of Committee of Creditors, but shall not have any right to vote in such meetings: Provided that the absence of any such Director, partner or representative of operational creditors, as the case may be, shall not invalidate proceedings of such meeting. (5) Subject to sub-sections (6), (6-A) and (6-B) of Section 21, any creditor who is a member of the Committee of Creditors may appoint an insolvency professional other than the resolution ....
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.... resolution professional shall prepare an information memorandum in such form and manner containing such relevant information as may be specified by the Board for formulating a resolution plan. (2) The resolution professional shall provide to the resolution applicant access to all relevant information in physical and electronic form, provided such resolution applicant undertakes- (a) to comply with provisions of law for the time being in force relating to confidentiality and insider trading; (b) to protect any intellectual property of the corporate debtor it may have access to; and (c) not to share relevant information with third parties unless clauses (a) and (b) of this sub- section are complied with. Explanation.-For the purposes of this section, "relevant information" means the information required by the resolution applicant to make the resolution plan for the corporate debtor, which shall include the financial position of the corporate debtor, all information related to disputes by or against the corporate debtor and any other matter pertaining to the corporate debtor as may be specified. 30. Submission of resolution plan.....
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....resolution applicant referred to in the first proviso is ineligible under clause (c) of Section 29-A, the resolution applicant shall be allowed by the Committee of Creditors such period, not exceeding thirty days, to make payment of overdue amounts in accordance with the proviso to clause (c) of Section 29-A: Provided also that nothing in the second proviso shall be construed as extension of period for the purposes of the proviso to sub-section (3) of Section 12, and the corporate insolvency resolution process shall be completed within the period specified in that sub-section. Provided also that the eligibility criteria in Section 29-A as amended by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 (6 of 2018) shall apply to the resolution applicant who has not submitted resolution plan as on the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018. (5) The resolution applicant may attend the meeting of the Committee of Creditors in which the resolution plan of the applicant is considered: Provided that the resolution applicant shall not have a right to vote at the meeting of the committee of credito....
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....force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of- (a) any application or proceeding by or against the corporate debtor or corporate person; (b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and (c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code. "61. Appeals and Appellate Authority.-(1) Notwithstanding anything to the contrary contained under the Companies Act, 2013 (18 of 2013), any person aggrieved by the order of the Adjudicating Authority under this part may prefer an appeal to the National Company Law Appellate Tribunal..... "62. Appeal to Supreme Court.-(1) Any person aggrieved by an order of the National Company Law Appellate Tribunal may file an appeal to the Supreme Court on a question of law arising out of such order under this Code within forty-five days from the date of receipt of such order. [emphasis supplied] ....
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....f they are to participate effectively in the meeting of the Committee of Creditors. This is for the reason that under Section 30(2)(b), repayment of their debts is an important part of the resolution plan qua them on which they must comment. So the first important thing to notice is that even though persons such as operational creditors have no right to vote but are only participants in meetings of the Committee of Creditors, yet, they would certainly have a right to be given a copy of the resolution plans before such meetings are held so that they may effectively comment on the same to safeguard their interest. 17. However, it was argued before us that the Notes on Clauses to Section 24 make it clear that the erstwhile members of the Board of Directors are participants in these meetings only so that the Committee of Creditors and the resolution professional may seek information from them. The Notes on Clauses, heavily relied upon by the learned counsel for the respondents, read as follows: "Clause 24 prescribes the modalities for the meeting of the Committee of Creditors. The meetings are conducted by the resolution professional and may be attended by the members....
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....tion against the Directors and management of the entity, with recommendations from the creditors committee. All material actions and events during the process are recorded at the adjudicating authority. The adjudicating authority can assess and penalise frivolous applications. The adjudicator hears allegations of violations and fraud while the process is on. The adjudicating authority will adjudicate on fraud, particularly during the process resolving bankruptcy. Appeals/actions against the behaviour of the insolvency professional are directed to the Regulator/Adjudicator." 17. Further, in the aforesaid decision of the Hon'ble Supreme Court of India, in Arun Kumar Jagatramka case (2021) 7 SCC at Page 474, wherein it is observed and held, as under: ''- Held . 29-A IBC is a crucial link is ensuring that the objects of the IBC are not defeated by allowing 'ineligible persons', including but not confined to those in the management who have run the company aground, to return in the new avatar or resolution applicants and S. 35(1) (f) IBC is placed in the same continuum - Further, the purpose of the ineligibility under S. 29-A IBC is to achieve a sustainable revival and to en....
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....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." 30. The role of the adjudicating authority under sub-section (1) of Section 31 comes into being upon the approval of the resolution plan by the CoC under sub-section (4) of Section 30. The function which is assigned by the statute to the adjudicating authority is to determine whether the resolution plan which has been approved by the CoC meets the requirements of sub-section (2) of Section 30. Upon being satisfied that the resolution plan meets those requirements, the adjudicating authority "shall by order approve the resolution plan". Before passing an order of approval the adjudicating authority has to satisfy itself that the resolution plan has provisions fo....
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....se is to prevent approval of resolution plans, which are not legally implementable. 4. Section 31(1) of the Code further provides that a resolution plan approved by the Adjudicating Authority shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. The notes to clauses appended to the Insolvency and Bankruptcy Code, 2015 (Bill) in respect of such clause explains: ''Therefore, if a plan requires stakeholders to do or not do certain actions for the successful implementation of a plan, it shall be binding on all the affected parties who shall be bound to undertake the actions set out in the plan". 5. In view of above, it is also clarified that the approval of shareholders/members of the corporate debtor/company for a particular action required in the resolution plan for its implementation, which would have been required under the Companies Act, 2013, or any other law if the resolution plan of the company was not being considered under the Code, is deemed to have been given on its approval by the Adjudicating Authority. 6. The issues with the approval of competent author....
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....solution Professional', as per Section 29A of the I & B Code, 2016. 22. It is not out of place for this 'Tribunal', to significantly points out the decision of the Hon'ble Supreme Court of India in Swiss Ribbons Pvt Limited and Anr. v. Union of India & Ors. (vide Writ Petition (C) No. 99 of 2018, reported in (2019) SCC Online SC 73, wherein at Paragraph 52, it is observed as under: 52. ''It is clear that once the Code gets triggered by admission of a creditor's petition under Sections 7 to 9, the proceeding that is before the Adjudicating Authority, being a collective proceeding, is a proceeding in rem. Being a proceeding in rem, it is necessary that the body which is to oversee the resolution process must be consulted before any individual corporate debtor is allowed to settle its claim. A question arises as to what is to happen before a committee of creditors is constituted (as per the timelines that are specified, a committee of creditors can be appointed at any time within 30 days from the date of appointment of the interim resolution professional). We make it clear that at any stage where the committee of creditors is not yet constituted, a party can approach t....
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.... paid in priority to any other creditor; (b) liquidation value due to operational creditors and provide for such payment in priority to any financial creditor which shall in any event be made before the expiry of thirty days after the approval of a resolution plan by the Adjudicating Authority; and (c) liquidation value due to dissenting financial creditors and provide that such payment is made before any recoveries are made by the financial creditors who voted in favour of the resolution plan. 20[(1A) A resolution plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the corporate debtor.] (2) A resolution plan shall provide: (a) the term of the plan and its implementation schedule; (b) the management and control of the business of the corporate debtor during its term; and (c) adequate means for supervising its implementation. (3) 21[A resolution plan shall contain details of the resolution applicant and other connected persons to enable the committee to assess the credibility of such applicant and other connect....
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.... of all 'assets', and 'dues' of the 'Corporate Debtor', in a time-bound manner for 'maximisation of value', for the 'stakeholders'. Section 60 (5) of the I & B Code, 2016: 28. The ingredients of Section 60 (5) of the I & B Code, 2016, are not all pervasive one, showering jurisdiction, upon an 'Adjudicating Authority', to decide any question, pertaining to a 'Corporate Debtor. Besides this, an 'Appellant', before the 'National Company Law Appellate Tribunal', under Section 61 of the Code is not to fall back upon the ingredients of Section 421 of the Companies Act, 2013, in the considered opinion of this 'Tribunal'. Section 53 of I & B Code: 29. In a 'Liquidation' of a 'Company', and in an 'Administration', where there is no issue of endeavouring to save the Company or its Business. The effect of the 'Insolvency Legislation', as interpreted by the 'Law Courts', is that, the 'Order of Priority', for payment of Company's assets. 30. Any 'Dividend', declared by a 'Corporate Debtor', but not 'paid', to the 'shareholders', such be 'payable' to them, in order of their priority, under Section 53 of the ingredients of I & B Code, 2016. In case of surplus, if any, is distribute....