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2023 (1) TMI 945
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....on Process for Corporate Persons) Regulations, 2016 (in short 'Regulations') seeking sanction of resolution plan, approved in the meeting of Committee of Creditors (in short 'CoC') held on 13.11.2019, has been allowed, subject to comments in Para No. 35 to 39 of the impugned order regarding performance security, reliefs and concessions as provided in the plan and further directions were issued under Section 31(3) of the Code that the moratorium order passed by the Adjudicating Authority under Section 14 of the Code shall cease to have effect and the RP shall forward all records relating to the conduct of the CIRP and the resolution plan to the board to be recorded on its database. 2. In brief, M/s Shiva Shakti Elmech Pvt. Ltd. (Operational Creditor) filed an application under Section 9 of the Code to initiate the Corporate Insolvency Resolution Process (in short 'CIRP') in the matter of M/s Drake and Scull Water & Energy India Pvt. Ltd. (Corporate Debtor), which was admitted on 30.10.2018 and the CIRP was initiated. Ms. Nisha Malpani was appointed as an Interim Resolution Professional (in short 'IRP') on 30.10.2018. She made a public announcement as per Regulation 6 of the Regul....
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....esolution Applicants (RAs) on 25.01.2019 by publishing Form G in Financial Express (English), Mumbai and Delhi Edition and Jansatta (Hindi). The CoC took note of invocation of non-fund based instrument and effect of such invocation on the reconstitution of CoC in its 6th meeting and after the reconstitution, the voting share was found as under:- Sr. No. Name of Creditor Voting Share% Claim Admitted 1. RBL Bank Limited 50.03% 288125779/- 2. Axis Bank 49.97% 287783590/- 7. It was informed to the CoC that in its 6th meeting, pursuant to the publication of Form G, since six persons have shown interest, but none has submitted EOI till the last date of submission i.e. 10.02.2019, it was resolved to publish revised Form G to enable the said parties or any other party having potential to submit the EOI. The revised Form-G was published on 25.02.2019 in which the last date of submission of EOI was extended to 03.03.2019. 8. The eligibility criteria for inviting fresh EOI and the request for resolution plan and evaluation matrix prepared by the RP in CIRP of the Corporate Debtor was approved by the CoC on 04.04.2019 in its 7th meeting. It was further....
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....rovided in the plan. 10. The present appeal has been filed by the Operational Creditor, inter alia, on the ground that while passing the impugned order dated 03.12.2020 by the Adjudicating Authority, it had failed to appreciate the mandatory provision of Section 29-A, Section 24(3)(c) & Section 30(2) of the Code and considered ineligible party as Successful Resolution Applicant and erred in approving the resolution plan in terms of Section 30 of the Code. 11. The Appellant has submitted that as per Section 29-A of the Code, a person shall not be eligible to submit a resolution plan, if such person, or any other person acting jointly or in concert with such person suffers from any of the condition mentioned in clause 29-A (a) & (i). He has referred to clause 29-A (j) which provides that "a person shall not be eligible to submit a resolution plan, if such person, or any other person acting jointly or in concert with such person - has a connected person not eligible under clause (a) to (i). He has further referred to explanation (1)(iii) of the 29-A (j) which provides that "the holding company, subsidiary company, associate company or related company of a person referred to in c....
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....it is an admitted position that the CD and Respondent No. 2 (SRA) are related & associated companies of Drake and Scull International PJSC, UAE. However, it is stated that the authenticity and veracity of the documents, which have been annexed in the said paragraph, cannot be ascertained by the Respondent No. 1. 28. In response to the contents of Para 7, sub-para 25, it is a matter of record, however, as stated above, the Resolution Applicant does not become disqualified merely by virtue of being a related company." 13. Similarly, the Respondent No. 2 (SRA) has also stated in this regard in Para 7.24 and 7.25 of the reply, which are as under:- "7.24. The contents of Para 7.24 are a matter of record. 7.25. The contents of para 7.25 pertaining to the table presented are a matter of record." 14. It is further submitted that Drake & Scull International PJSC, UAE (DSI) is the 100% holding company of the Passavant Energy & Environment GMbH, Germany (Successful Resolution Applicant) and is covered by the definition of a 'connected person'. 15. It is thus clear from the flow chart included earlier in this judgment that the Corporate Debtor is a subsidiar....
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....hall not invalidate proceedings of such meeting." 18. In the above connection, the Appellant has alleged that the representative of the Operational Creditors should have been included as a member of the CoC and the RP has failed in his duty by not including the representative of the Operational Creditors in the CoC, thereby making the constitution of CoC defective and null and void. 19. In this connection, we note the emails dated 18.02.2019, 30.04.2019 and 27.05.2019 (attached at PP. No. 112-116 of the Respondent No's 1 reply) addressed to all the Operational Creditors and also to the Counsel of the Appellant whereby the RP has stated and requested that the Operational Creditors to exercise their right to appoint an authorised representative to attend the meeting of the CoC who will not have the right to vote in such meeting. It is worthwhile to reproduce the relevant part of email dated 18.02.2019 to show how the RP has dealt with the issue of appointment of representative of the Operational Creditors:- "Respected Sir/Madam, You are aware that undersigned Shiv Nandan Sharma has been appointed as the Resolution Professional (RP) of Drake & Scull Water & Ene....
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....019 by the operational creditor before the NCLT, Chandigarh, wherein the following order is recorded: "2. As per Section 21(2) of the Code, the CoC shall comprise of financial creditors only. Section 24(3)(c) on which the Ld. Counsel placed reliance only provides for issuance of a notice and participation by operational creditor who satisfies the requirement thereunder, without any voting rights. At present, the CoC has already approved the plan and the application filed by the RP seeking approval of this Adjudicating Authority was once heard finally and for want of certain information the same was reopened and is listed today for final hearing. Hence, even if the contention of the applicant that he fulfils the requirements under Section 24(3)(c) is accepted the applicant can only participate in the CoC meetings but without voting right and thereby cannot have any bearing on the decision of the CoC either in conducting of the CIRP in any manner or in approving the plan of any resolution applicant. 3. In the circumstances, we do not find any merit in the CA No. 314/2019 and accordingly, the same is dismissed. 4. CA No. 314 of 2019 is disposed of." 22. I....
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....been invoked by the creditor and remains unpaid in full or part]; (i) is subject to any disability, corresponding to clauses (a) to (h), under any law in a jurisdiction outside India; or (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):" 24. It is therefore necessary to look at Section 29-A(c) according to which at the time of submission of the resolution plan, the Resolution Applicant or any other person acting jointly or in concert with the Resolution Applicant who has an account which is classified as non-performing asset, and at least a period of one year has lapsed from the date of such classification as NPA till the date of commen....
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....zation process started more than one year after the commencement of CIRP in the present case and not before the commencement of CIRP as is required in Section 29-A(c) in order to make the SRA ineligible to submit a resolution plan. Notably, the resolution plan was submitted in July 2019 by the SRA when its connected party and holding company 'Drake and Scull International PJSC, UAE' was not undergoing financial reorganization process. Thus, we are quite clear that any ineligibility under Section 29-A(c) is not attracted vis a vis the SRA. 27. In so far as, the claim alleged ineligibility of the SRA under Section 29- A (h) r/w Section 29-A(i) is concerned, we note the following statement in the written submissions submitted by the Respondent No. 1 vide diary no. 26907 dated 19.04.2021:- "6(d). As far as applicability u/s 29-A(h) IBC is concerned it could be inferred that the same is only applicable wherein the CIRP has been admitted on the application of such creditor who had invoked the guarantee and the same has remained unpaid in part of in full. Although the corporate guarantee executed by Drake and Scull International PJSC had been invoked by the financial creditor ....
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....y placed creditors after the application for insolvency application is admitted by the adjudicating authority. As a result, what is required to earn a disqualification under the said provision is a mere existence of a personal guarantee that stands invoked by a single creditor, notwithstanding the application being filed by any other creditor seeking initiation of insolvency resolution process. This is subject to further compliance of invocation of the said personal guarantee by any other creditor. We have already said that the concern of the Court is only from the point of view of two entities viz., corporate creditors and the corporate debtors. Any other interpretation would lead to an absurdity striking at the very objective of Section 29-A, and hence, the Code. Ineligibility has to be seen from the point of view of the resolution process. It can never be said that there can be ineligibility qua one creditor as against others. Rather, the ineligibility is to the participation in the resolution process of the corporate debtor. Exclusion is meant to facilitate a fair and transparent process." 29. It is clear from a reading of the above mentioned portion of the judgment that it ....
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.... between Drake and Scull International PJSC, UAE and the CD has been shown in the documents they do not claim or show any ineligibility of the SRA under Section 29-A to submit a resolution plan. 32. We also examine the advice given by process advisor regarding the ineligibility of the SRA to submit a resolution plan and the legal opinions submitted by the Resolution Applicant from Legal Remedy and the Legal Opinion obtained by the RP from Dhir and Dhir Associates. The process advisor's advice is included in the minutes of 9th meeting of CoC (attached at PP. 87 to 92 of the reply of the R1) the relevant portion of the minutes are as follows:- "At the outset, the process advisors informed the CoC members that Passavant Energy & Environment GmbH, one of the two applicants in fray, was disqualified under Section 29-A of the Code. The CoC members had divergent view on the interpretation of the applicable provision under which the disqualification is being proposed by the process advisors. Detailed discussion took place on the issue and the CoC members asked the process advisor to obtain further legal opinions before proceeding to issue the disqualification report in order to....
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....nment GmbH, Germany was approved after voting and the following resolution was passed regarding the approval of resolution plan submitted by the SRA:- "Resolved that, the Resolution Plan submitted by M/s Passavant Energy and Environment GmbH be and is hereby approved in compliance with the provisions of Section 30(4) of the IBC by CoC members having voting share of 100%. Further the CoC authorises the resolution professional Shiv Nandan Sharma to move an application under Section 31, on behalf of the CoC, for approval of resolution plan from the adjudicating authority. RP informed the CoC members that he shall now proceed to issue letter to intent to the SRA, Passavant. The RA shall, as per terms of the RFFP, has to submit a performance bank guarantee of 10% of the bid amount." 35. We also notice that representative of the Axis Bank and RBL Bank Limited were the members of CoC who attended 14th meeting of CoC wherein the successful resolution plan was approved by CoC quite obviously these members of CoC had no connection or were prejudiced in favour of the SRA nor has any such allegation been made by the Appellant. 36. Thus, we are of the view that the appro....