TaxTMI 
TaxTMI 
2023 (2) TMI 378
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....rofessional Mr. Alkesh Rawka under Section 33 of the I&B Code read with Rule 11 of the NCLT Rules 2016 for initiating Liquidation Process against the Gourmet Renaissance Private Limited (Corporate Debtor). By which the Adjudicating Authority passed the following orders: "The application be and the same is allowed. Gourmet Renaissances Private limited shall be liquidated in the manner as laid down in Chapter-III of the Code with the following consequential directions: a) Ms. Vaishali Arun Patrikar having Registration No. IBBI/IPA/-002/IP-N00812/2019-2020/12566 to act as Liquidator of the Corporate Debtor. b) She shall issue public announcement stating that Corporate Debtor is in liquidation. c) The Moratorium declared under Section 14 of the IBC 2016 shall cease to operate here from. d) Subject to section 52 of the IBC 2016 no suit or other legal proceedings shall be instituted by or against the Corporate Debtor. This shall however not apply to legal proceedings in relation to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. e) All powers of the Board of Directors....
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....rder dated 11.03.2019 passed by the Adjudicating Authority. The Respondent No. 3, The Nasik Merchants Co-operative Bank Ltd., Nashik (hereinafter referred to as "NAMCO") is a Multistate Scheduled Bank that in the usual course of its business, lent certain sums to Corporate Debtor and went to have the largest representation on the Committee of Creditors. On 28.06.2019, the aforementioned IRP, Mr. Alkesh Rawka furnished FORM AA written consent to act as Resolution Professional of Appellant pursuant to which was appointed as the Resolution Professional vide a resolution passed by the CoC on 04.07.2019. The IRP subsequently filed an Application under Section 33 of the IBC code, 2016 read with Rule 11 of the National Company Law Tribunal Rules, 2016 praying for instituting Liquidation Process against Respondent No. 2 Company. The Impugned order dated 05.08.2021 passed by the Ld. Adjudicating Authority in the said Application, IA. No. 244 of 2021 in C.P. (IB) No. 1661/MB/2018 is being challenged herewith vide the present Appeal before this Tribunal. iii) A Petition under section 9 of the Insolvency and Bankruptcy Code, 20l6 was instituted by Respondent No. l on the alleged failu....
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....id any action amounting to recovery/foreclosure/ enforcement of any security interest created by Corporate Debtor in respect of its properties. The Adjudicating Authority declared that the Order of Moratorium would be in effect till culmination of the resolution process, or an Order is passed approving liquidation of Corporate Debtor, Respondent No. 2 under relevant provisions of the IBC. It also proceeded to appoint Mr. Naren Seth as the Interim Resolution Professional to oversee functions delegated under the I&B Code, 2016. Pertinently it failed to notice that Appellant herein could not be excluded from participation the CIRP on account of him being the Chairman and MD of Corporate Respondent, an entity with a MSME certification. Public announcements by the IRP were carried in local newspapers in accordance with the conditions contained in Section 13 and Section 15 of the IBC, 2016. The last date for submissions of claims qua Respondent No. 2 Corporate Debtor to be 24.03.2019. Pursuant to the submission of Claims and verification thereof from Operational and Financial Creditors vide Form B and Form C respectively, a report certifying the constitution of a Committee of Creditors (....
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....al, replacing the incumbent Mr. Seth. The proposal was approved by 99.91% of the Committee. vi) In the fourth CoC meeting held on 07.07.2019, due to the fact that CIRP would in all likelihood extend beyond the prescribed 180 days, approval was accorded to Resolution Professional to approach the Adjudicating Authority seeking extension after the 180 days period from the commencement of CIRP (i.e., 07.09.2019) in line with Section 12 of the IBC. Subsequently M.A 3077/2019 was placed for consideration before the Adjudicating Authority, wherein RP of Respondent No.2 sought a further 90 days for closure of the CIRP. In its Order dated 18.09.2019, the Ld. Adjudicating Authority accorded sanction to M.A 2434/2019 wherein the replacement of RP's was prayed for. The Ld. Adjudicating Authority recorded the reasons for replacement as failure of then RP to prepare an Information Memorandum and the contention that there was no substantial work done by him. During the originally envisaged 180 days' time frame provided for Resolution, no concrete measures by the COC were taken to resolve the crisis of Corporate Debtor and substantial time was squandered. On 05.10.2019, the Fifth ....
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.... multitude of litigations that arose during the Resolution Process. On account of alleged lapses by Corporate Debtor regarding statutory compliances, the regularization of the same was deferred for a later date after a seriously Appellant submitted that he would provide records pertaining to the Respondent No. 2 Company in a weeks' time. On 11.11.2019, Mr. Atul Kumar Gupta provided certain details pertaining to measures adopted and undertaken by Invent ARC in a letter to the Chairman of NAMCO, inter alia highlighting the fact that Invent ARC had already settled liabilities to the tune of Rs.10 Crores. The Resolution Applicant expressed serious concerns over the serious illness of Appellant herein. The Appellant craves leave to refer to and rely upon the same when produced the threat to move an Application under Section 19(2) by majority members of the CoC and RP was made in every subsequent gathering of the CoC and was used as leverage to relegate Appellant herein to the side-lines and as evidenced by subsequent events and records, Appellant was always considered persona non grata, expressly contravening Section 240 (1) (A) of the I&B Code,2016. The COC was informed of the appo....
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....time till 25/26th January, 2020 for submission of a revised Resolution Plan. The Prospective Resolution Applicant Mr. Gupta stressed on the fact that in the meeting at Respondent No. 3 NAMCO's headquarters on the 7th January, 2020, he had expressed his inability to come up with a Resolution Plan by the 15th January, 2020 as demanded by Respondent No. 3 NAMCO. He appealed to the fellow members of the COC to consider the changed circumstances on account of the Income Tax Demand Order pertaining to Respondent No. 2, Corporate Debtor and extend the time to the proposed dates. The aforementioned dates proposed by Mr. Atul Kumar Gupta were rejected by the COC who demanded that a Resolution Plan be submitted by 21.01.2020. In light of this unilateral rejection, Mr. Atul Kumar Gupta was constrained to send another appeal to the Chairman of Respondent No.3 NAMCO requesting the lenders to consent to a revised date especially in light of a further Show Cause Notice indicating enhanced penalties on Corporate Debtor. Mr. Gupta further pointed out that the date for submission of the Resolution Plan set unilaterally by the lenders to be 21.01.2020 was not communicated with him and therefore p....
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....the list of creditors paid off by the Prospective Resolution Applicant, M/s Invent Arc and the remaining unpaid creditors who would have to be paid under terms of Section 53 of the IBC in a mail to members of the CoC. A perusal of the details thus provided indicates that Appellant herein was to undertake a substantial haircut and forego monies amounting to Rs. 744,150,4031/-. Prior to the scheduled 9th meeting of the CoC, the Prospective Resolution Applicant transmitted the points proposed to be tabled at the meeting of the CoC. Inter alia, it clearly details the proposed terms of payment including redemption of outstanding amount of Rs. 3 Crore in 360 days but payment terms of the Rs. 24 Crore Security Receipts would be redeemed within 24 months after the first year i.e 3 years in total. The communication via WhatsApp dated 18.03.2021 was sent to members of the CoC including the Chairman, CEO, and the legal advisor of NAMCO Mr. Rahul Totala. Meanwhile, in response to sustained and recurrent threats to file an Application under Section l9(2) of the Code, in a detailed, emphatic, and unequivocal letter address to this Chairman, COC dated 18.03.2020, Appellant herein expressed extrem....
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.....09.2020, to queries raised by the Prospective Resolution Applicant on the proposed Resolution Plan, the legal advisor of NAMCO, Mr. Rahul Totla attempted to discredit the plan by pointing out purported acts of noncompliance/nonadherence by the Prospective Resolution Applicant. The RA stressed that ARC Invent being both a Financial Creditor as well as a Resolution Applicant, placed emphasis on clearing the liabilities of NAMCO on a priority basis, over and above the Resolution Applicant's own claims. However, the legal advisor viewed this as contradictory to Regulations 30 and 38 (1) (b) of the I&B Code, 2016. The Resolution Plan formulated by M/s ARC Invent unequivocally and unambiguously stated that the term of implementation would be 36 months from the date of acceptance of the Resolution Plan by the Ld. Adjudicating Authority in accordance with the provisions contained in Regulation 38(2)(a) of the IBC. There was no semblance of ambiguity in this elucidation. Pertinently, the response to this as seen in Paragraph 4 of the mail dated 18.09.2020 was marked as 'Complied' by the legal advisor of NAMCO. The Prospective Resolution Applicant also stressed that Respondent N....
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....participation of Appellant herein, linking him to specific performance of certain measurable parameters amongst other aspects within the purview and knowledge of Appellant. The Legal Advisor however found this proposal noncompliant with provisions set out in Regulations 38(3)(d) and 38(3)(e), contingent to approval from the Ld. Adjudicating Authority. The document addressed other concerns that were raised, and the Resolution Applicant inter alia undertook to ensure compliance with the Regulations of CIRP and the same was accepted by the Legal Advisor in principle. The RA also pointed out that there was unequivocal agreement between him and NAMCO regarding the settlement of Rs.25 crores as outstanding Principal owed to NAMCO and the same had been adequately provisioned by the Auditor of Corporate Debtor. The RA was amenable to suggestions by the COC regarding changes to the proposed terms of provision of Performance Guarantee and pointed out that the plan was accorded in principle verbal acceptance by the Chairman of NAMCO. The Resolution Applicant pointed out that all purported contradictions were actually expounded in detail in the fine print of the Resolution Plan and that the se....
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....unfair on the part of the Resolution Professional to unexpectedly raise a demand for a detailed business plan despite the Resolution Professional not providing a signed balance sheet indicating the current financial status of the Corporate Debtor. Addressing a number of issues dealing with questionable ethical decisions of the Resolution Professional, the Resolution Professional beseeched the CoC to refrain from turning a blind eye to multiple instances of wrongdoings on part of the Resolution Professional that would ultimately be detrimental to the wellbeing of all stakeholders including NAMCO. Mr. Gupta again wrote a letter to the Chairman of the CoC on 23.09.2020 and on 29.09.2020 requesting him to treat and discuss the matter threadbare and on its merits with the other members of the CoC inter alia reminding hm that the option of liquidation is not financially viable for all stakeholders. He again pointed out that Resolution Professional had hitherto desisted from making any reference to a business plan but had suddenly sought to treat the non-existent plan as pivotal to the successful implementation of the proposed Resolution Plan. The Resolution Applicant hoped that saner min....
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....ng, Mr. Atul Kumar Gupta objected to the stance of the Process Advisor who refused to hear Appellant. He pointed out that it was imperative to have the support and involvement of Appellant in the ongoing CIRP and also requested defining and firming up of CIRP costs prior to the formal submission of the Plan. Thereafter, the extended Ninth Meeting on the CoC was held on 0r.10.2020 and 12.10.2020. A resolution was passed to file an Exclusion Application before the Ld. Adjudicating Authority and the reworked Resolution Application was to be filed after another 8 days. An Application No. IA 2215 of 2020 was subsequently filed before the Ld. Adjudicating Authority seeking exclusion time period of l0 days. The Ld. Adjudicating Authority on 07.01 .2021 heard and passed an Order granting an exclusion of 10 days. The Ld. Adjudicating Authority observed that the CIRP would normally come to an end on 17.0I.2020. In the Tenth Meeting dated 12.01.2021, CoC inter alia decided to extend the final CoC meeting to 16.01.2021. In a letter dated 14.01 .2021 addressed to the Resolution Professional, the Resolution Applicant placed on record a formal protest against the refusal by the Resolution Profess....
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....re of the proposals as the same had been discussed with them in detail, the new conditions put forward by the Bank were not acceptable by Resolution Applicant. Prospective Resolution Professional requested Mr. Sanjay Bagul, AGM of Respondent NAMCO Bank to discuss the proposal received from the Resolution Applicant Mr. Sane, chairperson of the Bank and consider the same- After discussion, Mr. Bagul informed that the proposal put forward by Mr. Gupta was not acceptable to the Bank and the Resolution plan stands rejected. It is pertinent to mention that terms elucidated in the Resolution Plan submitted was as per the terms discussed and deliberated with the Chairperson of the CoC a few hours before the last CoC meeting and that the Chairperson had not indicated any disagreement with the Proposal. Had he done So, Resolution Applicant would have revised the terms that attained finality on account of it being the last and final meeting of the CoC to discuss the plan. Furthermore, the Ld. Adjudicating Authority granted time whilst passing the order in IA 2215 of 2020 on 07.01.2021 solely on the ground that the CoC was not in a position to consider the revised plan and hence requested time....
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....nder the Code and subsequent notifications that were pronounced for MSME's particularly after the onset of COVID-19. 4. It is further submitted that the intention of Appellant, as borne out by the facts herein, to come up with a plan to revive Corporate Debtors was ignored and his rights stand supressed on account of the pronouncement of the Impugned order and thus is violative of Section 240-(A) (l) of the I&B, Code,20I6. The Appellant was erroneously designated as a wilful defaulter by the erstwhile management of NAMCO and the same was brought to the attention of the CoC who chose to ignore the same so as to achieve its objective of liquidation of Corporate Respondent rather than a meaningful resolution. The NAMCO did not revoke the status of Appellant as a wilful defaulter despite an overt and unambiguous request by the Resolution Applicant who felt that it would pave way for his participation in Resolution Process and aid in the infusion of funds to revive Corporate Debtor. The refusal by NAMCO to include Appellant herein in the Resolution process also prevented takeover of the loans owed to NAMCO by competent financial institutions. 5. It is further submitted that th....
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....hority did not consider that the balance sheet of Corporate Debtor was wilfully withheld for the purposes of scrutiny by the Resolution Applicant. The Resolution Professional unexpectedly demanded a business plan without alluding to it at any point in time in the past and made that a pivotal issue for the successful implementation of the Resolution Plan. The Ld. Adjudicating Authority overlooked the fact that there was no objection or alternative put forth by Respondent No.3 NAMCO with regards to the tenure of payment at any point in time until they substantially reduced the term from 36 months to 12 months in the last and final meetings on 16.01.2021. The Prospective Applicant was effectively stonewalled from providing an alternative payment term to the satisfaction of the CoC by members acting in concert to prevent the approval of the Resolution Plan as the CIRP timeline ended on 17.01.2021, a day after the plan was considered for approval of the CoC. There was no inkling of any change with regards to the repayment tenure of 36 months contained in the Proposal despite it being discussed in detail by Resolution Applicant on multiple occasions. The NAMCO did not provide Prospective....
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....Applicant to submit EOI and this time they provided partial records financials of ARC Private Limited and same was found ineligible by the Respondent No. 2. So as to save the Corporate Debtor from going into liquidation, the Respondent No. 2 provided third opportunity where they provided financials of Invent Assets Securitisations and Reconstructions Private Limited. * 04.12.2019 The Prospective Resolution Applicant submitted the EOI after a delay of 1 week to the Respondent No. 2. Further, the Respondent No. 2 sent an email to the members of committee of creditors intimating about EOI received and further requested that in the best interest it is necessary to modify the EOI so as to make Prospective Resolution Applicant Eligible Applicant and also intimated CoC and Prospective Resolution Applicant that Seventh Meeting of CoC will be held on 18.12.2019 for discussing the process ahead. * 12.12.2019 The Respondent No. 2 sent an email to Resolution Applicant requesting to submit Resolution Plan and also shared Information Memorandum & RFRP stating all the facts, ongoing litigation of Income Tax Department and Sales Tax Department, informed that Corporate Debtor don'....
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....ossible to grant any further extension for submission of resolution plan. * 01.02.2020 The Respondent No. 2 sent notice of Eighth Meeting of Committee of Creditors to be held on 04.02.2020 to the members of committee of creditors and Resolution Applicant for discussion of finalisation of Resolution Plan. After the due consideration and willingness of the Resolution Applicant to submit the resolution plan, 7 days were granted to submit the plan and intimated that by 11.02.2020 the resolution plan should be submitted and if it is not received then liquidation application will be initiated against the corporate debtor. * 11.02.2020 The First Resolution Plan was submitted by the Resolution Applicant and Respondent No. 2 on 13.02.2020 submitted a reply stating that the Resolution Plan is not compliant with the provisions of the Code and thus required to be complied. * 14.02.2020 The Resolution Applicant through a letter intimated committee of creditors that the revised resolution plan will be submitted by 18.02.2020 and Respondent No. 2 should accept it. And again, another opportunity was provided. Further the resolution plan received on 18.02.2020. *....
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....um. Further, in the meeting held on 30.09.2020 it was agreed by the Resolution Applicant to clarify the issues raised by the Respondent No. 2 and it was decided to hold meeting on 1.10.2020. In the meeting held on 01.10.2020, the Resolution Applicant stated that the Resolution Plan will be submitted on 08.10.2020. Again, the Resolution Applicant tried to halt the submission of resolution plan by seeking more and more clarification regarding the Sales Tax Liability, details of which were already shared by the Respondent No. 2 well in advance. Further, from the above facts it clearly shows that, the Resolution Applicant had very casual approach toward the CIRP and submission of Resolution Plan. The Appellant regarding letter submitted by Prospective Resolution Applicant alleging that CIRP of the Corporate Debtor was disrupted due to malafide intention of Respondent No. 2 and Respondent No.3 is false and specifically denied. The Respondent No. 2 had within his scope asked for detailed business plan so as to get better picture for the revival of the corporate debtor. Further, it has been alleged that the Respondent No. 2 has not shared signed balance sheet indicating current financial ....
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....um declared under Section 14 of the Insolvency and Bankruptcy Code, 2016. Based on above submissions, the Appellant completely failed to make out any case. Therefore, this Tribunal may be pleased to dismiss the Appeal filed by the Appellant. 13. The Ld. Counsel for the Respondent No. 3 in his reply affidavit submitted that the Appellant has been declared as a wilful defaulter on 24.04.2018. The proposed Resolution Applicant, Mr. Atul Kumar Gupta, whose plan has been rejected by the Respondent No. 3, CoC member in its commercial wisdom, has not challenged the impugned order till today as per the knowledge of the present Respondent. Despite having an opportunity of the purchasing the Company as a going concern in Liquidation, pursuant to the notice dated 18.04.2022 published by the Liquidator, neither the Appellant nor the proposed Resolution Applicant has chosen to participate in the said process for the reasons best known to them. Further, the Respondent No. 3 rely upon the true meaning and interpretation of the record, minutes of CoC meetings, correspondences exchanged between the parties, opinion given by CIRP Advisors and legal Advisors and orders passed by the Adjudicating A....