TaxTMI 
TaxTMI 
2023 (8) TMI 1290
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....eals have been filed under Section 61 of Insolvency and Bankruptcy Code, 2016 ("IBC" in short) by Mr. Anil Kumar, Suspended Director of Corporate Debtor - Appellant. The appeals arise out of the Orders dated 06.03.2023 and 15.05.2023 (hereinafter referred to as ("First Impugned Order and Second Impugned Order") passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench Court-II) in IA No.1826/2022 and 1415/2023 of CP(IB) No. 1474/MB/C-II/2019]. By the first impugned order, the Adjudicating Authority allowed placing of the resolution plan of the Corporate Debtor for consideration by the Committee of Creditors while the second impugned order approved the said resolution plan submitted by Metro Realty Group (previously known as M/s Turbhe Properties LLP), present Respondent No.3. Being aggrieved thereby, the present appeals have been preferred by the present Appellant-Mr. Anil Kumar, Suspended Director, SK Elite Industries. 2. The factual matrix of the case and the salient decisions taken in the meetings of the Committee of Creditors ("CoC" in short) meetings leading to the impugned orders which are necessary to be noted are as follows: - * SK Elite ....
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....allow any further time. Moreover, the PRAs had also not submitted revised offers to the satisfaction of CoC. The resolution plans were neither found compliant with requirements of IBC. Hence, their resolution plans were rejected and the CoC resolved to take steps to liquidate the Corporate Debtor. * The Resolution Professional filed IA No. 1826/2022 before the Adjudicating Authority seeking initiation of liquidation of the Corporate Debtor. * In the 16th CoC meeting held on 31.12.2022, a proposal received from the Appellant for purchase of premises was considered by CoC but not found satisfactory. The Resolution Professional also informed CoC that a proposal had been received from Metro Realty Group-Respondent No.3 on which legal opinion was being solicited. The CoC also decided to withdraw the liquidation application. * The 17th CoC meeting held on 25.01.2023 after going through the commercials of the Resolution Plan of Respondent No.3, decided to consider the resolution plan subject to approval and directions from the Adjudicating Authority in view of the pendency of IA No. 1826/2022 for liquidation of the Corporate Debtor. The Respondent No.3 was found....
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....d the two appeals which have been heard together. 3. Since both the Impugned Orders arise out of the same set of facts and the second impugned order is a sequel to the first impugned order, we propose to deal with both conjointly. Assailing the impugned orders, the Learned Counsel for the Appellant submitted that the Adjudicating Authority had failed to take notice that there were serious procedural irregularities on the part of the Resolution Professional in the conduct of CIRP. It was submitted that the resolution plan of the Respondent No.3 was not submitted in pursuance to Form G. Thus, by dispensing with the publication of Form G by the Resolution Professional, the entire resolution process was vitiated. It was also pointed out that by considering the resolution plan of the Respondent No.3 in the absence of fresh Form G, other interested parties were denied a fair opportunity thereby prejudicing their rights and interests. The approval of the resolution plan of Respondent No.3 was akin to the case of a Private Sale which is only permissible in case of liquidation of a Corporate Debtor and hence deserves to be set aside. Commercial wisdom of CoC cannot condone a material irr....
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....the Appellant to submit their proposal but the Appellant was not found to be serious. Even the PRAs were given sufficient opportunity to improve their offers. Hence, neither the Appellant nor PRAs can claim that their interests were jeopardized. It was also stated that denial of access to the Appellant to other competing resolution plans by the Resolution Professional was justifiable since sharing the resolution plans would be a breach of confidentiality under the Code. Holding the conduct of the Appellant mala- fide, it was argued that he was endeavouring to derail the resolution process and push the Corporate Debtor into liquidation. 7. Advancing other rival contentions, it was added that it is settled law that the primary objective of IBC is resolution and revival of the Corporate Debtor and liquidation must be resorted to at last. It was therefore within the ambit of commercial wisdom of CoC to explore resolution of the Corporate Debtor even after it had resolved to liquidate the Corporate Debtor. In the present case, the Resolution Professional had acted in a transparent manner of placing the resolution plan of the Respondent No.3 before the CoC for its consideration. Furth....
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....2016 ("CIRP Regulations" in short) as under: - 25. Duties of resolution professional. - 25(2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions, namely: - (h) invite prospective resolution applicants, who fulfil such criteria as may be laid down by him with the approval of committee of creditors, having regard to the complexity and scale of operations of the business of the corporate debtor and such other conditions as may be specified by the Board, to submit a resolution plan or plans. 30. Submission of resolution plan. - (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan - (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; (b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than- (i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 5....
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....he resolution professional during the corporate insolvency resolution period; (iii) the debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified by the Board; (iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or (v) the resolution plan does not comply with any other criteria specified by the Board. CIRP Regulation: 36A. Invitation for expression of interest. (1) The resolution professional shall publish brief particulars of the invitation for expression of interest in Form G of the Schedule-I at the earliest, not later than sixtieth day from the insolvency commencement date, from interested and eligible prospective resolution applicants to submit resolution plans. 11. It would also be relevant and constructive to note the overarching objectives of the IBC as adumbrated in the Preamble which reads as follows: "An Act to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership persons and individuals in a time bound manner ....
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....m G publication is to ensure a fair opportunity to all interested parties participating in the CIRP. However in the present case Form G had been dispensed with by the Resolution Professional and the CoC. The fallout of this procedural deviation, as contended by the Appellant, is that it amounted to according preferential treatment to Respondent No.3 and inflicting private sale upon the resolution process which is not permissible. The process having become vitiated, what resulted out of such vitiated procedure cannot be termed as fair and just. 15. For better appreciation of the issue at hand, we may focus on the minutes of the CoC meetings. We notice from the minutes that Form G was published thrice. Thereafter, EoIs were received from 3 PRAs. However, resolution plans were received from only 2 PRAs. These plans came to be deliberated by the CoC from the 8th CoC meeting onwards until the 15th CoC meeting and adequate opportunity was given to PRAs to make their plans IBC compliant as well as satisfactory. As regards the Appellant, interest was expressed in the 9th CoC to submit a Section 12-A settlement proposal and was allowed repeated opportunities. However, until the 15th CoC ....
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....nd the offer is far below the expectations of the CoC, it would be prudent to reject both the Resolution Plans and go for liquidation of the Corporate Debtor. Accordingly, the CoC after detailed discussion and deliberation rejected both the Resolution Plans. (Emphasis supplied) 17. The above records of the 15th CoC meeting clearly establishes that the Appellant as well as the PRAs were given ample time and opportunity to submit satisfactory proposals but they faltered. Left with no choice, the CoC in the exercise of its commercial wisdom, directed the Resolution Professional to file a liquidation application. We do not find any material on record which show that either the PRAs or the Appellant raised any voice of protest of having been denied an opportunity to participate in the resolution process. 18. While the liquidation application was pending before the Adjudicating Authority, the 16th CoC meeting records that a proposal was again received from the Appellant and another one from Respondent No.3 of which we are cognizant that this proposal was not in pursuance to Form G publication. The Appellant's proposal was considered by the CoC and allowed more time to revi....
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....icant has approached this Tribunal with a view to obtain appropriate directions given the current stage of the CIRP. In view of the aforesaid facts and circumstances narrated hereinabove we are satisfied with the reasons stated by the applicant in the application and we hereby exclude the period commencing from 18.04.2022 till the expiry of one month from the date of this order from the CIRP of the Corporate Debtor....... The applicant is directed to place the Resolution Plan submitted by Respondent No.2 before the CoC i.e. Respondent No.1 for their consideration...... The interim application IA.No. 1826/2022 filed by the applicant for initiating liquidation of the Corporate Debtor shall be kept in abeyance." (Emphasis supplied) 21. It may not be out of place to mention here that the Adjudicating Authority, while passing the first impugned order dated 06.03.2023, took notice of all developments since filing of liquidation application including the fact that the CoC desired to shelve its earlier decision to liquidate the Corporate Debtor so as to take up for consideration the resolution plan of the Respondent No.3. The CoC through the Resolutio....
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....with Form H, obtaining the Performance Bank Guarantee and other relevant documents shall be submitted with the Hon'ble NCLT, Mumbai Bench on or before 6th April 2023 as per the directions of the Hon'ble NCLT vide its order dated 6th March 2023. Mr. Anil Kumar, the suspended Director mentioned that he respects the NCLT Order dated 6th March 2023 for considering the Resolution Plan submitted by Mr. Atul Richard Rawat. However, he felt that there should be a Public Notice issued for inviting the Resolution Plans. It is pertinent to note that COC has given ample opportunities to the Promoters to submit the Resolution Plan. However, the promoter has failed to do so till date. It is further pertinent to note that despite various opportunities given to the Promoters in the past two years, no viable plan has been received from the Promoters or any other Resolution Applicant. It was discussed that liquidation is not in the interest of any stakeholder including the Promoters as the public money is involved. Hence, the Resolution Plan received from Mr. Atul Richard Rawat should be considered as directed by the Hon'ble NCLT. In this situation the Promoters and the COC sho....
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....ory and not mandatory. In that case the procedural irregularity in terms of non-publication of Form G on the designated website was disregarded by the Hon'ble Supreme Court on the ground that technicality of non-compliance to CIRP Regulations cannot annul the resolution process which had reached an advanced stage wherein the Resolution Professional has taken all requisite steps in consonance with the provisions of IBC. 27. Present is a case where the Appellant having been given multiple opportunities to submit a Section 12-A proposal and having consistently failed to do so, there does not appear to be any sufficient ground for the Appellant to claim that prejudice has been caused to their interest in allowing Respondent No.3 to submit their resolution plan. We have also noticed that PRAs had also been afforded reasonable opportunity to submit plans after having issued Form G thrice. The principle of fairness and equity have been reasonably met well. Since, no settlement offer from the Appellant or resolution plan from PRAs was available before the CoC and the extended CIRP period was also coming to an end, in the given circumstances, the decision of the CoC to entertain the reso....
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....0(4) has been complied with or not. In the present case, admittedly, the CoC after considering the viability and feasibility of the resolution plan has approved the same with 100% vote share thus fairly and squarely meeting the conditionalities laid down in Section 30(4) of the IBC. The decision as to whether the Corporate Debtor is to be revived or not by acceptance of a particular resolution plan is essentially a business decision and hence should be left to the CoC so long as it musters more than 66% vote share. Further the IBC provides that a plan which meets the conditions laid down in Section 30(2) and is approved by the CoC can be submitted to the Adjudicating Authority for its approval. 31. And it is here that primacy of the commercial wisdom of the CoC comes into play. The Adjudicating Authority must work within the framework of IBC which broadly aims at timely resolution of the Corporate Debtor for realising the maximum value while respecting the commercial wisdom of the CoC. The supremacy of commercial wisdom of the CoC has been reaffirmed time and again by the Hon'ble Supreme Court. 32. Adverting attention to the judgment of the Hon'ble Supreme Court in CA No. 366....