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2023 (10) TMI 235
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....erate Versus Radha Madhav Corporation Ltd. [ Justice Ashok Bhushan ] Chairperson And [ Barun Mitra ] Member ( Technical ) For the Appellant : Mr. Siddhartha Sinha, Mr. Nring Chamwibo Zelang and Ms. Anu Priya Nisha Minz, Advocates For the Respondent : Mr. Kanishk Khetan, Advocate for R-1 (RP). Ms. Varsha Banerjee, Advocate for R-6 (SRA) JUDGMENT [ Per : Barun Mitra, Member (Technical) ] Present is a set of four appeals filed under Section 61 of Insolvency and Bankruptcy Code, 2016 ("IBC" in short) by the Appellants which arises out of two orders dated 01.08.2022 and 28.09.2022 passed by the Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench, Court-1) in CP (IB) No 669 of 2019 and related IAs. Aggrieved by the said impugned orders, the present appeals have been preferred. 2. The brief facts of this case are as follows: The Adjudicating Authority vide impugned order dated 22.10.2020 initiated CIRP of the Corporate Debtor- Radha Madhav Corporation Ltd. ("RMCL" in short). IRP issued Public Announcement on 12.11.2020 inviting claims. The last date for submission of claims was 25.11.2020. Upon receiving the claims, the IR....
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....ing held on 14.10.2021. Only one Resolution Plan was received from VAMA Construction Company ("Vama" in short) before the last date for submission of the Resolution Plan. CRP approached the Adjudicating Authority vide IA No. 750/2021 seeking permission to submit its Resolution Plan which was allowed on 03.11.2021 giving seven days' time. On 13.11.2021, CRP submitted by email its Resolution Plan. In the 11th CoC meeting held on 18.11.2021, the CoC decided to reject the resolution plan of CRP as it was found to be defective and not in compliance with the IBC. The Revised Resolution Plan received by RP from Vama on 17.12.2021 was duly circulated to the CoC for their review and consideration. During the 15th CoC meeting, the RP verified the revised resolution plan of Vama along with the addendum dated 18.12.2021. This resolution plan was put to vote in 15th CoC meeting on 20.12.2021. CoC members representing 100% voting share cast their vote in favour of resolution plan. Letter of Intent was issued on 23.12.2021 to the Successful Resolution Applicant - Vama who unconditionally accepted it on 23.12.2021. RP preferred an application b....
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....P. By illegally excluding the plan of CRP from the purview of consideration of the CoC, it was contended that the RP has failed to elicit the most viable commercial plan and thus prevented the CoC to bring about an effective resolution of the corporate debtor. 5. Advancing the argument that the RP acted in an arbitrary manner, it was pointed out that RP approved a resolution plan by Vama well below the liquidation value of Rs 57.84 cr and the fair value of Rs 75.65 cr. Further, as against a debt of approximately Rs. 533.64 crores due to the secured financial creditors, the resolution plan provides for only Rs. 36 crores. This works out to haircut of 93.65%. It has also been contended by the Learned Counsel for the Appellant that CoC in the 13th meeting held on 13.12.2021 had raised serious concerns on the plan yet the RP had put up the same for the consideration by the CoC. This amounts to material irregularity in the exercise of powers by the RP and the CoC thereby rendering the approval of the resolution plan by the Adjudicating Authority in the first impugned order as null and void. 6. It has also been submitted that Vama and the Corporate Debtor are related parties within....
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.... these two appeals submitted that though the last date for filing claim for 25.11.2020, since Covid pandemic was prevailing at that time, and the administration was stretched on that count, their claim could not be filed on time. Eventually on the basis of demand orders/assessment order/show-cause notice issued to the Corporate Debtor, it could be determined that a claim of Rs.26.51 crore was pending against them. UTGST raised their claim on 02.11.2021 for Rs.26.51 crore which was sent to the RP by email and post on 09.11.2021. Their claim was wrongly rejected and not admitted by the RP on account of the fact that proof of claim has not been filed within prescribed time limit. 11. It was pointed out that aggrieved by the rejection of their claims by the RP, UTGST had taken up the matter again with the RP on 23.12.2021 pointing out that in view of Hon'ble Supreme Court's orders in MA No.665/2021, the period from 15.03.2020 till 02.10.2021 should stand excluded in computing the period of limitation. IA 265/2022 was also filed in CP (IB) No. 669/2019 before the Adjudicating Authority for issue of directions to the RP to admit their claim by allowing exclusion of certain period for ....
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.... the show cause notice on 02.03.2021. Subsequently, the Joint Commissioner, CGST on 20.10.2021 had imposed a penalty of Rs.37.73 crore on the Corporate Debtor which order was also shared with the RP. The RP in reply had informed on 26.10.2021 that since the claim was for a period prior to 22.10.2020 which was the date of commencement of CIRP, the same be sent in Form B. The AC-CGST had thereafter submitted their claim on 02.11.2021 but this was arbitrarily rejected by the RP on grounds of delay in filing of the claim. 16. It was also submitted that the Adjudicating Authority failed to consider that there was no obligation on the part of the State to lodge a claim in respect of statutory dues for which recovery proceedings have been initiated; that the RP did not have adjudicatory powers to accept or reject their claim; that the resolution plan would not bind the State as it ignores statutory demands payable to it; and that the Adjudicating Authority failed to consider that the State is a secured creditor. 17. It has been countered by the Learned Counsel for SRA-Vama that the claim of AC-CGST is legally untenable on account of having been raised after CIRP had been initiated o....
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....y the RP, the RP had managed to persuade the CoC to not consider the resolution plan on its own merits by raising hyper-technical objections. Thus, the RP failed to discharge the duties as mandated by law to ensure the revival of the corporate debtor by not adopting a fair and transparent process. Furthermore, CRP has alleged that the RP had endorsed the resolution plan of Vama though it was not meeting the requirements under applicable law. 23. For a proper appreciation of this issue, we need to have a quick glance at some of the important milestone dates in the CIRP proceedings which have already been captured in details at para 2 above. The CIRP against the Corporate Debtor had commenced on 22.10.2020. Publication was made by the RP on 12.11.2020. Form G was published on 06.02.2021 inviting EoIs. As PRAs had sought more time, a fresh form G was published on 22.08.2021 with last date of submission being 06.09.2021. CRP had submitted EoI on 05.10.2021 which being after the last date of submission was not entertained by the RP. 24. However, when the CRP agitated this matter before the Adjudicating Authority, the RP was directed by the Adjudicating Authority in IA No. 750(AHM)....
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.... the RP brought this matter to the notice of the CoC in the 13th meeting held on 13.12.2021 and the relevant extracts of the said meeting are as reproduced below: - "RP further informed the COC members that CRP had already been conveyed on 22.11.2021 itself about the decision of member of the COC but still CRP remitted EMD amount on 04.12.2021. RP also shared that it asked CRP for its Banking credentials for refund of EMD on 08.12.2021 but instead CRP had written an email on 10.12.2021 attaching therewith copy of Resolution Plan and an undated Letter. An envelope, yet to be opened, too has been received at the office of IPE on 13.12.2021 supposedly containing hard copies of the attachments mentioned in the email dated 10.12.2021. COC instructed the RP that it has already taken a call that CRP Resolution Plan is non-compliant due to defiance of Eligibility Criteria specified in EOI, RFRP etc. and RP should ask CRP to share its banking coordinates for refund of EMD besides conveying decision of non-acceptance/non-consideration of Resolution Plan of CRP for the reasons shared herein above amongst others." 28. From the facts of the case we have no doubt in our mind....
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....order had taken up the resolution plan of Vama for examination as envisaged by Section 30(2) of the IBC and after doing so held in para 23 of the impugned order that the resolution plan does not contravene any provision of law. The relevant excerpts from the first impugned order is as reproduced below: - "23. The RP has certified that the Resolution Plan does not contravene any provisions of law for the time being in force. On examination of the Resolution Plan, we also find that the Resolution Plan does not contravene any provisions of law. We also hold that the Resolution Plan is in compliance with the provisions stated in Regulations 38 and 39 of the IBBI (CIRP of the Corporate Person) Regulations, 2016, and the interests of all stakeholders are taken care of. The term of the plan is also stated. Hence, we see no reason to reject this Resolution Plan on any grounds." (Emphasis supplied) 31. We also notice that the Adjudicating Authority in the first impugned order has also dealt with the fact that the resolution plan value of Rs.36.46 crore is less than the liquidation value of the Corporate Debtor. However, it has come to a finding that there is nothing irr....
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..... It has also noted that interests of all stakeholders have been taken care of. CRP has failed to point out the contravention of any provision by the CoC in approving the plan. 33. We are of the considered view that the CoC has meticulously evaluated the matrix in approving the plan of Vama and the sole member of CoC having 100% voting share has already approved the plan in their commercial wisdom as contemplated under the law. That being the case, the Adjudicating Authority cannot substitute its views with the commercial wisdom of the CoC nor deal with the merits of Resolution Plan unless it is found it to be contrary to the express provisions of law and against the public interest. There is neither any material regularity nor contravention of any provisions of law by the CoC and the plan has been rightly approved by the Adjudicating Authority. 34. In the given statutory framework of IBC, there is only limited review which can be exercised by the Adjudicating Authority without trespassing upon the business decision of the CoC. There can be no fetters on the commercial wisdom of CoC and the supremacy of commercial wisdom of CoC has been reaffirmed time and again by the Hon'bl....
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.... procedural or material irregularity committed by the RP/CoC in rejecting their EoI and that the challenges raised by the CRP clearly fall within the domain of commercial wisdom of the CoC which is non-justiceable. Nor has CRP been able to establish any contravention of law by the Adjudicating Authority in approving the resolution plan of Vama. 37. This now brings us to dwell upon the second issue of the tenability of the contentions raised by UTGST and AC-CGST that rejection of their claims by the RP and CoC was not in consonance with the requirements of law and that the Adjudicating Authority ignored the settled position of law that if any resolution plan ignores the statutory demands payable to any State Government or a legal authority, such a resolution plan is bound to be rejected. Since the grounds raised in support of their contention are common and over-lapping, we will consider them in a combined manner. 38. It is the case of the UTGST and AC-CGST that delay in filing a claim cannot be the sole ground for rejecting a claim since timelines stipulated in the IBC for completion of CIRP proceedings are directory and not mandatory. Furthermore, the RP does not have adjudi....
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....creditor under regulation 8, it shall be included in the committee from the date of admission of such claim: Provided that such inclusion shall not affect the validity of any decision taken by the committee prior to such inclusion'. 42. We notice from material on record that it has been admitted by UTGST that the RP had sent letters to them on 17.03.2021, 09.07.2021 and 24.08.2021 for submission of claim along with supporting documents in Form B. We notice that the UTGST was served with these letters even though it was not required for the RP to personally intimate stakeholders to submit claims since a public announcement has been done. These letters are not in denial and there is an averment that they received such communications. Despite notice, UTGST waited for more than a year of the commencement of the CIRP before filing the claim. The delay in submission of the claim by the UTGST was on account of the fact that they had instituted new proceedings and passed several Demand Orders, Assessment Order and Show Cause Notice. The UTGST on 15.12.2021 also acknowledged the fact that UTGST did not have confirmed demand against the corporate debtor as on the last date of....
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....No. 420 of 2021 wherein it has been held that: ..........if at belated stage when the Resolution Applicants are already before the Committee of Creditors with their Resolution Plan(s) if new claims keep popping up and are entertained, the CIRP would be jeopardized and Resolution Process may become more difficult. Keeping in view the object of the 'I&B Code' which is Resolution of the Corporate Debtor in time bound manner to maximize value, if such requests of applicants like Appellant are accepted the purpose of 'I&B Code' would be defeated." 47. There is adequate force in the above contention. The Report of Bankruptcy Law Reform Committee dated November 2015 propounds that time is the essence in any resolution process. The Preamble to the IBC, 2016 also clearly emphasizes that the IBC was enacted to consolidate and amend existing laws relating to, inter-alia, reorganization and insolvency resolution of corporate entities in a time bound manner. The Hon'ble Supreme Court has in a catena of landmark judgements including M/s Innoventive Industries Ltd. v. ICICI Bank (2018) 1 SCC 407 and Arcelor Mittal India Private Limited v. Satish Kumar Gupta (2019) 2 SC....
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....lan in the present case was approved on 01.08.2022, in terms of the settled position of law of prospective overruling, the Rainbow judgment (supra) is not applicable in the present matter. Reliance has been placed on the judgement of the Hon'ble Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd v. Raman Ispat Private Limited 2023 SCC Online SC 842 wherein the Supreme Court has specifically concluded that the judgement of Rainbow (supra) has to be confined to the facts of that case alone. That apart it was added that the resolution plan as submitted by the SRA takes into account the interest of government authorities and provides for appropriate treatment of admitted government dues. 52. Coming to the facts of the present case, we find that the facts of the Rainbow (supra) is distinguishable since in that case the recovery proceedings by the department were initiated prior to initiation of CIRP proceedings and it was in this factual context that the Hon'ble Supreme Court had held that delay in filing of claim cannot be sole ground for rejecting the claim. In the present case, both UTGST and AC-CGST have filed claims on the basis of demand orders, assessment order and show ca....
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....aw for companies under Insolvency and Bankruptcy Code, 2016 - Reg. Various representations have been received from the trade and industry seeking clarification on issues being faced by entities covered under Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "IBC"). 2. .... 3. .... S. No. Issue Clarification 1. How are dues under GST for pre-CIRP period be dealt? In accordance with the provisions of the IBC and various legal pronouncements on the issue, no coercive action can be taken against the corporate debtor with respect to the dues for period prior to insolvency commencement date. The dues of the period prior to the commencement of CIRP will be treated as 'operational debt' and claims may be filed by the proper officer before the NCLT in accordance with the provisions of the IBC. The tax officers shall seek the details of supplies made / received and total tax dues pending from the corporate debtor to file the claim before the NCLT. Moreover, section 14 of the IBC mandates the imposition of a moratorium period, wherein the institution of suits or continuation of pending suits or proceedings against the corporate d....