TaxTMI 
TaxTMI 
2022 (7) TMI 1480
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....ed by the order dated 27.02.2019 passed in I.A. No. 224 of 2018 in CP (IB) No. 88/NCLT/AHM/2017 and other consequences. I.A. No. 230 of 2020 was dismissed by the Adjudicating Authority having found no misrepresentation or fraudulent misrepresentation in issuing Information Memorandum calling for the expression of interest for submitting insolvency resolution plan. I.A. No. 229 of 2022 3. I.A. No. 229 of 2020 was filed under Section 60 (5) of Insolvency and Bankruptcy Code, 2016 (for short 'IB Code') read with Rule 11 of National Company Law Tribunal, Rules 2016 ('NCLT Rules') and Regulation No. 39 (9) of Corporate Insolvency Resolution Process ('CIRP') regulations for issue of appropriate direction against the Respondent to implement the resolution plan including the direction for deposit of balance amount, allotment of debentures, giving of guarantees by Respondent Nos. 2 to 4 etc. as approved by the Adjudicating Authority vide order dated 27.02.2019 made by the Adjudicating Authority in I.A. No. 224 of 2018 and as confirmed by the Hon'ble NCLAT New Delhi by its order dated 19.12.2019 passed in Comp. App. (Ins.) No. 354 of 2019 and allied appeals.....
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..... In pursuance of invitation, the appellants herein submitted the resolution plan and the same was placed before the Committee of Creditors for voting on 6.6.2018 and 7.6.2018, the same was approved by the Committee of Creditors. 10. The Resolution Applicants/Appellants herein filed I.A. 224 of 2018 in CP (IB) No. 88/NCLT/AHM/2017 to approve the resolution plan under Section 30 of I&B Code, 2016 before the Adjudicating Authority. 11. The application was allowed by the Tribunal i.e. Adjudicating Authority upon hearing both the parties to the petitions, including objections, by order dated 27.02.2019. Thus, the Corporate Debtor was merged into applicant No. 1 company i.e. the first Appellant herein. As per the approved plan submitted by the Applicants/Appellants, the applicant is required to make payment as per plan in the specified manner at different intervals as agreed by Committee of Creditors, but the Appellants paid an amount of Rs. 30.50 crores as on the date of disposing the applications. 12. The contention of the appellants is that, they have also spent Rs. 3.67 crores as CIRP cost. It is further alleged that, despite complying with its obligation, applicant has not....
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....appellants were made to submit the resolution application along with plan, got approved from the Adjudicating Authority as per the orders in I.A. No. 224 of 2018 by order dated 27.02.2019, thus, the order was obtained by fraudulent misrepresentation which is avoidable or it can be avoided by the Appellants herein since the fraud or misrepresentation vitiates the entire proceedings and requested to recall the order passed in I.A. No. 224 of 2018 dated 27.02.2019 relying on the judgment in Kundan Care Products Ltd. vs. Amit Gupta Comp. App. (AT) (Ins.) No. 653 of 2020 dated 30.09.2020 19. The respondents opposed the appeals on various grounds. The Resolution Professional contended that the joint lenders meeting of Rainbow Paper Ltd. was held on 01.08.2017 accepted, the liability of Corporate Debtor as estimated by the applicant and that Information Memorandum was issued after exercising of due diligence by visiting the plant of Rainbow Papers Ltd. and only after visiting, after compliance of statutory procedure, the Information Memorandum was issued. On the basis of Information Memorandum, the appellants submitted the resolution plan and approved by the Committee of Creditors, lat....
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....stitute of Social Welfare (2002) 5 SCC 685; Indian Bank vs. Satyam Fibres (India) Pvt. Ltd. (1996) 5 SCC 550; Deepa Gourang Murdeshwar Katre vs. Principal, V.A.V. College of Arts (2007) 14 SCC 108; Revandas Ranchhodhbhai Rathod vs. Jyotiben Wd/o Rameshbhai Madhusudan Thakar; Bindeshwari Pd. Chaudhary V. Debendra Pd. Singh AIR 1958 Patna 618. 24. The Adjudicating Authority on erroneous appreciation of law arrived at such conclusion, on the ground that the Adjudicating Authority is not vested with power to recall its own orders. 25. It is further contended that the question of merger does not arise as the Appellants did not prefer any appeal before the Appellate Authority on the ground of misrepresentation or fraudulent misrepresentation made by Resolution Professional but filed appeal on different ground and the other aggrieved parties also preferred appeals before the Appellate Tribunal and Hon'ble Supreme Court, but the order was confirmed with certain modifications. Such order is not deemed to have been merged with the order and thereby, dismissal of the application of these Appellants on the ground of merger of the judgment of the Appellate Court into the judgment of A....
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....f 2018 dated 27.02.2019 be sustained?" POINT: 30. Indisputably, Rainbow Papers Limited filed an application to undergo process of the insolvency resolution and in that process Resolution Professional was appointed for completion of the insolvency resolution process. Later, he issued Information Memorandum inviting expression of interest from the public. In response to the Information Memorandum calling for expression of interest, the resolution applicants/appellants herein submitted their plan for resolution. 31. The Resolution Professional undisputedly issued the Information Memorandum calling for expression of interest dated 21.2.2018, disclosing the profile of Corporate Debtor in Annexure I, the same is extracted hereunder: "A Company Profile document provided by the company is shown as Annexure - 1. As per the total installed capacity of India of 22.15 Million MTs of Paper, the installed capacity of the Corporate Debtor (herein after also termed as Company) is 0.359 Million MTs equivalent to 1.6% of the Country's production capacity. Important information related to the Corporate Debtor are provided herein below:" 32. Though Annexure -1 is referred it w....
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....ed capacity of plant no. 7, 8 around 360 MTs per day * Plant has been closed since July, 2016, however, the machineries in reasonable good condition of the plant * The machineries and its part are in place 35. According to the report and as per Column No. III of the Information Memorandum, it is mentioned that the company profile document provided by the company show the installing capacity of the Corporate Debtor is 0.359 MTs is equivalent to 1.6% of Country Production Capacity. 36. Based on this Information Memorandum issued by the Resolution Professional, the Resolution applicants/appellants herein submitted their resolution plan and approved by COC and adjudicating authority, however, they got appointed GITCO for the purposes mentioned in the earlier paragraphs. The inspection was done unilaterally without the presence of CIRP or his representatives. However, the adjudicating authority calculated the production capacity based on GITCO report as follows: 37. We found that the production capacity of the industry is minimum, the same is shown as under:- Assumption 1- Considering the daily cap....
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....e coater (1.5 m Deckle) Cast coater 1 & 2 Page 62 37 37 37 Total 966 1111 1430 Annual Capacity (Assuming 365 days in a year) 352590 405685 52191 Formula for calculation of production capacity * Daily Operating Production (GSM x Machine Deckles in Meters x Operating Speed x Daily Operating hours)/(1000 x 1000) ** Installed capacity (GSM x Machine Deckles in Meters x design speed x 24 hours)/(1000 x 1000) Installed capacity means the design production capacity to run the machine at highest efficiency i.e. 24 hours x 365 days 38. As per the details mentioned above, the capacity was calculated by the Adjudicating Authority and found that the installing capacity as 5,21,911 MTs as shown in last column of the table. 39. Thus, the Tribunal on accessing the installing capacity i.e. the production capacity, the....
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.... and customs and other taxes, duties, assessments, or fees, however imposed, withheld, levied, or assessed by any Governmental Authority." 44. As the appellants themselves agreed to pay the future liability of taxes, non-disclosure of any pending cases as to assessment is not a ground. On the other hand, CIRP is under obligation to disclose pending cases but not the assessments. Hence, non-disclosure is not a ground to conclude that the CIRP made any misrepresentation. 45. In view of specific findings recorded by the Adjudicating Authority regarding the production capacity based on Information Memorandum and GITCO report, so also Point No. 51 of resolution plan, it is difficult to accede to the request of the learned counsel for the Appellants. 46. 'Misrepresentation' and 'fraud' are not defined in IBC. The word 'Fraud' is defined under Section 17 and 'Misrepresentation' is defined under Section 18 of the Indian Contract Act, 1872. "Section 17. 'Fraud' defined.- 'Fraud' means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive anot....
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....esolution applicants i.e. appellants herein. In the absence of such allegation and proof of it, by producing prima facie material, it is difficult for this Court to accept the contention of the Appellants, that the appellants have submitted the resolution plan based on such fraudulent misrepresentation made by Resolution Professional. 50. At this stage it is relevant refer to the provisions of IBC, as referred by the appellants in the grounds of the appeal. 51. Section 18 (1) (a) of IBC deals with duties of interim resolution professional. The IRP has to: (a) collect all information relating to the assets, finances and operations of the Corporate Debtor for determining the financial position of the Corporate Debtor, including information relating to; business operations for the previous two years; (b) financial and operational payments for the previous two years; list of assets and liabilities as on the initiation date; and such other matters as may be specified. But this provision is irrelevant since the appellants did not submit any resolution plan based on the IM issued by IRP. 52. Section 25 (2) (G) of IBC obligates the Resolution Professional to prep....
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....liabilities with such description as on insolvency commencement date. The word 'description' includes the details such as cost of acquisition information useful like identification numbers, depreciation of charge etc., as per the explanation under Regulation 36 (2) (a). The contention of the Appellant is that the report was submitted for obtaining loans and it is confidential. Based on such report, disclosure of production capacity is impermissible. But this contention is not acceptable, for the reason that the report was submitted by MITCON to Corporate Debtor within reasonable time before commencement of insolvency resolution process. Thus, the CIRP made every endeavor to disclose the relevant information as required under law. The appellants themselves obtained a certificate from stock exchange and placed on record. Even according to the certificate, the production capacity of corporate debtor is same as mentioned in Information Memorandum, as such, the information disclosed by CIRP is based on material. Hence the finding of Tribunal cannot be interfered by this Appellate Tribunal. 56. Viewed from any angle, the Resolution Professional prima facie did make no misrepre....
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....e Tribunal will be merged with the order passed by the Tribunal etc. The fraud allegedly detected in year 2020 appointing GITCO for assessing the production capacity of Corporate Debtor company and by the time the appeals were filed by the Appellants, so no such fraud was detected and no findings were recorded by the Appellate Tribunal or the Supreme Court in the appeals filed by the other creditors. 61. 'Doctrine of Merger' was laid down by the Hon'ble Apex Court in State of Madras V. Madurai Mills Company Ltd. AIR 1967 SC 681, wherein the Supreme Court held as follows: "But the doctrine of merger is not a doctrine of rigid and universal application and it cannot be said that wherever there are two orders, one by the inferior Tribunal and the other by a superior Tribunal, passed in an appeal or revision, there is a fusion or merger of two orders irrespective of the subject matter of the appellate or revisional order and the scope of the appeal or revision contemplated by the particular statute. In our opinion, the application of the doctrine depends on the nature of the appellate or revisional order in each case and the scope of the statutory provisions con....
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....ejected by him in the revision proceedings. On the contrary, the question before the Board of Revenue was whether the Dy. Commercial Tax Officer, Madurai was right in excluding from the net taxable turnover of the respondent the sum of Rs. 7,74,62,706-1-6 which was the value of cotton purchased by the respondent from outside the State of Madras. We are, therefore, of opinion that the doctrine of merger cannot be invoked in the circumstances of the present case." 62. The above principle is reiterated in Kunhayammed vs. State of Kerala (2000) 6 SCC 359; Khoday Distilleries Ltd. vs. Shri Mahadeswara Sahakara Sakkare Karkhane Ltd. (2019) 4 SCC 376; A.V. Papayya Sastry vs. Govt. of AP (2007) 4 SCC 221; Vijay Shekhar vs. Union of India (2004) 4 SCC 666; Venture Global Engineering LLC vs. Tech Mahindra Ltd. (2018) 1 SCC 656; Ganpatbhai Mahijibhai Solanki vs. State of Gujarat 2008 (3) SCALE 556; Vijay Shekhar vs. Union of India 2007 (9) SCALE 442, Venture Global Engineering LLC vs. Tech Mahindra Ltd. (2018) 1 SCC 656. 63. However, applying with principles laid down in the above judgments to the present facts of the case, we hold that dismissal of application of these appellants by th....
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....e, as part of the information memorandum, the RP must clearly state the expected shortfall in the coverage of the liabilities and assets of the entity presented in the information memorandum. Here, the asset and liabilities include those that the RP can ascertain and verify from the accounts of the entity, the records in the information system, the liabilities submitted at the start of the IRP, or any other source as may be specified by the Regulator. 3. Once the information memorandum is created, the RP must make sure that it is readily available to whoever is interested to bid a solution for the IRP. She has to inform the market (a) that she is the RP in charge of this case, (b) about a transparent mechanism through which interested third parties can access the information memorandum, (c) about the time frame within which possible solutions must be presented and (d) with a channel through which solutions can be submitted for evaluation. The code does not specify details of the manner or the mechanism in which this should be done, but rather emphasis that it must be done in a time-bound manner and that it is accessible to all possible interested parties." 67. Similarly....
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....ssed. Comp. App. (AT) (Ins.) No. 678 of 2022 71. In Comp. App. (AT) (Ins.) No. 678 of 2022, the simple issue is about implementation of resolution plan by the Appellants. 72. This application was filed by the employees of Corporate Debtor to direct the Respondent to make payments due to the applicants forthwith and evolve mechanism to ensure that future payments are made and initiate action against the Respondent under Section 74 of code for willful contravention of resolution plan approved on 27.02.2019. The Tribunal allowed the petition; directed the respondent to implement the resolution plan forthwith and to pay the dues to the employees. The same is now challenged on the ground that the resolution plan was submitted due to misrepresentation made by interim resolution professional and therefore no direction be issued against the appellants herein. 73. In Comp. App. (AT) (Ins.) No. 681 of 2022, a specific finding is recorded by this Tribunal that no fraudulent misrepresentation was made by the CIRP and the CIRP had undertaken an exercise to calculate the production capacity of the industry and concluded that no fraudulent misrepresentation was made by CIRP while issu....