TaxTMI 
TaxTMI 
TaxTMI 
2024 (1) TMI 338
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....lan of the Corporate Debtor contained therein as submitted by D. Konda (hereinafter referred to as the "DK"). Aggrieved by the impugned order, the present appeal has been filed by Punjab National Bank-the Appellant. 2. The salient facts of the case which are necessary to be noticed for deciding the matter are as follows: - * The Corporate Debtor-M/s Sandwoods Infratech Projects (P) Ltd. came under Corporate Insolvency Resolution Process ("CIRP" in short) on 25.10.2021. * The Committee of Creditors ("CoC" in short) was constituted with homebuyers as Financial Creditor in class with 71.75% vote share; State Bank of India(SBI) with 10.45% vote share and the present Appellant-Punjab National Bank(PNB) with 17.80% vote share. * The 3rd meeting of the CoC held on 01.01.2022 approved the publication of Form G, Information Memorandum ("IM" in short), eligibility criteria and performance security of resolution applicant as well as the evaluation matrix. * The Resolution Professional (hereinafter referred to as "RP") published Form G and Expression of Interest ("EoI" in short) were invited. * 5 EoIs were received with eligibility documents. The CoC in the 4th meeting held on 17.03....
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....ed with the voting of the resolution plan without providing the documents sought by the Financial Creditors. It has also been contended that the RP did not carry out a proper and due diligence of the resolution applicant including certificate of eligibility under Section 29A of the IBC. Thus, the RP conducted the proceedings in an arbitrary manner in violation of the principles of natural justice causing great prejudice to the interests of the two Financial Creditors. 4. Since the resolution plan was approved by the CoC in an arbitrary manner, it was submitted that the Appellant had filed IA No.2304 before the Adjudicating Authority seeking recall of the voting on the resolution plan. This was however dismissed on 12.07.2023 by the Adjudicating Authority without due consideration of the issues and objections raised therein and soon thereafter the resolution plan was approved by the Adjudicating Authority on 10.08.2023 in IA No.2414 of 2023 filed by the RP even though it was violative of Section 30(2) of the IBC. Advancing their cause further, it has been pointed out that Clause 6.5(ii) and (vii) of the resolution plan provided that all securities for any debt due to the secured cr....
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....this juncture, it may be pertinent to note that the main ground on which the Appellant had sought extended time period to examine the plan submitted by DK was the email of 21.04.2022 from the RP to all the CoC members intimating that DK had sent an email on 20.04.2022 conveying that they had inadvertently missed out to add in the plan that an amount of Rs.80,000/- would be reduced from the Basic Selling Price ("BSP" in short) and that wooden flooring in master bedroom would now be excluded from the list of items to be delivered. The said email has been placed at page 99 of the Appeal Paper Book ("APB" in short). The other ground cited for seeking more time to examine the plan is that the Appellant had sought additional information from the RP relating to transaction audit report, valuation reports and financials of the resolution applicant vide their emails dated 02.05.2022 and 04.05.2022 which were however not provided. 8. At this stage, we may go through the proceedings of the 6th CoC meeting to find out whether the request of the Appellant for additional information and extended time period to examine the resolution plan was duly deliberated upon by the CoC in the exercise of i....
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....nt earliest completion of the projects so that their hard earned money invested in their flats is fructified. For them delay of each day is costing them financially and emotionally. He also emphasized that when the plan is final with no further modification by the Resolution Applicant, there is no reason to defer the voting on the plan. After considering the request of majority members i.e. homebuyers holding 71.75% voting share, the resolution professional informed the members that the voting on the plan will be conducted as per the notice of the meeting. However, to give more time to the members banks, the voting for financial creditors (other than homebuyers) will be kept for 72 hours instead of 24 hours." (Emphasis supplied) 9. It is now pertinent to examine whether the Adjudicating Authority went into the details of the deliberations of the 6th CoC meeting to find out whether there was sufficient substance in the plea of the Appellant in IA 2304 of 2022 to seek more time to consider the resolution plan. While looking at the order of the Adjudicating Authority dated 12.07.2023, we find that the Adjudicating Authority has dwelt upon these issues at great length. Besides not....
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....Resolution Professional has followed the instructions of the majority stakeholders i.e. the Home Buyers holding 71.75% voting share and allowed the voting on the Resolution Plan. The Applicant Bank holding a minority share i.e. 17.80% in CoC is trying to derail the CIRP and trying to put undue pressure on the Resolution Professional by adopting unfair means. 9. The sole controversy in this matter is only with regard to the fact that the Applicant Bank was not afforded time to examine the plan and also that the Applicant was not provided with the relevant documents sought for by it. The Resolution Professional in its reply has specifically denied the allegations and has submitted that there was no modification in the resolution Plan and further, he has followed instructions of the Home Buyers who have majority voting rights and as per the provisions of the IBC, 2016, he has proceeded to conduct the 6h CoC meeting and held the e-voting in which the Resolution Plan has been approved by the majority CoC Members. 10. Therefore, the Resolution Professional has not committed any irregularity or illegality in conducting the CoC Meeting for approval of the Resolution Plan. 11. We find....
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....present is not a case where the Appellant has been able to successfully point out any breach of procedure or manifest error in the conduct of the CIRP proceedings which deserve rolling back of the e- voting results. 13. It is an undisputed fact that the RP had presented the resolution plan before the CoC which in turn approved the same with 71.75% vote strength. PNB/Appellant holding 17.80% vote share had abstained while SBI holding 10.45% vote share had not approved the resolution plan. Since the resolution plan had obtained the requisite vote strength of 71.75% which exceeded the threshold of 66% therefore passed the muster, as per material placed before us, the RP filed IA 2414 of 2022 before the Adjudicating Authority seeking approval of the resolution plan. 14. The Adjudicating Authority vide the impugned order had thereafter approved the resolution plan. Perusal of the impugned order shows that while approving the plan, Adjudicating Authority noticed that DK had submitted an affidavit of eligibility under Section 29A of the IBC. It is also noticed that the DK has proposed to complete both the housing projects at Mohali and Kasauli within 9 months from the date of approval o....
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....018 (17) SCC 394 and Lalit Kumar Jain v. Union of India 2021 (9) SCC 321 stating that Financial Creditors can independently proceed against the corporate and personal guarantors in spite of pending CIRP proceeding against the principal debtor. It was also pointed out that since CIRP was initiated against the Corporate Debtor, the moratorium was imposed against the Corporate Debtor and not against the guarantors. Hence, CIRP against the Corporate Debtor cannot be treated as resolution process against the guarantors. It was also pressed strongly that the resolution plan being arbitrary deserves to be quashed. 17. At the outset, we need to first notice Clause 6.5 of the resolution plan which deals with the assignment of securities in the present resolution plan, which is the bone of contention. We find that Clause 6.5 (c)(ii) and (vii) of the resolution plan provides as follows: - (ii) That all securities (primary/secondary/collateral) for any debt due to the secured Creditors, including the securities listed below, shall stand unconditionally released and transferred in favour of the Corporate Debtor. The Secured Creditors shall not be entitled to exercise any security interest wi....
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....res, as may be necessary, for CIRP of the Corporate Debtor for maximization of the value of its assets. This Regulation and its underlying spirit has been analysed and dissected by this Tribunal in the matter of Edelweiss Asset Reconstruction Company Ltd. v. Mr. Anuj Jain, Resolution Professional of Ballarpur Industries Ltd in CA (AT) (Ins.) No.517 & 518 of 2023 ("Edelweiss" in short) which is to the effect: "20. We may also notice, at this stage, the provisions of Regulation 37 of the CIRP Regulation, 2016, which provides as follows: "37. Resolution plan. - A resolution plan shall provide for the measures, as may be necessary, for insolvency resolution of the corporate debtor for maximization of value of its assets, including but not limited to the following:- (a) transfer of all or part of the assets of the corporate debtor to one or more persons; (b) sale of all or part of the assets whether subject to any security interest or not; [(ba) restructuring of the corporate debtor, by way of merger, amalgamation and demerger;] (c) the substantial acquisition of shares of the corporate debtor, or the merger or consolidation of the corporate debtor with one or more persons; ....
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....with regard to dealing of the security interest." (Emphasis supplied) 19. Thus, the scheme as delineated by Regulation 37 of CIRP Regulations fully supports the view that if a claim is filed by a Financial Creditor and the claims of the Financial Creditor is part of the CIRP process, their security interest can very well be dealt with in the resolution plan. Amplifying this concept further, this Tribunal has held in a recent judgement in the matter of ICICI Bank Ltd v BKM Industries Ltd & Or in CA(AT)(Ins)No.405 of 2023 ("ICICI Bank" in short) that reference to the value of its security interest by a dissenting Financial Creditor neither carries any meaning nor any substance as the entitlement of the dissenting financial creditor is specified in Section 30(2)(b) of the IBC. The relevant paragraphs of this judgement are as reproduced below: "18. Now we come to the judgment of the Hon'ble Supreme Court in India Resurgence Arc. Pvt. Ltd. Vs. M/s. Amit Metaliks Ltd. & Anr. In paragraph 3 of the judgment, facts were noticed, which is to the following effect: "3. When the resolution plan submitted by the respondent No. 1 was taken up for consideration by the CoC, the appellant....
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....plan at the instance of the appellant. The purport and effect of the amendment to sub- section (4) of Section 30 of the Code, by way of sub-clause (b) of Section 6 of the Amending Act of 2019, was also explained by this Court in Essar Steel (supra), as duly taken note of by the Appellate Authority (vide the extraction hereinbefore).The NCLAT was, therefore, right in observing that such amendment to sub-section (4) of Section 30 only amplified the considerations for the Committee of Creditors while exercising its commercial wisdom so as to take an informed decision in regard to the viability and feasibility of resolution plan, with fairness of distribution amongst similarly situated creditors; and the business decision taken in exercise of the commercial wisdom of CoC does not call for interference unless creditors belonging to a class being similarly situated are denied fair and equitable treatment. 16. The repeated submissions on behalf of the appellant with reference to the value of its security interest neither carry any meaning nor any substance. What the dissenting financial creditor is entitled to is specified in the later part of sub- section (2)(b) of Section 30 of the Co....
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.... be paid to it with reference to the value of the security interest." 20. The issue raised in the Appeal, is fully covered by the judgment of the Hon'ble Supreme Court. The Hon'ble Supreme Court in India Resurgence ARC Private Ltd. (supra) also referred to its earlier judgment in Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (India) Ltd. while coming to the conclusion." 20. From the ratio laid down by this Tribunal in Edelweiss supra and ICICI Bank supra, it is amply clear that the statutory construct of the IBC read with Regulation 37 of CIRP Regulations provides an enabling framework for CoC to exercise its commercial wisdom to approve a resolution plan of any Corporate Debtor which provides that all securities for any debt due to the secured creditors can be unconditionally released and transferred in favour of the Corporate Debtor. Hence, Clause 6.5(ii) and (vii) of the present resolution plan does not suffer from any infirmity or arbitrariness for having provided for assignment of securities of the Appellant nor can it be found to be non-compliant to the provisions of Section 30(2)(e) of the IBC. Merely raising the pretext that such assignment w....