TaxTMI 
TaxTMI 
2024 (1) TMI 529
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..... Prateek Kushwaha, Mr. Sahas Bhasin and Mr. Yashu Rustagi, Advocates for Intervenor (EPFO). Mr. Gopal Jain, Sr. Advocate, Ms. Bhavya Shukla, Advocates for Intervenor Mr. Sumesh Dhawan, Mr. Wattan Sharma and Mr. Shaurya Shyam, Advocates for Applicant in I.A. No. 6049 of 2023. JUDGMENT ASHOK BHUSHAN, J. These four appeals have been filed by the Suspended Director of the Corporate Debtor - Asian Hotels (West) Ltd. and shareholders of Corporate Debtor challenging the order passed by the Adjudicating Authority (National Company Law Tribunal) New Delhi Bench IV admitting Section 7 application filed by the Financial Creditor as well as orders passed in two Interlocutory Applications. These appeals arising out of same proceedings were heard together and are being decided by this common judgment. Company Appeal (AT) (Ins.) No.1192-1193 of 2022 and Company Appeal (AT) (Ins.) No.1338-1339 have been filed by the Suspended Directors of the Corporate Debtor - Asian Hotels (West) Ltd. challenging order dated 16.09.2022 passed by the Adjudicating Authority admitting Section 7 application filed by the Financial Creditor in C.P. (IB) No.571/PB/2021. Another order under challenge in these appe....
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.... on 03.05.2021, which was accepted by the Corporate Debtor on 04.05.2021, however, the Bank did not release the amount sanctioned under ECLGS on the ground that certain conditions which are to be fulfilled by the Corporate Debtor have not been fulfilled. vi. The default was committed by the Corporate Debtor in paying the instalments of April, 2021. There was default committed by the Corporate Debtor for loan and with regard to other facilities during April, 2021 to August, 2021. vii. On 30.07.2021, Bank issue a Loan Recall Notice recalling the entire loan amount along with interest. On the same date, notice under Section 13(2) was issued by Yes Bank. viii. On 19.08.2021, the Yes Bank filed Section 7 application before the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench IV claiming a default of an amount of Rs.264,07,35,129/- as on 13.08.2021. ix. The Yes Bank also took possession of assets on 21.08.2021 under SARFAESI Act, 2002. x. The Corporate Debtor filed a counter affidavit in Section 7 application filed in November, 2021. The Corporate Debtor in its counter affidavit opposed the Section 7 application. It was pleaded that the Corporate Debtor h....
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..... I.A. No.3041 of 2022 filed by JM Financial Asset Reconstruction Company Ltd. to be substituted in place of Yes Bank was also allowed. Aggrieved by orders dated 16.09.2022, appeals have been filed, as noted above. xvi. Company Appeal (AT) (Ins.) No. 1192-1193 of 2022 was heard by this Tribunal on 29.09.2022 on which date notices were issued and this tribunal passed following interim order: "In the meantime, CoC will not take any final decision regarding resolution." xvii. During pendency of the appeal, by assignment dated 30.11.2022, the JM Financial Asset Reconstruction Company Ltd. has assigned its debt to UV Asset Reconstruction Company Ltd (UVARCL). After assignment of debt in favour of UV Asset Reconstruction Company Ltd. IAs have been filed by UV Asset Reconstruction Company Ltd. in the appeals for substituting it in place of JM Financial Asset Reconstruction Company Ltd. which application were taken up by this Tribunal and parties were granted time to file reply vide order dated 11.01.2023. The appeals were listed before this Tribunal and were heard from time to time. I.A. No. 3897-3898 of 2023 in Company Appeal (AT) (Ins.) No. 1192-1193 of 2022 was filed by Appellant ....
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....nts are offering entire amount to be deposited along with interest. This Tribunal directed the said proposal to be placed before CoC to take a decision and in event CoC accepts the proposal, the Resolution Professional shall file an application, after deposit of the entire amount by the Appellant, under Section 12A for closure of the CIRP. xxi. Subsequent to order dated 27.09.2023, 15th CoC meeting took place on 10.10.2023 where it was noted that proposal has been submitted by the Shareholders of the Corporate Debtor holding approx. 88% shareholding in the Corporate Debtor. It was noted that on 04.10.2023 the relevant shareholders submitted a Revised Settlement Proposal in which the proposers have envisaged to deposit the entire admitted outstanding dues, without any haircut within six weeks from approval of the Revised 12A Proposal by the CoC. It was recorded in the minutes that the Proposers will deposit the entire monies within six weeks and only thereafter CoC shall consider the Revised 12A Proposal of the relevant Shareholders. The CoC asked the Resolution professional to keep the proposal in abeyance and the CoC will consider it once the monies are deposited. xxii. After ....
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....ian Hotels (West) Ltd. The deposit made by Novak Hotels Pvt. Ltd is deposit made by a third party. In the Affidavit certain other objections were raised regarding 12A Proposal submitted by the Appellant. The counter affidavit to Affidavit dated 04.12.2023 filed by the Financial Creditor was filed by the Appellants. All the parties were heard on 20.12.2023 and orders were reserved. 3. We have heard Shri Arun Kathpalia, learned senior counsel appearing for the Appellants in Company Appeals filed on behalf of the Suspended Directors. We have heard Ms. Pooja Mahajan, learned counsel appearing for the Resolution Professional. Shri Maninder Singh, learned senior counsel and Shri Navin Pahwa, learned senior counsel have appeared for UVARCL. Shri Gopal Jain, learned senior counsel has been heard for Prospective Resolution Applicant. We have also heard Shri Sumesh Dhawan and Shri Brajesh Kr. Tamber, learned counsels appearing for the Interveners. 4. Shri Arun Kathpalia, learned senior counsel for the Appellant submits that the proposal having been submitted before the CoC for payment of 100% dues along with interest of Financial Creditors and 100% dues of the Operational Creditor, Governm....
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....proposal for liquidating the debt of the Corporate Debtor to free the Corporate Debtor from CIRP. It is submitted that the objection now sought to be raised only indicate the intent of UVARCL to somehow reject the proposal of 12A to handover the assets to some Resolution Applicant of its choice for ungenuine purposes. Shri Kathpalia submits that present is a case where CoC having acted arbitrarily, which is apparent from minutes of its meeting dated 10.10.2023 and 13.10.2023, this Tribunal has every jurisdiction to accept the proposal and close the CIRP, the amount being already deposited, which amount may be directed to be released to the Resolution Professional for disbursement. Learned counsel relying on judgment in "Swiss Ribbons Pvt Ltd. & Anr. vs. Union of India, (2019) 4 SCC 17" submits that Hon'ble Supreme Court has categorically held that decision of the CoC on 12A proposal is not final and if the CoC arbitrarily rejects a just settlement, NCLT, and thereafter, NCLAT can always set aside such decision. 5. Shri Maninder Singh, learned senior counsel appearing for UV Asset Reconstruction Company Ltd (UVARCL) opposing the submission of the Appellant submits that the Appellan....
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....lding of Robust and Novak Hotels. 7. Shri Gopal Jain, learned senior counsel appearing for Applicant in I.A. No. 4520 of 2023 referring to order dated 21.11.2023 in Civil Appeal No.7581 of 2023 submits that the Resolution Plan submitted by the Applicant who is a Prospective Resolution Applicant need to be considered by the CoC. It is submitted that the proposal under 12A is an indirect attempt to tie the hands of CoC. Relying on Regulation 39 (2) of CIRP Regulation, it is submitted that the Resolution Professional has to place all plans including Resolution Plan of the Applicant before the CoC. It is submitted that the CoC wanted to consider the plans but cannot consider due to the interim order passed by this Tribunal. It is submitted that level playing field should be provided to all Resolution Applicants including the Applicant. 8. Shri Sumesh Dhawan, learned counsel appearing for Applicant in I.A. No.6049 of 2023 submits that there are now six Resolution Plans. It is submitted that as per Regulation 30A proviso there has to reason for justifying withdrawal after Expression of Interest is issued. 9. Shri Arun Kathpalia, learned senior counsel for the Appellant in his Rejoinde....
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....by the applicant with the approval of ninety per cent voting share of the committee of creditors, in such manner as may be specified.". 13. Consequential amendments were also made in Insolvency and Bankruptcy Board of India. (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 by inserting Regulation 30A by notification dated 25.07.2019. Regulation 30A provides as follows: "30A. Withdrawal of application. - (1) An application for withdrawal under section 12A may be made to the Adjudicating Authority - (a) before the constitution of the committee, by the applicant through the interim resolution professional; (b) after the constitution of the committee, by the applicant through the interim resolution professional or the resolution professional, as the case may be: Provided that where the application is made under clause (b) after the issue of invitation for expression of interest under regulation 36A, the applicant shall state the reasons justifying withdrawal after issue of such invitation. (2) The application under sub-regulation (1) shall be made in Form FA of the Schedule accompanied by a bank guarantee- (a) towards estimated expenses incurred on o....
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....y, an omnibus settlement involving all creditors ought, ideally, to be entered into. This explains why ninety per cent, which is substantially all the financial creditors, have to grant their approval to an individual withdrawal or settlement. In any case, the figure of ninety per cent, in the absence of anything further to show that it is arbitrary, must pertain to the domain of legislative policy, which has been explained by the Report (supra). Also, it is clear, that under Section 60 of the Code, the Committee of Creditors do not have the last word on the subject. If the Committee of Creditors arbitrarily rejects a just settlement and/or withdrawal claim, NCLT, and thereafter, NCLAT can always set aside such decision under Section 60 of the Code. For all these reasons, we are of the view that Section 12-A also passes constitutional muster." 15. The Hon'ble Supreme Court categorically held that "If the Committee of Creditors arbitrarily rejects a just settlement and/or withdrawal claim, NCLT, and thereafter, NCLAT can always set aside such decision under Section 60 of the Code.". 16. Now we may first notice proposals which were submitted by the Appellants under 12A. The propos....
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....so undertake to provide you with bank guarantee towards estimated expenses (as furnished by the RP) as detailed in Reg. 30A(2) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 within 7 days of the receipt of your consent so that you through the RP can make necessary application under Form FA with the Hon'ble Adjudicating Authority along with the required bank guarantee. In order to show our bonafide, we enclose herewith a copy of the bank guarantee in favour of the Corporate Debtor of INR 40 crores. The same shall be furnished immediately upon receipt of your consent for acceptance of our proposal. Since we are paying the entire admitted dues without any haircut and the entire CIRP costs, we request you to give your consent to the proposal immediately and urgently file the withdrawal application under section 12A of IBC to get the Corporate Debtor out of the CIRP. As per our understanding, the total admitted dues are INR 324,28,87,563/- (Rupees Three Hundred and Twenty-Four Crores, Twenty-Eight Lakhs, Eighty- Seven Thousand, Five Hundred and Sixty-Three only). However, you are also requested to let us know the exact amount of admitted due....
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....o. A5 following has been stated: "Concluding the discussions, RP stated that once the original bank guarantee is received from the Relevant Shareholders, the RP shall proceed with the verification process of the bank guarantee as requested by CoC members and apprise the members of CoC about outcome of such verification of bank guarantee to take the process forward." 19. As noted above, applications were filed by both Suspended Directors in the company appeals, where the applicants after referring to the proposal under 12A dated 11.08.2023 and Minutes of CoC held on 18.08.2023 has prayed for following reliefs: "a. Pass an interim order, thereby restraining the CoC and the RP to take any other steps or actions in the Corporate Insolvency Resolution Process till such time as the CoC considers and decides the 12A proposal filed by Applicants, including the Appellant; b. Pass an order directing the CoC to accept the 12A proposal filed by the applicants including the Appellant; c. Set aside the impugned orders dated 16.09.2022 passed by the Ld. Adjudicating Authority in CP (IB)-571/2021; d. Pass such other or further orders as this Hon'ble Tribunal may deem fit and prop....
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....ble legal expenses for which necessary details were asked for. It is useful to extract the proposal, which is to the following effect: ""To, 1. The Committee of Creditors Asian Hotels (West) Limited (Under CIRP) 2. Mr. Sapan Mohan Resolution Professional (IBBI/IPA-002/IP-N00315/2017-2018/10903) Asian Hotels (West) Limited D-54, First Floor Defence Colony. New Delhi-110024 Also at: [email protected] cirp.asianhotelswest.com Sir, Subject : Proposal under Section 12A of IBC 2016 ("IBC") in terms of order dated 27.09.2023 of the Hon'ble NCLAT, for payment of entire dues of all the creditors and other admitted claims without any haircut and the entire CIRP costs enabling you to make the necessary application to the Adjudicating Authority in respect of Asian Hotels (West) Limited, New Delhi ("Corporate Debtor") for withdrawal of the application admitted under section 7 of IBC. We, Sandeep Gupta and his associates (Promoter holding beneficial interest in approx. 45% of equity shares), Sudhir Gupta and his wife (Promoter holding beneficial interest in approx. 25% of equity shares), and Robust Hotels Limited and its associates (Public shareholder having approx. 18% e....
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....s, Sixty Nine lakhs, Seventy Five thousand seven hundred and Sixty Six only) along with balance CIRP costs of INR 2,80,43,124 within 6 weeks of approval by the CoC of the proposal. b. You, addressee no. 2, is requested to file an application under Section 12A of the IBC for the withdrawal of the application admitted under e section 7 of IBC, immediately upon the deposit of the entire amount by us in the above manner. c. Furnish us the details and description of the expenses of INR 59,911,097 claimed by the lead member of the CoC, i.e. UVARCL. This is without prejudice to the pending proceedings before the Hon'ble NCLT and Hon'ble NCLAT. Thanking you, Yours truly, Sandeep Gupta (Promoter/Member of Suspended Board of Directors) Sudhir Gupta (Promoter/Member of Suspended Board of Directors Mr. Saumen Chatterjee (on behalf of Robust Hotels Limited and its associates, Public Shareholders) CC: 1. UV Asset Reconstruction Company Limited [email protected] [email protected] [email protected] [email protected] 2. PTC India Limited [email protected] Date: 04th October, 2023 Place: New Delhi" "Schedule I" S. No. Creditor Amount Admitted I....
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.... Although by the minutes dated 10.10.2023 it was decided that Appellant may deposit entire amount within six weeks, however, on 13.10.2023 16th CoC meeting was held in which under Item No. B1 three resolutions were noted for consideration. The CoC members took the view that in view of the order dated 27.09.2023 of the NCLAT, the Revised 12A Proposal has to be decided and the same cannot be kept in abeyance. The Member of the CoC decided to put the Revised 12A Proposal for e-voting. Resolutions which were to be put for e-voting as noticed in the Item No. B1 are as follows: "Resolution: To consider and if thought fit, to pass with or without modification the following resolution : "RESOLVED THAT in terms of Section 12A of Insolvency and Bankruptcy Code, 2016, read with the Regulation 30A of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the consent of committee of creditors, be and is hereby accorded to approve the revised proposal received on 04 October 2023 from the Relevant Shareholders under Section 12A of the Code in respect of Asian Hotels (West) Limited (Corporate Debtor). RESOLVED FURTHER THAT in term....
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....ts proposal may include the same. List this Application on 17.10.2023. Other connected Appeals may also be listed on 17.10.2023." 2. Learned Sr. Counsel-Mr. Arun Kathpalia for the Appellant submits that Appellant has submitted an offer that they will deposit the entire amount in six weeks and thereafter the Application under Section 12A may be filed. 3 Learned Sr. Counsel appearing for the Respondents submits that the Appellant have not deposited the amount although they are making such statement since August, 2023, 4. Learned Counsel for the Appellant submits that Appellant is ready to deposit the amount in the Court within four weeks from today. It is submitted that Rs.40 Crores Bank Guarantee is already with the Respondent. 5. Let the Appellant deposit the entire outstanding amount less 40 Crores which is already deposited as Bank Guarantee within four weeks from today in the Court in a Fixed Deposit Receipt to the Registrar of NCLAT. 6. Appellant may file an affidavit bringing on record the proof of payments as directed above on or before 23rd November, 2023. List this Appeal again on 24th November, 2023. Interim Order to continue." 26. After aforesaid order da....
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....the financial creditor and by the said amount the 100% debt of the financial creditor can be liquidated and it is further submitted that said amount also includes the CIRP cost as well as amount payable to the operational creditor. 6. Learned Sr. Counsel Mr. Gopal Jain appearing for the prospective resolution applicant submits that he has already filed an appeal against the order dated 17.10.2023 passed in Company Appeal (AT) (Ins.) No. 1192 & 1193 of 2022 in which an order has been passed by Hon'ble Supreme Court dated 21.11.2023. He seeks time to bring the said order on record. Let him bring the copy of the order of the Hon'ble Supreme Court within a week from today. 7. He also submits that LA. No. 4520 of 2023 which I.A. may also listed on the next date. 8. Mr. Pahwa submits that the amount deposited is not by the appellant but by the third entity. 9. Learned Counsel for the financial creditor may obtain instruction, whether the financial creditor is willing to accept the amount deposited to liquidate their debt or not and the said statement shall be made by an affidavit before the next date. 10. List the appeals on 05.12.2023. 11. Financial creditor may file....
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.... objection on the ground that Section 12A cannot circumvent Section 29A. Section 29A contains a provision which deals with persons not eligible to submit a resolution plan. The eligibility is clearly to submit a Resolution Plan which is clear from the opening words of Section 29A: "29A. Person not eligible to be resolution applicant. - A person shall not be eligible to submit a resolution plan, if such person,..." 31. Section 12A provides for withdrawal of the application admitted under Section 7 or 9, on an application made by the applicant with the approval of 90% voting share of the Committee of Creditors. Application has to be filed as per procedure provided under Regulation 30A. The objective of Section 12A and Section 29A are totally different. Section 29A is a provision which debars certain categories of applicants from submitting Resolution Plan whereas Section 12A is entirely different provision where CIRP can be withdrawn after admission. The proposal is submitted by Applicant before the CoC and if the proposal is approved by 90% CoC, Regulation 30A provides for procedure for withdrawal. If the CoC approval is granted with 90% vote share, an application has to be file....
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....te that entire dues are offered to be deposited by the Appellant. As noted above, on 10.10.2023, time was given to deposit, however, within three days voting was held in which proposal was dissented, which clearly shows anxiety of the CoC to somehow reject the proposal. 35. After the order of this Tribunal dated 17.10.2023, now when the amount has been deposited by the Appellant although with delay of one or two days, the objection sought to be raised on the ground of deposit by third party is not acceptable. It is very much clear that the deposit has been made by the Promoters and Shareholders of the Corporate Debtor who are the same parties who have submitted the proposal. The Promoters and Shareholders are fully entitled to arrange finances for making deposit and in the present case the finances are all deposited by shareholders and their group companies. The objection of the UVARCL that Novak Hotel who has deposited the amount in the FDR has nothing to do with the Appellants has been denied and all details have been given in the Counter Affidavit. The delay in deposit of one day as explained in Para 7 of the Counter Affidavit, which is as follows: "7. That the contents of Pa....
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.... i. Comp. Appeal (AT) (Ins.) Nos. 1192 &1193 of 2022 titled Sandeep Gupta vs. JM Financial Asset Reconstruction Company Limited & Another; ii. Comp. Appeal (AT) (Ins.) Nos. 1338-1339 of 2022 titled Sudhir Gupta vs. JM Financial Asset Reconstruction Company Limited; iii. Comp. Appeal(AT) (Ins.) Nos. 1271 of 2022 titled Asian Hotels (East) Limited & Others vs. Yes Bank Limited & Another; iv. Comp. Appeal(AT) (Ins.) Nos. 1341 of 2022 titled Asian Hotels (East) Limited & Another vs. JM Financial Asset Reconstruction Company Limited & Others;" 36. We do not find any non-compliance of the order dated 17.10.2023 in depositing amount. Delay of 1 or 2 days deserves to be condoned in view of the reasons as detailed in the Counter Affidavit. In Para 7 itself the details of deposit by Novak Hotels and shareholding pattern of Novak Hotels has been mentioned and further in Para 7 following has been stated : It is further denied that Novak Hotels Pvt. Ltd has nothing to do with the Appellants. It is submitted that Novak Hotels Pvt. Ltd. is a Wholly Owned Subsidiary of Asian Hotels (East) Limited, Appellants in Company Appeal (AT) (Ins.) No. 1271 and Company Appeal (AT) (Ins.) No. 1341....
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....il Appeal No.7581 of 2023, Panchshil Corporate Park Pvt. Ltd. vs. Sandeep Gupta & Ors.". One of the Prospective Resolution Applicant - Panchshil Corporate Park Pvt. Ltd. which has submitted a Resolution Plan has filed Civil Appeal No.7581 of 2023 challenging order dated 17.10.2023. The Hon'ble Supreme Court passed following order on 21.11.2023: "ORDER The sole plea raised by the learned counsel for one of the resolution applicant is that there are seven plans submitted which have remained in abeyance and ought to be put to the Committee of Creditors. The same is not being done on account of an interdict by the NCLAT dated 29.9.2022. We may notice that the appeal is listed before the NCLAT on 24.11.2023 and since the NCLAT is in seisen of the issue, we feel that this issue is best addressed by the NCLAT on the next date. The appeal stands disposed of." 39. The Hon'ble Supreme Court disposed of the appeal leaving the issue to be addressed by NCLAT (this Tribunal). As noted above, an interim order was passed in this Appeal to the effect that in the CIRP CoC will not take any final resolution. The order was passed as early as on 29.09.2022 and the UVARCL obtained assignment mu....
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....ective Resolution Applicant cannot direct the CoC to evaluate the Resolution Plan which it has received. The said course cannot be allowed to be directed since the Proposal under 12A has to be finally determined as to whether it deserves to be accepted and the decision of the CoC to refuse to accept Proposal is arbitrary and unsustainable. 41. We having noticed the relevant facts and sequence of events and minutes of 13th to 16th CoC meetings as well as Proposal submitted by the Appellant dated 11.08.2023 and Revised Proposal dated 04.10.2023, we are satisfied that the decision of the CoC is arbitrary in not approving 12A Proposal which Proposal offered to pay entire debt of Financial Creditors as well as all other creditors. From the minutes of 14th and 15th CoC, it is clear that CoC has expressed its willingness to accept the proposal if entire amount is deposited, however, opportunity was not granted by the CoC and within three days from 10.10.2023 meeting i.e. on 13.10.2023 they dissented the proposal although they initially granted six weeks' time to deposit the amount. When in pursuance of order dated 17.10.2023, the entire amount has been deposited, the UVARCL refused to ac....