TaxTMI 
TaxTMI 
2024 (1) TMI 529
X X X X Extracts X X X X
X X X X Extracts X X X X
....esh Kumar Tamber, Mr. Vinay Singh Bisht, Mr. 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/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....acility of Rs.40 Crore under ECLGS 2.0 on 24.11.2020. The Yes Bank issued sanction letter 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.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as well as on I.A. No.3041 of 2022, I.A. No. 4021 of 2022 and by impugned order dated 16.09.2022 admitted Section 7 application filed by the Financial Creditor. 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 ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ey is deposited with the Resolution Professional upfront, the member of CoC shall consider the proposal positively. xx. On 27.09.2023 when the appeal was taken, Appellants submitted before this Tribunal that Appellants 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 the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... stated that Revised 12A Proposal has been twice disapproved by the CoC and the CoC in its commercial wisdom has not approved the 12A Proposal. It is further stated in the Affidavit that funds deposited on 15.11.2023 is actually Saraf Group/Public Shareholders of Asian 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h the amount deposited by Novak Hotels and Saraf Group. It is submitted that in the minutes of the 13th to 16th CoC it was very well noticed that it is 88% shareholders of the Corporate Debtor who have submitted the proposals and shareholders have every right to submit 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 arbitr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2023 with Saraf Group which was not disclosed in the application. Under the agreement the Promoters with the help of Robust Hotels Ltd. were to bring money. It is Saraf Group which is bringing entire money. Learned counsel has referred to MCA records to indicate the shareholding 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.60....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Pharmachem" made observations requiring amendment in the Rules. Section 12A was inserted by Act 26 of 2018 which provides as follows: "12A. The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re under challenge. In Para 83 of the judgment following has been laid down: "83. The main thrust against the provision of Section 12-A is the fact that ninety per cent of the Committee of Creditors has to allow withdrawal. This high threshold has been explained in the ILC Report as all financial creditors have to put their heads together to allow such withdrawal as, ordinarily, 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 Secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ors (inclusive of up-to-date interest amount), operational creditors and other creditors, without any haircut, within 45 (forty-five) Business Days from approval of the Withdrawal Application. 2. To pay off the entire CIRP costs in accordance with Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, as amended CCIRP Regulations). In this connection, we also 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 CIR....
X X X X Extracts X X X X
X X X X Extracts X X X X
....holders"), holding together approx. 88% shareholding in the Corporate Debtor have submitted a settlement proposal under section 12A of the Code along with a copy of bank guarantee in favour of the Corporate Debtor of INR 40 Crore." 18. After deliberation and discussion and the queries asked by UVARCL, it was stated on behalf of the UVARCL that they are willing to accept the proposal upon receipt or original Bank Guarantee and its verification and the Resolution Professional was requested to verify the original Bank Guarantee. In the concluding part of Minutes of Item No. 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 re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the proposers." 21. After minutes of meeting dated 14.09.2023, a revised proposal was submitted by the Appellants the said proposal was forwarded to both the CoC and the Resolution Professional. The revised proposal dated 04.10.2023 proposed to deposit the entire admitted outstanding dues of the financial creditors, operational creditors and other creditors without any haircut i.e. INR 361,69,75,766/- as furnished by the Resolution Professional by email dated 28.09.2023 detailed in Schedule I. With regard to expenses to the tune of Rs.5,99,11,097/-, it was mentioned that the Appellant would be willing to pay reasonable 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 da....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The RP has also intimated that the Lead member of the COC, Le. UV Asset Reconstruction Company Limited, has, for the purpose of 12A Application, claimed expenses to the tune of INR 59,911,097 as detailed in Schedule II annexed herewith. Neither the details or description of the said expenses has been furnished to us nor the rationale to include the same for the purpose of the proposal for withdrawal. We would be willing to pay reasonable legal expenses and in that regard, we request you to provide the necessary details and description. We request you to: a. kindly convene the CoC for consideration and approval of this proposal. We undertake to deposit the entire INR 361,69,75,766 (Rupees Three Sixty One Crores, 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....deration before 15th CoC meeting held on 10.10.2023, where Item No. A9 was to deliberate on the proposal received under Section 12A of Code in respect of Corporate Debtor. The minutes noted the order dated 27.09.2023 and the proposal dated 04.10.2023 received from the Appellant. In the minutes after elaborate discussion following decision is recorded in the minutes: "After detailed deliberation among the CoC members and the proposers it was decided that Proposers will deposit the entire amount within six weeks and only thereafter the CoC will consider the 12A proposal of the Relevant Shareholders." 23. Further in the same Item following was recorded: "The RP sought final clarity on the decision from the CoC members. Both the CoC members agreed to keep the current Revised 12A Proposal in abeyance until the money was deposited and asked the RP to record the same in the minutes that the proposal is being kept under abeyance as per the request of proposers and the CoC will consider it once the monies are deposited." 24. 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 C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s application has been filed by the Appellant. Appellant's case is that Appellant is ready to pay the entire 100% dues of the Creditors and CIRP Cost. Learned counsel for the Appellant submits that Appellant has already given Bank Guarantee of Rs.40 Crores which after resolution of the CoC has been verified. It is submitted that Appellant only requires approval of the CoC for deposit of the entire amount within six weeks so that application under 12A can be filed by the Resolution Professional after approval of the CoC. Let the Applicant/ Appellant submit proposal offering the entire amount which is being offered to be deposited alongwith interest upto 30.09.2023. The said proposal be placed before the CoC by the Resolution Professional to take a decision. 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. The decision of CoC shall be taken within two weeks. The Resolution Professional may communicate the amount of interest and CIRP cost so that Appellants proposal may include the same. List this Application on 17.10.2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e original letters dated 15th November 2023 confirming the lien in favour of the Ld. Registrar, National Company Law Appellate Tribunal has also been deposited with the Ld. Registrar of this Hon'ble Tribunal, on 17.11.2023 vide diary no.48465, along with the covering letter of the same date. A copy of the covering letter dated 17 November 2023 evidencing the proof of deposit of the two (2) original FDRs and the two (2) original letters dated November 2023 is annexed herewith und marked as Annexure A-6." 3. Learned Counsel for the appellant submits that under the order of this Tribunal dated 17.10.2023 amount was to deposit in a FDR is the name of the Registrar within four weeks. 4. Learned Counsel for the appellant has referred to letter dated 15.11.2023 issued by Kotak Mahindra Bank where it is stated that lien is marked to the Registrar, NCLAT, New Delhi for lien amount of Rs. 316 crores and at page 53 is the letter dated 15.11.2023 by IDBI Bank with regard to confirmation Delhi. of lien of 15 crores in favour of the Registrar NCLAT, New Delhi. 5. Learned Counsel for the appellant submits that amount deposited along with Rs. 40 Crores already given ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5,766/-. We have already noted the proposal dated 04.10.2023 and the details of Creditors as contained in Schedule I. Proposal clearly covered 100% dues of all creditors including Financial Creditors. The aforesaid proposal was in addition to payment of entire balance CIRP cost of Rs.2,80,43,124/-. 29. We have already looked into minutes of meeting of the CoC held on 18.08.2023, 14.09.2023, 10.10.2023 and 13.10.2023. In the 13th CoC meeting, the UVARCL resolved to first verify the Bank Guarantee given along with the proposal, which was verified and noted in the minutes dated 14.09.2023. In minutes dated 14.09.2023 proposal was not accepted on the ground that it do not provide for upfront payment. The minutes clearly mentioned that if entire money is deposited with the RP upfront, the members of the CoC will consider the proposal positively. Fresh proposal was given on 14.10.2023. On 10.10.2023, the CoC decided to give six weeks' time to the Appellant to deposit the entire amount and thereafter to take a decision on the 12A proposal and proposal was to be kept in abeyance. However, within three days to said decision, voting was held on 13.10.2023 and proposal was dissented by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed to get the original Bank Guarantee verified and after verification when the matter was considered in meeting dated 14.09.2023 the proposal was not approved on the ground that it does not provide for upfront payment. We have already noticed the resolution that in event 100% amount is deposited, the proposal shall be positively considered. Again in the 15th CoC meeting, no issue was raised with regard to locus of the Applicants who have submitted the proposal and the CoC also unanimously resolved to give six weeks' time to the Applicants to deposit entire amount. During the oral submissions objections are sought to be raised which did not find any consideration in the CoC meeting, rather the CoC has not shown to have any objection with regard to consideration of any proposal on such ground, which is now sought to be advanced. The submission advanced by learned counsel for the UVARCL clearly indicate that the whole intent is to somehow find one or other reason to support its decision to not approve the 12A proposal. 34. All creditors including the Financial Creditors under the scheme of IBC are only entitled to receive 100% of their admitted debt. The proposal which has now been....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the said delay bearing IA No.5407 & 5409 of 2023 and the same is pending before this Hon'ble Tribunal. The delay in complying with the orders dated 17.10.2023 passed by this Hon'ble Appellate Tribunal in deposit of the entire outstanding amount less INR 40 Crores is neither deliberate nor intentional but bonafide due to the reasons stated hereinabove. Moreover, no prejudice is caused to the Respondents or the COC. It is submitted that the FDRs along with lien letters were obtained from the Kotak Mahindra Bank (INR 316 Crores) and IDBI Bank Ltd. (INR 15 Crores) on 15.11.2023 itself and the same were duly e-filed before this Hon'ble Tribunal on 16.11.2023 and after taking permission of this Hon'ble Tribunal by way of mentioning the matter on 17.11.2023, original FDRs were physically filed with the office of the Ld. Registrar, NCLAT on the same day i.e. on 17.11.2023. A true copy of the list of documents filed by the Appellant along with e-filing receipts is annexed herewith and marked as Annexure 'D (Colly). The alleged understanding of UVARCL that only Mr. Sandeep Gupta and Mr. Sudhir Gupta were given the liberty vide order dated 17.10.2023 is ex-facie w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g Company Appeal (AT) (Ins.) No.1341 of 2022. Even otherwise all the three Companies are Saraf Group Companies." 37. We are of the view that after considering the submissions made by counsel for the parties and the materials brought on the record there is no non-compliance in the deposit made by the Appellant in the Court as per order dated 17.10.2023 nor there is any shortcoming or infirmity in the amounts deposited in the FDR and anxiety of UVARCL to somehow for one or other reason reject the proposal under 12A is more than apparent. From the record it is clear that the UVARCL was assigned the debt after filing of present appeals on 30.11.2023 for a consideration of Rs.295 Crores. Whatever claim is admitted in the CIRP is being paid full and the UVARCL is being proposed total payment of Rs.329,14,82,024/-. It is also to be noted that all creditors including Operational Creditors, Employees and Workmen and Government dues are getting 100% of their dues under the Proposal. We find substance in the submission of learned counsel for the Appellant that intent of UVARCL is to somehow take over prime prized asset of the Corporate Debtor i.e. Hyatt Regency, Mumbai and handove....
X X X X Extracts X X X X
X X X X Extracts X X X X
....NSORTIUM OF MAYANK WELFARE SOCIETY (LEAD MEMBER), AMALTAS HOTEL PRIVATE LIMITED, SURESH SINGH BHADORIA AND AMALTAS RESORTS PRIVATE LIMITED AND REFUND OF THE EARNEST MONEY DEPOSITED OF INR 2 CR. Based upon the deliberations held under agenda no. A8, the following resolution, to consider and approve the request for withdrawal from the CIRP process and refund of the earnest money deposited by them of INR 2 Cr., will be put up for e-voting before the CoC- Resolution: To consider and, if thought fit, to pass with or without modification the following resolution: "RESOLVED THAT, the consent of committee of creditors, be and is hereby accorded to approve the request of the Consortium of Mayank Welfare Society (Lead Member), Amaltas Hotel Private Limited, Suresh Singh Bhadoria and Amaltas Resorts Private Limited for withdrawal from the CIRP process in respect of Asian Hotels (West) Limited (Corporate Debtor). RESOLVED FURTHER THAT, the consent of committee of creditors, be and is hereby accorded to refund the earnest money deposited by the PRA of INR 2.00 Crore."" 40. The CoC having decided to refund the EMD of one of the Prospective Resoluti....