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2024 (5) TMI 16
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...., Mr. Nimish Kumar, Advocates for R1. Ms. Dyuti, Advocate for R-8 JUDGMENT ASHOK BHUSHAN, J. These two Appeals have been filed against the order dated 13.02.2023 passed by National Company Law Tribunal, Court-III, Mumbai Bench, allowing IA No.2767 of 2022 filed by Edelweiss Asset Reconstruction Company Limited (Respondent No.1 herein) under Section 33, sub-section (3) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "Code"). The Adjudicating Authority by the impugned order directed the liquidation of the Corporate Debtor - S.K. Wheels Private Limited. Aggrieved by which order, Company Appeal (AT) (Insolvency) No.499 of 2023 has been filed by Cosmos Cooperative Bank Limited, a Financial Creditor, who has vote share of 48.42% in the Committee of Creditors ("CoC") of the Corporate Debtor. Company Appeal (AT) (Insolvency) No.519 of 2023 has been filed by Successful Resolution Applicant, challenging the order of liquidation. Both the Appeals having been filed against the same order, have been heard together and are being decided by this common judgment. 2. Brief facts necessary for deciding the Appeals are: (i) The Adjudicating Authority vide order date....
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....e Financial Creditors dated 08.07.2022, where the Financial Creditor with 59.73% voted not to liquidate the Corporate Debtor, but the said decision was not accepted by the Adjudicating Authority on the premises that decision not to liquidate will lead to modification of the Resolution Plan, which is impermissible in the Code. Returning the aforesaid finding the Adjudicating Authority allowed the aforesaid IA filed for Company Appeal (AT) (Insolvency) Nos.499 & 519 of 2023 5 liquidation. Aggrieved by which order these two Appeals have been filed. 3. These Appeals were heard by this Tribunal on 26.04.2023, on which date, following interim order was passed: "26.04.2023 Both these Appeals have been filed challenging order dated 13.02.2023 by which the Adjudicating Authority has directed for Liquidation on an application filed by the Respondent No. 1. It is submitted that earlier on the order of Adjudicating Authority meeting of Committee of Creditors was convened on 02.12.2022 where CoC granted further time to the Successful Resolution Applicant to deposit the amount. It is further submitted that the proceeding of 02.12.2022 were not before the Adjudicating Authority. Any of the ....
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....ing Authority erroneously. It is further submitted that by a further Resolution of the Financial Creditors, passed on 02.12.2022, extension was allowed by the Financial Creditors to the SRA to make payment as per revised timeline. In view of the said decision of the CoC dated 02.12.2022, there was no question of any contravention of Plan by SRA. The SRA as per the decision dated 02.12.2022 of the Financial Creditors has already deposited the amount, which is deposited with Cosmos Cooperative Bank Limited, the largest Financial Creditor, in a fixed deposit. It is submitted that Respondent No.1 has filed IA No.2767 of 2022 in which neither RP, nor CoC or the SRA was impleaded and without issuing the notice on the said Application, the Adjudicating Authority proceeded to allow the Application. Respondent No.1 also did not bring to notice of the Adjudicating Authority about the Resolution dated 02.12.2022, which was passed subsequent to filing of the Application and before the hearing of the Application. It is submitted that action of Respondent No.1 is wholly malafide and against the majority decision of the Financial Creditors. When the Financial Creditors have decided to extend time....
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....ission of learned Counsel for the parties and have perused the record. 11. There is no dispute that Resolution Plan was approved by the CoC with 75.78% vote shares. As per the Resolution Plan, payments, which were required to be made within 60 days, could not be made by SRA and SRA has filed an Application praying for exclusion/ extension of time being IA No. 80 of 2022, which Application was rejected by the Adjudicating Authority vide order dated 04.05.2022. IA No.1054 of 2022 was filed by the RP, praying for liquidation under Section 33, sub-section (3) on the ground that SRA has not made the payments within the timeline allowed under the Resolution Plan for the upfront payments. IA No.1054 of 2022, came to be disposed of by Adjudicating Authority vide its order dated 04.05.2022, which order is as follows: "I. A. 1054/2022 The above Application is filed by the RP/Applicant, Mr. Vishal Ghusulal Jain under Section 33(3) for Liquidation of the Corporate Debtor on the ground that the successful Resolution Applicant, Mr. Anil Kumar miserably failed to implement the Resolution Plan which was duly approved by the Adjudicating Authority. The Bench notes that the Resolution Profe....
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....7 of 2022 was not brought on record by Respondent No.1 in its reply filed in the Appeal and it was only after order passed by this Tribunal on 14.02.2024, the copy of the Application has been brought on record by an affidavit dated 19.02.224. A perusal of the copy of the IA No.2767 of 2022 shows that neither CoC, nor RP or SRA were impleaded and in the IA following prayers were made: "a. Pass an order under Section 33 (3) of the Code directing initiation of Liquidation of the Corporate Debtor and appoint a Liquidator of the Corporate Debtor; b. Pass an order appointing Sachin Shrinivas Bhattad having Registration No. Reg No. - IBBI/IPA-001/IP-P00680/2017- 2018/11159 herein as the Liquidator of the Corporate Debtor; c. Pass appropriate orders, as deemed fit under Section 74(3) against the Resolution Applicant, for willfully failing to comply with the Resolution Plan; d. In the alternative to prayer Clause (a) and (b) and only in the event this Hon'ble Tribunal doesn't grant the prayer of liquidation, pass an order: i. classifying Applicant as a Financial Creditor who did not vote in favour of the Resolution Plan in terms of Regulation 38(1)(b) of CIRP Regulations; and ....
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....ority under section 31 or under sub-section (1) of section 54L, is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order as referred to in sub-clauses (i), (ii), (iii) of clause (b) subsection (1)." 21. The key words in sub-section (3) of Section 33 are "resolution plan approved by the Adjudicating Authority is contravened by the concerned corporate debtor". Thus, contravention by the SRA was to be proved. In IA No.2767 of 2022, Respondent No.1 has not even impleaded the SRA to give an opportunity to SRA to explain that SRA had not contravened the Plan. We, thus, do not approve the act of Respondent No.1 in filing IA No.2767 of 2022 without impleading the SRA, against whom contravention is sought. Further, we notice that in IA No.2767 of 2022, the Adjudicating Authority did not issue any notice, nor granted any opportunity to the CoC, whose majority decision taken on 08.07.022 was also questioned, to give its reply. The Adjudicating Authority did not give any opportunity to the SRA to respond to IA No.....
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.... at the end of Years 2, 3, 4 & 5 are to be paid as per the original timeline i.e. in Nov. 2023, Nov. 2024, Nov. 2025 and Nov. 2026". Name of the Creditors SHARE% FOR AGAINST ABSTAINED The Cosmos Co-op. Bank Ltd. 58.99 58.99 - - Edelweiss Asset Reconstruction Company Ltd. (Edelweiss ARC) 24.71 - 24.71 - State Bank of India 10.05 10.05 - - BMW India Financial Services Pvt. Ltd. 4.39 - 4.39 - Tata Capital Financial Services Ltd. 1.76 - - 1.76 Shriram Transport Finance Co. Ltd. 0.10 - - 0.10 Total 100.00 69.04 29.10 1.86 Result: Approved" 24. The said Resolution granted further time to the Resolution Applicant, which was approved by 69.04% vote shares. 25. Respondent No.1, who has filed IA No.2767 of 2022, was also part of the Meeting dated 02.12.2022 and voted against granting of extension, did not chose to bring the said Resolution before the Adjudicating Authority, which clearly prove that further time has been granted by Financial Creditors. Hence, no contravention can be alleged on the SRA. There is no material on the record to indicate that Respondent No.1, who has filed IA No.2767 of 2022 h....
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....rity is unsustainable. It is well settled that extension of time in payment by the Resolution Applicant is not modification of the Resolution Plan. 29. Learned Senior Counsel for the Appellant has relied on judgment of this Tribunal in Company Appeal (AT) (Insolvency) No.1038 of 2021 - Tricounty Premier Hearing Service Inc. vs. State Bank of India and Ors. decided on 20.01.2022, where this Tribunal took the view that Application filed by SRA praying for extension of timeline in payment as per the Resolution Plan was wrongly rejected by the Adjudicating Authority. This Tribunal allowed the Appeal and extended time to the SRA to comply with the financial obligations as per the Resolution Plan. In paragraphs 26 and 27, following has been held: "26. The facts and materials on record as noted above clearly indicate that although the Appellant had failed to make payment as per Resolution Plan, but it is not a case that efforts has not been made by the Appellant to make payment. Admittedly, payment of Rs.15 crores out of Rs.45 crores to the Financial Creditor has already been made apart from other payments as noted above. We, thus, are of the opinion that by granting 30 days' time to A....
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....red to deposit balance amount of Rs.165.31 Crores before 27.12.2021 but before aforesaid dated an I.A. was filed by the Appellant being I.A. No. 2941 of 2021 when Appellant came to know about the Report of the Sub-Divisional Officer dated 21.12.2021 that there is encroachment on the immovable property. Learned counsel for the Appellant before us submitted that they are ready to deposit the entire balance amount of Rs.165.31 Crores within any time allowed by this Tribunal to finally implement the Resolution Plan." 31. When the Adjudicating Authority directed the RP by order dated 04.05.2022 to convene the Meeting of CoC to take a decision, as to whether Corporate Debtor be liquidated or not, the decision taken by the CoC was a commercial decision of the CoC, i.e., not to liquidate the Corporate Debtor and the said commercial decision was not required to be interfered by the Adjudicating Authority by the impugned order directing for liquidation. 32. Shri Neeraj Malhotra, learned Senior Counsel appearing for Respondent No.1 tried to distinguish the judgment of this Tribunal in GP Global Energy Pvt. Ltd. by observing that in the said case time was extended for 30 days only, whereas ....