TaxTMI 
TaxTMI 
2024 (7) TMI 196
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....nafter referred to as 'Impugned Order') passed by the Adjudicating Authority, National Company Law Tribunal, Mumbai Bench-I in IA-1177/2021 and IA-1768/2021 in CP (IB) No. 2445 of 2019. By the impugned order, the Adjudicating Authority approved the resolution plan of the Successful Resolution Applicant ('SRA' in short) filed by the RP vide I.A. 1177/2021 and dismissed the I.A. 1768 of 2021 filed by the ex-Director of the Corporate Debtor objecting to the approval of the resolution plan of the SRA. Aggrieved by this order, the present appeal has been preferred by the ex- Director of the Corporate Debtor-Appellant. 2. Coming to the factual matrix of the present case, it has been brought to our notice that the Corporate Debtor-Genesis Resorts Pvt. Ltd. had availed a loan of Rs.149.05 cr from the Financial Creditor-Bank of Baroda during the years 2012 to 2014. The loan facility had been granted for construction of a hotel on a plot of land at Vile Parle near the Mumbai Airport. The Corporate Debtor applied for restructuring of the credit facilities which was allowed by Financial Creditor-Bank of Baroda on 18.02.2015. However, the Corporate Debtor failed to repay the outstanding loan....
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....larity according to the Appellant is the under-valuation of the assets of the Corporate Debtor. It was submitted that the RP had published an incomplete Information Memorandum which failed to capture the correct value of the assets of the Corporate Debtor. This led to arriving at a very low liquidation value. Thus, it was contended that the RP had conducted the CIRP process without ensuring maximization of the value of assets of the Corporate Debtor which goes against the grains of IBC. 6. Pointing out another alleged grave irregularity, it is submitted that the SRA is a non-banking non-deposit financial company on which the Securities and Exchange Board of India ('SEBI' in short) had imposed fine. It was also pointed out that the SRA is a company under the umbrella of M/s Finquest Group promoted by one Sh. Bharat Patel who had failed to make necessary disclosure under the prohibition of insider trading norms on several occasions. Thus, when the Bharat Patel Group had violated the norms set out under the SEBI Act and had been debarred from transacting in the market, the RP had failed and neglected in carrying out necessary steps to ascertain the eligibility of the present SRA wh....
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....he assets of the Corporate Debtor have been under-valued. A property which could have fetched more than Rs.200 cr in the current market situation is being sold at a much lower valuation causing loss of public money. It was added that the Bank of Baroda had conducted valuation of the said property on two earlier occasions in 2015 and 2019. In 2015, the valuation conducted by A.V. Shetty & Associates showed the realisable value as Rs.413.02 cr, while in 2019 the valuation conducted by Kakode & Associates showed the market value of the property to be Rs.142.49 cr as on 22.01.2019. It is also submitted that the valuation of the said property in the Balance Sheet of the Corporate Debtor for 2018-19 stood at Rs.210.10 cr. Even as per the Ready Reckoner Rate of the Registrar's Office, which is otherwise deemed to be the minimum rate of property transactions notified by the Government, the price of the said property was valued at Rs.260 cr. Furthermore, keeping in view the prime location of the said property, the valuation should have been much more than what had been stated by the SRA. It was incumbent upon the RP to consider the balance sheets of the Corporate Debtor and the earlier valu....
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....onducted by IBBI registered valuers appointed post the admission of Corporate Debtor into CIRP is required to be considered by the CoC. Any valuation conducted in the past by any entity for whatever purposes prior to the initiation of CIRP does not have any relevance for the purposes of CIRP of the Corporate Debtor. 14. The Learned Counsel of the Respondent No.1 has contended that claim of the Appellant that the real value of the assets is higher is only a ruse to derail the CIRP of the Corporate Debtor and placed reliance on the judgement of the Hon'ble Supreme Court in M.K. Rajagopalan v. Dr. Periasamy Palani Gounder & Or (2024) 1 SCC 42 to contend that once the members of CoC are satisfied with and have endorsed the process of valuation, allegations of irregularities in the valuation of assets raised by the ex-Director of the Corporate Debtor needs to be discounted. The relevant extracts of the Gounder judgment supra in the context of valuation process undertaken under CIRP Regulations 27 and 35 is as below: "135. It has rightly been contended on behalf of the appellants that the members of CoC were provided with fair value and liquidation value after obtaining a con....
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....he RP. When we see the findings of the Hon'ble Supreme Court in the Gounder judgement supra, we are inclined to hold the view that the findings therein are squarely applicable in the present factual matrix and that the allegation of irregularity raised by the Appellant lacks merit. Once a valuation report is submitted by the RP to the CoC and the CoC is satisfied with the same, the Adjudicating Authority cannot go into the question of valuation of the assets conducted by the RP during the CIRP. The perception of the Appellant as to real value of the Corporate Debtor cannot be a yardstick or a factor to reject the resolution plan which has been approved by the CoC with 100% voting share. Hence, the reliance placed by the Appellant on pre-CIRP valuations conducted by Bank of Baroda in the past is misconceived and misplaced. 16. It was also submitted by the Learned Counsel for the Respondent No.1 that the value offered in the resolution plan is not required to be higher than the fair or liquidation value of the Corporate Debtor as has been wrongly asserted by the Appellant. In support of their contention, reliance has been placed on the judgement of the Hon'ble Apex Court in Mahara....
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....ittedly therefore, the Appellant was provided copy of the resolution plan as well as minutes of the CoC meeting and even allowed to attend the CoC meetings. Hence, the allegations raised by the Appellant of the RP not inviting the Appellant to attend the CoC meetings and not being provided with the resolution plan is frivolous and self-contradictory and therefore deserves scant regard. It is clear therefore that the Appellant has unjustifiably claimed that there has been statutory violations and irregularities in the valuation process conducted by the RP. 19. Coming to the second limb of argument that the SRA attracted Section 29-A(f) of the IBC and was not eligible to be a resolution applicant, we find that this aspect has been holistically dealt at length by the Adjudicating Authority in the impugned order. It may be useful to notice the relevant paragraphs of the impugned order which are as extracted below: "14. At the outset, we find that the Resolution Professional has filed a declaration certifying the compliance of Sec. 29A and this has also been verified by an independent agency, M/s_ We further find that on the date of the submission of the Resolution Plan, the....
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....RA. This independent third-party entity in its report had confirmed that the promoters of the SRA had complied with the orders of SEBI and that the SRA was eligible to submit the resolution plan for the Corporate Debtor. Thus, in our considered view even on this count the Appellant has hopelessly failed to validate their contention of alleged irregularity. 21. More importantly, we find that the CoC has approved the resolution plan with 100% vote share and prior to the approval of the plan, the valuation exercise conducted by the registered valuers were also brought to the knowledge of the CoC. All these facts have been duly noted and considered by the Adjudicating Authority as may be seen at paras 33 and 34 of the impugned order which is as reproduced below: "33. The RP states that Finquest Financial Solutions Private Ltd and Mr. Jiten K Ajmera submitted Resolution Plan along with Section 29A Affidavits, Undertakings and other necessary documents as per RFRP on 02.02.2021. Both the Resolution Plans were opened in the 8th COC meeting held on 04.02.2021. The said Resolution Plans were discussed by the COC members in the 8th and 9th CoC meetings held on 04.02.2021 and 15.0....
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....the meetings through voting, is the collective business decision and that the decision of the CoC's 'commercial wisdom' is non justiciable, except on limited grounds as are available for challenge under Section 30(2) or Section 61(3) of the IBC. This position of law has been consistently reiterated in a catena of judgments of this Court, including: (i) K. Sashidhar v. Indian Overseas Bank (ii) Committee of Creditors of Essar Steel India Limited through authorized signatory v. Satish Kumar Gupta, (iii) Maharashtra Seamless Limited v. Padmanabhan Venkatesh, (iv) Kalpraj Dharamshi v. Kotak Investment Advisors Limited, (v) Ghanashyam Mishra and Sons Private Limited through the Authorized Signatory v. Edelweiss Asset Reconstruction Company Limited through the Director" ( Emphasis supplied ) 23. When the CoC has approved the Resolution Plan by 100% voting share after considering its feasibility and viability, such decision of CoC is a commercial decision. There can be no fetters on the commercial wisdom of the CoC. It is settled law that commercial wisdom of CoC in approving the Resolution Plan is not to be interfered in the exerci....