TaxTMI 
TaxTMI 
2024 (10) TMI 509
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.... approval of the Resolution Plan which was submitted by the Respondent No.3- 'Invent Assets Securitization & Reconstruction Private Limited' has approved the Resolution Plan which was submitted by Respondent No.4- 'Westend Investment and Finance Consultancy Private Limited' who was permitted to be substituted in place of 'Invent Assets Securitization & Reconstruction Private Limited' with the approval of the Committee of Creditors (CoC). Adjudicating Authority by impugned order has approved the Resolution Plan of Respondent No.4, aggrieved by which order this Appeal has been filed. 2. Brief facts of the case and sequence of the events necessary to be noticed for deciding this Appeal are: 2.1. Corporate Insolvency Resolution Process of the Corporate Debtor commenced vide an order dated 09.12.2020 on an application filed under Section 9. Resolution Professional on 17.05.2021 invited Expression of Interest in Form G. Request for Resolution Plan was issued by Resolution Professional on 18.06.2021 in response to which only one Resolution Applicant namely 'GSEC Ltd.' filed its plan. Other Resolution Applicant requested for further extension of time. After order dated 23.08.2021 pas....
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....CoC required clarification and modification. On 01.09.2023, the Adjudicating Authority while hearing the application IA No.764 of 2021 directed the Resolution Professional to file the Request for Resolution Plan (RFRP) and to point out the relevant provisions in the RFRP whereby the Resolution Applicant could be changed after Resolution Plan was approved by the CoC. CoC in its 29th CoC meeting held on 12.09.2023 examined the feasibility and viability of the plan already approved and the Resolution Plan was again re-approved by the CoC by third time with 100% approval. On 20.10.2023, 30th CoC meeting was held where COC by appropriate voting resolved to amend RFRP and to include provision for substitution / replacement of the Resolution Applicant. On 24.11.2023, Resolution Professional filed another updated Form-H before the Adjudicating Authority. Adjudicating Authority after hearing the parties has passed the impugned order on 04.12.2023 approving the Resolution Plan as modified with Respondent No.4 as Resolution Applicant, aggrieved by which order this appeal has been filed. 3. We have heard Shri Krishnendu Datta, Learned Senior Counsel for the Appellant, Shri Abhijeet Sinha, L....
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....d or changed. Although RFRP was filed by the Resolution Professional but no clause in the RFRP could be pointed out where Resolution Applicant could be changed or substituted after plan has been approved. It is submitted that the CoC even proceeded to pass a Resolution on 20.10.2023 for amending the RFRP to include a provision for substitution/ replacement of Resolution Applicant. The entire process adopted by the Resolution Professional and the CoC were clearly contrary to the provisions of the CIRP Regulations 2016. Adjudicating Authority committed serious error in approving such modified Resolution Plan with new Resolution Applicant i.e. Respondent No.4 who had neither filed any EoI nor has filed any Resolution Plan in the process. Permitting the SRA to be changed after Resolution Plan of the SRA has been approved, is clearly impermissible and mockery of the entire CIRP process. According to Form-H which was submitted by the Resolution Professional, the CIRP of the corporate debtor had come to an end on 14.09.2021. Thereafter, Resolution Professional held 10th CoC meetings last being held on 20.10.2023 without any authority or jurisdiction. No meeting of the CoC could have been ....
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....w management has taken over the control of the corporate debtor. Resolution Plan having been implemented, the appeal has become infructuous. Object of the IBC is to revive the business of the corporate debtor which having been revived, no interference is called for in the impugned order. 7. Counsel for the Resolution Professional submits that he has to file revised Form-H due to the decision of the CoC where Respondent No.4 was substituted. Counsel for the Resolution Professional referred to the order of the Adjudicating Authority dated 18.10.2023 where an application filed by SKIL Infrastructure Limited against partial rejection of its claim of financial debt has been rejected. Another order dated 18.10.2023 has been referred to where Adjudicating Authority again took the view that SKIL Group was promoter and cannot be taken as member of the CoC. Revised Form-H has been filed on 28.06.2023 after approval of the modified Resolution Plan in 25th and 26th CoC meeting. 8. We have considered the submissions of the Counsel for the parties and perused the record. 9. Counsel for the parties have relied on various judgments of the Hon'ble Supreme Court and this Tribunal which we s....
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....3, the Adjudicating Authority directed the Resolution Professional to file the RFRP and also point out the relevant provisions in the RFRP whereby the Resolution Applicant could be changed after the Resolution Plan is approved by the CoC. RFRP was filed by the Resolution Professional but no clause of RFRP could be pointed out or placed before the Adjudicating Authority which permits change of the Resolution Applicant after approval of the Resolution Plan. (e) The Adjudicating Authority heard the IA No.764 of 2021 along with the Affidavit filed by the Resolution Professional and modified Resolution Plan placed before the Adjudicating Authority in which SRA was substituted from Respondent No.3 to Respondent No.4. The Adjudicating Authority by the impugned order has approved the modified Resolution Plan i.e. Respondent No.4 as SRA. 13. Counsel for the Respondent has questioned the locus of the Appellant to file this appeal. We, thus, need to first consider the objections of the Respondents regarding the locus. 14. The submission of the Appellant in response to the objection regarding locus is that Appellant was Resolution Applicant in the CIRP process who had file....
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....thing to the contrary contained under the Companies Act 2013 (18 of 2013), any person aggrieved by the order of the Adjudicating Authority under this part may prefer an appeal to the National Company Law Appellate Tribunal. xxx xxx xxx (3) An appeal against an order approving a resolution plan under section 31 may be filed on the following grounds, namely: - (i) the approved resolution plan is in contravention of the provisions of any law for the time being in force; (ii) there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period; (iii) the debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified by the Board; (iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or (v) the resolution plan does not comply with any other criteria specified by the Board." 15. The grounds ....
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....d by the Respondent No.3 on 14.12.2022 seeking substitution of name of Respondent No.4 in place of Respondent No.3. IA was subsequently withdrawn by the Respondent No.3 which was permitted by the Adjudicating Authority vide order dated 19.04.2023. The order passed in IA No.1 of 2023 is as follows:- "IA/1(AHM)2023 This IA has been moved by the Successful Resolution Applicant for substitution of Respondent No.2 as the Resolution Applicant as the holding company. At the outset, it is stated by the Ld. Sr. Counsel representing the Applicant that there is no approval so far from the CoC. In view of this, he seeks to withdraw this particular IA with liberty to move appropriate representation before the CoC. Accordingly, IA/1(AHM)2023 stands disposed of with liberty as above. List all other IAs on 08.05.2023." 19. The above order indicates that the Adjudicating Authority did not express any opinion on the merits of the IA No.1 of 2023 rather Counsel appearing for the Respondent No.3 withdrew the application of its own with liberty to move an appropriate representation before the CoC. It is clear that the liberty was sought by Respondent No.3 it....
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....mong them is as under: * The CoC has been re-constituted during the CIRP due to assignment of loan. The earlier CoC constituted is as mentioned below:- Sr. No. Name of Creditor Voting Share (%) 1. Citi Securities & Financial Services Pvt. Ltd. 72.97% 2. Edelweiss Rural and Corporate Services Limited 23.38% 3. The Karur Vysya Bank Ltd. 0.57% 4. Union Bank of India 3.08% The reconstituted CoC members is as mentioned below: Sr. No. Name of Creditor Voting Share (%) 1. Citi Securities & Financial Services Pvt. Ltd. 72.97% 2. RKG Fund-I, A scheme of RKG Trust, category II AIF, managed by RKG Asset Management LLP 23.38% 3. Prudent ARC LTD. 3.65% The list of financial creditors of the CD E-complex Pvt. Ltd. being members of the CoC and distribution of voting share as per modified resolution plan present in 26th CoC meeting held on 5th may, 2023 is as under:- Sr. No. Name of Creditor Voting Share (%) Voting for Resolution Plan (Voted for/ Dissented/ Abstained) 1. Citi....
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....f 2021. The order dated 01.09.2023 passed by the Adjudicating Authority is as follows:- "IA/764(AHM) 2021 In compliance of the order dated 21.08.2023 the applicant / RP has filed affidavit vide dairy no 3312 dated 31.08.2023 which is taken on record. We have heard Learned Counsel for the applicant as well as Learned Counsel for the CoC and Learned Counsel for the SRA. Learned Counsel for the applicant/ RP is directed to file the RFRP and point out the relevant provisions whereby resolution applicant could be changed after Resolution Plan is approved. RP is also directed to place on record the relevant Resolution of CoC, where at the feasibility and viability of the Plan was duly verified by the CoC. Liberty is given RP to hold one more CoC meeting if it is not clearly recorded in the previous meeting. List for further hearing on 15.09.2023." 24. The order dated 01.09.2023 clearly indicate that the Adjudicating Authority has required the Resolution Professional to explain and place the relevant provisions of the RFRP under which Resolution Applicant could be changed after Resolution Plan was approved. 25. Counsel for the Ap....
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.... amount required to meet liquidation costs, in consultation with the resolution professional, in the event an order for liquidation is passed under section 33. (2) The committee shall make a best estimate of the value of the liquid assets available to meet the liquidation costs, as estimated in sub-regulation (1). (3) Where the estimated value of the liquid assets under sub-regulation (2) is less than the estimated liquidation costs under sub-regulation (1), the committee shall approve a plan providing for contribution for meeting the difference between the two. (4) The resolution professional shall submit the plan approved under sub-regulation (3) to the Adjudicating Authority while filing the approval or decision of the committee under section 30 or 33, as the case may be. Explanation.- For the purposes of this regulation, "liquidation costs" shall have the same meaning regulation 2 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016." 28. The clear provision of the statute is that the Resolution Plan received from a person who does not appear in the final list of Prospective Resolution Applicants (PRAs) c....
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....the corporate actions (if any) required to achieve the aforesaid events shall be taken by the Monitoring Agent acting on behalf of the Company and infusion of RA Equity Subscription Amount, the Company's issued and paid up equity share capital shall stand reduced to INR Cr (Indian Rupees One Crore only) held by RA directly or indirectly through subsidiary(ies)/special purpose vehicle/limited liability partnership firms including nominees and financial lenders of ECPL in the ratio 26:74 respectively. Extinguishment of shares of Corporate Debtor will be done as per the Applicable Laws and accounting standards including through credit to Capital Reserve Account. The equity shareholding of the Corporate Debtor post cancellation of existing capital shall be as follows: Category of shareholder % of Equity Shareholding RA directly or indirectly through subsidiary(ies)/ special purpose vehicle/ limited liability partnership firms including nominees 26% Existing Promoter Group Nil Verified Financial Creditors 74% Total issued, subscribed and Paid up Equity Capital 100.00% (b) (viii) After completion of all the st....
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....judicating Authority was a case where Respondent No.3 herein- 'Invent Assets Securitization & Reconstruction Private Limited' was one of the co-applicant and Resolution Plan was rejected by the Adjudicating Authority holding that 'Invent Assets Securitization & Reconstruction Private Limited' cannot submit its Resolution Plan it being an Assets Securitization & Reconstruction Company against which Appeal was filed. 34. In the above case, 'Invent Assets Securitization & Reconstruction Private Limited' was a co-applicant and it was submitted before this Tribunal that co-applicant was not proposing to acquire any equity shareholding and that the other co-Resolution Applicants were to solely acquire the shareholding and run the business. The submission of the Appellant was noticed in paragraph 5, which is as follows:- "5. The Learned Counsel for the 'Appellant also submitted that the ARC, though a Co-Resolution Applicant, was not proposing to acquire any Equity Shareholding and that the other Co-Resolution Applicants were to solely acquire the Shareholding and run the business and therefore at the very outset, the analogy drawn by the Adjudicating Authority is i....
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....al of the Corporate Debtor and Resolution'. Liquidation ought to be the last resort, keeping in view the scope and spirit of the Code." 38. Reliance on the above judgment by the Adjudicating Authority is wholly erroneous. In the present case, 'Invent Assets Securitization & Reconstruction Private Limited' was sole Resolution Applicant and present is not a case that whether 'Invent Assets Securitization & Reconstruction Private Limited' should be permitted to be Resolution Applicant or not. The question is that whether in place of 'Invent Assets Securitization & Reconstruction Private Limited' another SRA can be substituted at the instance of 'Invent Assets Securitization & Reconstruction Private Limited' with approval of the CoC. Thus, the judgment which has been relied by the Adjudicating Authority for approving the Resolution Plan is clearly distinguishable and does not support the submission of the Respondent in the present case. 39. Adjudicating Authority itself has noticed that RFRP does not contain any provision for change of SRA after approval of the plan. It glossed over the said issue and has not considered the issue apart from the above observations in paragra....
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....sgressing into the domain of the legislature, especially in matters relating to economic and regulatory legislation. This Court observed: (P. Laxmi Devi case, SCC p. 751. para 80) "80. As regards economic and other regulatory legislation judicial restraint must be observed by the court and greater latitude must be given to the legislature while adjudging the constitutionality of the statute because the court does not consist of economic or administrative experts. It has no expertise in these matters, and in this age of specialisation when policies have to be laid down with great care after consulting the specialists in the field, it will be wholly unwise for the court to encroach into the domain of the executive or legislative (sic legislature) and try to enforce its own views and perceptions." (emphasis supplied) 158. Judicial restraint must not only be exercised while adjudicating upon the constitutionality of the statute relating to economic policy but also in matters of interpretation of economic statutes, where the interpretative manoeuvres of the Court have an effect of transgressing into the law-making power of the legislature and disturbing the delicate ba....
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.... its voting is to the effect that the corporate debtor has a perpetual exclusive right to use the brands, namely, "Deccan Chronicle" and "Andhra Bhoomi" and it nowhere indicates regarding the right of ownership over the trade marks/brands, "Deccan Chronicle" and "Andhra Bhoomi" of the corporate debtor. But the adjudicating authority while adjudicating application IA No. 155 of 2018, apart from upholding the exclusive right to use the trade marks, "Deccan Chronicle" and "Andhra Bhoomi", made a further declaration that trade marks belong to corporate debtor DCHL under its order dated 14-8-2019 [Canara Bank v. Deccan Chronicle Holdings Ltd., 2019 SCC OnLine NCLT 32753] , which, in our view, was a modification/alteration in the approved resolution plan which indisputably is impermissible in law and this is what NCLAT in para 32 of its impugned order has observed as under : (Deccan Chronicle Marketeers case [Deccan Chronicle Marketeers v. Deccan Chronicle Holdings Ltd., 2022 SCC OnLine NCLAT 3484] , SCC OnLine NCLAT) "32. In view of the law declared [Ed. : The reference appears to be to Ebix Singapore (P) Ltd. v. Educomp Solutions Ltd. (CoC), (2022) 2 SCC 401 : (2022) 1 SCC &nb....
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....fter submission, or a withdrawal after approval by the CoC and submission to the adjudicating authority, irrespective of the content of the terms envisaged by the resolution plan, when unregulated by statutory timelines could occur after a lapse of time, as is the case in the present three appeals before us. Permitting such a course of action would either result in a downgraded resolution amount of the corporate debtor and/or a delayed liquidation with depreciated assets which frustrates the core aim of IBC. 222. If the legislature in its wisdom, were to recognise the concept of withdrawals or modifications to a resolution plan after it has been submitted to the adjudicating authority, it must specifically provide for a tether under IBC and/or the Regulations. This tether must be coupled with directions on narrowly defined grounds on which such actions are permissible and procedural directions, which may include the timelines in which they can be proposed, voting requirements and threshold for approval by the CoC (as the case may be). They must also contemplate at which stage the corporate debtor may be sent into liquidation by the adjudicating authority or otherwise, in t....
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....Court which is pending consideration. Learned counsel for the Appellant submits that the Appellant cannot be Resolution Applicant in view of the clouds on the eligibility of the Appellant, hence, he has prayed for substituting another Resolution Applicant. 3. The Adjudicating Authority after hearing learned counsel for the Applicants as well as learned counsel for the Monitoring Committee took the view that new Resolution Applicant cannot be brought in nor can be substituted with another Resolution Applicant and rejected the application. Learned counsel for the Appellant submits that the Appellant cannot be Resolution Applicant in view of the clouds on the eligibility on the Appellant, hence, the Adjudicating Authority ought to have been found certain via media with regard to implementation of the resolution or initiate fresh process. 4. We have heard the learned counsel for the Appellant as well as learned counsel for the Monitoring Committee. 5. The present Appeal has been filed against the order by which application filed by the Appellant has been rejected and we fully agree with the reasons given by the Adjudicating Authority for rejecting....
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....d the meeting and modify the Resolution Plan. We have already noticed above that CIRP of the Corporate Debtor has come to an end on 14.09.2021 but CoC thereafter continued for two years by holding several CoC meeting with object to change that SRA into another entity. We have already observed that the steps taken by the CoC and the Resolution Professional were subsequent to filing the application for approval of the Resolution Plan are not inconformity with the IBC and the CIRP Regulations 2016. 48. In the facts of the present case, we are of the view that one more time bound opportunity be given for finding out as to whether any other Resolution Applicants can revive the Corporate Debtor. We, thus, are of the view that by setting aside the order of the Adjudicating Authority approving the Resolution Plan, we need to direct for issuance of fresh Form-G by the Resolution Professional and complete the entire process within 90 days from today. In result, we allow the appeal, set aside the order impugned dated 04.12.2023 passed in IA No.764 of 2021. We answer the questions in following manner:- (i) After approval of the Resolution Plan of Respondent No.3 by the ....