TaxTMI 
TaxTMI 
2024 (10) TMI 509
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....s 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 passed by the Adjudicating Authority directing t....
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....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, Learned Senior Counsel for the CoC, Shri Nikhil ....
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....lution 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 called after expiry of the period of the CIRP. 5....
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....ate 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 shall refer to while considering the submissions in detail. ....
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....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 filed the Resolution Plan which was not approved by COC and plan of Respondent No. 3 was approved in 20th COC meeting. Aft....
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....ing 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 which have been raised in the appeal are the grounds which are fully covered by sub-section (3) of Section 61, hence, it cannot be said that the Appellant is not an agg....
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....uthority 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 itself. We are of the view that the said order passed on 19.04.2023 does not clothe the CoC to permit substitution of Respondent No.4 in place of Respondent No.3. After taking aforesaid liberty the CoC proceeded to hold the meetings of the....
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.... 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 Securities & Financial Services Pvt. Ltd. 72.97% Voted for 2. RKG Fund-I, A scheme of RKG Trust, category II AIF, managed by RKG Asset Management LLP 23.38% Voted for 3. Prudent ARC LTD. 3.65% Voted for 100.00% 20. The aforesaid clearly indicate that the CoC has approved the Resolutio....
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....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 Appellant submitted that after the order dated 01.09.2023 meeting of the CoC was held on 20.10.2023 i.e. 30th CoC meeting where CoC has passed the resolution authorising the Resolution Professional to amend the RFRP which was approved with 100% voting share. The Resolution Professional in its reply has brought on record minutes of the 30th CoC meeting dated 20.10.2023, which is as follows:- "Resolutions passed by the Committee....
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....roviding 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) cannot be considered. In the present case, there is no dispute that the Respondent No.4 has never submitted a Resolution Plan and he was not included in the list of PRA. The CoC has no jurisdiction to approve the Resolution Plan treating it to be the plan of Respondent No.4 or to substitute Respondent No.4 as Resolution Applicant. The outcome of the CoC approval and filing of revised Form-H is that now the Respondent No.4 has become the SRA whose plan has been approved. The approval of the Resolution Plan of Respondent No.4 i....
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....tor 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 steps outlined above in this Plan, the shareholding of the Company 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* *For the purpose of implementation of this Plan, such subsidiary(ies)/ limited liability partnership firms, including nominees (if any) shall also remain in compliance with Section 29A of the IBC 26% Existing Promoter Group Nil Verified Financial Creditors 74% Total issued, subscribed and Paid up Equ....
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....ding 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 incorrect as facts are distinguishable. It is also submitted that the Appellant is an 'Aggrieved Person' as elucidated under Section 61(1) of the Code." 35. This Tribunal took the RBI's response in the issue, which is noticed in paragraph 6 of the judgment which is as follows:- "6. This Tribunal, vide Order dated 14/06/2022, deemed it appropriate to seek the view of RBI and therefore the Appellant filed IA No. 743/2022, seeking to implead 'RBI' and 'Long View Resources (HK) Private Ltd.', the Co-Resolution Applicants". 36. Counsel for the RBI appeared before the Appellate Tribunal and submitted that it is not necessary to implead ....
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....tization & 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 paragraph 15(iii). Other discussion of the Adjudicating Authority in paragraph 50 are on the commercial wisdom of the CoC. Adjudicating Authority relied on the judgments of the Hon'ble Supreme Court in "K. Sashidhar v. Indian Overseas Bank and Ors.- (2019) 12 SCC 150", "Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta and Ors.- (2020) 8 SCC 531" and "Maharastra Seamless Ltd. vs. Padmanabhan Venkatesh & Ors.- (Civil Appeal No.4242 of 2019)" for coming to the conclusion that the commercial wisdom of the CoC cannot be interfered with. The Adjudicating Authority further observed that the CoC in its 30th CoC meeting has approved the plan with requisite majo....
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....croach 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 balance of separation of powers between the legislature and the judiciary. Judicial restraint must be exercised in such cases as a matter of prudence, since the court neither has the necessary expertise nor the power to hold consultations with stakeholders or experts to decide the direction of economic policy. A court may be inept in laying down a detailed procedure for exercise of the power of withdrawal or modification by a successful resolution applicant without impacting the other procedural steps and the timelines under IBC which are sacrosanct. Thus, judicial restraint must be exercised while intervening in a law governing substantive outcomes through procedure, such as IBC. In this c....
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....tion/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 (Civ) 586 and Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. (P) Ltd., (2021) 9 SCC 657] by the Hon'ble Supreme Court, applying the same to the present appeal, we have no hesitation to conclude that right or ownership, if any, claimed after approval of resolution plan by CoC is extinguished and if ownership of corporate debtor is declared over the trade marks, it would amount to modification or alteration of approved resolution plan by CoC which is impermissible. Hence, the order of adjudicating authority to the extent of declaring the ownership of corporate debtor over the trade marks "Deccan Chronicle" and "Andhra Bhoomi" is illegal and th....
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....r 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 the event of a failed negotiation for modification and/or withdrawal. These are matters for legislative policy." (emphasis supplied) 42. The above judgment also supports that CoC after having approved the Resolution Plan could not have allowed to modify. There can be only one exception to aforesaid, where Resolution Plan violates any provision of Section 30(2) and the CoC takes a decision to delete the provision which are non-compliant to make the plan compliant. However, that is not an issue in the present case, hence, not required to be dealt any further. 43. Counsel for the Appellant has placed reliance on the judgment of this Tribunal in Company Appeal (AT) (Ins.) No. 333 of 2024- "UV Asset Reconstruction Company Ltd....
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....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 the application filed by the Appellant for substituting another Resolution Applicant in place of the Appellant. When plan of the Appellant as Resolution Applicant was approved, the Adjudicating Authority rightly refused to substitute another Resolution Applicant, in which order no infirmity is found. 6. In so far as submission of the Appellant that some way forward has to be looked into. It is always open for the Monitoring Committee as well as the Appellant to make appropriate application before the Adjudicating Authority to find out a way forward and to proceed further and it is for the Adjudicating Authority to take call on said applications and decide the same in accordance with law. Subject to the liberty above, both the appeals are dismissed." 44.....