TaxTMI 
TaxTMI 
2024 (4) TMI 1216
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....ng The Union of India). ORDER The petitioner is before this Court seeking a slew of prayers and in effect seeking to quash minutes of the 22nd meeting of the Committee of Creditors of Associate Décor Limited held on 21-12-2022 as non est and illegal and other prayers are sequel to the said prayer. This Court, accepting certain of the prayers of the petitioner had allowed the writ petition in part, in terms of its order dated 21-11-2023. Subsequent developments took place and while answering review petitions, this Court recalled the order so passed on 21-11-2023 in Review Petition No. 573 of 2023 c/w 574 of 2023 in terms of its order dated 28-02-2024. Therefore, the matters are heard afresh, in the light of the order passed in the review petitions on 28-02-2024. 2. Heard Sri S. Basavaraj, learned senior counsel for Sri Sivaramakrishnan M.S., learned counsel for the petitioner; Sri S.S.Naganand, learned senior counsel for Sri Lomesh Kiran N., learned counsel for respondent Nos. 1 to 3; Smt. Lakshmy Iyengar, learned senior counsel for Sri Ajay Rao, learned counsel for respondent No. 4; Sri Sajjan Poovayya, learned senior counsel for Sri M. Nikilesh Rao, ....
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....ich would far exceed the liabilities of the Company to the consortium of Banks. Pending the application, the NCLT appointed an Interim Resolution Professional for the Company under the Code and the petitioner then ceased to be the Director of the Company as respondent No. 4 who is appointed as Interim Resolution Professional took over the affairs of the Company. Thereafter, the 4th respondent made it public that the CIR process had commenced with regard to the Company. 6. Pursuant to all the aforesaid, a Committee of Creditors of the Company came to be constituted wherein the 1st respondent had 24.16% voting share and 2nd and 3rd respondents had 41.18% and 34.66% voting share respectively. The first meeting of the Committee of Creditors was held on 26-12-2018. The Committee of Creditors then appointed the 4th respondent as a Resolution Professional of the Corporate Debtor, him already being appointed as Interim Resolution Professional. The Resolution Professional issues Form-G through which he invites expression of interest for submission of resolution plans in respect of the Corporate Debtor. Things go on in this manner. 7. On 09-10-2019 the 4th respondent in the 11th m....
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....ting to Rs.40 crores as opposed to Rs.40 crores offered by the 5th respondent. The petitioner also offered to settle the dues of operation creditors in full amounting to Rs.60 crores as opposed to Rs.60 crores offered by the 5th respondent, as also, the dues of the workmen in full which was approximately Rs.1 crore which was the same offered by the 5th respondent. 10. The Committee of Creditors rejected the offer of the petitioner without any reason and notified the petitioner that since the offer of the 5th respondent had already been approved, no opportunity can be given for considering the proposal of the petitioner is the submission of the learned senior counsel. It is his emphatic submission that the proposal of the 5th respondent was approved in the meeting of the Committee of Creditors held on 11-02-2020 wherein only three hours notice was given to the petitioner in complete contravention of Section 24 of the Code and Regulation 19 of the IBBI Regulations. It is his submission that on 10-02-2020 deliberation on approval of a particular resolution plan of the 5th respondent was in place. Deliberations happened. The deliberations did not conclude on the said day. There was ....
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....x court. 5th RESPONDENT: 12. The learned counsel representing the 5th respondent would toe the lines of the Committee of Creditors to contend that it is the commercial wisdom of the Committee of Creditors to approve the resolution plan of the 5th respondent. This Court in exercise of its jurisdiction under Article 226 of the Constitution of India would not entertain a petition, which is a commercial wisdom of approval of resolution plan. Insofar as the opportunity not being granted to the petitioner, the learned senior counsel would contend that the petitioner was represented on 10-02-2020 on which day the meeting was adjourned to 11-02-2020. It was not a meeting on a new agenda. The agenda was the same. Since the petitioner had already represented on 10-02-2020 and all the deliberations had happened on 10-02-2020 in the presence of the petitioner, the petitioner cannot complain of violation of principles of natural justice. On 11-02-2020 notice was given to the petitioner and he has also appeared through video conferencing which was always available to him. The learned senior counsel would struck to the stand that it was only an adjourned meeting and there can be no question....
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....refore, the petitioner cannot now iterate the contentions that he has lost. He would also seek dismissal of the petition. 15. In reply to all these submissions, the learned senior counsel for the petitioner would again take this Court through the documents appended to the petition to demonstrate that, if it was not an amended agenda, there was no question of issuance of notice at all. But, notice is issued to the petitioner and if it is issued then they will have to follow the rigour of the Code and the Regulations. He would further contend that the Resolution Professional has shown interest more than what is necessary. The Resolution Professional ought to have been neutral, as the role of the Resolution Professional is limited to the conduct of proceedings and not to show any partisan attitude towards anybody. The submissions that are made by the Resolution Professional before this Court are clearly an act of overstepping the jurisdiction. 16. I have given my anxious consideration to the submissions made by the learned senior counsel for the respective parties, other counsel and have perused the material on record. 17. The afore-narrated facts are all a matter of record, ....
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.... of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (d) The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor. (e) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period. (f) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. (g) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process. (h) The IRP should follow all extant provisions of IBC, 2016 and the rules including fees rules as framed by IBBI. The IRP is hereby directed to file his report in the Tribunal from time to time. 3) The Board of Directors and all the staff of Corporate Debtor are hereby directed to extend full co-operation to the IRP in carrying out his functions as prescribed under the Code....
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....y make it convenient to attend the meeting. Thanks & Regards Alok Saksena" (Emphasis added) The agenda for 11-02-2020, for voting reads as follows: "B. List of Issues to be voted upon after discussions. 1. To approve the resolution plan of Mohammed Enterprises (Tanzania) Limited and direct RP to file the same before Hon'ble NCLT. The matter was discussed, and the following resolution was put to vote. "RESOLVED THAT the Resolution Plan dated February 11, 2020 submitted by Mohammed Enterprises (Tanzania) Limited and that was placed by the Resolution Professional before the CoC meeting held on 11th February 2020 under Section 30(3) of the Insolvency and Bankruptcy Code, 2016 be and is hereby approved RESOLVED FURTHER that upon approval of the Resolution Plan dated February 11, 2020 submitted by Mohammed Enterprises (Tanzania) Limited. Mr. Alok K Saksena, the Resolution Professional of Associate Décor Limited is hereby authorized to file an application with the Hon'ble Adjudicating Authority in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016" Since the members decided....
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....lvency and Bankruptcy Code, 2016 read with Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 was held on Friday, 07th February, 2020 at 2.30 P.M. at IMC Building. Bhagwandas Thakker Room, Third Floor, IMC Marg, Churchgate, Mumbai - 400 020 which was adjourned to Monday, 10th February, 2020 at 5.30 P.M. at IMC Building, Bhagwandas Thakker Room, Third Floor, IMC Marg, Churchgate, Mumbai - 400 020 which was again adjourned to Tuesday, 11th February, 2020 at 3.00 P.M. at IMC Building, Bhagwandas Thakker Room, Third Floor, IMC Marg Churchgate, Mumbai - 400 020. The items listed for voting were put to vote through evoting. The voting period started on 13th February, 2020 at 4.00 PM and ended on 6th March 2020 at 6.00 PM. Please find enclosed record of summary of decision taken on a relevant agenda items along with names of the members who voted for or against the decision, or abstained from voting as per Regulation 26 (4) and (5) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Sd/- Alok Saksena Resolution Professi....
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.... no necessity for issuance of notice. It is, therefore, the respondents are caught in contradiction. Whether it is in tune with law or contrary is what is necessary to be noticed. 20. Section 24 of the Code deals with meetings of Committee of Creditors. It reads as follows: "24. Meeting of committee of creditors.-(1) The members of the committee of creditors may meet in person or by such electronic means as may be specified. (2) All meetings of the committee of creditors shall be conducted by the resolution professional. (3) The resolution professional shall give notice of each meeting of the committee of creditors to- (a) members of committee of creditors, including the authorised representatives referred to in sub-sections (6) and (6-A) of Section 21 and sub-section (5); (b) members of the suspended Board of Directors or the partners of the corporate persons, as the case may be; (c) operational creditors or their representatives if the amount of their aggregate dues is not less than ten per cent of the debt. (4) The directors, partners and one representative of operational creditors, as referred to in sub-section (....
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....gulation 20. (2) The committee may reduce the notice period from five days to such other period of not less than twenty-four hours, as it deems fit: Provided that the committee may reduce the period to such other period of not less than forty-eight hours if there is any authorised representative." (Emphasis supplied) Regulation 19 mandates that subject to the Regulations, a meeting of the Committee shall be called by giving not less than 5 days notice in writing to every participant at the address it has provided to the Resolution Professional and such notice may be sent by hand delivery or by post and can also be served by electronic means in terms of Regulation 20, which permits service of notice by electronic means. Sub-Regulation (2) of Regulation 19 mandates notice period to be 5 days prior to the said meeting which can also be reduced to 24 hours as it would deem fit. It further provides that the Committee may reduce the period to such other period of not less than 48 hours if there is any authorized representative. It is not that the Resolution Professional was not aware of the mandate of the statute as quoted supra, nor the Committee of Creditors. Ce....
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....agenda. On 11-02- 2020 the meeting is scheduled to be held at 3.00 p.m. This is the notice received by the petitioner on electronic mail. It is a matter of record and not in dispute. The hue and cry of the respondents is that it is a carried forward meeting from 10-02-2020. The 5th respondent itself admits that it is an amended and re-stated agenda. Therefore, it becomes a new agenda on the next day. The Resolution Professional also has thought that it is a new agenda and issues a notice. But, the notice falls completely foul of the Regulations and the Code, and his own mandate of 48 hours prior notice supra. Therefore, the Resolution Professional has acted contrary to what is the mandate under the statute and the resolution quoted supra. 22. The time limit for issuance of notice of meeting was also reducible to 24 hours. This, should be in the considered view of the Court, for reasons to be recorded in writing, as the words used are 'as it deems fit'. The deeming fitness would only to be discerned in an order reducing the notice period from 5 days to 24 hours, if it is in writing. No document of that kind is placed on record for having reduced it from 5 days to 24 hours. What h....
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..... 24. In respect of I.A.No.161 of 2020 which was filed by the Resolution Professional, the NCLT observes that it is deemed to be disposed of and restored to the Resolution Professional for being reconsidered by the Committee of Creditors along with the resolution plan submitted by Svamitva Landmarks. It is in this petition, the petitioner had preferred I.A.No.248 of 2020 to implead himself contending that he also has an offer or a proposal. The said application comes to be disposed of as having become infructuous in the light of the order dated 28-05-2021. The order passed by the NCLT is as follows: "V. Directions 1. In view of the foregoing, in accordance with the provisions of section 60(5)(0) of I&B code read with Rule 11 of NCLT Rules 2016 this Adjudicating Authority passes the following orders and directs the Resolution Professional as under: (1) IA 85 of 2021 C.P. (IB) No. 51/BB/2018 is disposed of with the directions that the claim filed by the Applicant, the State of Karnataka, Department of Industries & Commerce as a Financial Creditor, in Form C, shall be put up by the RP to the CoC for its consideration/acceptance, in the light of our f....
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....allowed by the Appellate Tribunal by restoring I.A.No.161 of 2020 before the NCLT. I.A.No.161 of 2020 was the one filed by the Resolution Professional placing on record the approval of the resolution plan of the 5th respondent. The Appellate Tribunal passes the following order: "Conclusion 43. Having analysed the facts, legal position and the precedents and viewed in that perspective, this 'Tribunal' unequivocally comes to a resultant conclusion that the 'impugned order', passed in I.A. No. 161 of 2020 in CP No. 51 of 2018 dated 28.05.2021 is per se 'illegal', 'without application of mind', the same is set aside, with the following directions to be complied with by the 'Adjudicating Authority' (National Company Law Tribunal, Bengaluru Bench). Directions: (i) I.A. No. 161 of 2020 in CP No. 51 of 2018 is restored to its original position on the file of the 'Adjudicating Authority', ('National Company Law Tribunal', Bengaluru Bench). (ii) The 'Adjudicating Authority' is hereby directed to consider the plan of the 'Successful Resolution Applicant' / '5th Resp....
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....-11-2022. On 7-12-2022 the petitioner communicates a letter for full and final restructuring of settlement proposal proposing to pay Rs.280 crores as full and final settlement, as against the offer of the 5th respondent. The communication was in detail with the prayer sought in the communication reading: "i. The Resolution Professional of the Corporate Debtor convening and holding the meeting of CoC members within 7 (seven) days from the date of receipt of this letter; and ii. The CoC member unanimously agreeing to accept the settlement proposal submitted hereunder and deciding to submit an application of withdrawal under Section 12 A in C.P(IB) No. 51/BB/2018 pending before the Hon'ble NCLT, Bengaluru Bench; and iii. The Hon'ble NCLT accepting and approving the Section 12A application and passing necessary orders thereto as prayed for by the CoC/Applicant; and iv. Submission of the certified copy of the order of withdrawal of the Section 7 petition with the Escrow bank within 7 (seven) days from the date of release of the said order; and v. issuing letter of satisfaction / full and final discharge towards all the charges / ....
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....ectors], in full, which will be more beneficial to protect the interest of all stakeholders and undersigned humbly prays for acceptance of this proposal in its entirety. 10. The present communication is being issued by the undersigned promoter /suspended director/guarantor of the Corporate Debtor in absolute good faith and in bonafide. Nothing contained in the present communication should be deemed to be an admission of liability of the undersigned promoter /suspended director /guarantor of the Corporate Debtor, whether in terms of the personal guarantee so executed or otherwise. The undersigned promoter/suspended director/guarantor of the Corporate Debtor herein expressly denies any personal liability or any legally subsisting debt towards any of the creditors of the Corporate Debtor. 11. Looking forward to the pleasure of unanimous decision of the CoC/Consortium Banks in good faith and to enable the undersigned to comply with and arrange for the said consideration of Rs. 275 (Rupees Two Hundred and Seventy- Five Crores) crores as stated above. Thanking you." (Emphasis added) What happens then is the 22nd meeting of Committee of Creditors on 23-12-2022....
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....RE 'K') issued by the Respondent No. 4 / Resolution Professional to the Respondent No. 5, wherein the Respondent No. 4 as illegally and fraudulently declared the Respondent No. 5 as the Successful Resolution Applicant, as Non-Est and illegal in the eyes of law; v. Issue a writ of mandamus or any other writ(s), order(s), rule(s) or direction(s) to the Respondents No. 1-4 herein to de novo consider the restructuring / settlement proposal of the Petitioner made vide Letter dated 07.12.2022 (at ANNEXURE 'W'), in accordance with law; vi. Issue a writ of mandamus or any other writ(s), order(s), rule(s) or direction(s) to the Respondents No. 1-4 herein to convene a Committee of Creditors Meeting within 14 days to consider the restructuring / settlement proposal of the Petitioner made vide Letter dated 07.12.2022 (at ANNEXURE 'W'); vii. Further issue a writ of mandamus or any other writ(s), order(s), rule(s) or direction(s) to the Respondent No. 4 / Resolution Professional of Associate Décor Ltd., to file an appropriate and necessary application under Section 12-A of the IB Code, 2016 and the regul....
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....as from that stage this Court has noticed the violation of principles of natural justice. 28. The Apex Court has time and again held that a suspended Director has every right to participate in the proceedings. Therefore, it cannot be said that the suspended Director can be taken for a ride, without him being put on notice and resolving things that are detrimental to the said suspended Director. The Apex Court in the case of VIJAY KUMAR JAIN v. STANDARD CHARTERED BANK [(2019) 20 SCC 455], has held as follows: "14. The relevant provisions of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 read as under: "7. Certificate of registration.-(1) *** (2) The registration shall be subject to the conditions that the insolvency professional shall- *** (h) abide by the Code of Conduct specified in the First Schedule to these Regulations; and ***" "FIRST SCHEDULE [Under Regulation 7(2)(h)] CODE OF CONDUCT FOR INSOLVENCY PROFESSIONALS *** 21. Confidentiality.-An insolvency professional must ensure that confidentiality of the information relating to the insolvency resolu....
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....d at such meetings under Section 25(2)(i). It cannot be gainsaid that operational creditors, who may participate in such meetings but have no right to vote, are vitally interested in such resolution plans, and must be furnished copies of such plans beforehand if they are to participate effectively in the meeting of the Committee of Creditors. This is for the reason that under Section 30(2)(b), repayment of their debts is an important part of the resolution plan qua them on which they must comment. So the first important thing to notice is that even though persons such as operational creditors have no right to vote but are only participants in meetings of the Committee of Creditors, yet, they would certainly have a right to be given a copy of the resolution plans before such meetings are held so that they may effectively comment on the same to safeguard their interest. 17. However, it was argued before us that the Notes on Clauses to Section 24 make it clear that the erstwhile members of the Board of Directors are participants in these meetings only so that the Committee of Creditors and the resolution professional may seek information from them. The Notes on Clauses, heavi....
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....n memorandum, which then includes the financial position of the corporate debtor and information relating to disputes by or against the corporate debtor, etc. All this has nothing to do with Section 24 of the Code which deals with meetings of the Committee of Creditors. 19.2. Secondly, the resolution professional does not prepare a resolution plan as is mentioned in the Notes on Clause 24; he only prepares an information memorandum which is to be given to the resolution applicants who then submit their resolution plans under Section 30 of the Code. The Committee of Creditors, in turn, gets information so that they can assess the financial position of the corporate debtor from various sources before they meet. It is, therefore, difficult to understand the Notes on Clause 24. 19.3. Even assuming that the Notes on Clause 24 may be read as being a one-way street by which erstwhile members of the Board of Directors are only to provide information, we find that Section 31(1) of the Code would make it clear that such members of the erstwhile Board of Directors, who are often guarantors, are vitally interested in a resolution plan as such resolution plan then binds them. ....
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....(c) is also very wide, and a member of the erstwhile Board of Directors also has an independent right to approach the adjudicating authority, which must then hear such person before it is satisfied that such resolution plan can pass muster under Section 31 of the Code. 20. It is also important to note that every participant is entitled to a notice of every meeting of the Committee of Creditors. Such notice of meeting must contain an agenda of the meeting, together with the copies of all documents relevant for matters to be discussed and the issues to be voted upon at the meeting vide Regulation 21(3)(iii). Obviously, resolution plans are "matters to be discussed" at such meetings, and the erstwhile Board of Directors are "participants" who will discuss these issues. The expression "documents" is a wide expression which would certainly include resolution plans. 21. Under Regulation 24(2)(e), the resolution professional has to take a roll call of every participant attending through videoconferencing or other audio and visual means, and must state for the record that such person has received the agenda and all relevant material for the meeting which would include the....
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....ntial." (Emphasis supplied) The Apex Court in the judgment quoted supra holds that in the statutory scheme of the Code, members of the erstwhile Board of Directors are not members of the Committee of Creditors, yet they have a right to participate in each and every meeting held by the Committee of Creditors and also have a right to discuss along with the members of the Committee of Creditors all resolution plans that are presented. Therefore, when the Apex Court had recognized the right of members of the erstwhile Board of Directors, it naturally includes a suspended Director. In the light of what is analyzed hereinabove, the petitioner has a right to participate in the deliberations of 11-02-2020. Though notice was issued, it has fallen foul of law. Therefore, it is here the proceedings cut at the root of the matter. 29. The Resolution Professional, in the case at hand, appears to have involved himself more than necessary. The Resolution Professional does not participate in the meetings of the Committee of Creditors. It is important that the Resolution Professional has to give notice of each and every meeting of the Committee of Creditors to the suspended members of the B....