AI Drafter 
TaxTMI 
TaxTMI 
2025 (2) TMI 523
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....erent orders passed by National Company Law Tribunal, Jaipur Bench. Company Appeal (AT) (Ins.) No.888 of 2023 has been filed challenging order dated 19.04.2023 passed in CP No.(IB)- 28/7/JPR/2022, by which order Section 7 Application filed by Bank of Baroda has been disposed of noticing admission of Pre-Packed Insolvency Resolution Process ("PPIRP") against the CD initiated vide order dated 19.04.2023, giving liberty to the Bank of Baroda to file claim before the IRP. Company Appeal (AT) (Ins.) No.890 of 2023 has been filed challenging order 19.04.2023 passed in CP No. (IBPP)-01/54C/JPR/ 2022, by which order Adjudicating Authority admitted Application filed under Section 54C by the Corporate Debtor ("CD") for initiation of PPIRP. Company Appeal (AT) (Ins.) No.1492 of 2023 has been filed against the order dated 22.08.2023 passed in IA No.451/JPR/2023 in CP No. (IBPP)- 01/54C/JPR/2022 by which order Adjudicating Authority approved the Resolution Plan in the PPIRP of the CD. These three Appeal(s) have been filed challenging aforesaid three orders. 2. Brief background facts of the case necessary to be noticed for deciding these Appeal(s) are: i. The CD - M/s Shree Rajasthan....
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....roda in the Application for PPIRP filed by the CD, objecting to the maintainability of the Application. vi. On 19.04.2023, the Adjudicating Authority passed an order admitting Application filed under Section 54C by the CD. The RP - Shri Lekhraj Bajaj was appointed, who was directed to make public announcement and take all other steps with respect to PPIRP. By an order of the same date, i.e. 19.04.2023, Section 7 Application filed by the Bank of Baroda was disposed of, relying on the admission of PPIRP. The Adjudicating Authority observed that Bank of Baroda may file a claim before the IRP. vii. The RP in the PPIRP of the CD, placed a Base Resolution Plan before the Committee of Creditors ("CoC"), where the State Bank of India had vote share of 47.21 vote share; IDBI Bank has 26.70% vote share and Bank of Baroda has 26.09% vote share. The Base Resolution Plan was placed before the CoC, which came to be approved with 73.91% vote shares. In the Base Resolution Plan approved by the CoC, which was placed before the Adjudicating Authority, the SBI and Bank of Baroda were proposed 30.02% payment of their outstanding dues. viii. The RP filed an Application seekin....
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....ditor. It is submitted that Resolution Plan itself contemplate paying the same amount to the assenting Financial Creditor and dissenting Financial Creditor, which is not in accordance with statutory scheme as delineated by Section 30, sub-section (2) of the IBC. Hence, the Resolution Plan, which is not in accordance with Section 30, sub-section (2) deserves to be set aside on this ground alone. It is submitted that payments received by the Bank of Baroda in pursuance of the Resolution Plan were subject to interim orders passed in Company Appeal (AT) (Ins.) No.888 and 890 of 2023, i.e. "In the meantime, proceedings of implementation of the Resolution Plan may go on which shall abide by the result of the Appeal. It is submitted that orders passed by Adjudicating Authority questioned in these Appeal(s) are unsustainable and deserve to be set aside. It is submitted that Bank of Baroda, which was one of the Consortium Member of the Lenders had every right to initiate proceedings under Section 7 and did not require consent of other Members of the Consortium. The Bank of Baroda had every right to initiate proceeding under Section 7. The Learned Counsel for the Appellant submits that CD is....
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.... the CD, as mandatory approvals were pending. The CD, thus, filed Section 54C Application within 14 days as prescribed under Section 11A, after the period for fulfilling the mandatory requirement are excluded. Hence, the Application filed by the CD, cannot be said to be beyond 14 days. It is submitted that the period of 14 days as referred to in Section sub-section (3) of Section 11A has to be read as 'directory'. The Application under Section 54C, can be filed by the CD, only after completing the mandatory procedures as prescribed in Section 54A and 54B of the IBC. It is submitted that period, which was taken for necessary statutory compliances, under Section 54A and 54B, if excluded, the Application under Section 54C was well within 14 days. The Adjudicating Authority did not commit error in admitting Section 54C Application filed by the CD and disposing of Section 7 Application filed by the Appellant. It is submitted that the Appellant and other Consortium Lenders, i.e., SBI and IDBI Bank have given their consent for negotiated settlement, much before filing of the Application by Bank of Baroda under Section 7. Other Consortium Members having agreed for negotiated settlement, i.....
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....he other Consortium Lenders including SBI and IDBI Bank. The reply was filed by the SBI in Section 7 Application, vehemently opposing the Application filed by the Bank of Baroda under Section 7. The SBI has further pleaded that in event Section 7 Application is admitted, it will cause great harm and injury to majority stakeholders, which is never the intent of legislature while enacting IBC. The stand taken by minority stakeholder, cannot be allowed to defeat the interest of majority stakeholders. The Bank of Baroda also participated in the Meeting dated 21.07.2022, where Base Resolution Plan came for consideration. The Base Resolution Plan having been approved by majority of vote shares, the Bank of Baroda is also bound by approval and cannot wriggle out from the decision on the pretext that it has filed Section 7 Application on 18.04.2022. It is further submitted that OTS proposal was given by the CD in February 2021 and Bank of Baroda without communicating any final decision, has proceeded to file Section 7 Application, which did not have approval of other Consortium Members of the Bank. Learned Counsel for the SBI submits that Section 7 Application deserve to be rejected. 7.....
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....ch are as follows: "1. Classification of enterprises.-An enterprise shall be classified as a micro, small or medium enterprise on the basis of the following criteria, namely:-- (i) a micro enterprise, where the investment in plant and machinery or equipment does not exceed one crore rupees and turnover does not exceed five crore rupees; (ii) a small enterprise, where the investment in plant and machinery or equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees; and (iii) a medium enterprise, where the investment in plant and machinery or equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees. 4. Calculation of investment in plant and machinery or equipment.-- (1) The calculation of investment in plant and machinery or equipment will be linked to the (2) In case of a new enterprise, where no prior ITR is available, the investment will be based on self-declaration of the promoter of the enterprise and such relaxation shall end after the 31st March of the financial year in which it files its first ITR. (3) The expression ―plant....
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....ia. 11. The Appellant's case in the Appeal is that in the 41st Annual Report of the CD as on 31.03.2021, investment in plant and machinery is more than Rs.50 crores. We have noted the submission of the learned Counsel for the Respondent that for the purposes of computing the investment in plant and machinery has to be on the basis of Income Tax Return filed by the CD. The Notification dated 26.06.2020 as extracted above in Clause 4 clearly provides that "The calculation of investment in plant and machinery or equipment will be linked to the Income Tax Return (ITR) of the previous years filed under the Income Tax Act, 1961. In the reply, which was filed by the CD to Company Appeal (AT) (Ins.) No.888 of 2023, the CD has given the details of the ITR of the CD based on which the classification of MSME was changed automatically from year to year. It is useful to notice paragraph 8 of the reply of the CD, which gives all relevant facts and explain the process. Paragraph 8 of the reply is as follows: "8. That the said contention is in teeth with criteria 4 of the said Notification dated 26.06.2020 which in unequivocal terms lays down that the calculation of investment in plant....
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....r are automatically picked from respective database which clarifies that the Respondent Company had no role in declaring these crucial figures while applying to MSME Ministry through their online portal. Similarly, the renewal and review of the MSME status year on year basis is done by the MSME ministry by default and the Respondent Company has no role to submit any data or figures related to investments and turnover. The copy of the investment in plant and machinery or equipment, turnover and ITR is annexed herewith and marked as Annexure-3." 12. We, thus, do not find any error in classification of the CD as MSME. Learned Counsel for the Respondent has also placed reliance of the judgment of this tribunal in Amit Guptaq vs. Yogesh Gupta, RP (Company Appeal (AT) (Ins) No.903 of 2019) decided on 20.12.2019 wherein it is held that in the summary procedure under IBC, the Adjudicating Authority is not expected to go into account and investigate if and in which category an application falls under Section 7 examining Notifications under the MSME Act. This Tribunal in Company Appeal (AT) (Insolvency) No. 1672-1673 of 2023 in Ramesh Shah vs. Central Bank of India & Ors. had occasion to ....
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.... "11A. Disposal of applications under section 54C and under section 7 or section 9 or section 10. (1) Where an application filed under section 54C is pending, the Adjudicating Authority shall pass an order to admit or reject such application, before considering any application filed under section 7 or section 9 or section 10 during the pendency of such application under section 54C, in respect of the same corporate debtor. (2) Where an application under section 54C is filed within fourteen days of filing of any application under section 7 or section 9 or section 10, which is pending, in respect of the same corporate debtor, then, notwithstanding anything contained in sections 7, 9 and 10, the Adjudicating Authority shall first dispose of the application under section 54C. (3) Where an application under section 54C is filed after fourteen days of the filing of any application under section 7 or section 9 or section 10, in respect of the same corporate debtor, the Adjudicating Authority shall first dispose of the application under section 7, section 9 or section 10. (4) The provisions of this section shall not apply where an application under section ....
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....d first. In practice, this will only help debtors that are at an advanced stage of preparation for filing the pre-pack application. C. Where an application for initiating CIRP is filed and subsequently a pre-pack application is filed after 14 days of former, the Adjudicating Authority should first dispose of the application for initiating CIRP. As with (a), this approach provides an objective manner of dealing with simultaneous applications as it considers the application that has been filed first before any subsequent applications. d. In order for this mechanism outlined in paragraph b and c. to work as intended, the Committee noted that it was critical that the 14-day time-limit be strictly adhered to (see para 4.9.). The filing systems of the NCLTs will need to monitor this closely to prevent abuse of the process." 16. The learned Counsel for the Appellant has referred to the decision of the Committee as reflected in Clauses (c) and (d). 17. The statutory scheme delineated by Section 11A provides the same priorities as recommended by the Insolvency Law Committee. In the present case, the relevant dates for filing of the Application under Section 7 or Sect....
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....itors of the corporate debtor, not being its related parties, representing not less than sixty-six per cent. in value of the financial debt due to such creditors, have approved such proposal in such form as may be specified: Provided that where a corporate debtor does not have any financial creditors, not being its related parties, the proposal and approval under this clause shall be provided by such persons as may be specified; (f) the majority of the directors or partners of the corporate debtor, as the case may be, have made a declaration, in such form as may be specified, stating, inter alia, that- (i) the corporate debtor shall file an application for initiating pre-packaged insolvency resolution process within a definite time period not exceeding ninety days; (i) the pre-packaged insolvency resolution process is not being initiated to defraud any person; and (ii) the name of the insolvency professional proposed and approved to be appointed as resolution professional under clause (e); (g) the members of the corporate debtor have passed a special resolution, or at least three-fourth of the total number of partners, as the ca....
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....ckaged insolvency resolution process is admitted or rejected by the Adjudicating Authority, as the case may be. (3) The fees payable to the insolvency professional in relation to the duties performed under sub-section (1) shall be determined and borne in such manner as may be specified and such fees shall form part of the pre-packaged insolvency resolution process costs, if the application for initiation of pre-packaged insolvency resolution process is admitted. 19. Shri Datta has contended that unless the CD is able to fulfill the mandatory requirements, no Application under Section 54C can be filed. Hence, the period, which is taken by the CD for completing the mandatory compliances under Section 54A and 54B need to be excluded from 14 days period as provided in Section 11A(3). 20. The issue which has arisen before us is interpretation of Section 11A and the object and purpose of Section 11A. Provision for PPIRP was inserted in IBC when amendment in Code was found necessary to provide for PPIRP. When Chapter III-A was inserted by Act No.26 of 2021, legislator was well aware that against the CD there might be Applications under Section 7, 9 and 10 pending or will be....
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....4, para 22) "22. ... In construing a statutory provision, the first and the foremost rule of construction is the literary construction. All that we have to see at the very outset is what does that provision say? If the provision is unambiguous and if from that provision, the legislative intent is clear, we need not call into aid the other rules of construction of statutes. The other rules of construction of statutes are called into aid only when the legislative intention is not clear." 67. In B. Premanand v. Mohan Koikal [B. Premanand v. Mohan Koikal, (2011) 4 SCC 266 : (2011) 1 SCC (L&S) 676] , this Court held : (SCC p. 270, para 9) "9. It may be mentioned in this connection that the first and foremost principle of interpretation of a statute in every system of interpretation is the literal rule of interpretation. The other rules of interpretation e.g. the mischief rule, purposive interpretation, etc. can only be resorted to when the plain words of a statute are ambiguous or lead to no intelligible results or if read literally would nullify the very object of the statute. Where the words of a statute are absolutely clear and unambiguous, recourse cannot ....
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....The long-standing principle of the consequence of non- compliance being the determinative factor, was later reaffirmed in several judgments, such as Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd.30, Mackinnon Mackenzie & Co. Ltd. v. Mackinnon Employees Union, as well as Indore Development Authority v. Manoharlal." 22. The Hon'ble Supreme Court observed that proviso of Section 31(4) is mandatory, which require approval of Competition Commission of India before approval of the Plan by the CoC. In paragraphs 150 to 154, the Hon'ble Supreme Court laid down following: "150. In the present case, for reasons discussed above, the statutory provision and legislative intent unequivocally affirm the mandatory nature of the proviso to Section 31(4) of the IBC. For a Resolution Plan containing a combination, the CCI's approval to the Resolution Plan, in our opinion, must be obtained before and consequently, the CoC's examination and approval should be only after the CCI's decision. This interpretation respects the original legislative intent, and deviation from the same would not only undermine the statute but would also erode the faith posed by the stakeholders i....
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....d sub-section (3) of Section 11A inserted in the Act by amending Act No.26 of 2021. Hence, the legislature was well aware of the statutory scheme and the statutory scheme does not indicate that while computing 14 days period as referred to in Section 11A, any exclusion of period is provided. The submission of Shri Datta is against the clear intendment of statutory scheme delineated by the above provision. We, thus, are unable to accept the submission of Shri Datta that while computing 14 days period, the period taken in obtaining statutory compliances need to be excluded. Filing an Application under Section 7, 9, 10 and 54C is a well known concept. NCLT Rules 2016, defines the expression 'filed' in Rule 2, sub-rule (14), which means - 'filed in the office of the Registry of the Tribunal'. 24. We, thus are of the view that Application under Section 54C was filed after 14 days from filing of Section 7 Application and as per Section 11A, sub-section (3), the Adjudicating Authority was obliged to consider the Application under Section 7 before proceeding to dispose of Section 54A Application. Question Nos.(3) and (4) are answered accordingly. Question Nos.(5) and (6) 25. While....
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....S proposal dated 04.02.2022 of the Corporate Applicant pending with it. 4. That thereafter, despite having filed the said Section 7 Application, Resp. 3 Bank of Baroda has all along been participating in the meetings being held by the Corporate Applicant and consortium members to discuss the pre-package insolvency resolution proposal submitted by the Corporate Applicant, which gets duly substantiated from contents of the minutes of meeting of the consortium members held on 21.07.2022 (Copy of minutes of meeting enclosed as Annexure-II). 5. That from the aforesaid events, it is manifestly clear that Resp. 3-Bank of Baroda has, for the reasons best known to it, been approbating and reprobating at the same time and have while keeping the OTS proposal dated 04.02.2022 pending, proceeded to submit Section 7 application under the Code before the Hon'ble NCLT and that during the pendency of Section 7 Application before the Hon'ble NCLT have still been regularly participating in all the meetings being convened for deciding the pre-package proposal. 6. That it would also be relevant to state here that the Resp. 3 - Bank of Baroda participated in the said m....
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.... the code." 30. Paragraph 3 also notice the payment of Resolution Plan proceeds to all the Financial Creditors. Paragraph 3A is as follows : "Sr. No. Name of Bank Principal O/s Amount % of total Exposure Payment proposed under plan % payment of Outstanding 1. State Bank of India 43.33 43.30 12.00 30.02 2. IDBI Bank 33.03 33.00 10.00 30.07 3. Bank of Baroda 13.62 13.61 4.09 30.02" 31. It is also on the record that entire payment has been made to all the Financial Creditors. We have already noticed that while considering these Appeal(s), this Tribunal had passed an interim order on 20.11.2023, which provided that proceedings of implementation of Resolution Plan may go on which shall abide by the result of the Appeal. 32. The object of the IBC is Resolution of the CD. The present is a case, which consist of three Consortium Members of the Bank - SBI being 47.21% vote share; IDBI Bank 26.70% vote share and Bank of Baroda with 26.09% vote share. Both the Lenders, i.e., SBI and IDBI had also granted approval of negotiated settlement much prior to filing of Section 7 Application. Both the above Lenders have a....
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.... the amounts decided under the approved resolution plan by the CO C. Priority in release of payment under the provisions of the amounts in the plan shall be given to such dissenting creditors over the creditors voting in favour of the Resolution Plan. It is clarified that such priority would be limited to an earlier payment by one day without effecting the amount approved by COC." It is most respectfully submitted that clause 4.11 (d) is against the provisions of section 30(2) ofthe IBC, 2016 and thus liable to be set aside. A copy of Resolution Plan dated 26.04.2023 is annexed herewith and marked as Annexure A-7." 34. Section 30, sub-section (2), sub-clause (b), which has been inserted in the IBC by Act No.26 of 2019 provides for payment of debt of Financial Creditors, who do not vote in favour of the Resolution Plan, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of Section 53. Section 53(1), is as follows: "53. Distribution of assets. - (1) Notwithstanding anything to the contrary contained in any law enacted by the Parliament or any State Legislature for the time being in force, the proceeds from the ....