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2025 (7) TMI 845
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....ates for SBI & IL&FS JUDGMENT ( Hybrid Mode ) Per : Barun Mitra, Member ( Technical ) The present two appeals filed under Section 61 of Insolvency and Bankruptcy Code 2016 ('IBC' in short) by the Appellants arise out of the common order dated 24.03.2025 (hereinafter referred to as the 'Impugned Order') passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench-V) in I.A. No. 07 of 2024 in CP(IB) No. 106 of 2022. By the impugned order, the Adjudicating Authority has dismissed I.A. No. 07 of 2024 filed by the Resolution Professional seeking approval of the resolution plan filed by Univastu India Limited as the Successful Resolution Applicant in the Corporate Insolvency Resolution Proceedings ("CIRP" in short) of the Corporate Debtor- Setubandhan Infrastructure Ltd. Aggrieved by the impugned order, CA No.612 of 2025 has been preferred by the Resolution Professional and CA No.613 of 2025 has been preferred by the Successful Resolution Applicant. 2. The sequence of events and the salient facts which are relevant to be noticed for consideration of both the appeals at hand are as depicted below: * Setubandhan Infrastructure Ltd.-Corporate Debtor was initiated....
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....voting window was opened on 16.08.2023. However, the e-voting window for approval of resolution plans was halted and cancelled owing to intimation received from the Respondent No. 3 seeking re-issuance of Form G with wider publication. * On 21.08.2023, at the 11th CoC meeting, the CoC decided to re-issue the Form G to be published in the whole of Maharashtra and Gujarat, with the intent of value maximisation of the Respondent No. 1. The Form G was reissued on 26.08.2023. * On 05.09.2023 and 13.10.2023, the Adjudicating Authority allowed two extensions of 90 days for completion of the CIRP, in order to allow value maximisation. * The RP had received four EOIs from PRAs with whom the IM and the RFRP was shared along with EM. The last date for submission of the resolution plan of 09.11.2023 was further extended up to 17.11.2023 at the request of the PRAs. * On 05.12.2023, at the 13th CoC meeting, it was resolved by the CoC, to go forward with modification of the resolution plans after one time negotiations for value maximisation. The CoC members further resolved to seek third extension of 60 days for completion of the CIRP. RP apprised the CoC regarding the claims received aft....
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....ier on 17.12.2024. * On 03.01.2025, the RP conducted the 18th CoC Meeting and apprised the CoC of the clarifications sought by the Adjudicating Authority. On 07.01.2025, the RP requested for time from the Adjudicating Authority to place on record the proceedings of the 18th CoC meeting by an Additional Affidavit. The Additional Affidavit was filed on 15.01.2025 which the Adjudicating Authority allegedly refused to consider on the ground that the said affidavit was rife with procedural irregularities. * On 06.02.2025, the Adjudicating Authority reserved IA No. 07 of 2024 for Orders. By way of the Impugned Order dated 24.03.2025, the Adjudicating Authority rejected the Resolution Plan of the SRA purportedly for reasons of statutory violations and procedural irregularities and for compromise of the principles of transparency and fairness. * Aggrieved by the rejection of their resolution plan, the impugned order has been assailed by the SRA in C.A. No.613 of 2025 for rejecting the plan by overriding the commercial wisdom of the CoC and by the RP in C.A. No.612 of 2025 for the Adjudicating Authority not having considered their clarifications to the resolution plan provided by way ....
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....he Adjudicating Authority in the impugned order. Making their submissions, it has been submitted that the impugned order has been passed without due application of mind and without consideration of the relevant material placed on record for approval of the resolution plan by the Adjudicating Authority. Since their submissions largely overlap, for reasons of convenience, their arguments are compositely captured. 5. It has been contended that the reasoning adduced in the impugned order for rejection of the resolution plan cannot be sustained as no valid grounds of rejection as envisaged under Section 30(2) and Section 31 of the IBC have been substantiated. It was vehemently contended that the Adjudicating Authority had substituted the commercial wisdom of the CoC with its own findings which is not permissible as it is well-settled law that the jurisdiction of the Adjudicating Authority under the IBC is limited in that it cannot sit in appeal over the justness of the commercial wisdom of the CoC while considering the approval of the resolution plan. It was emphatically asserted that the Adjudicating Authority failed to appreciate that the CoC had voted in favour of the resolution pla....
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....he Adjudicating Authority, and hence the RP furnished an Additional Affidavit dated 15.01.2025 with requisite clarifications which however the Adjudicating Authority did not take proper cognisance of. 8. It was contended that the Adjudicating Authority instead of cursorily dismissing the additional affidavit and debunking the clarifications contained therein as an afterthought to cover loop-holes in the resolution plan ought to have referred the plan back to the CoC for reconsideration in terms of the judgement of the Hon'ble Supreme Court in Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta (2020) 8 SCC 531. If the resolution plan was found deficient on the grounds as pointed out by the Adjudicating Authority in its order dated 17.12.2024, it ought to have given proper and adequate opportunity to the RP who had filed an application for approval of the plan to properly explain and clarify various aspects of the resolution plan. Even the SRA was not given a chance to address any queries or give any clarifications on the plan to the Adjudicating Authority at a time when they were the best placed to address any such queries. By depriving the SRA of such an opportuni....
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....EPFO Claims on the baseless premise of talking to / settling with EPFO Authorities. * Not making any specific provision for dissenting / abstaining Financial Creditor in the total plan outlay against the statutory provisions. * convening the 18th CoC meeting on 03.01.2025 while the matter was Reserved for Orders, filing an Additional Affidavit date 15.01.2025 as a belated attempt to address fundamental deficiencies. * RP kept claims of Mohini Buildwell Private Limited and Assistant Commissioner of State Tax, Mazgaon, Mumbai on hold and got the plan approved from the CoC. * Made no efforts to recover, protect, and preserve the assets of the Corporate Debtor." 12. At this juncture, it is equally pertinent to notice the earlier order of the Adjudicating Authority dated 17.12.2024 in which it had sought clarifications from the RP which have been extracted at para 2(xi) of the impugned order as reproduced here-under: "1. The case was listed for clarification on the following issues: (i) The upfront cash payment in the Plan, to be paid within 45 days is stated to be Rs. 4.97 Crores. The breakup of the amount is as under: a) Rs. 75 lacs CIRP cost. b) Rs. 2 lacs Operationa....
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....es raised vide order dated 17.12.2024. Adjourned to 06.01.2025." 14. When we look at the contents of paras 10 to 12 above, it broadly captures the various grounds which have been inter-alia adverted to by the Adjudicating Authority in the impugned order for rejecting the resolution plan. The thrust of the impugned order primarily centers around the finding that the CoC had not been presented with the correct facts and value of the assets by the RP and that the latter had failed to take proper efforts to recover, protect and preserve the assets of the Corporate Debtor thus necessitating separate consideration by the IBBI on the conduct of RP. 15. Coming to the various grounds held by the Adjudicating Authority for not approving the plan, we notice that one of the principal grounds was inconsistency and blatant discrepancies in the total plan value of the SRA. The Adjudicating Authority has observed that the total plan value in the I.A. No 7 of 2024 filed by the RP mentions plan value to be Rs 27.50 cr while perusal of the resolution plan reveals that the plan value is only Rs 20 cr. Yet again the total plan amount mentioned by the SRA as put to the CoC was Rs 67.21 cr. Since there....
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....hares therefore stood explained at the 15th CoC meeting. It was clarified by the RP in the 15th CoC meeting that the plan value of Rs. 67.21 Cr. was by the inclusion of maximum recoveries to be made from arbitration claim/car/ITNL dues and debentures to be issued to the SRA. The RP cannot be faulted for having communicated to CoC the maximum amount that may be payable upon recovery to make the CoC aware of the maximum amount that can be recovered from contingent events. The RP at IA No 7 of 2024 depicted the plan value as Rs 27.50 Cr. as seen at page 616- 617 of APB. However Rs. 20 Cr therein was referred to as the amount payable through upfront cash and secured convertible debentures. Note 1 therein also stated that the SRA proposed to buy back equity shares issued to all Secured Financial Creditors at a value of Rs. 7.5 Cr. at the end of five years thus adding Rs. 7.5 Cr. over and above the Rs. 20 Cr. to the total plan value. The Plan therefore clearly mentioned that in addition to this amount of Rs. 20 Cr., equity shares of Rs.7.50 cr were to be issued. The total of funds infused and shares issued was thus Rs. 27.50 cr which was the amount also mentioned in IA No 7 of 2024. 19.....
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....ing the plan. 22. When we peruse the CoC deliberations, we find that the Adjudicating Authority has failed to notice that during the 15th CoC meeting, the said question of potential differentiation between the operational creditors was placed by the SRA before the RP and the CoC alongwith justification in a transparent manner. It was contended that the repayment to self by the SRA was proposed in form of Optionally Convertible Debentures issued at 0% for 30 years with an immediate call option discounting the same at 18% p.a. as can be seen at page 460 of APB. Payment to self by SRA was thus to be made after 30 years without interest while payment to other operational creditors was to be upfront and that if both these payments were compared on the same time-scale, the quantum of self-payment to the SRA would be lower than other operational creditors. When the amounts amount proposed to be paid upfront to the operational creditors and SRA is juxtaposed on the same time-lines, it was stated that the SRA proposed to clear only 0.69% of its own dues as against clearing 1% of the dues of the other operational creditors on an immediate cash basis. The SRA had even proposed to grant the s....
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....as asserted that the Adjudicating Authority had failed to appreciate that these immoveable properties could not be made part of the plan as their titles were defective in nature. It was canvassed that no immovable property bereft of registered ownership transfer, can become part of the resolution plan in terms of the judgement of this Tribunal in Gaurav Mahendru v. Sunil Kumar Aggarwal in CA(AT)(Ins) No.1590 of 2024. 27. When we look at the material facts placed before us, we find that the details of such properties and related shortcomings were brought to the notice of the CoC by the RP at 8th CoC meeting and discussed in detail. As regards the Pinnacle Mall in Nashik, only an advance payment had been made and RP was in possession of only an unstamped and unregistered purchase agreement. SBI, as the lead member of CoC, had advised valuers to exclude this property as it was in the name of a related company of the Corporate Debtor and separately mortgaged with SBI. Hence Pinnacle Mall was excluded from the assets of the Corporate Debtor. The shops in Raipur were in the possession of third party and no title documents were available to the RP except for purchase agreements. As regar....
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....rity. 30. The findings of the Adjudicating Authority have been contended to be misplaced by the RP since claims raised by these creditors were brought to the notice of the CoC by the RP and the same was discussed by the CoC. The CoC had noted that the plan did make provision for these claims in that an amount of Rs 3 lakhs was set aside by the SRA towards contingencies to squarely provide for these claims if they so materialised. It was also asserted that no clarification was sought on these claims by the Adjudicating Authority except with respect to the status of the claim filed by Mohini Buildwell Pvt. Ltd. as may be seen at page 649 of APB. 31. As regards claims of Mohini Buildwell Pvt. Ltd., clearly the claim was received after the last date for filing claims. Hence the claim could not have been admitted. This fact was categorically communicated to Mohini Buildwell. Admittedly, however, there was a bonafide error on the part of the RP that the status of the claim was not changed from the category of "under verification" to "not admitted" immediately. When the reasons for non-acceptance of the claims had already been duly communicated to Mohini Buildwell and the latter had not....
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....n grounds that interest payment upon delay in implementation of the resolution plan was indicative of impending default in payment. We find that the CoC had duly considered the Resolution Plan and after arriving at its own satisfaction the Resolution Plan has been approved by it. Furthermore, this clause did not deprive the CoC of the prerogative to initiate appropriate proceedings against the SRA for non-implementation of the plan as Clause 11 in the Addendum to the plan had categorically and expressly provided for secured financial creditor to proceed against SRA for default in payment. We find no good grounds to disagree with the RP and the CoC that the issue of interest payment upon delay in implementation of the Resolution Plan is a subject which falls squarely within the commercial wisdom of the CoC. 36. Yet another ground of objection to the plan expressed by the Adjudicating Authority was that the feasibility and viability of the plan was not expressly mentioned in the resolution plan thus violating Regulation 38 of CIRP Regulations. It was asserted by the RP that no clarification was sought on this issue by the Adjudicating Authority but surprisingly made a ground for rej....
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....r Steel India Limited v. Satish Kumar Gupta (2020) 8 SCC 531; Maharashtra Seamless Limited v. Padmanabhan Venkatesh (2020) 11 SCC 467; Kalpraj Dharamshi v. Kotak Investment Advisors Limited, (2021) 10 SCC 401 and Ghanashyam Mishra and Sons Private Limited through the Authorized Signatory v. Edelweiss Asset Reconstruction Company Limited through the Director (2021) 9 SCC 657. When the CoC has approved a Resolution Plan by requisite voting share after considering its feasibility and viability, such decision of CoC cannot be interfered in the exercise of judicial review either by the Adjudicating Authority or by this Tribunal in the exercise of its appellate powers. 38. Having said that we also do not find any good ground to refer the conduct of the RP in the present facts of the case to the IBBI. When we look at the sequence of events, we find that after the Corporate Debtor was admitted into CIRP, the RP on the basis of claims admitted, constituted the CoC. The composition of the CoC was never challenged at any stage. Material on record show that timely CoC meetings were also held. It is also an undisputed fact that the RP had published Form G on two occasions. The RP had given suf....