TaxTMI 
TaxTMI 
2025 (7) TMI 845
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..... Advocate with Mr. Lokesh Malik, Advocates 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: * Setuba....
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....RAs. * The 10th CoC meeting on 02.08.2023 decided to proceed with voting upon the modified resolution plan and the e-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 maximisat....
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....to be paid to the Dissenting Financial Creditor. Vide Order dated 19.12.2024, the Adjudicating Authority adjourned the matter to 06.01.2025 with liberty to the RP to respond to all the issues raised earlier 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 2....
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.... proper. 4. Shri Krishnendu Datta, Ld. Senior Advocate appeared for the RP; Learned Sr. Counsel, Shri Abhijeet Sinha appeared for the CoC while Ms Anusha Nagarajan appeared for the SRA in both appeals. The Learned Counsels appearing for the RP, CoC as well as the SRA and have collectively assailed the findings of the 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 Adju....
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....by the Adjudicating Authority for clarification while the matter was reserved for orders. It was contended that the RP had placed a note on record by way of an affidavit on 18.12.2024 to provide clarifications sought by the Adjudicating Authority. Admittedly, the clarifications offered by the RP were found insufficient by the 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 appro....
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....as deprived the CoC from appreciating the true value and worth of the assets of the Corporate Debtor while evaluating and approving the Resolution Plan of the SRA on flimsy ground of some legal opinion. Reference deserves to be made to Paragraphs 6-8 of the present Order. * Further, the RP's actions of not making a specific provision for pending 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 ....
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.... the Adjudicating Authority found to be insufficient and vide its Order dated 19.12.2024, the Adjudicating Authority made the following observations which have been extracted at para 2(xiii) of the impugned order as under : "The short note provided by the Ld. Counsel for the RP on 18.12.2024 has once again failed to take into consideration, the amount of Rs. 48 lacs to be paid to Dissenting Financial Creditor at the outset. On the request of the Ld. Counsel for the RP to respond all the issues 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 ....
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....ese inconsistencies in the plan value. 18. The above finding of the Adjudicating Authority however lacks force when we look at the material on record. We find that the various plan values of the SRA were discussed in various CoC meetings. The breakup of the modified plan of the SRA in the table at page 459 of Appeal Paper Book ("APB" in short) in the 15th CoC minute quite clearly depicts the basis of arriving at these plan values. The three different amounts arising due to incentive/upside and buy-back of shares 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 de....
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....nal creditors which was 1% of the admitted claim. Attention was adverted to the judgement of this Tribunal in Gail India Ltd. v. Ajay Joshi, 2021 SCC OnLine NCLAT 359 wherein it has been held that the CoC in its commercial wisdom has the discretion to classify Operational Creditors into further categories for deciding the manner in which payment is made to them. It is also the case of the RP that the Adjudicating Authority did not seek any clarification on this issue but erroneously made this a ground for not approving 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 ....
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....pur; Pinnacle Mall and Bhakti Sankul Hotel at Nashik. It has been held by the Adjudicating Authority that this conduct of the RP tantamount to material violations of statutory and regulatory requirements by the RP who is otherwise ordained to take proper safeguards for the maximization of the corporate debtor's assets. 26. It was emphatically asserted by the RP and SRA that no clarification was sought even on this issue at all by the Adjudicating Authority but was surprisingly made a ground for knocking down the plan. It was 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 Mal....
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....r reason for not approving the plan stems from the findings returned by the Adjudicating Authority that three claims had not been considered by the RP. The claims of operational creditors like Mohini Buildwell Pvt. Ltd. and Commissioner of Sales Tax, Mazgaon, Mumbai were not verified and the SRA did not make provision for these claims in the resolution plan. No specific provision was made in the plan for the claim of the EPFO which has been held to be violative of Section 30(2)(e) and Section 53 of the IBC by the Adjudicating Authority. 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. A....
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....gulation 38 of the CIRP Regulations. The Adjudicating Authority had therefore sought clarifications vide its order dated 17.12.2024 and the RP had responded to this query by issuing a clarification note dated 18.12.2024 as seen at page 634-635 of APB. However, in the order dated 19.12.2024, the clarification provided by the RP vide clarification note dated 18.12.2024 was not accepted without giving any reasons as is seen at page 636 of APB. 35. We do not find much force in this finding of the Adjudicating Authority to strike down the plan on 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....
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....w available to it, cannot deal with the merits of Resolution Plan or substitute its views with the commercial wisdom of the CoC in rejecting the resolution plan unless it is found it to be contrary to the express provisions of law and against the public interest. There can be no fetters on the commercial wisdom of CoC and the supremacy of commercial wisdom of CoC has been reaffirmed time and again by the Hon'ble Supreme Court in a catena of judgements including K. Sashidhar v. Indian Overseas Bank (2019) 12 SCC 150 ; Committee of Creditors of Essar 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 ....