TaxTMI 
TaxTMI 
2024 (12) TMI 1704
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.... MEMBER (TECHNICAL) 1. This appeal has been filed by Laxmi Narayan Sharma who is the Suspended Director/ Promoter of the Corporate Debtor against the Impugned Order dated 07.02.2020, passed in I.A. No. 433, 447 & 448/2018 & I.A. No. 32, 61, 950, 960 & 961 of 2019 in CP (IB) No. 248/7/HDB/2017. Subodh Kumar Agrawal is the Respondent No. 1 herein who is former Resolution Professional of M/s Golden Jubilee Hotels Private Limited/ Corporate Debtor. There are eight Financial Creditors i.e., Bank of Baroda, Dena Bank, Punjab National Bank, Syndicate Bank, Corporation Bank, Jammu and Kashmir Bank, Punjab and Sind Bank and Bank of Maharashtra of the Corporate Debtor, who are Respondent No. 2 to Respondent No. 9 herein. BREP Asia II Indian Holding Co. II (NQ) Pte. Ltd. is the Respondent No.10 herein who is the Successful Resolution Professional ('SRA') of the Corporate Debtor. EIH Limited is one of the Promoters of the Corporate Debtor and hotel operator under operation and management and is Respondent No. 11 herein. 2. The Appellant stated that he is the promoter / suspended director of corporate debtor who is controlling majority shareholder holding 84% of the paid up ca....
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....avour of corporate debtor for a period of 33 years, i.e. upto 2040. Corporate debtor also executed development and management agreement with YATCL on 09.05.2007, executed by the Corporate Debtor as Lessee on behalf of Consortium. Subsequently, on 11.06.2009 another lease was executed between corporate debtor and the Shilparaman Arts, Crafts and Cultural Society ('Society') for additional plot of land. Both the leasehold lands form part of the hotel project consisting two towers out of which only one tower is in operation and the Appellant was making all efforts to complete second tower to make it operational which got stalled, due to commencement of CIRP. The Appellant highlighted that Corporate Debtor entered into two separate lease agreement with YATCL and Society, which are two separate entities. 6. The Appellant stated that for the construction of the said Hotel, over the period of 2009 to 2016, GJHPL availed various financial assistance and credit facilities from a consortium of Banks i.e., the Respondent No. 2 to Respondent No. 9 herein. The said Consortium of Banks executed various Facilities Agreements, dated 02.09.2009, 02.02.2013, 13.09.2014 and 29.03.2016 and also ent....
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....ed a revised proposal of OTS of Rs. 505 Crores for fund base facilities and the banks after discussion with the joint lenders, indicated that the resolution which was being positively considered by the Consortium members i.e., Dena Bank, Syndicate Bank, Corporation Bank, Punjab National Bank, The Jammu and Kashmir Bank, Punjab & Sind Bank and Bank of Maharashtra. However, the Respondent No. 2 Bank i.e., Bank of Baroda made it clear in the meeting that they wanted to approach the Adjudicating Authority for proceeding CIRP against the Corporate Debtor. 11. The Appellant submitted that the Respondent No 2 inclination to approach the Adjudicating Authority was not approved by the JLF, as all other members of the JLF were inclined towards accepting the proposed Corrective Action Plan of GJHPL. The Appellant stated that in spite of not having the requisite approval by the JLF, on 17.10.2017, Respondent No 2 approached the Adjudicating Authority, by way of an application under Section 7 of the Code. 12. The Appellant stated that on getting notice from the Adjudicating Authority, Corporate debtor unsuccessfully challenged filing of Section 7 application before Hon'ble High court ....
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.... to make direct payment to operational creditors and further requested all the financial creditors to approve the same and take appropriate steps to withdraw the petition. The Appellant stated that the said proposal of Rs. 430 Crores was more than the Floor price fixed by CoC in their 14th meeting of CoC held on 28.09.2018, but the CoC instead of accepting the proposal of the Appellant, which was in interest of the Corporate Debtor, deliberately accepted the Resolution Plan of SRA, contrary to the provisions of the Code. 16. The Appellant submitted that he unsuccessfully challenged order of admission of petition filed under section 7 of the Code by order dated 07.02.2017 by filing appeal before this Appellate Tribunal in Company Appeal (AT) (Ins) No. 84 of 2018, which was dismissed by this Appellate Tribunal order dated 06.09.2018. 17. The Appellant stated that the failure to provide the copy of resolution plan to the suspended director denying the opportunity to raise objections is violative of principles of natural justice. The Appellant admitted fact that the copy of the resolution plan was provided to the appellant only in pursuance to order/directions issued by Adjudicat....
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....tor, filed statement of claim before Arbitral Tribunal comprising of Sh. Justice (Retd) V.V.S. Rao, challenging the arbitrary and illegal notices issued raising illegal demands of which proceedings were concluded prior to the CIRP and finally the award was pronounced on 25/02/2020, holding that the notices issued by Special Operational Creditor, being the lessor is illegal, contrary to the lease agreement and development management agreement and further awarded the cost of Rs. 28.20 Crores in favour of the corporate debtor and against the Special Operational Creditor along with interest which comes to arounds Rs. 40 Crores. It is the case of the Appellant that passing of such award itself justify the reconsideration of the resolution plan. 21. The Appellant submitted that the Adjudicating authority in para 58 upheld non-payment to the operational creditor by placing reliance only on "commercial wisdom" of the COC, without appreciating the facts that non- payment to the operational creditor of their claim of more than Rs.100 Crores may result in insolvency of operational creditors and the Adjudicating authority also failed to appreciate that plan submitted by SRA on 19.10.2018, w....
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....submitted that the Hon'ble Supreme Court of India in case of Arcelormittal India Pvt. Ltd. Vs Satish Kumar Gupta in Civil Appeal Nos. 9402-9405 of 2015 in para 29 to 63 in detail dealt with the see-through provision including the definition of promoter, control and management. The Appellant submitted that by applying the parameters laid down by Hon'ble Supreme Court, the EIH Ltd. being promoter of the Corporate Debtor cannot be permitted, to continue as operator of the Hotel on the precedence of independent person because of alleged execution of separate management agreement. 26. It is the case of the Appellant that the approved Resolution Plan stipulates that if condition precedents are not satisfied within one year from the date of approval of Resolution Plan by Adjudicating Authority, it will expire automatically expire and the resolution plan will be null and void. The Appellant submitted that this make the Resolution Plan as conditional and hence not valid Resolution Plan. 27. The Appellant stated that the Resolution Professional published advertisement for Expression of Interest in May 2018, pursuant to which Blackstone along with three other entities submitted ....
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....rated that the COC is having ultimate power under the code and the regulations to decide on the commercial aspects of the resolution plan placed before and engaging in deliberations and discussions with the resolution applicants on the various aspects of the bids in the course its evaluation, keeping the spirit and objective of the code, the members of the COC have deliberated extensively and taken a collective decision by exercising their commercial wisdom in approving the resolution plan which has been submitted by the SRA. The Hon'ble Supreme court in the case of K Shashidhar Vs. Indian Overseas Bank & Ors in CIVIL APPEAL No.10673/2018 categorically has held that commercial wisdom of the CoC cannot be subjected to judicial scrutiny and the same is not justiciable before the adjudicating authority or the appellate authority. 33. The Respondent No. 1 denied the allegation of the Appellant that the whole process of e-voting was rigged and manipulated. The Respondent No. 1 submitted that the Appellant is not empowered under the Code to verify the record of the E- voting process of the decision of the CoC. The Respondent stated that minutes was circulated to all the COC member....
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....Method). The CoC elaborated that The Resolution plan provides for a payment of 37% of admitted claim for the secured Financial Creditors (including dissenting Financial Creditors) and also to bring in capital funds of Rs.180 Cr. 40. The Respondents denied the allegations of the Appellant regarding discriminating treatment to Special Operational Creditors. The Respondents submitted that the Special Operational Creditors being land owners were paid in full to ensure viability and feasibility of the Resolution Plan for revival of the Corporate Debtor. The Respondents gave details fo payments to be made as per Resolution Plan. The Respondents submitted that though Rs.60.14 Crores has been admitted as against a claim of Rs. 200.08 Crores with regard to Operational Creditor, the plan provides for 'Nil' amount to operational Creditors being NIL liquidation value as per Sec. 53 of the Code. 41. The Respondents submitted that if the Actual Special Operational Creditor Amount is higher than the Society Claim, then the difference between the Actual Special Operational Creditor Amount and the Society Claim will be added to Rs.384 cr. and shall be deemed to be the restated Upfront....
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....The Respondents further stated that under the waterfall mechanism of Section 53 of code, the payment to operational creditors would remain NIL irrespective of payment or non payment to Special Operational Creditors and further the CoC can provide for payment (either full or partial) to any Operational Creditor for keeping the Corporate Debtor as going concern and in this case without lease of land, there would be nothing left with Corporate Debtor 48. The Respondents submitted that that allegations of bias levelled against Bank of Baroda are baseless and reason for default was not the opening of new bank account in United Bank of India in 2015, but stress was there in account of Corporate Debtor since 2014 and JLF was constituted to address it. 49. The Respondents stated that the allegations of connivance amongst the resolution applicants Blackstone (BREP) & Sattva are baseless as there is no joint venture amongst them. These are two business entities which may decide to collaborate for some specific projects and may also compete against one another in other cases. 50. Concluding their arguments, the Respondents requested this Appellate Tribunal to dismiss this appeal with....
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....circulated amongst the suspended directors of the corporate debtors also. We have further noted from the pleadings that the Appellant was attending the COC meeting and was aware of the contents of resolution plan including that of SRA. We also note that subsequent to Judgement in Vijay Kumar Jain (Supra), the Respondent No.1 vide e-mail dated 20.02.2019 circulated a final resolution plan as approved by CoC in its meeting held on 18.12.2018. We have also noted that CoC during pleading have categorically mentioned that even if resolution plan would have been available with the Appellant, the decision of the CoC would have remained the same. In view of all this especially keeping in view that while approving the resolution plan on 18.12.2018, there was no legal requirement neither in the Code nor in regulation to submit such resolution plan to suspended directors, hence non-providing copy of the Resolution Plan to the Appellant cannot be faulted upon at this stage due to subsequent pronouncement of Judgement of Hon'ble Supreme Court of India. In any case, we find that no prejudice could have been caused to the Appellant since he was attending all the CoC meetings and was in know of al....
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....e 6.1 also mentioned that on the receipt, the approval of Resolution Plan by the Adjudicating Authority the SRA shall take steps as set out in Schedule II of the Resolution Plan and shall undertake all effort to procure the satisfaction of condition precedent within a period of one year of approval of Resolution Plan by the Adjudicating Authority. It is the case of the Respondent that development and management agreement is co-terminus with lease agreement which tantamount that without prior consent of GoT, the shareholding of the Corporate Debtor cannot be changed and therefore it would be absolutely essential to have such condition precedent. 64. We note that this Appellate Tribunal in the case of Jet Aircraft Maintainance Engineers Welfare Association Vs. Ashish Chhawchharia Resolution Professional of Jet Airways (India) Ltd. & Ors. in Company Appeal (AT) (Ins.) No. 752 of 2021, held that where it has been stipulated that the condition precedent in the Resolution Plan, is necessary for implementation of Resolution Plan, then such condition precedent would be valid. This judgment was challenged before the Hon'ble Supreme Court of India which upheld the same vide order dated 30....
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.... note that by the amended Section 30(2)(b) (notified w.e.f. 6.8.2019), it has been made amply clear that as long as payment to its creditors under plan is in compliance to the amended Section 30(2)(b)(i) and (ii), the same has to be considered as fair and equitable. We have dealt with this issue in great detail in connected CA (AT) (Ins) No.426 of 2020 which is also being pronounced along with this Order. On this account, we have noted that the Hon'ble Supreme Court of India has held time and again that commercial wisdom of COC is supreme. We have also noted that in the cases of Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors. (Civil Appeal No. 8766-67 of 2019), Excel Engineering & Ors. v. Vivek Muralidhar Dabhade [2022 SCC OnLine NCLAT 4461] and Sabari Realty Private Limited v. Sivana Realty Private Limited & Ors., Company Appeal (AT) (Insolvency) No. 1162 of 2023, the different treatments to creditors proposed to be made by SRA which was duly considered and recommended by CoC and finally approved by the Adjudicating Authority were found to be in compliance with Section 30(2) of the Code. Hence, we do not find any illegality on this count. Furtherm....
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....nancial creditors and other creditors have been given. It is not required to indicate party- wise the payment in the approved resolution plan as this is subject to decision to be taken by CoC. Hence, we do not find any merit in the argument of the Appellant. 70. The Appellant also alleged that Respondent No.11 - EIH has siphoned Rs.80 Crores in collusion with Bank of Baroda - Respondent No.2 herein for which he has filed a Writ Petition before Hon'ble High Court which is pending. In view of this, we would not like to comment on this aspect. 71. As regard the contention of the Appellant that the Respondent No.11 - EIH held 16% of the shares of the Corporate Debtor and was hit by Section 29A of the Code. We note that even the Adjudicating Authority has indicated the R11/EIH ineligible in terms of Section 29A of the Code. 72. Thus, in view of our detailed discussion in preceding paragraphs, we do not find any merit in the Appeal. The Appeal fails and stands rejected. No case. IA, if any, stand closed. ============= Document 1 CONDITION PRECEDENT AND IMPLEMENTATION OF THE RESOLUTION PLAN 6. 6.1 Condition Precedent The obligation of the Resolution Applicant to imp....
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....INR 10.19 crores out of which claims of INR 5.94 crores have been admitted; and (d) a claim of'un aggregate amount of approximately INR 6.46 crores has been filed by three employees of the Company with the Resolution Professional out of which claim, an amount of approximately INR 3.44 crores has been admitted. The requirement for disclosing the Liquidation Value of a company undergoing insolvency resolution process to the resolution applicant has been dispensed with. Accordingly, the Liquidation Value of the Company is currently not available to the Resolution Applicant. Consequently as per the Resolution Applicant's estimate: (i) the liquidation value would not be sufficient to cover the amounts owed to the Financial Creditors in full; and (ii) if the Company were to be liquidated, other than liquidation costs and CIRP Costs, it is only the Financial Creditors and workmen of the Company, who will be entitled to receive the liquidation proceeds (proportionate to the Admitted Financial Debt owing to the Financial Creditors and the workmen's dues which have been unpaid for a period of 24 (twenty four) months preceding the commencement of the CIRP of the Company respectively). ....