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Judgment
Subrata Kumar Dash, Member (Technical)
IA No. 326/2021:
This application has been filed under section 60(5) of the Insolvency and Bankruptcy Code, 2016, read with second proviso to Section 12(3) of the Insolvency and Bankruptcy Code, 2016 and Regulation 40 and 40 C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 for extension/exclusion of 90 days for re-publication of invitation for the Expression of Interest (Form-G) in the newspaper due to receipt of another Resolution Plan on 12.04.2021 with 10% addition in amount and better terms of payment.
In this said application, the applicant-Resolution Professional has made references to the decisions in the various CoC meetings convened by the applicant. In the 19th CoC meeting held on 12.04.2021, the main matters discussed were:
i. Chairman apprised the CoC members that on the basis of observations of SIDBI, the Prospective Resolution Applicant, Mr. Ramneek Goel has amended the Resolution Plan. Further, Chairman apprised the CoC members that RP has received a mail from Mr. Sunil Bajaj, wherein a resolution plan for an amount of 27.06 Crore has been annexed. Pursuant to this, COC members deliberated in detail and looking at the improved resolution plan amount along with better terms of payment decided that since the objective of CIRP is maximization of values of stakeholders, RP should file an application for Extension of CIRP Period for 90 days as 300 days of CIRP period is going to expire on 15th April 2021.
ii. COC members also deliberated upon the Expenses of the Resolution Professional for the CIRP of the Corporate Debtor.
iii. COC members also deliberated upon the monthly fees of the Resolution Professional as compared to lump sum fee decided earlier.
iv. COC members took note of that agenda No. 19.07 to 19.16 and deferred the same on account of decision of extension of time for further period of 90 days.
v. CoC members took note of actions taken by RP.
That the present application has been filed on the basis of the decision of the CoC members in the 19th CoC meeting for seeking an extension of 90 days beyond 300 days of the CIRP period approved with a voting share of more than 51% (Annexure A-28 of the Application) on the following lines:
"RESOLVED THAT the CoC members holding more than 51% voting rights has approved the resolution to move an application before the Hon'ble NCLT us 60(5) of the Insolvency and Bankruptcy Code, 2016 and regulation 40 and 40 C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons Regulations, 2016 for seeking exclusion/extension of time lost (90 days) for re-publication of invitation for expression of interest (form-G) in the newspaper due to receipt of another resolution plan on dated 12.04.2021 with 10% difference in amount and better terms of payment."
It has been further stated by the applicant that the time period of 300 days expired on 15.04.2021, and ample time had been consumed in fulfilling observations of CoC members in the Resolution Plan submitted by Mr. Ramneek Goel-Resolution Applicant, where another Resolution Plan from Mr. Sunil Bajaj was received 15 minutes prior to the 19th CoC meeting. CoC members thereby considered the proposal of Mr. Sunil Bajaj as the amount offered, and the terms of the payment are better than the offer of Mr. Ramneek Goel. Thus, the applicant seeks an extension/exclusion of the said time period of negotiations with Mr. Ramneek Goel in the best interest of all stakeholders of the corporate debtor. Further, the applicant-Resolution Professional pleads no responsibility for such delay in non-completion of the CIRP in 300 days.
The applicant has placed reliance on the following judgments holding, inter alia, that the commercial wisdom of the CoC is given paramount status with very limited scope for judicial intervention:
i. K.Sashidhar Vs. Indian overseas bank & Ors., (20L9) 12 SCC 150;
ii. Committee of Creditors of Essar Steel India Ltd Vs. Satish Kumar Gupta & ors., (2020) SCC 531;
iii. Kalpraj Dharmashi & Anr. Vs. Kotak lnvestment Advisors Ltd., & Anr., 2021 SCC online SC 204;
iv. Kalpraj Dharmshi & An V Kotak Investment Advisors Ltd & An (SC) 10.03.2021;
v. Maharashtra Seamless Limited Vs Padmanabhan Venkatesh & Ors. Civil Appeal No 4242 of 2019.
In view of the aforementioned discussion, we allow the prayer for an extension of the period of 90 days beyond 300 days which has expired on 15.04.2021, for concluding the CIR Process of the corporate debtor. We also note that the present application for extension and exclusion was filed on 23.04.2021. For an effective conclusion of the resolution process, this bench further allows the exclusion of the period from the date of filing of the present application till the date of the present order from the Insolvency resolution process period. The resolution professional is directed to take all steps to complete the resolution process within the further period allowed to him in the present order.
In the result, this application is allowed and disposed of accordingly.
IA No. 328 of 2021 and IA No. 329 of 2021 are interlinked and interconnected, based on similar contentions, and are hence, taken up together for discussion.
IA No. 328 of 2021:
The present application is filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, by Mr. Ramneek Goel (hereinafter referred to as ‘Applicant ’) against the respondents to issue directions for:
a) Direct Respondent No. 2 to Respondent No. 5 to produce all relevant documents before this Adjudicating Authority (including but not limited to the resolution plan of Respondent No. 1 in a sealed cover) to show how Respondent No. 1 received access to the information.
b) Declare that Respondent No. 1's submission of the resolution plan is in breach of the confidentiality of information of the Corporate Debtor;
c) Declare that Respondent No. 1 is guilty of the fraudulent practice of CIRP;
d) Declare all action basis submission of resolution plan by the Respondents is void, including but not limited to publication of Form-G.
The brief facts stated in the application are that the CIRP of the corporate debtor commenced vide order dated 25.11.2019. The RP made a public announcement inviting claims and constituted the Committee of Creditors (hereinafter referred to as ‘CoC’) on 18.12.2019. The CoC held on 09.01.2020, approved the appointment of Mr. Jalesh Kumar Grover as Resolution Professional. An invitation of Expression of Interest (herein referred to as ‘EoI’) dated 08.02.2020 was issued by publication in Form G, and further, a fresh form G was issued by Respondent No. 2 (the Resolution Professional) on 30.06.2020 inviting submission of resolution plan till 14.08.2020. The applicant submitted its EoI on 15.07.2020, and Respondent No. 2 issued the applicant a Request for Resolution Plan (RFRP) on 22.07.2020. In the 12th CoC meeting held on 16.09.2020, the applicant was identified as an H1 bidder. After various correspondences between the applicant and Respondent No. 2, the applicant presented the revised resolution plan before the 14th CoC meeting held on 17.10.2020. On 19.01.2021, the applicant received an email from Respondent No. 2 stating that the resolution plan submitted by the applicant had not been approved by the CoC, and thereafter the applicant received various observations from Respondent No. 2 on the resolution plan and the revised resolution plan of the applicant was to be presented at the 18th CoC meeting scheduled on 18.03.2021. However, a day before the scheduled meeting, Respondent No. 4 emailed observations regarding the revised resolution plan of the applicant, and thereafter, the final plan dated 12.04.2021 was submitted by the applicant. Respondent No. 2 informed the applicant that prior to the 19th CoC meeting, another resolution plan had been received from Mr. Sunil Bajaj, Respondent No. 1, and thereby the applicant was asked to revise his bid to match the amount proposed by Respondent No. 1, and pursuant to the 19th CoC meeting held on 12.04.2021 and 13.04.2021, the Respondent No. 2 stated the intention of the CoC to republish Form G. The applicant gave no objection to the republishing of Form G and further refused any revision in his proposed Resolution Plan. Thus, the applicant seeks the aforementioned prayer on the following grounds:
a) Respondent No. 1 is guilty of fraud because in collusion with the other respondents or in breach of confidentiality as he directly submitted a full resolution plan on 12.04.2021, whereas he was never on the list of any eligible prospective resolution applicants in accordance with Regulation 36A of the Regulations and lead to the inference that Respondent No. 1 is in collusion with the other respondents who are privy to confidential information of the corporate debtor.
b) Resolution of CoC for re-publication of Form G after the expiry of 270 days from the insolvency commencement date and 10 months post the last Form G is against the intent and purpose of the proviso to Section 12(3) of the Code.
c) Respondent No. 1’s submission of the plan and Respondent No. 2’s consideration and presentation of the plan to the COC is in violation as per Section 25(2)(h) of the Code and Regulation 36 A(7) and Regulation 36A(8) of the Regulations. Moreover, it is violative as per Regulation 21(3) of the Regulations, according to which a notice along with the agenda is to be sent to every participant not less than five days which may be reduced to a period not less than 24 hours in accordance with Regulation 19 of the Regulations.
d) The consideration of the resolution plan and voting on the re-issuance of form G in the 19th meeting of the CoC is in violation of the provisions of the Code and Regulations as an expression of interest received after the time specified in the invitation is liable to be rejected.
Respondent No. 1, Mr. Sunil Bajaj, has filed his reply vide Dairy No. 623/5 dated 14.03.2022 and stated that respondent No. 1 came to know about the ongoing CIRP against the corporate debtor in the month of December 2020. Respondent No. 1 is the proprietor of M/s Brothers Polymers and is inter alia engaged in the business of manufacturing of flexible, laminates and high-quality packaging products, which involves similar business activities to that of the corporate debtor hence decided to bid to acquire the business of the corporate debtor. As per the invitation of Expression of Interest dated 22.07.2020, respondent No. 1 submitted its expression of interest dated 11.01.2021 on 12.01.2021 to Respondent No. 2. Further, respondent No. 1 also found a request for a resolution plan dated 22.07.2020 issued by the respondent No. 2 and subsequently filed its resolution plan on 12.04.2021 along with the demand draft of Rs.10,00,000/- to show his bona fide intention to participate in CIRP process. Respondent No. 1, further on 13.04.2021, wrote a letter to the resolution professional and committee of creditors to consider his application for a resolution plan in light of Kalpraj Dharmishi & Anr. Vs. Kotak Investment Advisors Ltd. & Anr. of the Hon’ble Supreme Court in which it was held that the acceptance of resolution plans after the due date but before the expiry of the timeline specified by the Insolvency and Bankruptcy Code for completion of the process if consciously approved by the COC does not warrant judicial interference . Furthermore, as per the contentions raised by the applicant, the following averments have been made by respondent No. 1:
a) Respondent No. 1 had duly participated in the CIRP of the corporate debtor by submitting its expression of interest.
b) Respondent No. 1 had drawn its resolution plan on the basis of information available on the public domain and thereby denies that any confidential information or any undue gain has been obtained by or given to the respondent.
The Respondent No. 2, the resolution professional, has filed his reply vide Diary No. 623/2 dated 17.01.2022 and stated that pursuant to the order dated 25.11.2019, a petition under section 7 of IBC 2016 was initiated and the Hon’ble Tribunal appointed Ms. Ritu Rastogi as the interim resolution professional. Pursuant to the 2nd meeting of COC, an application under section 22 of IBC was filed for the appointment of respondent No. 2 as the resolution professional of the corporate debtor, which was confirmed by this adjudicating authority vide order dated 22.01.2020. In the 3rd COC meeting, respondent No. 2 (resolution professional) was authorized to publish form G for inviting prospective resolution applicants; however, only three prospective resolution applicants submitted their Expression of Interest. However, none came forward for submission of the resolution plan till the last date of submission, i.e. 08.04.2020. there for COC in its 5th meeting dated.27.05.2020 authorize respondent No. 2 to republish Form G. On the re-publication, 5 prospective resolution applicants submitted the resolution plan before the last date of submission, i.e. 14.08.2020, out of which the applicant, Mr. Ramneek Goyal, was declared the H1 bidder after various negotiation rounds held between him and the CoC. Finally, on 23.12.2020, the Resolution Plan submitted by the applicant was put on e-voting, which was open up till 30.12.2020. The said Resolution Plan was not approved by the CoC in its 16th CoC meeting with the requisite 66% voting share. Thereafter, respondent No. 2 received a revised resolution plan from the applicant on 15.03.2021, which was shared with the other members of the CoC. However, the answering respondent No. 2 received an email from respondent No. 4 on 17.03.2021, having certain observations regarding the revised resolution plan, which was forwarded to the applicant. Thereafter long persuasion through such various correspondences between respondent No. 4 and the applicant, the latter agreed to consider all the observations of respondent number 4. In the 19th COC meeting dated 12.04.2021, respondent No. 2 received an email from respondent No. 1 wherein a resolution plan for the amount of Rs.27.06 crore had been submitted, but the matter could not be concluded as there were differing opinions regarding accepting or rejecting the plan received from Respondent No. 1, therefore, the meeting was adjourned for the next date whereby the COC members while exercising their commercial wisdom, as the bid of respondent No. 1 offered higher value, decided that it is in the best interest of the corporate debtor to republish Form G and look for more resolution applicants. Respondent No. 2 further brings to light the judgment of the Hon’ble Supreme Court in the matter of ‘ Arcelor Mittal India Pvt. Ltd. Vs. Salish Kumar Gupta’ along with the judgment of this bench in the matter of ‘Oriental Bank of Commerce & Gupta Exim India Pvt Ltd’ wherein no vested right had been granted to the applicant, and further fresh resolution plans/revised resolution plans were allowed. Furthermore, in the judgment of ‘Swiss Ribbons Pvt. Ltd. Vs. Union of India’ of 2019 AIR (SC) 739 of the Supreme Court, it was held that the primary focus of the IBC is to ensure the revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. Further, in the case of ‘Innovative Industries Ltd. Vs. ICICI Bank’ reported at 2017 AIR (SC) 4084, it was held that one of the objects of the IBC is speeding up the insolvency process and speed is the essence of the IBC, and hence, respondent No. 2 seeks dismissal of the application.
Respondent No. 3, i.e. the State Bank of India (SBI), has filed his reply vide Diary No. 623/9 dated 04.05.2022 and states that the acceptance or rejection of any resolution plan is within the commercial jurisdiction of the members of the CoC and thus the applicant has no locus standi to file the present application. Moreover, respondent No. 3 seeks misjoinder of parties as no relief has been sought against him. It is averred that the entire corporate insolvency process has been carried out in complete confidentiality by the Resolution Professional, and all the information which is sought by the applicant is with the Resolution Professional. Therefore, no relief can be sought against members of the CoC, and therefore denies all the averments made by the applicant.
Respondent No. 4, i.e. Small Industries Development Bank of India (SIDBI), has filed his reply vide Diary No. 623/1 dated 05.07.2021 and takes similar contentions as the other respondents and refers to the aforementioned judgment in Kalpraj Dharmishi & Anr. Vs. Kotak Investment Advisors Ltd. & Anr. of the Hon’ble Supreme Court of India. Further, respondent No. 4 states that he is justified in making observations on the pending resolution plan to ensure that the resolution plan is implementable. Further, respondent No. 4 sought financial details about the resolution applicant to enable it to assess the financial soundness and capability of the resolution applicant to implement the plan vide email dated 08.02.2021 addressed to the Resolution Professional. After receiving part of the information on 15.03.2021, several loopholes were found therefore, vide email dated 17.03.2021, the same were taken up. The applicant, instead of taking into account the observations raised by respondent No. 4, repeatedly ascribed ulterior motives, which led respondent No. 4 to write a mail dated 06.04.2021 in which it was stated that “...The RA has been repeatedly casting aspersions regarding the motives etc as per the trail mails. It is gradually becoming clear that he is trying to take advantage of the fact that he is the sole bidder left in the fray and thinking that Banks will approve any plan, being left with no alternative, just in the name of saving the unit (irrespective of the fact that his commitments are in thin air, based on loosely drafted plan). Any attempt to bring seriousness to the issue is being seen with suspicion. His intransigence is for sure leading the unit into liquidation, as indicated by him… ”.
Respondent No. 5, i.e. Canara Bank through its authorized representative, has filed its reply vide Diary No. 623/4 dated 25.02.2022, stating that the applicant was never declared as the H1 Bidder as the Resolution Plan presented by the applicant in the 16th CoC meeting was not approved by the requisite voting percentage of the CoC. The judgment of the Hon’ble Apex Court in the matter of ‘Arcelor Mittal India P. Ltd. Vs. Satish Kumar Gupta’, (Civil Appeal Nos. 9402-9405 of 2018, etc.), it has been observed that: "76. Given the timeline referred to above and given the fact that a resolution applicant has no vested right that his resolution plan be considered, it is clear that no challenge can be preferred to the Adjudicating Authority at this stage. A writ petition Under Article 226 filed before a High Court would also be turned down on the ground that no right, much less a fundamental right, is affected at this stage. This is also made clear by the first proviso to Section 30(4), whereby a Resolution Professional may only invite fresh resolution plans if no other resolution plan has passed muster.". In the case of ‘K Sashidhar Vs. Indian Overseas Bank & Ors.’ (Civil Appeal No. 10673 of 2018) the Hon’ble Supreme Court held that the legislature, while enacting the Code, has consciously ensured that no ground is available to question the commercial wisdom of the individual financial creditors or the collective decision of the CoC before the Adjudicating Authority, in approving or rejecting a resolution plan and such commercial considerations are outside the
scope of judicial review. In the case of ‘Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta’, (Civil Appeal No. 8766-67 of 2019) wherein it was held that the scope of judicial review while approving the resolution plans was required to be within the four corners of (i) Adjudicating Authority u/s 30(2) of the Code, (ii) Appellate Tribunal u/s 32 read with Section 61(3) of the Code . In the matter of ‘ Oriental Bank of Commerce and Gupta Exim Pvt. Ltd.’ via IA No. 124 of 2021 filed in CP(18) No. 312/Chd/Hry/2018, this corresponding Tribunal had permitted the applicant and all other prospective resolution applicants to participate in the resolution process of the corporate debtor and to submit their fresh resolution plans/revised resolution plans within the stipulated time period. Therefore, respondent No. 5 claims to be well within their legal rights to deliberate upon the pending Resolution Plan and asking the applicant to improve his bid value.
In various rejoinders filed by the applicant, vide Dairy No. 623/6 dated 05.04.2022, Dairy No. 623/7 dated 05.04.2022, Dairy No. 623/10 dated 11.05.2022 and Dairy No. 623/8 dated 05.04.2022, in response to the replies filed by respondents 1-4, it is argued that the decision of the CoC of issuing a fresh Form G is prejudicial to the applicant and such a decision does not fall under the purview of the commercial decision of the CoC for maximization of value of assets of the corporate debtor as discussed in the judgment of Hon’ble Supreme Court in ‘Committee of Creditors of Essar Steel India Vs. Satish Kumar Gupta & Ors.’ [(2020) 8 SCC 531]. Further, the applicant emphasised on the fraudulent conduct of Respondent No. 1 and the breach of confidentiality by other respondents. It is also denied that the submissions of the applicant have the effect of seeking the CoC not to adhere to the object of the Code by placing reliance on IMR Metallurgical Resources AG Vs. Ferro Alloys Corporation Limited [Company Appeal (AT) (Insolvency) No. 272/2020],
We have heard learned counsel for the parties and have gone through the records, especially the correspondence exchanged between the parties and the minutes of the relevant meetings of the CoC.
In the case in hand, the applicant had filed a Resolution Plan, and the RP had asked the applicant to match the amount offered by another Resolution Applicant who had filed his plan at a very late stage. As the applicant consistently refused to increase his offer, the CoC decided to publish Form G and seek a better proposal.
As regards the applicant’s allegations that respondent No. 1-Resolution Applicant offered a higher amount in his proposal than the applicant at a belated stage by fraudulently accessing confidential information, we are of the view that this issue of an alleged breach of confidentiality cannot be adjudicated by this Bench as it has only a summary jurisdiction in the matter.
The real issue, therefore, is whether the CoC has the necessary power to restart the process of Resolution by issuing Form G when it is not satisfied with the amount offered by the Resolution Applicant(s) before it. In this connection, a reference is made to the various emails received by the respondent-RP from the members of the CoC regarding the acceptability of the offer of the applicant, which is summarised in the minutes of the 19th CoC meeting held on 12.04.2021 under the agenda item- K to consider the fully complied revised Resolution Plan received from the Resolution Applicant Mr. Ramneek Goyal and seek approval of the members of the CoC under Section 30 of IBC 2016. It is also seen that the RP has taken the following legal opinion, as mentioned in the minutes itself -
“The RP informed that the legal opinion has been taken on the following points:
Whether Resolution Professional or Committee of Creditors can accept a new resolution plan without publication of Form-G?
If the answer to the above is in the affirmative, then whether timelines can be reduced or in accordance ith timelines specified as per Regulation 38(e) of the CIRP Regulations, 2016?
What is the voting percentage required for voting to accept a resolution plan without FORM G on voting?
The answer to the first two queries is:
"In view of the aforesaid recent decision of the Hon'ble Supreme Court, it is evident that the said action to allow or reject another prospective Resolution Applicant at this stage and issuance of FORM-G falls within the "commercial wisdom" of the coC and therefore, the answer to the Query (r) is answered in the affirmative. However, at this stage, the CoC whilst exercising the said power and commercial wisdom shall follow the process i.e. publishing a fresh FORM-6 in order to invite more applicants and maximise the value of the assets of the Corporate Debtor."
Answer to the Third Query is:
"Thus, whilst answering the query of the Querist, the agenda dealing with the issuance of fresh FORM.G does not Sell Within the purview of any Section of the Code as detailed in paragraph 27 above, where any specific voting share has been provided. Therefore, the same being a decision of the Committee of Creditors other than provided in the Code, wherein no specific voting percent has been provided, the agenda will have to voted in terms of Section 21(8) of the Code and accordingly, a voting share of 51% of the financial creditors in favor will be required for approval of the said agenda."
It is also noted from the minutes on the same agenda item that members of the CoC have taken into account the time factor involved if Form G is issued fresh. After considering the pros and cons, the following decision was taken :
“The Committee of Creditors decided that in order to maximize the assets of the Corporate Debtor, as the other resolution plan is offering higher value, it would be in the interest of the stakeholders to republish the FORM-G and seek more resolution applicants for resolution of the Corporate Debtor.”
In this connection, we also profitably refer to the decision of the Hon’ble Apex Court in the case of Kalpraj Dharmishi & Anr. Vs. Kotak Investment Advisors Ltd. & Anr., in which it was held that the acceptance of resolution plans after the due date, but before the expiry of the timeline specified by the Insolvency and Bankruptcy Code for completion of the process, if consciously approved by the COC does not warrant judicial interference .
We also refer to a catena of judgments of the Hon’ble Apex Court, wherein it is laid down that acceptance or rejection of any Resolution Plan is within the commercial jurisdiction of the members of the CoC, and the Adjudicating Authority has very limited scope for questioning the same. We also note that the CoC had not taken any final decision on the offer made by the applicant in view of the higher offer received and had deferred a decision in this matter. After going through the minutes of the CoC meeting, we are of the view that due procedures under the Code have been followed, and there is no need to interfere with the collective wisdom of the members of the CoC to issue fresh Form G in the present case.
In view of the aforementioned discussion, we do not accede to the prayer of the applicant to declare the Resolution Process, including the proposal to republish Form G, void.However, the applicant is at liberty to file his fresh EoI upon publishing of new Form -G.
As a result, IA No. IA 328/2021 is dismissed and stands disposed of accordingly.
IA No. 329/2021
This application has been filed for interim prayer under section 60(5) of the Insolvency and Bankruptcy Code, 2016, in the main application. IA No. 328/2021, wherein the applicant has taken the ground that the Resolution Professional is in breach of confidentiality and guilty of fraud under Section 29(2) of the Code read with Regulation 36(4) of the CIRP Regulations. The applicant in this application pleads for a stay on the publication of Form G pending adjudication of the main application. As the main application, i.e., IA No. 328/2021, has already been disposed of, the present application is rendered infructuous
In the result, this application is rendered infructuous and disposed of accordingly.