Canara Bank Vs. Mamta Binani, RP of Aristo Texcon Pvt. Ltd. - He (Resolution Professional) is an Officer of the Court and he is to exercise reasonable and responsible care for the company whose property and affairs are entrusted with him.

 NCLAT (03.01.2022) in Canara Bank  Vs. Mamta Binani, RP of Aristo Texcon Pvt. Ltd. [(Company Appeal(AT)(Insolvency) No. 1117 of 2019) ] held that;

• He (Resolution Professional) is an Officer of the Court and he is to exercise reasonable and responsible care for the company whose property and affairs are entrusted with him.

• In case, the Resolution Plan is not meeting the requirement of Section 30 of the Code, the Resolution Professional is empowered to refuse to present the Plan to the Committee of Creditors.

• A ‘Resolution Professional’ is not required to take any decision but he is to confirm that the Resolution Plan does not violate any of the provisions of Law for the time being in force (including Section 29A of I&B Code). Suffice for this ‘Tribunal’ to pertinently point out that an ‘ex-facie’ opinion is to be offered to the ‘Committee of Creditors’ by the ‘Resolution Professional’ that the Law was not violated.

• A Resolution Plan submitted by the concerned Resolution Applicant on accounts of its confidentiality, cannot be disclosed to any competing Resolution Applicant nor any opinion can be taken or objection can be called for from other Resolution Applicants in regard to one other Resolution Plan.

Excerpts of the Order;

The ‘Appellant’ /Canara Bank as an ‘Aggrieved Person’ has preferred the instant Company Appeal (AT)(Insolvency) No.1117 of 2019 being dissatisfied with the with order dated 20.8.2019 in CA (IB)No.709/KB/2019 in CP(IB)No.570/KB/2018 passed by the ‘Adjudicating Authority’ (National Company Law Tribunal, Kolkata Bench, Kolkata).

 

# 2. The ‘Adjudicating Authority’ (National Company Law Tribunal, Kolkata Bench) while passing the impugned order dated 20.08.2019 in CA (IB)No.709/KB/2019 in CP(IB)No.570/KB/2018 (Filed by the Resolution Professional under Section 30(6) and 31 of the I&B Code, 2016 r/w Regulation 39(4) of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 at paragraph 8 to 15 had observed the following:-

• 8. “We have given our thoughtful consideration to the submission made by the Ld. Counsel for the Canara Bank. We hold that order passed by NCLAT in case of Standard Chartered Bank Vs Satish Kumar Gupta RP of Essar Steel Ltd and Ors is now the subject to appeal before Hon’ble Supreme Court. Hon’ble Supreme Court stayed the execution of that order. Secondly, the facts before Hon’ble NCLAT and point for consideration was whether Operational Creditor can be treated in discriminatory manner while distributing assets of the Corporate Debtor in between them and the Financial Creditors. In this case, there are some Operational Creditors but no provision is made to pay any sum in view of Section 53 of Insolvency and Bankruptcy Code, 2016. All Financial Creditors are equally treated while distributing funds.

• 9. In case of K. Sashidhar Vs Indian Overseas Bank Ltd (Civil Appeal No.10673 of 2018), the Hon’ble Apex Court hold that ‘the legislature has not endowed on the Adjudicating Authority (NCLT) with the jurisdiction or authority to analyse or evaluate commercial decision of CoC, which lies to enquire into the justness of the rejection of resolution plan by descending financial creditors.”

• 10. In short it is held that this Authority cannot sit in appeal against the financial decisions that are taken by CoC, In our considered opinion, it is within commercial wisdom of the CoC as to what Financial Creditors will get what share of the resolution funds.

• 11. Hence, we reject the objection of Canara Bank and proceed to check whether the resolution plan submitted for our approval complies the approval under Section 30(2) of Insolvency and Bankruptcy Code, 2016.

• 12. Section 30(2) of Insolvency and Bankruptcy Code, 2016 mandates that resolution plan shall provide:-

• (a) the payment of insolvency resolution process cause in priority and payment of other debts of the Corporate Debtor.

• (b) provides for payment of debts of Operational Creditors in such a manner specified by the Board subject to Section 153 of Insolvency and Bankruptcy Code, 2016.

• (c) provides mechanism for management of affairs of the Corporate Debtor after approval of the resolution plan.

• (d) provides mechanism for implementation and supervision of the resolution plan.

• (e) the plan should not contravene in provision of law for time being in force.

• (f) plan must confirm other requirement as specified by the Board.

• 13. Keeping before our sight, we have examined the resolution plan produced for our approval. It is seen that there is no Operational Creditor, employees or the workmen and hence no provision made towards their payment.

• 14. Para 6 of mandatory contents of the plan provides mechanism regarding management in control of affairs of the Corporate Debtor. It is also provided therein the mechanism for effective supervision and implementation of the plan. Provision is also made to pay resolution costs. The resolution fund appears to be equally distributed among all the Financial Creditors giving them equal share i.e. 23.43%. RP has certified the plan and compliance Certificate is produced as Annexure F. The affidavit of resolution applicant is also produced stating that they are not disqualified under Section 25A of Insolvency and Bankruptcy Code, 2016.

• 15. Perusal of plan shows that it does not contravene any provision of law time being in force and it complies all requirement of Insolvency and Bankruptcy Board of India (in short IBBI).”

 

accepted and approved the Resolution Plan of M/s Jagannath Financial Advisory Pvt Ltd.

 

RESOLUTION PROFESSIONAL’S DUTIES

# 31. A Resolution Professional has a duty among other things to invite the prospective Resolution Applicant who satisfies the requirements as prescribed by him with the approval of the ‘Committee of Creditors’ keeping in mind the complexity and scale of operation of the business of the ‘Corporate Debtor’ and other conditions as may be prescribed by the IBBI to place forward the Resolution Plans, project such plan to the ‘Committee of Creditors’ etc. He is an Officer of the Court and he is to exercise reasonable and responsible care for the company whose property and affairs are entrusted with him. He has an absolute duty to secure the best prize in the given circumstances and he is not made liable because his perception is wrong, of course, with the rider that unless it is not a reasonable one.

 

# 32. As per Section 25(2)(i) of the Code, a duty is cast on the Resolution Professional to scrutinize the Resolution Plan to ensure that it is in accordance with Section 30 of the I&B Code and Regulation 37 of the IBBI(Insolvency Resolution Process for Corporate Persons) Regulations, 2016. In case, the Resolution Plan is not meeting the requirement of Section 30 of the Code, the Resolution Professional is empowered to refuse to present the Plan to the Committee of Creditors.

 

# 33. A Resolution Professional is only to examine and confirm that each Resolution Plan conforms to what is mentioned by Section 32 of the Code. The ‘Resolution Professional’ shall undertake to project all the Resolution Plans during the Meetings of the ‘Committee of Creditors’ and as per Section 30(3) of the Code the Resolution Professional shall present to the ‘Committee of Creditors’ for its approval, such Resolution Plans which confirms the condition mentioned in sub-section (2).

 

# 34. A ‘Resolution Professional’ is to scrutinise that the Resolution Plan furnished by numerous applicants is complete in all aspects, before presenting it to the Committee of Creditors. A ‘Resolution Professional’ is not required to take any decision but he is to confirm that the Resolution Plan does not violate any of the provisions of Law for the time being in force (including Section 29A of I&B Code). Suffice for this ‘Tribunal’ to pertinently point out that an ‘ex-facie’ opinion is to be offered to the ‘Committee of Creditors’ by the ‘Resolution Professional’ that the Law was not violated.

 

# 35. It is the duty of the ‘Resolution Professional’ to determine as to whether the eligibility criteria of Resolution Applicants prescribed in Section 29-A of the Code are satisfied. He is to consider the objections brought to his notice prior to the submission of the Resolution Plan to the ‘Committee of Creditors’. As per Section 30(2) of the I & B Code, the Resolution Professional is to examine each Resolution Plan received by him to confirm that the Resolution Plan provides for payment of Insolvency Resolution Process Costs, Payment of Debts of the Operational Creditors, management of the affairs of Corporate Debtor, the fulfillment and supervision of Resolution Plan, other requirement as may be specified by the Board and does not violate any of the provisions of the law for the time being in force.

 

# 36. A Resolution Plan submitted by the concerned Resolution Applicant on accounts of its confidentiality, cannot be disclosed to any competing Resolution Applicant nor any opinion can be taken or objection can be called for from other Resolution Applicants in regard to one other Resolution Plan.

 

RESOLUTION PLAN’S APPROVAL:

# 37. Subjective satisfaction is a pre-requisite for approval of Resolution Plan. A threadbare scrutiny and a study of the Resolution Plan is to be made prior to the ‘satisfaction’ being arrived at by the ‘Adjudicating Authority’ in a written form. The I & B Code speaks of accountability of the Insolvency Professional and also the ‘Committee of Creditors’ who comprise of the Lender Banks.

 

ASSESSMENT:

# 38. The First Respondent/Resolution Professional before the ‘Adjudicating Authority’ filed CA(IB) No. 709/KB/219 in CP(IB) No. 570/KB/2019 (under Section 30(6) & 31 of the Insolvency & Bankruptcy Code 2016 r.w. Regulation 39(4) of Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) praying for an approval of the Resolution Plan dated 19.04.2019 submitted by Jagannath Advisory Pvt. Ltd. as per Section 31(1) of the code as approved by the ‘Committee of Creditors’.

 

# 39. The First Respondent/Resolution Professional in CA(IB) No. 709/KB/219 in CP(IB) No. 570/KB/2019 had averred that the Resolution Plan dated 19.04.2019 submitted by Jagannath Advisory Pvt. Ltd was examined and was found to be fulfilling the mandatory provision of Section 30(2) of the Code and the relevant regulations. Furthermore, Jagannath Advisory Pvt. Ltd was identified as a ‘Successful Resolution Plan’ and that the First Respondent/Resolution Professional resting on the instructions of and due authorization from the ‘Committee of Creditors’ issued the Letter of Intent (LOI) to Resolution Application on 22.05.2019.

 

# 40. It transpires that the Successful Resolution Applicant / Jagannath Advisory Pvt. Ltd had furnished an unconditioned Performance Deposit in the form Demand Draft amounting to Rs. 30 lakhs, drawn in favour of the ‘Corporate Debtor i.e., ‘Aristo Texon Private Limited’ dated 22.05.2019 in regard to the implantation of the ‘Successful Resolution Plan’. Moreover, the Performance Deposit was given together with an undertaking towards the maintaining the Instruments validity for a period of at least six months from the date of communication of approval of the Resolution Plan by the Resolution Professional or till the end of the Resolution Plan, implementation period whichever is later.

 

# 42. In the present case, the 1st Respondent/Resolution Professional and the ‘Committee of Creditors’ were in receipt of four Resolution Plans- (1) Dalmia Industrial Development Limited (2) Damani Infra com Pvt. Ltd. (3) Jagannath Financial Advisory Pvt. Ltd. (4)KNG Industrial Traders Pvt. Ltd.

 

# 43. It is brought to the fore that in the 11th Meeting of the ‘Committee of Creditors’ held 24..04.2019 the decided to accord approval to the Resolution Plan furnished by M/s Jagannath Financial Advisory Pvt. Ltd. Because of the fact that the required period for CIRP was to come to an end, the ‘Committee of Creditors’ had turned down the contentions of the Appellant and approved the Resolution Plan in its meeting that took place on 21.05.2019. In short, the distribution of Resolution Fund was decided as (a) Canara Bank- 24-30% (b) North Eastern Development Financial Corporation- 47.77% (c) Punjab National Bank – 27.93%.

 

# 44. Although, the Appellant/Canara Bank gave a dissenting Vote for the approval of the Plan, based on the reason that ‘Distribution of Resolution Fund’ was discriminatory as against them and despite its plea that it was entitled to the equal and share in regard to the distribution of the Resolution Fund on the footing that the Bank held more than 80% of the assents of the ‘Corporate Debtor’ as security, the fact of the matter is that the ‘Committee of Creditors’ had approved the Resolution Plan of Jagannth Financial Advisory Pvt. Ltd by 75.70% of votes.

 

# 45. It cannot be gainsaid that the ‘Resolution Fund’ was equally distributed among all the ‘Financial Creditors’ showring them equal share i.e., 23.43 % and that the 1st Respondent/Resolution Professional had certified the plan and the compliance certificate was furnished. There is no illegality in the Resolution Plan as opined by this Tribunal, it comes to be known that the Successful Resolution Applicant/Respondent No. 4 had implemented the Resolution Plan in part and made part payments quite in tune with the ‘Approved Resolution Plan’.

 

# 46. Besides the above, at this juncture, this ‘Tribunal’ aptly points out the decision of Hon’ble Supreme Court in India Resurgence ARC Pvt. Ltd. V. Amit Metalks & Anr. 2021 SCC online SC 409 wherein a paragraph 21 it is mentioned as under:

• 15. “ The limitation on the extent of the amount receivable by a dissenting financial creditor is innate in Section 30(2)(b) of the Code and has been further exposited in the decisions aforesaid. It has not been the intent of the legislature that a security interest available to a dissenting financial creditor over the assets of the corporate debtor gives him some right over and above other financial creditors so as to enforce the entire of the security interest and thereby bringing about an inequitable scenario, by receiving excess amount, beyond the receivable liquidation value proposed for the same class of creditors.”

 

# 47. To be noted, in the present case, the distribution of the amount was made by the ‘Committee of Creditors’ resting on the total dues of individual Creditor and the same is not either whimsical or arbitrary in any manner. To put it differently, the ‘distribution of the amount’ between the Creditors provide the equal treatment to all of them. Also that the Appellant was provided with a fair value as per decision of the ‘Committee of Creditors’ and the value proportionate to the dues was allotted same as that of other Financial Creditors.

 

# 48. Undoubtedly, the commercial decision and matters pertaining to it solely comes within the ambit of the ‘Committee of Creditors’ who in the present case had approved the Resolution Plan with a majority of 75.70% affirmative votes. In effect, the acceptance and approval of Resolution Plan of 4th Respondent/M/s Jagannath Financial and Advisory Pvt. Ltd. by the ‘Adjudicating Authority’ (National Company Law Tribunal, Kolkata Bench) as per its order 28.02.2019 in CA(IB) No. 709/KB/2019 in CP(IB) No. (IB) 570/KB/ 2018 does not suffer from any vice of material irregularities or patent illegalities in the eye of law, as opined by this Tribunal. Viewed in that perspective, the instant Appeal sans merits.

 

RESULT:

# 49. In fine, the instant Company Appeal (AT)(Insolvency) No. 1117 of 2019 is dismissed. No costs. Consequent to the dismissal of Company Appeal (AT)(Insolvency) No. 1117 of 2019, C.A. No. 13 of 2020 (Contempt Application) filed by the Appellant/Applicant Bank is closed.

 

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Joseph Joseph & Ors. Vs. Churakulam Tea Estate Pvt.Ltd. & Ors. - Resolution Plan of Erstwhile Director (MSME) cannot be considered, after the approval of a Resolution Plan by CoC &AA

 NCLT Kochi  (30.06.2021) in Joseph Joseph & Ors. Vs. Churakulam Tea Estate Pvt.Ltd. & Ors.   [IA/(IBC)/74/KOB/2021 In IBA/21/KOB/2019] held that; 

• As Corporate Insolvency Resolution Process is a time bound measure, value maximization has also to be in time bound manner. At this late stage, this Tribunal cannot allow this application to set aside the approved Resolution Plan and allow the applicants to submit a Resolution Plan.

 

Excerpts of the order;

This is an Application filed under Section 60 (5) of the Insolvency and Bankruptcy code, 2016 read with Rule 11 of the National Company Law Tribunal Rules, 2016 by Mr. Joseph Joseph and others against M/s. Churakulam Tea Estate Private Limited and Others to direct the Respondent No. 2 (Mr. Jasin Jose, former Resolution Professional) to consider Resolution Plan submitted by the Applicants in terms of the provisions of the I&B Code, 2016 and to set aside the Resolution Plan submitted by the 4th Respondent.

 

# 2. In the Application it is stated that Applicants are the erstwhile promoters of the Corporate Debtor. They have now secured enough funds to settle the dues of the Respondent No.3 and every other creditor to the Respondent No.1 Company. The recent amendments to the Insolvency and Bankruptcy Code,2016 have paved the way for Applicants themselves to file a Resolution Plan in terms of Section 30 (1) of the Code,2016. The Corporate Debtor was registered under Micro, Small or Medium Enterprise (MSME)on 23.03.2015. The Company has accordingly applied under Udayam Registration. Being a Micro, Small or Medium Enterprise are entitled to file the Resolution Plan, since the Section 240A which specifically dispenses the applicability of Section 29A clause (c) to (h) in case the Corporate Debtor is a Micro, Small or Medium Enterprise. The applicant referred to a decision of the Hon’ble NCLAT in the matter Sarvana Global Holdings Ltd & Another V. Bafna Pharmaceuticals Ltd & Others [Company Appeal(AT) (Insolvency) No.203 of 2019] and stated that the I&B Code clearly envisages maximisation of value of assets of the Corporate Debtor so that they can efficiently run as a going concern and in turn will promote entrepreneurship. The preamble does not, in any manner refer to liquidation, which is only availed of as a last resort if there is either no Resolution Plan or the Resolution plan submitted are not up to the mark. Since the Applicants have mobilised sufficient funds and the Resolution Plan of the 4th Respondent has been failed, it is only just and reasonable that the applicants be extended an opportunity to settle their entire dues which would further the cause of Applicants, Respondent Nos. 1 to3 and other creditors of the Respondent No.1 Company.

 

# 3. The Resolution Professional filed a Memo and stated that this Tribunal approved the Resolution plan on 08.01.2021 and the 9th CoC decided the existing CoC to continue as the Monitoring Committee. Therefore, Resolution Professional was absolved from all statutory duties. Since the Monitoring Committee has no statutory powers to intervene in the operation of the Corporate Debtor, he has no comments to offer.

 

# 4. We have heard the learned counsel for the Applicant and Shri. Jasin Jose, former Resolution Professional in the matter through video conferencing and had gone through the records placed before this Tribunal. It appears from the record that the Applicants herein are the ex-directors of the Corporate Debtor. The Applicants herein stated that they have registered the Corporate Debtor under the Micro, Small and Medium Enterprises and Annexure-A/1 is the Registration Certificate. While perusing the records, it is seen that Annexure-A/1 is an Acknowledgement issued on 23.03.2015 by the Department of Industries, Government of Kerala valid for a period of 2 years which has already expired. The Applicants could not produce any valid Certificate issued with regard to MSME Status of the Corporate Debtor.

 

# 5. If the Corporate Debtor is a Micro, Small or Medium Enterprise is entitled to file the Resolution Plan, Section 240A which specifically dispenses the applicability of Section 29A clause (c) to (h) in case the Corporate Debtor is a Micro, Small or Medium Enterprise as per the Amendment Act 26 of 2018. The intention behind the enactment of this provision was to grant exemptions to Corporate Debtor which are MSME(s), by permitting a promoter who is not a wilful defaulter or covered under any other specific disqualification as provided under Section 29A, to bid for the Resolution Plan of an MSME.

 

# 6. In this Application, the Applicants claims that Corporate Debtor is a MSME as per the acknowledgement Certificate annexed with the application. The Corporate Debtor was put under Corporate Insolvency Resolution Process vide order dated 28.11.2019. Regulation 40-A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations,2016 set out the Model Time Line for Corporate Insolvency Resolution Process, within 75 days of Corporate Insolvency Resolution Process the Resolution Professional have to commence invitation of EoI. In the present case as per Regulation 36-A Resolution Professional Published Form G, on 17.02.2020, within 35 days i.e. on 115th day, final list of the Resolution Applicant has to be prepared by the Resolution Professional. EoI was received from 2 Resolution Applicants, out of which one was found eligible. Further the 3rd CoC decided to extent the time for submission of EOI for further 10 days and reissue the FORM G. No fresh EoI has been received. Therefore, the provisional list of the Resolution Applicant was submitted on 23.03.2020. Meanwhile lockdown was imposed by the Government of India. On 29.10.2020 Resolution Applicant submitted the revised Resolution Plan and the CoC considered the same in the 9th CoC meeting convened on 4.11.2020. In the 10th CoC meeting dated 20.11.2020 it was unanimously approved the Resolution Plan in compliance with the provisions of the I&B Code,2016. Applicants who are also a member of the CoC was silent during the CIRP period and they want to submit the plan after the approval of Resolution Plan by the Adjudicating Authority on 08.01.2021.

 

# 7. As Corporate Insolvency Resolution Process is a time bound measure, value maximization has also to be in time bound manner. At this late stage, this Tribunal cannot allow this application to set aside the approved Resolution Plan and allow the applicants to submit a Resolution Plan.

 

# 8. Hence IA(IBC)/74/KOB/2021 is dismissed.

 

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Sreeram E. Techno School Pvt. Ltd. Vs Beans and More Hospitality Pvt. Ltd. - There is no bar for the ‘Promoter’ to file ‘resolution application’, even if otherwise not eligible in terms of Section 29A.

 NCLAT (11.09.2019) in Sreeram E. Techno School Pvt. Ltd. Vs Beans and More Hospitality Pvt. Ltd.  [Company Appeal (AT) (Insolvency) No. 936 of 2019] held that;

• However, such submission cannot be accepted as it has no bar for the ‘Promoter’ to file ‘resolution application’, even if otherwise not eligible in terms of Section 29A. There is nothing on record to suggest that the ‘Corporate Debtor’ is an undischarged insolvent or wilful defaulter in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulations Act, 1949 or at the time of submission of ‘resolution plan’ has an account, classified as ‘Non-Performing Asset’ (NPA) in accordance with the guidelines of the Reserve Bank of India or that the ‘Promoter’ or its Directors or has been convicted for any offence punishable with imprisonment or is disqualified to act as a Director under the Companies Act, 2013 or was prohibited by ‘Securities and Exchange Board of India’ (SEBI) or made any preferential transaction , an undervalued transaction or granted extortionate credit transaction or made fraudulent transaction etc. 

• The question of viability, feasibility and other conditions as prescribed by the ‘Insolvency and Bankruptcy Board of India (for short, ‘the Board) of a ‘Corporate Debtor’ can be looked into by the ‘Committee of Creditors’ which has experte in the financial field. Such issue of viability, feasibility and other conditions of the ‘Corporate Debtor’ cannot be looked into by the Adjudicating Authority or by this Appellate Tribunal.

Excerpts of the order;

11.09.2019 ‘Shree Siyaram Automations Private Limited’ (now ‘Shreeram E Techno School Private Limited’ – Appellant herein) moved an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short, ‘the I&B Code’), pursuant to which ‘Corporate Insolvency Resolution Process’ was initiated against ‘Beans and More Hospitality Pvt. Limited (Corporate Debtor). In the said case, the ‘resolution plan’ was submitted by one Mr. Abhay Jain, ‘Promoter’, was considered by the ‘Committee of Creditors’ in its meeting on 12th November, 2018 by voting of 74.19% of voting share discussing all aspects of approved ‘resolution plan’. The Adjudicating Authority taken into consideration all the facts and the plan being in consonance of Section 30(2) of the ‘I&B Code’ approved the said plan by impugned order dated 19th July, 2019. Relevant portion of which reads as :

• “13. It is stated in the CA that the Resolution Plan envisages that the Financial Creditors are proposed to be paid against the full and final settlement of their entire financial/ operational debt against the Corporate Debtor including contingent liabilities), as tabulated on page 16 of the typed set of the CA.

• 14. It is also submitted that the Resolution Plan envisages the continuation of the Corporate Debtor as a “going concern” and previous management will run the company to make it viable so that society and other stakeholder will gain and keeping company as going concern and continuity of the company will contribute significantly to the society and government by putting the natural resources to best use and contributing significant direct and indirect employment and income generation opportunities in the region and will wait for the decision of the court and acquisition.”

 

# 2. While considering the same, the Adjudicating Authority also noticed that the ‘Promoter’ issued an affidavit to the effect that they are not ineligible under Section 29A of the I&B Code.

 

# 3. The Appellant, one of the ‘dissenting financial creditor’ has challenged the impugned order dated 19th July, 2019 alleging different infirmities and irregularities.

 

# 4. Learned counsel appearing on behalf of the Appellant submitted that the ‘resolution applicant’ was the erstwhile ‘Promoter’ and, therefore, is the relevant eligible party under Section 29A of the I&B Code. However, such submission cannot be accepted as it has no bar for the ‘Promoter’ to file ‘resolution application’, even if otherwise not eligible in terms of Section 29A. There is nothing on record to suggest that the ‘Corporate Debtor’ is an undischarged insolvent or wilful defaulter in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulations Act, 1949 or at the time of submission of ‘resolution plan’ has an account, classified as ‘Non-Performing Asset’ (NPA) in accordance with the guidelines of the Reserve Bank of India or that the ‘Promoter’ or its Directors or has been convicted for any offence punishable with imprisonment or is disqualified to act as a Director under the Companies Act, 2013 or was prohibited by ‘Securities and Exchange Board of India’ (SEBI) or made any preferential transaction , an undervalued transaction or granted extortionate credit transaction or made fraudulent transaction etc. 

 

# 5. Next, it was contended that the ‘Corporate Debtor’ is not a going concern. However a ‘resolution plan’ cannot be rejected on such grounds if the resolution applicant can show the feasibility to run the company in future. The question of viability, feasibility and other conditions as prescribed by the ‘Insolvency and Bankruptcy Board of India (for short, ‘the Board) of a ‘Corporate Debtor’ can be looked into by the ‘Committee of Creditors’ which has experte in the financial field. Such issue of viability, feasibility and other conditions of the ‘Corporate Debtor’ cannot be looked into by the Adjudicating Authority or by this Appellate Tribunal. The ‘Committee of Creditors’ having gone through the financial aspects, including the viability, feasibility and other conditions of the ‘Resolution Plan’ and having approved the plan with 74.19% of voting share, this Appellate Tribunal is not inclined to decide such issue.

 

# 6. It was next submitted that the Regulation 38 has not been complied with. However, we have noticed that the ‘Committee of Creditors’ has noticed all the aspects and merely because the Appellant is a dissenting financial creditor, no interference is called for in absence of any illegality.

 

# 7. We have also noticed that the ‘successful resolution applicant’ proposed to pay 100% dues of all the ‘financial creditor’ with interest including the Appellant. In this background also, no interference is called for.

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Hon’ble Supreme Court of India in Chitra Sharma v. Union of India [Writ Petition (Civil) No. 744 of 2017] held that; 

• “accepting the proposal submitted on behalf of JAL would cause serious prejudice to the discipline of the IBC and would set at naught the salutary provisions of the statute. ” 

It further went on to observe that the provision of Section 29A of IBC is intended to ensure that among others, persons responsible for the insolvency of the corporate debtor do not participate in the resolution process.

 

NCLT, Kolkata (18.12.2017) in RBL Bank Limited v. MBL Infrastructures Limited [CA(IB) No. 543/KB/2017] held that; 

• “clause (h) of section 29A is not to disqualify the promoters as a class for submitting a resolution plan. The intent is to exclude such class of persons from offering a resolution plan, who on account of their antecedents, may adversely impact the credibility of the processes under the Code”. (Page -12)

• “in insolvency proceedings, the promoters of Insolvent Company is the most natural person to submit a plan unless the insolvency is caused due to his acts of omission and commission or if he has an indulgence, fraud, malfeasance or other criminal activity and causes financial loss to creditors, knowingly or with criminal intent. ”  (Page -12)

This order was upheld by the  Hon’ble NCLAT.

 

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