Case Law Details
Shyson Thomas Vs Madhugiri Venkatarayappa Sudarshan (NCLAT Chennai)
NCLAT Chennai held that ‘Order of Dissolution’ sustainable as the ‘Promoters’ failed to project the ‘Resolution Plan’ within the specified time limit.
Facts- The Appellant / Promoter, is the Managing Director of M/s. Air Pegasus Private Limited, has preferred the instant appeal before this Tribunal as an ‘Aggrieved Person’ in respect of the impugned order passed by the `Adjudicating Authority’ (`National Company Law Tribunal’, Bengaluru Bench).
The Appellant / Promoter of the ‘Corporate Debtor’ had sold his Properties, infused funds from many sources, to keep the Company afloat. However, due to the `Working Capital’ crunch and `Non-availability of Funds’, had affected the business very badly and added further, the high `Lease Rental Cost’, huge `Advance Security Deposit’, etc., had affected the profitability of the business.
According to the Appellant, when the `Aircraft’, was acquired, the `Lease Costs’ and `Security Deposit’, for the `Aircraft’, were more than twice its actual rate, due to Kingfisher debacles. But, the situation had changed, and there is a drastic reduction in the `Lease Rentals’ and `Aircraft Operators’, needing only the minimal `Security Deposit’.
However, because of the pandemic situation, the `Aircraft Suppliers’ are collecting `Lease Rentals’, at a very low rate, which gives an advantage to the `Aircraft Operators’, to have more margin on their `Value’. Because of the increased traffic on roads and increased purchasing power of people in `Tier II’ and `Tier III’ Cities, people are resorting to faster and more efficient means of Travel and there is huge scope for the `Corporate Debtor’, to bounce back and commence its operations.
The Appellant brings it to the notice of this `Tribunal’ that the Appellant was not aware of the `Hearing’, before the `Adjudicating Authority’ / `Tribunal’, and that was not in a position to bring it to the notice of the said `Authority’, and hence, the `Order of Dissolution’, is to be `set aside’, and that the `Appellant’, be permitted to furnish the `Resolution Plan’.
Conclusion- The Insolvency Resolution Process under the I & B Code, 2016, is a `Time Bound Process’, and the `Appellant / Promoter’, having failed to project the `Resolution Plan’, within the specified time limit and later, the 1st Respondent / Resolution Professional, is not to accept any Plan.
Suffice it for this `Tribunal’, to make a pertinent mention that in the absence of any `Asset(s)’ / the `Resolution Plan(s)’, the Resolution Professional, had no other go, but to pray for an `Order of Dissolution’, to be passed by the `Adjudicating Authority’. After all, the end of `Liquidation’, requires complete `Dissolution’ of an `Entity’.
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
The Appellant / Promoter, is the Managing Director of M/s. Air Pegasus Private Limited, has preferred the instant TA (AT) No. 8 of 2021 in Comp. App (AT) (CH) (INS.) No. 925 of 2020, before this `Tribunal’, as an `Aggrieved Person’, in respect of the `impugned order’, dated 24.06.2020 in IA No. 198 of 2020 in CP (IB) No. 180 / BB / 2018, passed by the `Adjudicating Authority’ (`National Company Law Tribunal’, Bengaluru Bench).
2. The `Adjudicating Authority’ (`National Company Law Tribunal’, Bengaluru Bench), while passing the `impugned order’ in IA No. 198 of 2020 in CP (IB) No. 180 / BB / 2018, at Paragraph Nos. 5 & 6, had observed the following:
5̏. In terms of Section 60 of Code, the Adjudicating Authority shall be NCLT having territorial jurisdiction over the place, where the registered office of Corporate Persons is located. By conjointly reading the above provisions, the ultimate objective of Code is either to resolve the issue by way of Resolution Plan or to dissolve the Corporate Debtor, as expeditiously as possible. If the facts and circumstances of a case, justify there would not serve any purpose to keep the Corporate Debtor under regular CIRP proceedings, and thereafter under Liquidation proceedings, under the provisions of Code, the Adjudicating Authority, by exercising its inherent powers conferred under the Code, can pass appropriate order(s) in the interest of speedy justice.
6. The above facts and circumstances of the Case fully justified, that there would be no useful purpose be served, by placing the Corporate Debtor under Liquidation process, under the extant provisions of Code. Since no assets exists in the Company, as declared by the Resolution Professional, the liquidation process under the provisions of Code, is deemed to have completed under Chapter III of Part II of Code, and thus it would just and proper for the Adjudicating Authority to dissolve the Company as prayed by the Resolution Professional. The instant Application is filed in accordance with law and the Resolution to dissolve the Corporate Debtor was approved by the Sole COC, as detailed supra.”
and ultimately, dissolved the `Corporate Debtor’ / `M/s. Air Pegasus Private Limited’, with immediate effect, and proceeded to observe that the `Personal Liability’ / `Guarantee’ of any `Director’ / `Promoter’ of the `Corporate Company’, if any, would not absolve them, by virtue of this `Order’ and granted `liberty’, to any `Party / Parties’, to take appropriate `legal course of action’, aggrieved by the `Order’.
Appellant’s Contentions:
3. The Learned Counsel for the Appellant submits that the Appellant / Promoter of the `Corporate Debtor’ / `M/s. Air Pegasus Private Limited’, had sold his Properties, infused funds from many sources, to keep the Company afloat. However, due to the `Working Capital’ crunch and `Non-availability of Funds’, had affected the business very badly and added further, the high `Lease Rental Cost’, huge `Advance Security Deposit’, etc., had affected the profitability of the business.
4. According to the Appellant, when the `Aircraft’, was acquired, the `Lease Costs’ and `Security Deposit’, for the `Aircraft’, was more than twice of its actual rate, due to Kingfisher debacles. But, the situation had changed now and there is a drastic reduction in the `Lease Rentals’ and `Aircraft Operators’, need to pay only the minimal `Security Deposit’.
5. It is represented on behalf of the Appellant that because of the pandemic situations, the `Aircraft Suppliers’ are collecting `Lease Rentals’, at very low rate, which gives advantage for the `Aircraft Operators’, to have more margin on their `Value’. Because of the increased traffic on roads and increased purchasing power of people in `Tier II’ and `Tier III’ Cities, people are resorting for faster and efficient means of Travel and there is huge scope for the `Corporate Debtor’, to bounce back and commence its operations.
6. The Learned Counsel for the Appellant points out that the Appellant had already got sufficient infrastructure, to support the `Corporate Debtor’, and that `Booking Engine’, `Ground Support Equipment’, `Ground Power Unit’, `Push back Truck’, `Baggage Trollies’, `Water Cart’, `Toilet Cart’, `Engineering Trestles’, `Tractor’, `Buses’, etc., are readily available with the Appellant and in short, there is no requirement of creating new infrastructure, unlike the new Startups.
7. The Learned Counsel for the Appellant proceeds to take a stand that the `Corporate Debtor’ has a `No Objection Certificate’, obtained from the Ministry of Civil Aviation Sector and that the Company has to go through the rigorous scrutiny, checks, etc., to secure the same, from the `Ministry’. As a matter of fact, the Appellant / Promoter, has an experience of more than 20 years in Airline Sector, more particularly the track record of the successfully running the Airlines with three Aircrafts with 29 Sectors per day, and has an exclusive and extensive exposure and experience in the field.
8. The Learned Counsel for the Appellant brings it to the notice of this `Tribunal’ that the `Appellant / Company’, being the `Service Industry’, would not have `Assets’, but has the `No Objection Certificate’, to revive the `Air Operator Permit’, and in fact, the `Air Operator Permit’, got lapsed on 23.03.2020, and that with great difficulty, the `No Objection Certificate’, was secured from the `Ministry of Civil Aviation’, which is effective till 29.09.2021 and utilising the said `Certificate of NOC’, the Appellant can secure the `Air Operator Permit’, without any further `scrutiny / checks’.
9. The Learned Counsel for the Appellant brings it to the notice of this `Tribunal’ that the Appellant was not aware of the `Hearing’, before the `Adjudicating Authority’ / `Tribunal’, and that was not in a position to bring it to the notice of the said `Authority’, and hence, the `Order of Dissolution’, is to be `set aside’, and that the `Appellant’, be permitted to furnish the `Resolution Plan’.
10. It is the version of the Appellant that he had secured the `Funding Approval’ of 4 Million US$ (approximately 29 Crores) from a Dubai based Corporation named M/s. Alareej Capital LLC for `Revival’ of the `Business’, and that, the `Funding Approval’, came on the day of the impugned order. Also, that the copy of `Funding Approval Letter’, dated 24.06.2020, was issued by the Chairman of M/s. Alareej Capital LLC. In fact, the Appellant had to meet the Chairman of the said Corporation personally in concluding the deal and for executing the documents.
11. The contention of the Appellant is that, when he was taking necessary all possible endeavours to revive the business of the Company, the 1st Respondent had filed an Application for early `Dissolution of the Corporate Debtor’, in terms of `Regulation 14 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations 2016’, at the `Corporate Insolvency and Resolution Process’ itself.
12. The Learned Counsel for the Appellant points out that a Sum of Rs.29 Crores (approximately), which would be disbursed as `Term Loan’, for a period of 10 years, with Interest at 2% per annum, would be sufficient for the Appellant, to bounce back and recommence the `Operations’.
13. The clear cut stand of the Appellant is that, this `Tribunal’, on 03.2020, in Comp. App No. 1 of 2020, had excluded the period of lock down (Covid-19 period), for the purpose of computing the period of Resolution Process, as per Section 12 of the I & B Code, 2016, in all cases where the `Corporate Insolvency and Resolution Process’, was initiated and the same is pending before the `Adjudicating Authority’ / `Tribunal’.
14. According to the Appellant, the Respondents by not considering the aforesaid Order, made in Comp. App No. 1 of 2020, by the `Appellate Authority’, had proceeded for the early `Dissolution’ of the `Corporate Debtor’, inspite of knowing that the `Appellant’, is endeavouring his best, to secure `Funding’ amidst this `Covid-19’ pandemic.
15. The Learned Counsel for the Appellant comes out with a plea that the Appellant had submitted his `Expression of Interest’, through email dated 07.01.2020, and was finding a suitable Investor, to fund the Company. In the interregnum, the `Lockdown’ was imposed because of Covid-19 and from 24.03.2020 to 03.05.2020, there was a complete travel restrictions, and that, the `Appellant, could not secure an `Investment’, from `Any Source’, on account of the `uncertainty’ and `turmoil’, created in the Country. But the Appellant, had secured an `Investment’, after negotiating with the `Dubai’ based `Corporation’.
16. The Learned Counsel for the Appellant points out that the `1st Respondent / Resolution Professional’, had acted in great haste, ignored the Order, passed by this `Tribunal’, for excluding the number of days, in counting the `Corporate Insolvency Resolution Process’ period and projected an `Application / Petition’, for a `Direct Dissolution’, without `Liquidation’.
17. Continuing further, the Learned Counsel for the Appellant adverts to the Judgment of the Hon’ble Supreme Court of India in the matter of Committee of Creditors of Essar Steel India Limited v. Sateesh Kumar Gupta & Ors. (vide Civil Appeal No. 8766-67 of 2019) wherein, the word `Mandatory’ was struck down, as deemed `manifestly arbitrary’, under Article 14 of the Constitution of India and as being an excessive and unreasonable restriction, on the `right’, to carry on business, under Article 19(1)(g) of the Constitution of India. That apart, in the `interests of the Creditors and Companies’, the period beyond 330 days was extended, to encourage the `Resolution’ and `Revival’ of the Company.
18. The Learned Counsel for the Appellant projects an argument that since the `330 days CIRP period’, had lapsed, there is a necessity for this `Tribunal’, to extend the same, by taking into `Plurality of Factors’, which had affected the `Corporate Debtor’ to `Revive’ its business and submit a `Resolution Plan’, amidst the `Pandemic’.
19. The Learned Counsel for the Appellant takes a stand that the `Loan’ of the `1st Respondent / Corporate Debtor’, was secured by `sufficient Collaterals’, and prayed for an opportunity being provided to the Appellant, to `Revive’ the `Business’ of the `Corporate Debtor’, in the best interests of `Stakeholders’.
20. The Learned Counsel for the Appellant while rounding up contends that because of the fact that the `Corporate Debtor’, is already possessing a `No Objection Certificate’, that it is not a difficult task to secure the `Air Operator Permit’, `Re-issued’ or `Re-certified’, and considering the fact that the `Corporate Debtor’, is also getting `Funding’, for about Rs.29 Crores, to submit his `Resolution Plan’, to revive the business, an opportunity may be provided to the Appellant. Moreover, if the Company is `Revived’, `no one will suffer’, and on the other hand, the Appellant will be put to an `irreparable harm’, if the instant Appeal, is not allowed by the `Tribunal’.
1st Respondent’s Submissions:
21. The Learned Counsel for the 1st Respondent contends that the Letter dated 27.09.2018 of the Under Secretary to the Government of India, Ministry of Civil Aviation, is only a `No Objection Certificate’, granted to the `Appellant / Managing Director’ of the `Corporate Debtor’ / `Air Pegasus Private Limited’, and the said `No Objection Certificate’, cannot be treated as the permission to operate and that the `Permit’ (`AOP’), is different from that of the `No Objection Certificate’.
22. According to the 1st Respondent / Resolution Professional, the mere fact that `No Objection Certificate’, granted to Mr. Shyson Thomas, Managing Director of the `Corporate Debtor’, by itself does not `Revive’ the `Air Operator Permit’, dated 23.03.2016 (expired on 23.03.2020) nor it guaranteed the grant of `AOP’, because of the fact that the conditions specified for an `Issuance of AOP’ are entirely different than mere grant of `No Objection Certificate’, to an `Individual’.
23. The Learned Counsel for the 1st Respondent brings it to the notice of this `Tribunal’, that mere grant of `No Objection Certificate’ dated 27.09.2018, will not wish away the fact that the `Corporate Debtor’ on the date of Order dated 24.06.2020, as admitted by the `Corporate Debtor’, in the email dated 18.12.2019, had `No Asset’ and also the `Fair Value’ and `Liquidation Value’ of the Corporate Debtor was `Nil’, including the fact that the Corporate Debtor was `Inactive’, `Inoperative’ from 2015-2016. Therefore, `No Fault’, can be found in respect of the `Order’ dated 24.06.2020, passed by the `Adjudicating Authority’/ `Tribunal’, resting upon the decision, taken by the `Committee of Creditors’ with `100% voting’.
24. The Learned Counsel for the 1st Respondent / Resolution Professional pertinently points out that the Appellant, out of `Six Committee of Creditors Meeting’, had not attended the `Five Committee of Creditors Meeting’ and that the minutes of the `6th CoC Meeting’, that took place on 29.05.2020, were sent on the another email of the Appellant Viz. shyson.thomas@gmail.com at 21:28 PM on 29.05.2020, which was mentioned by the Appellant in Paragraph 6 at Page 5 of the `Rejoinder’.
25. The Learned Counsel for the 1st Respondent contends that the Appellant had adopted a `Wait and Watch Method’, as evident from the facts that (a) the `Committee of Creditors’, in its 6th Meeting, that took place on 29.05.2020, had decided to `Dissolve’ the `Corporate Debtor’ with `100% Voting’ (b) `the Petition for Dissolution’, was filed with the `Adjudicating Authority’ / `Tribunal’ on 04.06.2020 and by an `Order’ on 24.06.2020, the `Adjudicating Authority’, had approved the `Dissolution’ of the `Corporate Debtor’, and thereafter, the `Appellant’, had sought permission to file a `Writ Petition’, from the `Registry’ of the Hon’ble High Court on 07.07.2020 and filed the `Writ Petition’ on 14.07.2020.
26. The Learned Counsel for the 1st Respondent takes a plea that after receipt of the `Minutes of the 6th Committee of Creditors Meeting’, that took place on 29.05.2020 (by Mail at 21:28 PM), the Appellant, had remained silent till 07.07.2020 and took no steps, either with the `Committee of Creditors’ or with the `Resolution Professional’ or contacted with them, to ascertain the current status of the `Corporate Insolvency and Resolution Process’.
27. The Learned Counsel for the 1st Respondent forcefully submits that the Appellant has failed to mention as to `when and how the notice or the minutes of the `Committee of Creditors’, sent through `mail’, were finally, came to his knowledge and what action thereafter, he had taken in this regard. In short, in the absence of further relevant and material averments, the stand taken by the Appellant that he was `unaware’, about the `Agenda’ of the `Committee of Creditors Meeting’ and the `Minutes of the 6th CoC’, is nothing, but an `afterthought’.
28. The Learned Counsel for the 1st Respondent submits that an `Adjudicating Authority’ / an `Appellate Tribunal’, may not interfere with the `Commercial Wisdom’ of the `Committee of Creditors’, to prevent an `Aberration of Justice’.
29. The Learned Counsel for the 1st Respondent points out that the `Adjudicating Authority’ / `Tribunal’, had rightly passed the `impugned order’ dated 24.06.2020 in IA No. 198 of 2020 in CP (IB) No. 180/BB/2018, in regard to the `Dissolution’ of the `Corporate Debtor’, after the `Dissolution’ of the `Corporate Debtor’, was `approved’, by the `Financial Creditor’, with `100% Voting Rights’.
2nd Respondent’s Pleas:
30. The Learned Counsel for the 2nd Respondent contends that the 2nd Respondent / Bank in the 6th CoC Meeting, that took place on 29.05.2020, having regard to the fact that (a) there were `No Realisable Financial Assets’, and the only one `Intangible Valuable Asset’, in the nature of `Air Operator Permit’, which had lapsed on 23.03.2020 and the `Fair Value’ and the `Liquidation Value’ of the `Corporate Debtor’ / `Air Pegasus Private Limited’, was `Nil’, `Approved’ for `Dissolution’ of the `Corporate Debtor’ , and permitted the `Resolution Professional’, to prefer an `Appropriate Petition’, before the `Adjudicating Authority’, which was accepted by the said `Authority’, and by an `Order’ dated 24.06.2020, the `Dissolution of the Corporate Debtor’, was `approved’.
31. It is projected on the side of the 2nd Respondent that since there is `No Asset’ of the `Corporate Debtor’, from which the 2nd Respondent / Bank has `Secured Creditor’, could recover its `Secured Dues’, the Bank had initiated proceedings under the `SARFAESI Act, 2002’, against the `Guarantor’, Viz. Mr. Shyson Thomas, S/o. late P C Joseph; Mrs Shyna Thomas; all are residing at # 637/1, Ashwin Manor Air Port Road HAL Post, Bangalore – 560017; M/s Décor Aviation Pvt Ltd, Rep. by Auth Signatory Sri Shyson Thomas, # 22 and 23 3rd Main Air View Colony HAL, Bangalore 560017 and had issued notice dated 27.10.2020 under Section 13(2) of the SARFAESI Act, 2002 to the said Guarantor.
32. On behalf of the 2nd Respondent / Bank, a plea is advanced to the effect that the `Account’ of the `Corporate Debtor’ / `M/s. Air Pegasus Private Limited’, was classified as `Non Performing Asset’, as per the Reserve Bank of India guidelines, on 18.09.2016 with an Outstanding Sum of Rs.42,34,31,227.44, as on 30.11.2020, and further `Outstanding’, in the `Corporate Debtor’s Account’, is much more than the `Proposed Alleged Investment of Rs.29 Crores’, received by the `Corporate Debtor’.
33. The Learned Counsel for the 2nd Respondent, therefore, prays for dismissal of the instant `Appeal’, preferred by the Appellant, in the interest of Justice.
Respondents Citations:
34. The Learned Counsel for the Respondents cites the decision of the Hon’ble Supreme Court of India in Maharashtra Seamless Limited v. Padmanabhan Venkatesh & Ors., reported in 2020, SCC Online, SC 67, wherein at Paragraphs 26, 28 and 29, it is observed as under:
2̏6. No provision in the Code or Regulations has been brought to our notice under which the bid of any Resolution Applicant has to match liquidation value arrived at in the manner provided in Clause 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. This point has been dealt with in the case of Essar Steel (supra). We have quoted above the relevant passages from this judgment.
28. The Appellate Authority has, in our opinion, proceeded on equitable perception rather than commercial wisdom. On the face of it, release of assets at a value 20% below its liquidation value arrived at by the valuers seems inequitable. Here, we feel the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. Such is the scheme of the Code. Section 31(1) of the Code lays down in clear terms that for final approval of a resolution plan, the Adjudicating Authority has to be satisfied that the requirement of sub-section (2) of Section 30 of the Code has been complied with. The proviso to Section 31(1) of the Code stipulates the other point on which an Adjudicating Authority has to be satisfied. That factor is that the resolution plan has provisions for its implementation. The scope of interference by the Adjudicating Authority in limited judicial review has been laid down in the case of Essar Steel (supra), the relevant passage (para 54) of which we have reproduced in earlier part of this judgment. The case of MSL in their appeal is that they want to run the company and infuse more funds. In such circumstances, we do not think the Appellate Authority ought to have interfered with the order of the Adjudicating Authority in directing the successful Resolution Applicant to enhance their fund inflow upfront.
29. So far as the IA taken out by the MSL is concerned, in our opinion they cannot withdraw from the proceeding in the manner they have approached this Court. The exit route prescribed in Section 12-A is not applicable to a Resolution Applicant. The procedure envisaged in the said provision only applies to applicants invoking Sections 7, 9 and 10 of the code. In this case, having appealed against the NCLAT order with the object of implementing the resolution plan, MSL cannot be permitted to take a contrary stand in an application filed in connection with the very same appeal. Moreover, MSL has raised the funds upon mortgaging the assets of the corporate debtor only. In such circumstances, we are not engaging in the judicial exercise of determining the question as to whether after having been successful in a CIRP, an applicant altogether forfeits their right to withdraw from such process or not.”
35. The Learned Counsel for the Respondents relies on the Judgment dated 05.02.2019 of the Hon’ble Supreme Court of India in K. Sashidhar v. Indian Overseas Bank & Ors., (vide Civil Appeal No. 10673 of 2018), wherein at Paragraphs 64 to 67, it is observed as under:
64. As regards the application by the resolution applicant for taking his revised resolution plan on record, the same is also devoid of merits in as much as it is not open to the Adjudicating Authority to entertain a revised resolution plan after the expiry of the statutory period of 270 days. Accordingly, no fault can be found with the NCLAT for not entertaining such application.
65. The counsel appearing for the resolution applicant and the stakeholders supporting the resolution plan were at pains to persuade us to exercise powers under Article 142 of the Constitution of India. In as much as, in both the cases, the vote of approval exceeded more than 66% of the voting share of the financial creditors and yet the benefit of the amended provision could not be availed, as it came only during the pendency of the appeal before the NCLAT. The submission is that this Court may set aside the order passed by the Tribunal and relegate the parties in both the cases, before the NCLT for considering the proceedings afresh in light of the amended provision reducing the threshold requirement of percent of voting share of financial creditors to 66%. We are afraid, it is not possible for us to exercise powers under Article 142 of the Constitution which will result in issuing directions in the teeth of the provisions as applicable to the cases on hand. We, therefore, decline to accede to this request. Having answered the core issues and to avoid prolixity, we do not wish to dilate on the exposition in other reported decisions relied upon by the counsel.
66. As a result, we hold that the NCLAT has justly concluded in the impugned decision that the resolution plan of the concerned corporate debtor(s) has not been approved by requisite percent of voting share of the financial creditors; and in absence of any alternative resolution plan presented within the statutory period of 270 days, the inevitable sequel is to initiate liquidation process under Section 33 of the Code. That view is unexceptional. Resultantly, the appeals must fail.
67. In view of the above, the appeals are dismissed. The companion applications also stand dismissed. No order as to costs.”
36. The Learned Counsel for the Respondents, adverts to the Judgment dated 10.03.2021 of the Hon’ble Supreme Court of India in Kalpraj Dharamshi & Another v. Kotak Investments Advisors Limited and Another (vide Civil Appeal No. 2943 – 2944 of 2020), wherein at Paragraphs 154 to 158, it is observed as under:
1̏54. This Court observed, that the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. This Court clearly held, that the appellate authority ought not to have interfered with the order of the adjudicating authority by directing the successful resolution applicant to enhance their fund inflow upfront.
155. It would thus be clear, that the legislative scheme, as interpreted by various decisions of this Court, is unambiguous. The commercial wisdom of CoC is not to be interfered with, excepting the limited scope as provided under Sections 30 and 31 of the I&B Code.
156. No doubt, it is sought to be urged, that since there has been a material irregularity in exercise of the powers by RP, NCLAT was justified in view of the provisions of clause (ii) of sub−section (3) of Section 61 of the I&B Code to interfere with the exercise of power by RP. However, it could be seen, that all actions of RP have the seal of approval of CoC. No doubt, it was possible for RP to have issued another Form ‘G’, in the event he found, that the proposals received by it prior to the date specified in last Form ‘G’ could not be accepted. However, it has been the consistent stand of RP as well as CoC, that all actions of RP, including acceptance of resolution plans of Kalpraj after the due date, albeit before the expiry of timeline specified by the I&B Code for completion of the process, have been consciously approved by CoC. It is to be noted, that the decision of CoC is taken by a thumping majority of 84.36%. The only creditor voted in favour of KIAL is Kotak Bank, which is a holding company of KIAL, having voting rights of 0.97%. We are of the considered view, that in view of the paramount importance given to the decision of CoC, which is to be taken on the basis of ‘commercial wisdom’, NCLAT was not correct in law in interfering with the commercial decision taken by CoC by a thumping majority of 84.36%.
157. It is further to be noted, that after the resolution plan of Kalpraj was approved by NCLT on 28.11.2019, Kalpraj had begun implementing the resolution plan. NCLAT had heard the appeals on 27.2.2020 and reserved the same for orders. It is not in dispute, that there was no stay granted by NCLAT, while reserving the matters for orders. After a gap of five months and eight days, NCLAT passed the final order on 5.8.2020. It could thus be seen, that for a long period, there was no restraint on implementation of the resolution plan of Kalpraj, which was duly approved by NCLT. It is the case of Kalpraj, RP, CoC and Deutsche Bank, that during the said period, various steps have been taken by Kalpraj by spending a huge amount for implementation of the plan. No doubt, this is sought to be disputed by KIAL. However, we do not find it necessary to go into that aspect of the matter in light of our conclusion, that NCLAT acted in excess of jurisdiction in interfering with the conscious commercial decision of CoC.
158. It is also pointed out, that in pursuance of the order dated 5.8.2020 passed by NCLAT, CoC has approved the resolution plan of KIAL on 13.8.2020. However, since we have already held, that the decision of NCLAT dated 5.8.2020 does not stand the scrutiny of law, it must follow, that the subsequent approval of the resolution plan of KIAL by CoC becomes non−est in law. For, it was only to abide by the directions of NCLAT. We are of the view that nothing would turn on it. The decision of CoC dated 13/14.2.2019 is a decision, which has been taken in exercise of its ‘commercial wisdom’. As such, we hold, that the decision taken by CoC dated 13/14.2.2019, which is taken in accordance with its ‘commercial wisdom’ and which is duly approved by NCLT, will prevail. Further, NCLAT was not justified in interfering with the stated decision taken by CoC.”
37. The Learned Counsel for the Respondents seek in aid of the decision of the Hon’ble Supreme Court of India in Committee and Creditors of Essar Steel India Limited v. Satishkumar Gupta & Ors., reported in 2019, SCC Online, SC 1478, for the proposition that the `Adjudicating Authority’ or an `Appellate Authority’, may not `interfere’, with the `Commercial Wisdom’, of the `Committee of Creditors’.
Assessment
38. Before the `Adjudicating Authority’ (`National Company Law Tribunal’, Bengaluru Bench), the `1st Respondent / Resolution Professional’, had preferred an IA No. 198 of 2020 in CP (IB) No. 180/BB/2018 (under Section 54 of the I & B Code, 2016), praying for an `Order of Dissolution’ of the `Corporate Debtor’ / `M/s. Air Pegasus Private Limited’, with immediate effect, in permitting the `Resolution Professional’, to complete further `intimation’ of `Dissolution Order’, and to close all the `Accounts’ of the `Corporate Debtor’.
39. Be it noted, Section 54 of the I & B Code, 2016, provides that once the affairs of the `Corporate Debtor’, have been wound up, its `Assets’, completely liquidated, the `Liquidator’, has to prefer an `Application’, before the `Adjudicating Authority’ (`National Company Law Tribunal’) for the `Dissolution’ of the `Corporate Debtor’.
40. It comes to be known that in main CP (IB) No. 180/BB/2018, filed by the `Petitioner’ / `Operational Creditor’ / `Skyways Technics / A/s, Denmark’ (under Section 9 of the I & B Code, 2016, read with Rule 6 of I & B (AAA) Rules, 2016), against the `Corporate Debtor’ / `M/s. Air Pegasus Private Limited’, Bangalore, seeking to initiate `CIRP’, in respect of the `Corporate Debtor’ / `M/s. Air Pegasus Private Limited’, on the basis that the `Corporate Debtor’, had committed `Default’ for a Sum of USD 1,51,387.36 (US Dollars One Hundred Fifty One Thousand Three Hundred and Eighty Seven and Thirty Six Cents only).
41. After contest, the `Adjudicating Authority’ / `Tribunal’, in main CP (IB) No. 180 / BB / 2018 (preferred by the `Petitioner / Operational Creditor’), on being satisfied with the reasons mentioned by the Petitioner to initiate `CIRP’, by exercising its powers, as per Section 9 (5) (i) of the I & B Code, 2016, had `admitted’ the main Petition, by initiating the `CIRP’, against the `Corporate Debtor’, by appointing an `Interim Resolution Professional’, and declared `Moratorium’, etc.
42. In the `Reply’ of the 1st Respondent / Resolution Professional to the main TA (AT) No. 8 of 2021 (Comp. App (AT) (CH) (INS.) No. 925 of 2020), it was mentioned that the `Appellant’, had failed to submit the `Resolution Plan’, within the time limit stipulated i.e., by 10.02.2020, despite the email was sent by the `1st Respondent / Resolution Professional’ to the Appellant on 13.01.2020. Also that, the `Notice’ of the `6th Meeting of the CoC’, was to be held on 29.05.2020, along with the `Agenda’ papers, were served / communicated to the `Appellant’ / `Ex-Director of the `Corporate Debtor’ / `Promoter’, but the `Appellant’, remained absent in the `6th CoC Meeting’.
43. It cannot be lost sight off that the `Corporate Debtor’, had `No Realisable Financial Assets’, and the only `Valuable Asset’, was of `Intangible’ in nature of the `Air Operator Permit’, a `License’, issued by the `DGCA’ and the `Validity’ of the said `License’, had lapsed on 23.03.2020.
44. It cannot be brushed aside that the `Dissolution’ of the `Corporate Debtor’, was approved by the `Financial Creditor’ with `100% Voting Rights’, and in IA No. 198 of 2020, filed by the 1st Respondent / Resolution Professional (under Section 54 of the I & B Code, 2016), an `Order’, dissolving the `Corporate Debtor’ / `M/s. Air Pegasus Private Limited’ (Applicant Company), was passed with an immediate effect, etc.
45. At this juncture, this `Tribunal’, pertinently points out that there is no fetter that the `Corporate Debtor’, cannot be `Dissolved’, without undergoing the `Process of Liquidation’.
46. It is to be noted that the `Account of the Corporate Debtor’, was classified as `Non Performing Asset’, by the `2nd Respondent / Bank’, on 18.09.2016. There is no two opinion of the primordial fact that in the absence of any Resolution Plan(s) or Saleable Assets of the Company, the 1st Respondent / Resolution Professional, had no option, but to seek a `Relief’, for the `Dissolution’ of the `Corporate Debtor’, and the fact of the matter is that the same was `approved’, by the `Committee of Creditors’.
47. It is to be remembered that the `Appellant’ was issued with a `No Objection Certificate’, dated 27.09.2018, and it has `No Nexus’ with the present `Controversy’ / `Dispute’, that the said `No Objection Certificate’, was no way concerned with the `Corporate Debtor’, because of the simple fact that it was issued to the `Appellant’, in his personal capacity as `Corporate Debtor’.
48. One cannot remain oblivious of the candid fact that the I & B Code, 2016, does not envisage that the `Adjudicating Authority’ / `Tribunal’, ought to provide a `Hearing’ to the `Promoter’ / `Corporate Debtor’ of the Company, at the time of passing of an `Order’ for `Liquidation’.
49. Before the Hon’ble High Court of Karnataka in W.P. No. 9093 of 2020, filed by the `Appellant’ / `Promoter’ (as Writ Petitioner), the 1st Respondent / Resolution Professional, had averred that as per One Time Settlement Proposal Letter dated 09.09.2019, and in terms of the One Time Settlement Sanction Letter, the Appellant / Promoter, was to `repay’ the `Agreed Sum’, by 09.03.2020, prior to the `Corona Pandemic’. However, according to the 1st Respondent, the One Time Settlement Proposal was cancelled, because of the non-compliance with any of the terms of the Sanction by him, including the `payment of One Time Settlement Amount’, etc., and in fact, the `One Time Settlement’ stood cancelled and as such, the `Appellant’ on account of his breach of the `One Time Settlement’, cannot place reliance on the same.
50. In the teeth of the ingredients of the I & B Code, 2016, the Appellant, had to furnish the `Resolution Plan’, within the prescribed time period and having failed in this regard, the `Adjudicating Authority’ / `Tribunal’, had passed the `impugned order’ dated 24.06.2020 in IA No. 198 of 2020 in CP (IB) No. 180 / BB / 2018, as per the tenets of the I & B Code, 2016.
51. It may not be out of place for this `Tribunal’, to make a pertinent mention that the Hon’ble Supreme Court of India in the Judgment dated 03.06.2022 (vide Civil Appeal Nos. 1811 – 1812 of 2022), in the matter of Vallal RCK v. M/s. Siva Industries and Holdings Limited & Ors., wherein at Paragraphs 24 to 27, it is observed as follows:
24. When 90% and more of the creditors, in their wisdom after due deliberations, find that it will be in the interest of all the stake−holders to permit settlement and withdraw CIRP, in our view, the adjudicating authority or the appellate authority cannot sit in an appeal over the commercial wisdom of CoC. The interference would be warranted only when the adjudicating authority or the appellate authority finds the decision of the CoC to be wholly capricious, arbitrary, irrational and de hors the provisions of the statute or the Rules.
25. In the present case, the proceedings of the 13th, 14th and 15th meetings of CoC would clearly show that there were wide deliberations amongst the members of the CoC while considering the Settlement Plan as submitted by the appellant. Not only that, the proceedings would also reveal that after suggestions were made by some of the members of the CoC, suitable amendments were carried out in the Settlement Plan by the appellant. One of the members of the CoC having voting share of 23.60%, though initially opposed the Settlement Plant, subsequently decided to support the same. Accordingly, the NCLT itself, vide order dated 29th March 2021, directed the RP to reconvene the CoC meeting. As per the directions of the NCLT, on 1st April 2021, the 17th meeting of the CoC was reconvened, wherein the Settlement Plan was approved by 94.23% votes.
26. It is thus clear that the decision of the CoC was taken after the members of the CoC, had due deliberation to consider the pros and cons of the Settlement Plan and took a decision exercising their commercial wisdom. We are therefore of the considered view that neither the learned NCLT nor the learned NCLAT were justified in not giving due weightage to the commercial wisdom of CoC.
27. This Court has, time and again, emphasized the need for minimal judicial interference by the NCLAT and NCLT in the framework of IBC. We may refer to the recent observation of this Court made in the case of Arun Kumar Jagatramka v. Jindal Steel and Power Limited and Another7:
95. ….However, we do take this opportunity to offer a note of caution for NCLT and NCLAT, functioning as the adjudicatory authority and appellate authority under the IBC respectively, from judicially interfering in the framework envisaged under the IBC. As we have noted earlier in the judgment, the IBC was introduced in order to overhaul the insolvency and bankruptcy regime in India. As such, it is a carefully considered and well thought out piece of legislation which sought to shed away the practices of the past. The legislature has also been working hard to ensure that the efficacy of this legislation remains robust by constantly amending it based on its experience. Consequently, the need for judicial intervention or innovation from NCLT and NCLAT should be kept at its bare minimum and should not disturb the foundational principles of the IBC……. ’’
52. The Insolvency Resolution Process under the I & B Code, 2016, is a `Time Bound Process’, and the `Appellant / Promoter’, having failed to project the `Resolution Plan’, within the specified time limit and later, the 1st Respondent / Resolution Professional, is not to accept any Plan.
53. Suffice it for this `Tribunal’, to make a pertinent mention that in the absence of any `Asset(s)’ / the `Resolution Plan(s)’, the Resolution Professional, had no other go, but to pray for an `Order of Dissolution’, to be passed by the `Adjudicating Authority’. After all, the end of `Liquidation’, requires complete `Dissolution’ of an `Entity’.
54. The other prime fact is that `Air Operator Permit’ is required for running the operations of an `Airline’, but got lapsed on 23.03.2020, and in any event, it has no bearing with the `Corporate Debtor’ / `Company’, since the same was issued to the `Appellant’, in his status as `a Director’.
55. In the light of the foregoing detailed upshot, considering the rival submissions, this `Tribunal’, taking note of the facts and circumstances of the instant case, in a conspectus fashion, comes to a consequent conclusion that the `impugned order’, dated 24.06.2020 in IA No. 198 of 2020 in CP (IB) No. 180 / BB / 2018, passed by the Adjudicating Authority’ (`National Company Law Tribunal’, Bengaluru Bench), in passing an `Order of Dissolution’ of the `Corporate Debtor’ / `Company’ (M/s. Air Pegasus Private Limited), with immediate effect, is free from any `Legal Infirmities’. Resultantly, the `Appeal’ fails.
Conclusion:
In fine, the instant TA (AT) No. 8 of 2021 in Comp. App (AT) (CH) (INS.) No. 925 of 2020 is dismissed. No costs. The connected pending IA No. 2510 of 2020 (seeking Exemption from filing True Typed Copies of DIM / Single Space Document etc.) and IA No. 2511 of 2020 (for `Stay’) are Closed.
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