Mathuraprasad C Pandey Vs Partiv Parikh (NCLAT Delhi)
NCLAT Delhi held that as per provisions of section 31 of Insolvency & Bankruptcy Code, 2016, Adjudicating Authority is empowered to either accept or reject the resolution plan. Adjudicating Authority is not empowered to modify/ alter the conditions in the resolution plan.
Facts-
The appellant, Nandish Patel, in the capacity of operational creditor filed the application u/s. 9 of the IBC Code which was admitted in the month of August, 2019 and Interim Resolution Professional namely Mr. Parthiv Parikh (IRP) was appointed as IRP. The present Respondent No.1, Mr. Parthiv Parikh was appointed as Resolution Professional by the Adjudicating Authority on 01.2020.
The plan submitted by the appellant M/s Mathura Prasad was approved by 97.79% of CoC. Whereas about 99% voting was made against liquidation of the Corporate Debtor.
After approval of the Resolution Plan which was approved by majority of 97.79% on 23.11.2020, RP filed an application u/s. 31 of the IBC before the Learned Adjudicating Authority. Finally by the impugned order the Resolution Plan was approved.
Even though the Resolution Plan of the Appellant M/s Mathura Prasad and other was approved by the Learned Adjudicating Authority the appellant M/s Mathura Prasad C Pandey being aggrieved by modification in the Resolution Plan in para 15 of the impugned order M/s Mathura Prasad C Pandey has preferred the present appeal.
Conclusion-
It is clear that mandate of legislation is either to approve the resolution plan or to reject. However, there is no provision for making alteration or modification in the resolution plan. In view of the statutory provisions as contained in Section 31 of the IBC we are satisfied the learned Adjudicating Authority to some extent exceeded its jurisdiction in modifying/altering the conditions in the resolution plan which has been done in para 15 of the impugned order which we have already quoted hereinabove. In such view of the matter the appeal i.e. Company Appeal (AT)(Ins) No.201/2021 can be allowed and it is held that the condition in para 15 of the impugned order shall not be looked into or may not be taken note of.
FULL TEXT OF THE NCLAT DELHI JUDGMENT/ORDER
As per order dated 01.04.2021 passed in Company Appeal (AT)(Insolvency) No.266/2021, both the appeals were directed to be listed together. Accordingly, both the appeals were heard together on number of dates and finally after conclusion of hearing on 01.09.2022 Judgement was reserved in both the appeals. Learned counsel for the parties were granted liberty to file Notes of Written Submissions within 10 days.
2. Both the appeals have been preferred under Section 61 of the Insolvency & Bankruptcy Code, 2016 (hereinafter referred to as the IBC) against an order dated 28.01.2021 passed in IA No.846/2020 in CP (IB) No.404/2019. By the said order learned Adjudicating Authority, National Company Law Tribunal, Ahmedabad Bench, Ahmedabad (hereinafter referred as NCLT) approved the Resolution Plan dated 09.2020 alongwith addendum dated 13.11.2020 filed by the Resolution Professional namely Mr. Partiv Parikh who has been arrayed as Respondent No.1 in both the appeals.
3. However, while approving the Resolution Plan the learned Adjudicating Authority modified the Resolution Plan to the extent that “if any member of Resolution applicants has entered into or stand as guarantor in the individual capacity, in that event, he shall not be covered with any immunity given under the Resolution Plan.”
4. Company Appeal (AT)(Ins) No.201/2021 has been preferred by successful resolution applicant who were promoters of the Corporate Debtor. The appellants in Company Appeal (AT)(Ins) No.201/2021 are aggrieved with modification made by the learned Adjudicating Authority which has been done in para 15 of the impugned order. Whereas Company Appeal (AT)(Ins) No.266/2021 has been preferred by an ex employee of the Corporate Debtor who was operational creditor and had filed petition for initiation of Corporate Insolvency Resolution Process (hereinafter referred to as CIRP) against the Corporate Debtor in the present case. The application filed by the appellant under Section 9 of IBC was admitted by the learned Adjudicating Authority in the month of August, 2019.
5. The appellant, Nandish Patel, in Company Appeal (AT)(Ins) No. 266/2021 while appearing in person has assailed the order of the Learned Adjudicating Authority whereby the Resolution Plan submitted by the Appellants in Company Appeal (AT) (Ins) No.201/2021 was allowed. The appellant, Nandish Patel, has assailed the order of the approval of the resolution plan primarily on the ground that the Resolution Plan submitted by appellants M/s Mathura Prasad Pandey & Ors was fit to be rejected since Mathura Prasad had suppressed the material fact and misrepresented that the Corporate Debtor was Micro, Small and Medium Enterprise (MSME). In sum and substance on the ground of suppression of fact showing Corporate Debtor as MSME the approval was obtained and as such the entire impugned order is liable to be set aside.
6. Since in both the appeals common order has been assailed fact disclosed in one of the appeal i.e. appeal filed by Mathura Prasad would suffice the purpose in deciding the present appeal.
7. The short fact of the case is that the appellant, Nandish Patel, in the capacity of operational creditor filed the application under Section 9 of the IBC Code which was admitted in the month of August, 20196 and Interim Resolution Professional namely Mr. Parthiv Parikh (Hereinafter referred to as IRP) was appointed as IRP. The present Respondent No.1, Mr. Parthiv Parikh was appointed as Resolution Professional by the Adjudicating Authority on 01.2020. After number of meetings of Committee of Creditors (hereinafter referred to as CoC) on 7.9.2020 in 14th CoC Meeting Resolution Plan was discussed with clarificatory addendum dated 01.09.2020 which was submitted by the appellant Mr Mathura Prasad Pandey and others, Resolution Plan as per evaluation matrix.
Thereafter the appellant M/s Mathuraprasad and another communicated revised resolution plan which was put on e-voting before the CoC on 19.11.2020 and e-voting concluded on 21.11.2020. In the said e-voting the plan submitted by the appellant M/s Mathura Prasad was approved by 97.79% of CoC. Whereas about 99% voting was made against liquidation of the Corporate Debtor.
8. After approval of the Resolution Plan which was approved by majority of 97.79% on 23.11.2020, RP filed an application under Section 31 of the IBC before the Learned Adjudicating Authority. Finally by the impugned order the Resolution Plan was approved.
9. Even though the Resolution Plan of the Appellant M/s Mathura Prasad and other was approved by the Learned Adjudicating Authority the appellant M/s Mathura Prasad C Pandey being aggrieved by modification in the Resolution Plan in para 15 of the impugned order M/s Mathura Prasad C Pandey has preferred the present appeal. It would be appropriate to reproduce para No.15 of the impugned order as follows:-
“15. With regard to the subrogation (Clause 4 at page No.78 of the application), it is hereby observed that since Resolution Plan is approved by the CoC, they have already dealt with the Guarantee, if any, provided by the Corporate Debtor i.e. before the approval of the Resolution Plan. Hence, are not dealt herein again. However, if any member of the Resolution Applicant has entered into or stand as Guarantor in individual capacity, in that event, he shall not be covered with any immunity given under the Resolution Plan.
10. Mr Abhijeet Sinha, learned counsel appearing on behalf of the appellant submits that by making modification in Resolution Plan which was finally approved by more than 97% of majority of CoC, the Learned Adjudicating Authority has committed error. It was argued that time without number it has been held that the approval of the Resolution Plan by the Coc is within commercial wisdom of the CoC and as such the Adjudicating Authority was not having any jurisdiction to modify or alter any of the condition of the Resolution Plan. According to him once the Resolution Plan was in accordance with the provisions contained in Section 31, and Resolution Plan was in accordance with condition as imposed under Section 30 of the IBC the learned Adjudicating Authority was having no option but to approve the same. He submits that once Resolution Plan approved by the majority of CoC in its commercial wisdom was submitted before the Adjudicating Authority for his approval, the Adjudicating Authority was only required to examine whether the resolution plan was to be approved or rejected. However, the Adjudicating Authority was not justified in putting any modification or alter any condition in the resolution plan. According to Mr. Sinha para 15 of the impugned order is required to be deleted from the impugned order.
11. Mr. Abhijeet Sinha, learned counsel has referred to judgement of Hon’ble Supreme Court reported in 2019 (12) SCC 150 K Sashidhar Vs JOB and others. He has particularly referred to para 62 of the judgement which has been quoted in the Memo of Appeal and is reproduced below:
62. The argument, though attractive at the first blush, but if accepted, would require us to rewrite the provisions of the I&B Code. It would also result in doing violence to the legislative intent of having consciously not stipulated that as a ground to challenge the commercial wisdom of the minority (dissenting) financial creditors. Concededly, the process of resolution plan is necessitated in respect of corporate debtors in whom their financial creditors have lost hope of recovery and who have turned into nonperformer or a chronic defaulter. The fact that the concerned corporate debtor was still able to carry on its business activities does not obligate the financial creditors to postpone the recovery of the debt due or to prolong their losses indefinitely. Be that as it may, the scope of enquiry and the grounds on which the decision of “approval” of the resolution plan by the CoC can be interfered with by the adjudicating authority (NCLT), has been set out in Section 31(1) read with Section 30(2) and by the appellate tribunal (NCLAT) under Section 32 read with Section 61(3) of the I&B Code. No corresponding provision has been envisaged by the legislature to empower the resolution professional, the adjudicating authority (NCLT) or for that matter the appellate authority (NCLAT), to reverse the “commercial decision” of the CoC muchless of the dissenting financial creditors for not supporting the proposed resolution plan. Whereas, from the legislative history there is contra indication that the commercial or business decisions of the financial creditors are not open to any judicial review by the adjudicating authority or the appellate authority.”
12. Nandish Patel, the appellant has appeared in person. He has emphasized in his argument that Resolution Plan was not required to be approved by the Adjudicating Authority since RP in connivance with the Corporate Debtor with a view to get the resolution plan approved by the Adjudicating Authority made a false statement as if the Corporate Debtor was MSME. He emphatically argued that while committing fraud and suppressing fact the RP got the resolution plan approved by Adjudicating Authority.
13. To substantiate his submission regarding suppression of fact and misrepresentation by the RP, Mr Patel has argued that the Corporate Debtor suppressing fact has obtained Udhyog Aadhar to show that it was MSME and on such strength he obtained the certificate as if the Corporate Debtor was MSME. He has referred to number of documents to show that value of the assets of the Corporate Debtor was much beyond the cap of MSME. Of course, Nandish Patel who was appearing in person has argued on number of dates and referred to number of documents to show that by suppression of fact or misrepresentation depicting the Corporate Debtor as MSME the RP got its resolution plan approved by the Adjudicating Authority, we think it appropriate not to go into such detail, in view of facts and circumstances which we may deal hereinafter.
14. Besides making oral submissions Mr. Nandish Patel, appellant in Company Appeal (AT)(Ins) No.266/2021 has also filed Notes of Written submissions. The facts disclosed in the written submissions are as follows:
1. The ‘Resolution Plan’ of the ‘Promoter Directors’, was approved vide impugned order dated 28.01.2021 in IA 846 of 2020 in C.P. (LB.) No. 404 of 2019, which enabled illegal back-door entry of the Promoter Directors who were ineligible persons with non-credible background.
It is submitted that the “Resolution Plan’ got approved by playing fraud, suppression of material facts and corporate debtor is not ‘MSME’.
Aggrieved by the same, the Appellant herein, who is the original applicant of the C.P. (1 .B.) No, 404 of 2019 under which the CIRP was conducted, has filed this first statutory appeal to set-aside the impugned order approving the Resolution Plan.
2. WHAT WAS THE FRAUD PLAYED’ AND MATERIAL FACTS SUPPRESSED’?
A)The Promoter Directors made fraudulent misrepresentation that the Corporate Debtor (CD) was ‘MSME’ by submitting an online generated ‘Udyog Aadhar Acknowledgement’ dated 30.11.2017 with UAM No. GJ01FO086283 (Page-455 of Appeal Memo).
EVIDENCE
The summary of investment in Plant & Machinery as derived from the Balance Sheets of CD, shows that the CD was never a ‘MSME’ beyond 31.03.2008 (Page-50 of Appeal Memo).
The Promoter Directors (Successful Resolution Applicants) namely Mr. M. C. Pandey & Mr. V. C. Pandey have been signatories of these balance sheets and thereby were aware that the CD was not ‘MSME’
OBJECTIVE
This fraud was played to derive benefit of Section 240A of 1&B Code and evade test of provisions of Section 29A(c) & (h). It was withheld from the Hon’ble NCLT that the accounts of CD were already classified as NPA prior to CIRP commencement.
It was also withheld from the Hon’ble NCLT that the State Bank of India alongwith Consortium Bankers had already invoked the guarantees of the Promoter Directors & others and the same remained unpaid in part or full. (Page 21-58 of Rejoinder to R1).
IMPUGNED ORDER /Page-73 of Appeal Memo
As stated in the impugned order, the Hon’ble NCLT has placed reliance on the representation that the CD is ‘MSME’ and concluded that the Promoter Directors are not debarred (Page-77, 88 of Appeal Memo).
The Hon’ble Supreme Court of India has held in the following judgements:
AV Popayya Sastry and Ors. V. Govt. of A.P. and Ors.(2007) 4 SCC 221, dated 07.03.2007 (Para- 21, 22, 25, 26, 31, 39)
22. It is thus settled proposition of law that a judgement, decree or order obtained by playing fraud on the court, tribunal or authority is a nullity and non est in the eye of the law. Such a judgement, decree or order—by the first court or by the final court— has to be treated as nullity by every court, superior or inferior. It can be challenged in any Court, at any time, in appeal, revision, writ or even in collateral proceedings.
A Shamugam V. Ariya Kshatriya Rajakula Vamsathu Mad alaya Nandhavana Paripalanai Salngam and Ors. (2012) 6 SCC 430, dated 27.04.2012 (Para-43.1 to 43.5).
43.1 It is the bounden duty of the court to uphold the truth and do justice
*****
43.5 It is the bounden obligation of the court to neutralise any unjust and/or undeserved benefit or advantage obtained by abusing the judicial process.
B) Auto computer generated “Udyog Aadhar” Acknowledgement’ (GJ01FOO86283) dated 30.11.2017 obtained ty Promoter Directors by false submissions. Evidence is as below:
The Udyog Aadhar Booklet by Ministry of MSME, Govt. of India categorically clarifies that the UAM is filed on self certification basis and generated instantly through online auto: computer process. It further clarifies that there is no monítoring of the registration process and the enterprise filing the UAN online s liable to provide documentary proof of the information provided (Page-769 of Appeal Memo). It is therefore not a conclusive proof of MSME.
The certificate from the ‘MSME commissioner ate shows that the investment details, submitted in online system by the CD to generate the ‘Udyog Aadhar Acknowledgement’ (GJOIF0086283) on 30.11.2017 was Ns. 4.50 Crores and it further states that the CD has not submitted any document in support of the information (Page-34 of Rejoinder to R 2-4),
