Rathi Graphic Technologies Limited Vs Raj Kumar Rathi And Others (NCLT Allahabad)
Held that a statutory institution like CoC which is in most of the cases represented by public financial institutions is expected to act in a fair and neutral manner so that the objects of IBC, 2016 can be achieved for the benefit of all.
Facts-
The Interim Resolution Professional (“IRP”) was appointed to conduct Corporate Insolvency Resolution Process (“CIRP”). Subsequently, IRP was replaced by current RP vide order of this Adjudication Authority dated 10th June, 2020 on the basis of resolution passed by the CoC to this effect. The deadline of submission of resolution plan was 12.11.2020. However, the applicant herein submitted its revised resolution plan on 15.11.2020. The said plan was not considered by the RP/ CoC as this was submitted after the time fixed for submission of such plan and for the reason that timelines for completion of CIRP were to be strictly adhered to.
Conclusion-
Held that a statutory institution like CoC which is in most of the cases represented by public financial institutions is expected to act in a fair and neutral manner so that the objects of IBC, 2016 can be achieved for the benefit of all. This can be put in other words i.e., every person/ entity associated with the processes/ proceedings under IBC, 2016 has a legitimate expectation that CoC will act fairly and would take into consideration the broader objectives of IBC, 2016 over its narrow interest of realization of its own dues which are mostly secured otherwise also. Another aspect which needs to be highlighted is that a resolution applicant is required to demonstrate in the resolution plan that it can address the cause of default whereas this should be the responsibility of CoC as Members of CoC are assumed to be knowing the corporate debtor since beginning as they lend money on the basis of business plans/projections given by a corporate debtor. In the end, we have no hesitation in stating that every inappropriate act or omission by CoC cannot be accepted in the garb of supremacy and non-justiciability of commercial wisdom of CoC.
FULL TEXT OF THE NCLT JUDGMENT/ORDER
1. IA No.31 of 2021 has been filed by Resolution Professional (hereinafter referred to as “RP”) for approval of resolution plan. In this application brief account of the processes employed in the course of conduct of CIRP as well as resolution of plan, has been given. Form H has been filed by the RP. Revised Form H has also been filed, which was required in view of certain deficiencies pointed out by this Adjudicating Authority in the course of perusal of resolution plan after conclusion of the hearing on 18.10.2021. Additional affidavit in regard to revised manner of distribution of money amongst similarly situated operational creditors has also been filed.
IA No.293/2020
2. In this application, the applicant has prayed for direction to be given to RP to place its revised resolution plan submitted on 15.11.2020 before Committee of Creditors (hereinafter referred to as “CoC”) and reschedule the e-voting thereafter so that its resolution plan can be considered in the true spirit of Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC, 2016”). One more relief by way of stay on e-voting conducted on 15th to 19th November, 2020 or thereafter has been sought, however, the same has become infructuous as voting has already taken place.
3. The pleas in this application have mainly been made on the ground of arbitrary, unreasonable and biased approach adopted by RP and CoC in not considering its such revised Plan resulting into less realization of value of assets of the Corporate Debtor and simultaneously causing grave prejudice to the Applicant.
FACTS OF THE CASE AS APPLICABLE TO BOTH APPLICATIONS
4. In this case, insolvency proceedings against the Corporate Debtor commenced vide order of this Adjudicating Authority dated 03.02.2020. The Interim Resolution Professional (hereinafter referred to as “IRP”) was appointed to conduct Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”). Subsequently, IRP was replaced by current RP vide order of this Adjudication Authority dated 10th June, 2020 on the basis of resolution passed by the CoC to this effect. Initially, Form G was published on 18.04.2020 and last date for invitation of Expression of Interest was 25.06.2020. Subsequently, another Form G was published on 24.08.2020 and last date for receipt of resolution plan was fixed as 22.09.2020. The provisional list was prepared on 18.09.2020 and final list was prepared on 03.10.2020.
5. 4th CoC meeting was held on 20.10.2020, wherein, on the basis of request made by Successful Resolution Applicant (hereinafter referred to as “SRA”), the last date for submission of resolution plan was extended up to 03.11.2020. The resolution plans were submitted by both the resolution applicants before the extended deadline fixed by the CoC i.e., 03.11.2020. 5th CoC meeting was held on 05.11.2020 wherein valuation reports were considered by the CoC.
6. From the perusal of the minutes of these CoC meetings, it is noted that the RP informed that other parties were also interested to submit the resolution plans and exclusion of 128 days was available. In the 5th CoC meeting the CoC directed the RP to carry out the due diligence. The RP informed that some clarifications were still required. It is also noteworthy that the minimum period of notice required for convening CoC meeting was reduced with the approval of the CoC.
7. 6th CoC meeting was held on 07.11.2020 wherein the revised plans submitted by both the resolution applicants were considered. It is noted that the CoC was not satisfied even with the revised offers as evident from the minutes of 6th CoC meeting. 7th CoC meeting was held on 12.11.2020 where several discussions were held and CoC expressed its concern that the Resolution Plans submitted were far below the liquidation value. In this meeting, the RP also informed that one particular transaction of transfer of brand by the corporate debtor had also been referred to transaction audit which was also pending. In the said meeting both the PRAs, who were in the final list, were asked to submit their revised resolution plans by 07:00 PM on the same date i.e., 12.11.2020. The SRA submitted its revised plan before the said deadline. However, the applicant herein submitted its revised resolution plan on 15.11.2020. The said plan was not considered by the RP/ CoC as this was submitted after the time fixed for submission of such plan and for the reason that timelines for completion of CIRP were to be strictly adhered to. 8th CoC meeting was held on 20.11.2020 wherein various scenarios, which could arise, if the resolution plan submitted by the applicant herein on 15.11.2020 was considered for voting. Notably, this was done after pre-poned voting schedule i.e., 15.11.2020 12:00 noon to 19.11.2020 06:00 PM had already been exhausted. A suggestion was also made by the RP that both the resolution applicants may be given a further opportunity. Even it was suggested that the process for invitation of Expression of Interest (hereinafter referred to as “EoI”) could be re-initiated as there were some more interested parties who could also participate. A suggestion to the effect that proposals may be invited from all resolution applicants appearing in the provisional list was also made. However, the CoC formed a view that there was no need to consider the resolution plan submitted by the applicant on 15.11.2020 and CoC also rejected other suggestions. Further, a decision was taken to extend the voting time as some of the members of CoC could not participate in voting during the period from 15.11.2020 to 19.11.2020 as internal approvals were to be taken multiple extensions of voting schedule were sought. The details of such extensions are as under: –
