Ankit Patni Erstwhile And Suspended ... vs State Bank Of India And Others

[Arising out of Order dated 25.11.2021 passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata, in IA (IB) No. 644/KB/2021 in C.P. (IB) No. 1214/KB/2018]

In the matter of:

Ankit Patni (Erstwhile Director of Rohit Ferro Tech Limited) Sarita Kunj, 15, Burdwan Road, Kolkata- 700027 ...Appellant

Vs.

State Bank of India & Ors. ...Respondents

For Appellant: Mr. Gaurav H. Sethi, Mr. Anuj Singh, Ms. Rashmee Singhee, Ms. Tanisha and Mr. Abhinav Tyagi, Advocates. For Respondents: Shri Tushar Mehta, SGI with Mr. Abhishek Swaroop and Mr. Naman Kamdar, Advocates for R- 1. Mr. Ramji Srinivasan, Sr. Advocate with Ms. Rajshree Chaudhary, Ms. Ojasa Arya, Mr. Shubham Rai, Mr. Akash Yadav, Mr. Indranil Ghosh, Mr. Palzer Mokhtan, Mr. Orijit Chatterjee and Ms. Swati Dalmia, Advocates for R-2. Mr. Ratnanko Banerji, Sr. Advocate with Mr. Soorjya Ganguli, Ms. Pooja Chakrabarti, Mr. Kanishk Kejriwal and Ms. Kiran Sharma, Advocates for R-3.

JUDGMENT

(06th April, 2022)

Ashok Bhushan, J.

1. This Appeal has been filed against judgment dated 25.11.2021 passed

by the Adjudicating Authority (National Company Law Tribunal), Kolkata 2

Bench, Kolkata, rejecting I.A (IB) No. 644/KB/2021 in C.P. (IB) No.

1214/KB/2018. The Appellant, a Suspended Director of the Corporate

Debtor, has filed this Appeal challenging the order of the Adjudicating

Authority rejecting the I.A filed by the Appellant. The brief facts of the case

necessary for deciding this Appeal are:-

By an order dated 07.02.2020, an Application filed under Section 7 of

the Insolvency and Bankruptcy Code, 2016 ("Code" for short) by the State

Bank of India against the Corporate Debtor- 'Rohit Ferro Tech Limited' was

admitted. In pursuance of the initiation of Corporate Insolvency Resolution

Process (CIRP), the Resolution Professional published statutory Form "G" on

10.12.2020 inviting Expression of Interest (EoI). The provisional list of the

Prospective Resolution Applicants as per Form- "G" issued on 10.12.2020 was

published on 26.12.2020. As on 01.01.2021, the Resolution Professional had

identified eight Prospective Resolution Applicants. The list of Prospective

Resolution Applicants was updated on 25.01.2021 and on 20.03.2021, the

said list was again updated including Respondent No.3. In the 19th CoC

meeting, Resolution Plans submitted by the Resolution Applicants were

opened. Resolution Professional informed all Resolution Applicants that CoC

in its meeting dated 18.03.2021 decided to extend the last date for submission

of revised financial proposal/ Resolution Plan on 25.03.2021. The Resolution

Plan submitted by Respondent No.3 was considered. The Respondent No.3

held to be H-1. The Resolution Plan of Respondent No.3 was ultimately

approved by the CoC by 100% votes in its meeting dated 01.06.2021. After

the plan was approved, the Appellant- Suspended Director filed I.A (IB) No.

Company Appeal (AT) (Ins.) No.326 of 2022 3

644/KB/2021 on 17.07.2021 praying for various reliefs including prayer to

set aside the entire Insolvency Resolution Process and to reinstate the Board

of Directors of the Corporate Debtor. It was further prayed that proceedings

instituted under Section 230 of the Companies Act, 2013 be revived. The

Adjudicating Authority after hearing the Applicant as well as the Respondent

by order dated 25.11.2021, rejected the Application. The Appellant aggrieved

by the said order has come up in this Appeal.

2. We have heard Shri Anuj Singh, Learned Counsel for the Appellant.

Learned Counsel for the Appellant challenging the impugned order submits

that inclusion of the Respondent No.3 in the list of Prospective Resolution

Applicants was illegal since before the said date, the Resolution Plans

submitted by other Resolution Applicants were already discussed in the 18th

meeting of the CoC held on 02.03.2021. After plans of other Resolution

Applicants were discussed, there was no occasion to permit the Respondent

No.3 to submit any Resolution Plan or to consider the Resolution Plan. The

representative of the Respondent No.3 were well aware of the proceedings and

they visited the site since December, 2020 but deliberately did not submit any

Expression of Interest. It is submitted that inclusion of the Respondent No.3

as Prospective Resolution Applicants as well as acceptance of the Resolution

Plan by Respondent No.3 is wholly against the provisions of the IBC and

deserves to be set aside. It is further submitted that Applicant who had

submitted a Scheme to settle the entire debt of the Financial Creditor was not

considered and in the meeting convened for consideration of the Scheme

except one Financial Creditor, no other Creditors appeared. The Applicant was

Company Appeal (AT) (Ins.) No.326 of 2022 4

denied opportunity to pay off all the Creditors by the Scheme which was

submitted on behalf of the Appellant under Section 230 of the Companies Act,

2013. Learned Counsel also referred to the order of the Adjudicating Authority

dated 18.12.2019 and submits that the Adjudicating Authority has noticed

that opportunity be given to convene the meeting of the Creditors as per the

relevant provisions of the Companies Act, 2013 for approval of the Scheme of

Arrangement.

3. We have considered the submissions of the Learned Counsel for the

Appellant and have perused the record.

4. As per Form- 'G' published, the last date for submission of the

Expression of Interest was 31.12.2020. The list of Prospective Resolution

Applicants was also uploaded. It is true that in the 18th meeting of the CoC

dated 02.03.2021, the CoC took note of the three Resolution Plans which were

received from 'Mainthan Alloys Limited', 'ESL Steel Limited' and 'Rimjhim

Ispat Private Limited'. However, minutes of the 18th meeting of the CoC

indicate that Resolution Plans were not voted upon in the said meeting.

Similarly, in the 19th CoC meeting dated 08.03.2021 detailed discussion was

made on the Resolution Plans received from the Resolution Applicants. The

minutes under Agenda Item No.5 noticed that Applicants were requested to

reconsider the financial proposal made by them. On 20.03.2021, the

Resolution Professional issued a final list of the Prospective Resolution

Applicants in which Respondent No.3 was also included. In the final list,

following note was approved with respect to Respondent No.3 'Tata Steel

Mining Limited'-:-

Company Appeal (AT) (Ins.) No.326 of 2022 5

"**The Expression of Interest (EOI) from M/s. Tata Steel

Mining Limited was received by me on 16th March,

2021, i.e. after the expiry of the last date of submission

of EOI. Tata Steel Mining Limited while citing its reason

for delay also requested for condonation of delay in

submission of EOI. In order to maximize the value of

assets of the Corporate Debtor the EOI submitted by

Tata Steel Mining Limited was placed before the

Committee of Creditors in its meeting held on 18th

March, 2021 (and e-voting results dated 20th March,

2021) and after considering all aspects the CoC

decided to condone the delay of Tata Steel Mining

Limited in submitting its EOI and include its name in

the final list of Prospective Resolution Applicants for

Rohit Ferro Tech Limited."

5. The above note indicates that delay in submission of Expression of

Interest by 'Tata Steel Mining Limited' was condoned by the CoC in its meeting

held on 18.03.2021 and e-voting results dated 20.03.2021. It is well settled

that the commercial wisdom of the CoC is to be given due regard. The CoC

having decided to condone the delay in submission of Expression of Interest

by Respondent No.3 and to include the Respondent No.3 in the list of

Resolution Applicants, no exception can be taken by the Appellant to the

decision of the CoC. The object of the IBC is to maximise the assets of the

Company Appeal (AT) (Ins.) No.326 of 2022 6

Corporate Debtor and as noted above, in the 19th CoC meeting, earlier

Resolution Applicants were requested to revise the financial proposal. Thus,

by the time Respondent Nos.3 was permitted to submit a Resolution Plan

neither any Resolution Plan was accepted nor even put to e-vote. Hence, the

commercial wisdom of the CoC to accept the Respondent No.3 as Prospective

Resolution Applicant cannot be faulted. The Resolution Plan submitted by the

Respondent No.3 was subsequently deliberated and found to be H-1 and was

ultimately approved by 100% vote share of the CoC. The Adjudicating

Authority has considered the objection raised by the Appellant with regard to

the above aspect and has ultimately held that there is neither any

arbitrariness nor any illegality or foul play either on the part of the CoC or the

Resolution Professional by including the name of Respondent No.3 in the final

list of Prospective Resolution Applicants or approval of Resolution Plan of

Respondent No.3 by the CoC. It was further held by the Adjudicating

Authority that CoC has also accorded opportunity to the Resolution

Applicants to submit their revised Resolution Plan in order to maximise the

value of assets of the Corporate Debtor. We do not find any infirmity in the

above findings of the Adjudicating Authority and we do not find any substance

in the submissions of the Counsel for the Appellant.

6. Now, the next submission of the Learned Counsel for the Appellant is

with regard to Scheme filed under Section 230 of the Companies Act, 2013. It

is true that the Adjudicating Authority in its order dated 18.12.2019 noticed

the Application C.A. (C.A.A.) No. 1683/KB of 2019 filed under Section 230 of

the Companies Act, 2013 wherein the Adjudicating Authority granted four

Company Appeal (AT) (Ins.) No.326 of 2022 7

weeks' time to the Corporate Debtor to convene the meeting of the Creditors

and get the approval of the Scheme of Arrangement. It is on record that in

spite of the opportunity granted by the Adjudicating Authority, the Scheme of

Arrangement never came to be approved. No creditor other than State Bank

of India attended the meeting. The State Bank of India has also intimated the

Applicant by an e-mail dated 09.12.2020 that the financial proposal under

the Scheme of Arrangement was not tenable in law. The creditor having not

agreed with the Scheme, no reliance can be placed by the Appellant on the

said Scheme. Further, after initiation of the CIRP, the Applicant being

Suspended Director of the Corporate Debtor stands disqualified under Section

29A of the Code in submission of any Scheme of Arrangement or Resolution

Plan.

7. Section 230 of the Companies Act as well as Section 29A of the Code

came for consideration before the Hon'ble Supreme Court in "Arun Kumar

Jagatramka vs. Jindal Steel and Power Ltd. & Anr.- (2021) 7 SCC 474" where

it was held that it would be far-fetched to hold that the ineligibilities which

attach under Section 35(1)(f) read with Section 29A would not apply

when Section 230 is sought to be invoked. In paragraphs 71 and 72 of the

Judgment, following has been laid down by the Hon'ble Supreme Court:-

"71. The IBC has made a provision for ineligibility under Section 29A which operates during the course of the CIRP. A similar provision is engrafted in Section 35(1)(f) which forms a part of the liquidation provisions contained in Chapter III as well. In the context of the statutory linkage provided by the

Company Appeal (AT) (Ins.) No.326 of 2022 8

provisions of Section 230 of the Act of 2013 with Chapter III of the IBC, where a scheme is proposed of a company which is in liquidation under the IBC, it would be far-fetched to hold that the ineligibilities which attach under Section 35(1)(f) read with Section 29A would not apply when Section 230 is sought to be invoked. Such an interpretation would result in defeating the provisions of the IBC and must be eschewed.

72. An argument has also been advanced by the appellants and the petitioners that attaching the ineligibilities under Section 29A and Section 35(1)(f) of the IBC to a scheme of compromise and arrangement under Section 230 of the Act of 2013 would be violative of Article 14 of the Constitution as the appellant would be "deemed ineligible" to submit a proposal under Section 230 of the Act of 2013. We find no merit in this contention. As explained above, the stages of submitting a resolution plan, selling assets of a company in liquidation and selling the company as a going concern during liquidation, all indicate that the promoter or those in the management of the company must not be allowed a back-door entry in the company and are hence, ineligible to participate during these stages.

Proposing a scheme of compromise or arrangement under Section 230 of the Act of 2013, while the company is undergoing liquidation under the provisions of the IBC lies in a similar continuum. Thus, the prohibitions that apply in the former situations must naturally also attach to the latter to ensure that like situations are treated equally."

Company Appeal (AT) (Ins.) No.326 of 2022 9

8. The submission raised by the Appellant on the basis of Scheme of

Arrangement under Section 230 of the Companies Act, 2013 was elaborately

considered by the Adjudicating Authority and it has been rightly held that the

said Scheme having never been approved by the Creditors cannot come to any

benefit of the Appellant and further after initiation of the CIRP, the present

Appellant who is Suspended Director of the Corporate Debtor is hit by Section

29A of the Code. The submission of the Learned Counsel for the Appellant,

thus, on the basis of Scheme of Arrangement under Section 230 of the

Companies Act, 2013 has no substance. The Adjudicating Authority by a very

elaborate and well considered order has discussed all the submissions which

were raised on behalf of the Appellant and has rightly rejected the submission.

The Order passed by the Adjudicating Authority is a well considered order

which needs no interference by us in exercise of our Appellate Jurisdiction.

9. We do not find any substance in any of the submissions of the Counsel

for the Appellant. There is no merit in the Appeal. The Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Dr. Alok Srivastava] Member (Technical)

[Shreesha Merla] Member (Technical)

New Delhi Anjali

Company Appeal (AT) (Ins.) No.326 of 2022