Arcelormittal India Pvt. Ltd vs Abhijit Guhathakurta , Rp Of Epc ...

Arcelormittal India Pvt. Ltd. ...Appellant

Vs.

Abhijit Guhathakurta, Resolution Professional of EPC Constructions India Ltd. & Ors. ...Respondents

Present: For Appellant: - Mr. Amit Sibal and Mr. Arun Kathpalia, Senior Advocates with Mr. Raghav Shankar, Mr. Sevanshu Saylav, Mr. Sudip Mahapatra, Mr. Shahezad Kazi, Ms. Misha Chandra, Ms. Adity Agarwal, Mr. Arshiya Sharda, Mr. Saksham Dhingra, Mr. Sohan Kumar, Mr. Eklavya Dwivedi and Mr. Aubert Sebastian, Advocates.

For Respondents: - Mr. Abhinav Vashisht, Senior Advocate with Mr. Sumesh Dhawan, Mr. Nakul Sachdeva and Mr. Aakarshan Sahay, Advocates. Mr. Sudipto Sarkar, Senior Advocate with Mr. Dinakar Maheshwari, Mr. Rajeev Vidhani, Mr. Himanshu Vidhani and Ms. Pratiksha Mishra, Advocates.

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

'ArcelorMittal India Private Limited' (Appellant) is one of the

'Resolution Applicants', whose 'Resolution Plan' was not voted in its

favour by the 'Committee of Creditors'. The 'Committee of Creditors' by

majority vote of 73.14% approved the 'Resolution Plan' submitted by 3rd

Respondent- 'Royale Partners Investment Fund Limited'. The Appellant

preferred Miscellaneous Application challenging the decision of the 2

'Committee of Creditors' which has been rejected by the Adjudicating

Authority (National Company Law Tribunal), Mumbai Bench, Mumbai.

2. Learned counsel for the Appellant submitted that approval of plan

is in contravention of the mandatory requirement under the proviso to

Section 31(4) of the Insolvency and Bankruptcy Code, 2016 ("I&B Code"

for short), as amended, requiring 'Resolution Applicants' to obtain

approval of the Competition Commission of India prior to approval by the

'Committee of Creditors'.

3. According to Appellant, the 'Committee of Creditors' without

appreciating the fact that the Appellant's 'Resolution Plan' is ex facie

better 'Resolution Plan' and serves the twin objects of the 'I&B Code' has

rejected the plan.

4. It was further submitted that the action of the 'Committee of

Creditors' is vitiated by procedural irregularities rendering illegal

approval.

5. Learned counsel appearing on behalf of the 'Resolution

Professional' of 'EPC Constructions India Limited' submitted that the

Appellant is 'Unsuccessful Resolution Applicant' and cannot challenge

the 'Resolution Plan' as it has been duly approved by the 'Committee of

Creditors'. It was informed that the Appellant was called for negotiations

on 4th December, 2018, 14th December, 2018, 24th December, 2018, 4th

January, 2019, 7th January, 2019 and 10th January, 2019. Thereafter,

Appellant's 'Resolution Plan' was duly considered in the meeting of Company Appeal (AT) (Insolvency) No. 524 of 2019 3

'Committee of Creditors' held on 10th January, 2019, and was rejected by

the 'Committee of Creditors' as it received only 17.67% of the total voting

share. The reasons for rejection of the Appellant's 'Resolution Plan' were

duly recorded in the meeting of the 'Committee of Creditors' as follows:

"The reasons for rejection of the plan as provided by

the CoC was the failure to maximise the value of the

assets of the Company. The receivables being

assigned to the creditors while having book value of

˜700 crores would be insignificant if the contracts are

cancelled as proposed in the plan. Therefore, there is

no certainty in the realization of any of the amounts.

It was noted that the offer made was significantly

lower than the liquidation value determined for the

Resolution Applicant. In the light of the object of Code

being to maximise the value of the assets of the

Corporate Debtor, the plan was rejected on account of

the plan not satisfactory achieving the same."

6. Learned counsel for 3rd Respondent-('Successful Resolution

Applicant') submitted that the plan submitted by 3rd Respondent has

been duly approved by the 'Committee of Creditors' with majority voting

shares of 73.14%. The Adjudicating Authority finally heard the matter

and reserved the Judgment on 9th September, 2019.

Company Appeal (AT) (Insolvency) No. 524 of 2019 4

7. It was submitted that the appeal under Section 61, in absence of

any approval of plan by the Adjudicating Authority is not maintainable.

8. It was also informed that the Competition Commission of India has

also given its approval of the plan subsequently.

9. In Arcelormittal India Private Limited v. Satish Kumar Gupta

& Ors.─ (2019) 2 SCC 1", the Hon'ble Supreme Court observed and held

as follows:

"75. What has now to be determined is whether

any challenge can be made at various stages of

the corporate insolvency resolution process.

Suppose a resolution plan is turned down at the

threshold by a Resolution Professional under

Section 30(2). At this stage is it open to the

concerned resolution applicant to challenge the

Resolution Professional's rejection? It is settled

law that a statute is designed to be workable, and

the interpretation thereof should be designed to

make it so workable........."

76. Given the timeline referred to above, and

given the fact that a resolution applicant has no

vested right that his resolution plan be considered,

it is clear that no challenge can be preferred

Company Appeal (AT) (Insolvency) No. 524 of 2019 5

to the Adjudicating Authority at this stage. A

writ petition under Article 226 filed before a High

Court would also be turned down on the ground

that no right, much less a fundamental right, is

affected at this stage. This is also made clear by

the first proviso to Section 30(4), whereby a

Resolution Professional may only invite fresh

resolution plans if no other resolution plan has

passed muster.

xxx xxx xxx

79. Take the next stage under Section 30. A

Resolution Professional has presented a

resolution plan to the Committee of Creditors for

its approval, but the Committee of Creditors does

not approve such plan after considering its

feasibility and viability, as the requisite vote of not

less than 66% of the voting share of the financial

creditors is not obtained. As has been mentioned

hereinabove, the first proviso to Section 30(4)

furnishes the answer, which is that all that can

happen at this stage is to require the Resolution

Professional to invite a fresh resolution plan within

the time limits specified where no other resolution

plan is available with him. It is clear that at this

stage again no application before the Adjudicating

Company Appeal (AT) (Insolvency) No. 524 of 2019 6

Authority could be entertained as there is no

vested right or fundamental right in the resolution

applicant to have its resolution plan approved,

and as no adjudication has yet taken place.

81. If, on the other hand, a resolution plan has

been approved by the Committee of Creditors, and

has passed muster before the Adjudicating

Authority, this determination can be challenged

before the Appellate Authority under Section 61,

and may further be challenged before the

Supreme Court under Section 62, if there is a

question of law arising out of such order, within

the time specified in Section 62. Section 64 also

makes it clear that the timelines that are to be

adhered to by the NCLT and NCLAT are of great

importance, and that reasons must be recorded by

either the NCLT or NCLAT if the matter is not

disposed of within the time limit specified. Section

60(5), when it speaks of the NCLT having

jurisdiction to entertain or dispose of any

application or proceeding by or against the

corporate debtor or corporate person, does not

invest the NCLT with the jurisdiction to interfere at

an applicant's behest at a stage before the quasi-

judicial determination made by the Adjudicating

Authority. The non-obstante clause in Section Company Appeal (AT) (Insolvency) No. 524 of 2019 7

60(5) is designed for a different purpose: to ensure

that the NCLT alone has jurisdiction when it comes

to applications and proceedings by or against a

corporate debtor covered by the Code, making it

clear that no other forum has jurisdiction to

entertain or dispose of such applications or

proceedings."

10. It is clear and apparent from the aforesaid judgment that the

Appellant has no vested right to challenge the decision of the 'Committee

of Creditors' which rejected its 'Resolution Plan' and approve another

resolution plan which is under consideration of the Adjudicating

Authority.

11. Section 5 of the Competition Act, 2002 is limited to the enterprises

and the matter of merger, amalgamation and acquisition, if it comes

within threshold of value of assets, as mentioned therein, which reads as

follows:

"5. Combination.─ The acquisition of one or more

enterprises by one or more persons or merger or

amalgamation of enterprises shall be a

combination of such enterprises and persons or

enterprises, if--

(a) any acquisition where--

(i) the parties to the acquisition, being

the acquirer and the enterprise, Company Appeal (AT) (Insolvency) No. 524 of 2019 8

whose control, shares, voting rights

or assets have been acquired or are

being acquired jointly have,--

(A) either, in India, the assets

of the value of more than

rupees one thousand crores or

turnover more than rupees

three thousand crores; or

(B) [in India or outside India,

in aggregate, the assets of the

value of more than five

hundred million US dollars,

including at least rupees five

hundred crores in India, or

turnover more than fifteen

hundred million US dollars,

including at least rupees

fifteen hundred crores in

India; or]

(ii) the group, to which the enterprise whose

control, shares, assets or voting rights have

been acquired or are being acquired, would

belong after the acquisition, jointly have or

would jointly have,--

Company Appeal (AT) (Insolvency) No. 524 of 2019 9

(A) either in India, the assets of

the value of more than rupees

four thou sand crores or

turnover more than rupees

twelve thousand crores; or

(B) [in India or outside India, in

aggregate, the assets of the

value of more than two billion

US dollars, including at least

rupees five hundred crores in

India, or turnover more than

six billion US dollars, including

at least rupees fifteen hundred

crores in India; or]

(b) acquiring of control by a person over an

enterprise when such person has already

direct or indirect control over another

enterprise engaged in production,

distribution or trading of a similar or

identical or substitutable goods or provision

of a similar or identical or substitutable

service, if--

(i) the enterprise over which control

has been acquired along with the

enterprise over which the acquirer Company Appeal (AT) (Insolvency) No. 524 of 2019 10

already has direct or indirect control

jointly have,--

(A) either in India, the assets of

the value of more than rupees

one thousand crores or

turnover more than rupees

three thousand crores; or

(B) [in India or outside India,

in aggregate, the assets of the

value of more than five

hundred million US dollars,

including at least rupees five

hundred crores in India, or

turnover more than fifteen

hundred million US dollars,

including at least rupees

fifteen hundred crores in

India; or]

(ii) the group, to which enterprise

whose control has been acquired, or

is being acquired, would belong after

the acquisition, jointly have or would

jointly have,--

(A) either in India, the assets of

the value of more than rupees Company Appeal (AT) (Insolvency) No. 524 of 2019 11

four thou sand crores or

turnover more than rupees

twelve thousand crores or

(B) [in India or outside India, in

aggregate, the assets of the

value of more than two billion

US dollars, including at least

rupees five hundred crores in

India, or turnover more than

six billion US dollars, including

at least rupees fifteen hundred

crores in India; or]

(c) any merger or amalgamation in

which--

(i) the enterprise remaining after

merger or the enterprise created as a

result of the amalgamation, as the

case may be, have,--

(A) either in India, the assets of

the value of more than rupees

one thou sand crores or turnover

more than rupees three

thousand crores; or

(B) [in India or outside India, in

aggregate, the assets of the Company Appeal (AT) (Insolvency) No. 524 of 2019 12

value of more than five hundred

million US dollars, including at

least rupees five hundred crores

in India, or turnover more than

fifteen hundred million US

dollars, including at least

rupees fifteen hundred crores in

India; or]

(ii) the group, to which the enterprise

remaining after the merger or the

enterprise created as a result of the

amalgamation, would belong after

the merger or the amalgamation, as

the case may be, have or would

have,--

(A) either in India, the assets of

the value of more than rupees

four-thou sand crores or

turnover more than rupees

twelve thousand crores; or

(B) [in India or outside India, in

aggregate, the assets of the

value of more than two billion

US dollars, including at least

rupees five hundred crores in Company Appeal (AT) (Insolvency) No. 524 of 2019 13

India, or turnover more than

six billion US dollars, including

at least rupees Fifteen

Hundred Crores in India

Explanation.-- For the purposes of this

section,--

(a) "control" includes controlling the affairs or

management by--

(i) one or more enterprises, either jointly or

singly, over another enterprise or group;

(ii) one or more groups, either jointly or

singly, over another group or enterprise;

(b) "group" means two or more enterprises which,

directly or indirectly, are in a position to --

(i) exercise twenty-six per cent or more of

the voting rights in the other enterprise; or

(ii) appoint more than fifty per cent of the

members of the board of directors in the

other enterprise; or

(iii) control the management or affairs of the

other enterprise;

(c) the value of assets shall be determined by

taking the book value of the assets as shown, in

the audited books of account of the enterprise, in

the financial year immediately preceding the Company Appeal (AT) (Insolvency) No. 524 of 2019 14

financial year in which the date of proposed merger

falls, as reduced by any depreciation, and the

value of assets shall include the brand value, value

of goodwill, or value of copyright, patent, permitted

use, collective mark, registered proprietor,

registered trade mark, registered user,

homonymous geographical indication,

geographical indications, design or layout- design

or similar other commercial rights, if any, referred

to in sub-section (5) of section 3."

12. From the said provision, it is clear that in all such combinations

which do not come within the meaning of Section 5 of the Competition

Act, 2002, there is no need of obtaining any approval of the Competition

Commission of India under Section 6(2) by issuing notice on it.

13. As per Section 54 of the Competition Act, 2002, the power of the

Central Government to exempt by notification from the application of the

Act including Section 6(2). In fact, the Central Government from its

Ministry of Corporate Affairs by Notification dated 27th March, 2017, in

exercise of the powers conferred by clause (a) of Section 54 of the

Competition Act, 2002, in public interest exempted number of

enterprises, from any acquisition referred to in clause (a) of Section 5 of

the 'Competition Act, 2002', as extracted below:

Company Appeal (AT) (Insolvency) No. 524 of 2019 15

14. In the present case, we are not deciding such issue as to whether

the 3rd Respondent- 'Royale Partners Investment Fund Limited' whose

plan has been approved by the 'Committee of Creditors' can claim that it

does no come within the meaning of Section 5 or can take advantage of

exemption under Section 54, as notified, on 27th March, 2017.

15. We have noticed and hold that proviso to sub-section (4) of Section

31 of the 'I&B Code' which relates to obtaining the approval from the

'Competition Commission of India' under the Competition Act, 2002 prior

to the approval of such 'Resolution Plan' by the 'Committee of Creditors',

is directory and not mandatory. It is always open to the 'Committee of

Creditors', which looks into viability, feasibility and commercial aspect of

Company Appeal (AT) (Insolvency) No. 524 of 2019 16

a 'Resolution Plan' to approve the 'Resolution Plan' subject to such

approval by Commission, which may be obtained prior to approval of the

plan by the Adjudicating Authority under Section 31 of the 'I&B Code'. In

present matter already approval of the Competition Commission of India

has been taken to the 'Resolution Plan'.

16. For the reasons aforesaid and in view of the decision of the Hon'ble

Supreme Court, we dismiss the appeal being not maintainable. The

Appellant has no vested fundamental right to challenge the plan approved

by the 'Committee of Creditors'.

In absence of any merit, the appeal is dismissed. No costs.

[Justice S.J. Mukhopadhaya] Chairperson

[Justice A.I.S. Cheema] Member (Judicial)

[Kanthi Narahari] Member (Technical) NEW DELHI 16th December, 2019

AR

Company Appeal (AT) (Insolvency) No. 524 of 2019