Bankey Bihari Infrahomes Private ... vs Alok Kumar Kuchchal Liquidator ...

For Appellant: Mr. Abhijeet Sinha, Mr. Aditya Shukla, Heena Kochar, Mr. Narendra Kumar, Advocates

For Respondent: Mr. Abhishek Anand, Rukbaan Tyagi, Advocates for Liquidator Mr. Alok Kumar Kuchchal, party in person Mr. P. Nagesh, Sr. Advocate with Advocate Akshay Sharma, for R-2 Advocate Srijan Mehrotra, Advocate Anshu Yadav, for Homebuyer

JUDGMENT

(Dated: 06.12.2022)

[Per. Dr. Alok Srivastava, Member (Technical)]

The present appeal is filed under section 61 of Insolvency and

Bankruptcy Code, 2016 (in short 'IBC') by the Appellant aggrieved

by the order dated 1.6.2022 (hereinafter called Impugned Order) -2-

passed by the Adjudicating Authority (National Company Law

Tribunal, Allahabad) in the matter of IA(IB) No. 154/ALD/2022 in

CP(IB) No. 45/ALD/2019.

2. In brief, the case of the Appellant is that it is involved in the

construction and development of own or leased property, including

buying, selling, renting and operating of self-owned or leased real

estate such as apartment buildings, non-residential buildings,

developing and subdividing real estate into lots etc. The Corporate

Insolvency Resolution Process (in short 'CIRP') was initiated against

the Corporate Debtor Ratandeep infrastructure Pvt. Ltd. vide order

dated 16.4.2019 of the Adjudicating Authority on an application

under section 7 of the IBC filed by Nitin Jain & Anr. as Financial

Creditor. Upon unsuccessful completion of CIRP, order for

liquidation of the corporate debtor was passed on 31.1.2022 in IA

No. 73/2021 and Alok Kumar Kuchchal/Respondent was

appointed as the Liquidator. The Appellant preferred IA No.

115/2022 under section 60(5) of IBC seeking direction to the

Resolution Professional to place the scheme of compromise and

arrangement submitted by the Appellant under section 230 of the

Companies Act, 2013 read with Regulation 2B of the Insolvency and

Bankruptcy Board of India (Liquidation Process) Regulations, 2016

(in short 'Liquidation Process Regulations'). This IA No. 115/2022

was disposed by the Adjudicating Authority vide order dated

13.4.2022, whereby the Liquidator was directed to consider the

Company Appeal (AT) (Insolvency) No. 718 of 2022 -3-

scheme of comprise and arrangement submitted by the Appellant

and the time allowed for completion of this exercise was three

weeks.

3. The Appellant has further stated that after passing of order

dated 13.4.2022, he sought details and information from the

Liquidator to enable him to prepare the scheme of compromise and

arrangement, but instead of providing such information the

Liquidator through an e-mail dated 24.3.2022, asked the Appellant

to submit a confidentiality undertaking which was provided to the

Liquidator. The requisite information was provided by the

Liquidator on 29.4.2022, but since there were some discrepancies

in the list of creditors provided by the Liquidator, the Appellant

again sent e-mail on 21.5.2022 repeating his request to provide a

correct list of claims.

4. The Appellant has further stated that while he was in the

process of eliciting necessary information for preparing the scheme

of comprise and arrangement, the Liquidator published a public

announcement for initiating the auction process of the corporate

debtor's assets. Thereafter, the Appellant submitted a scheme of

compromise and arrangement to the Liquidator on 24.5.2022. The

Appellant has claimed that the Liquidator continued with the

auction process, and hence the Appellant was compelled to file IA

No. 154/2022 before the Adjudicating Authority seeking stay of the

Company Appeal (AT) (Insolvency) No. 718 of 2022 -4-

auction scheduled on 19.5.2022 and also direction to the Liquidator

to place the scheme of compromise and arrangement before the

Stakeholders Consultation Committee. The Appellant has further

stated that IA No. 154/2022 was disposed vide order dated

1.6.2022 whereby the reliefs sought by the Appellant were not

granted and directions for the auction process to be reinitiated.

5. We heard the oral arguments advanced by the Learned

Counsels for all the parties and perused the record.

6. The Learned Counsel for Appellant has submitted that the

Appellant was interested in offering scheme of compromise and

arrangement under section 230 of the Companies Act, 2013 to

enable the corporate debtor to avoid liquidation, which would have

meant definite corporate death of the corporate debtor, and in

pursuance of this objective, the Appellant obtained an order on

13.4.2022 from the Adjudicating Authority directing the Liquidator

to consider the Appellant's scheme of compromise and arrangement

in respect of the corporate debtor. He has further submitted that

consequent to this order, the Appellant sought information about

the claims from the Liquidator vide e-mail dated 20.4.2022, and

also for providing documents required by him to enable him to

prepare the scheme of compromise and arrangement.

Company Appeal (AT) (Insolvency) No. 718 of 2022 -5-

7. The Learned Counsel for Appellant has further stated that

after the Appellant submitted a confidentiality undertaking to the

Liquidator, he was supplied some incomplete information which

also contained discrepancies in the list of creditors/claims.

Thereafter, some more e-mails were exchanged between the

Appellant and Respondent/Liquidator which resulted in delay in

submission of the scheme of compromise and arrangement him.

The Liquidator, without considering the scheme presented by the

Appellant, in total disregard of the directions given by the

Adjudicating Authority for consideration of the scheme of

compromise and arrangement, issued a public notice dated

19.5.2022, which was published on 20.5.2022, for auction sale of

the land of the corporate debtor.

8. The Learned Counsel for Appellant has further stated that, in

view of this auction sale notice publication, the Appellant was

compelled to file IA No. 154/22 seeking stay of the auction process

and direction to the Liquidator to submit the scheme presented by

the Appellant for consideration of the Stakeholders Consultation

Committee. He has claimed that the Adjudicating Authority,

without giving due consideration to its earlier order regarding

submission of the scheme of compromise and arrangement, passed

the Impugned Order, whereby it refused to intervene in the process

of e-auction of the corporate debtor's land, and further directed the

Company Appeal (AT) (Insolvency) No. 718 of 2022 -6-

Liquidator to act with the view to maximize the value of the

corporate debtor's land.

9. The Learned Counsel for Appellant has referred to various e-

mails sent by the Appellant dated 7.4.2022, 20.4.2022, 23.4.2022,

29.4.2022 and 4.5.2022 to claim that the Appellant was genuinely

interested in putting forward a scheme of compromise and

arrangement, but due to various unnecessary and irrelevant issues

raised by the Liquidator which resulted in delay in obtaining the

required list of claims, the Appellant could not submit the said

scheme in time. He has explained that when the Liquidator

continued with the e-auction schedule on 19.5.2022, the Appellant

sent e-mail dated 21.5.2022 to the Liquidator seeking a clear list of

claims in view of the repetition of certain claims in the list already

sent to him, and upon receiving a final list of creditors from the

Liquidator he could finally submit the said scheme through e-mail

dated 24.5.2022. He has claimed that in view of the unreasonable

functioning of the Liquidator in moving forward with the e-auction

process, since the Liquidator had shown his helplessness through

e-mail dated 20.4.2022 for providing any extension of time for

consideration of the scheme stating that it was beyond his power

as a Liquidator the Appellant had to file an application bearing IA

No. 154/2022 on 25.5.2022 seeking direction from the Adjudicating

Authority for stay of the e-auction process and direction to the

Liquidator to consider the scheme that he had submitted.

Company Appeal (AT) (Insolvency) No. 718 of 2022 -7-

10. The Learned Counsel for Appellant has further submitted

that the lack of seriousness on the part of the Appellant in putting

forward a credible and meaningful scheme of compromise and

arrangement is clearly displayed by the fact that the said scheme

purports to make provision for payment of Rs.12.48 crores to the

stakeholders, but a major portion of payments are meant for

creditors whose claims were either not accepted in the CIRP or who

are related parties of the corporate debtor. He has claimed that the

Liquidator is required to act with a view to maximise the value of

the corporate debtor and the successful bid found in the e-auction

is only Rs. 7.45 crores which is much less than the amount offered

by the Appellant through the said scheme, and, therefore, the

scheme is worth considering as it would lead to maximisation value

of the assets of the corporate debtor, which is the primarily objective

of the IBC.

11. In response, the Learned Senior Counsel for the Respondent

No. 1/Liquidator has adverted to the string of e-mail

communication exchanged between the Appellant and the

Liquidator after the direction dated 9.4.2022 given by the

Adjudicating Authority, starting with e-mail dated 20.4.2022 of the

Appellant. He has claimed that the Appellant was not really

interested in submitting a genuine scheme of compromise and

arrangement, but his motivation was to only derail the process of

Company Appeal (AT) (Insolvency) No. 718 of 2022 -8-

liquidation of the corporate debtor. The Learned Counsel of the

Liquidator has further submitted that Mr. Rakesh Kumar Agarwal,

a director of the Appellant had earlier filed IA No. 220/2021 in July,

2021 through one of his group companies AIG Infratech (Pvt.) Ltd.

requesting permission of the Adjudicating Authority for submission

of a resolution plan, which was turned down vide order dated

7.12.2021.

12. The Learned Senior Counsel for Respondent No. 2 has further

brought to our notice that later another application IA No.

115/2022 was preferred by Mr. Rakesh Kumar Agarwal, a director

of the Appellant company, wherein by an order dated 13.4.2022,

the Adjudicating Authority had granted three weeks' time for

submission and complete consideration of the said scheme of

compromise and arrangement but the Appellant failed to submit

the said scheme, nor did he inform the Liquidator about the delay.

He has contended that it was only after the Liquidator published

the auction notice on 20.5.2022 that the Appellant again became

active and submitted a half-baked scheme which is in no way better

than the value of land discovered through the successful bid. He

has claimed that the Liquidator has been absolutely fair and

unprejudiced in dealing with various requests of the Appellant, but

time and again, the Appellant has raised frivolous and irrelevant

issues to only buy time and derail the process of liquidation, but

the Liquidator is duty bound to complete the liquidation of the

Company Appeal (AT) (Insolvency) No. 718 of 2022 -9-

corporate debtor in view of the time-lines prescribed in IBC and

Liquidation Process Regulations.

13. The Learned Senior Counsel for Liquidator has cited the

judgment of Hon'ble Supreme Court in the matter of Arun Kumar

Jagatramka vs. Jindal Steel and Power Limited and Anr (2021

7 SCC 474) to highlight that a scheme of compromise and

arrangement under section 230 of the Companies Act, 2013 could

not have been filed by someone who is trying to takeover the

corporate debtor through 'backdoor'.

14. In support of the above, the Learned Counsel for Liquidator

has pointed out that in Interlocutory Application No. 177 of 2022

filed by Mr. Prince Jain, a creditor of the corporate debtor whose

claim was not admitted during the CIRP, for seeking directions

against the Liquidator for staying the auction process, it was found

that Mr. Prince Jain is acting in collusion with Mr. Rakesh Kumar

Agarwal, a director of the Appellant/Bankey Bihari Infrahomes Pvt.

Ltd., an allegation that has not been denied by the Appellant. He

has also claimed that the act of 'collusion' between the erstwhile

management of the corporate debtor and Mr. Rakesh Kumar

Agarwal is established by the sharing of e-mail dated 30.4.2022 by

Mr. Rakesh Kumar Agarwal, a director of the Appellant, with the

erstwhile directors of the corporate debtor when this email

contained confidential information relating to the claims filed in the

Company Appeal (AT) (Insolvency) No. 718 of 2022 -10-

liquidation of the corporate debtor and Mr. Rakesh Kumar Agarwal

was bound by the confidentiality undertaking to keep such

information confidential.

15. With regard to the Liquidator's conduct as being fair and

without prejudice, the Learned Counsel for Liquidator has

explained that the Liquidator has provided all the necessary

information sought by the Appellant in time, but he was completely

remiss in submitting a full and complete scheme within the allotted

time i.e. by 02.05.2022. Therefore, the Liquidator was duty-bound

to continue with the e-auction process in which eventually the

successful bid of Rs. 7.45 crores was received. He has further

contended that action of the Liquidator is fully above board and in

accordance with the various directions received from the

Adjudicating Authority, and therefore e-auction process should now

be permitted to be culminated and the appeal of the Appellant

should be dismissed.

16. The Learned Senior Counsel for the successful bidder AKJ

Realtech Private Limited (who was impleaded as Respondent No. 2

on order of this Tribunal) has submitted that the e-auction process

was a validly undertaken process in consonance with the provisions

of IBC and Liquidation Process Regulations. He has further

submitted that Respondent No. 2 participated in the e-auction of

sole asset of the corporate debtor i.e. land admeasuring 3542 sq.m.

Company Appeal (AT) (Insolvency) No. 718 of 2022 -11-

comprising of Tower No. S2 falling in undivided Khasra Nos. 1470

(area 0.0070 hectare), 1471 (area 0.2830 hectare) and 1484 (Area

0.0642 hectare) falling in GH Plot No. 2 in Township known as

"Jaipuria Sunrise Greens", Bamheta, Ghaziabad and there is no

allegation made by the Appellant against Respondent No. 2, but

only some vague allegation of collusion between some parties and

the Respondent No. 2 to sell the corporate debtor's land at

throwaway price, which is completely false.

17. The Learned Senior Counsel for Respondent No. 2 has further

submitted that the Liquidator was duty bound to complete the

liquidation process within 90 days from the liquidation

commencement date, which time limit was expiring on 31.4.2022

and since there was no order for further extending the e-auction

process, the Liquidator has acted in his call of duty in accordance

with law to conduct e-auction in which the Respondent No. 2 is the

successful bidder.

18. The Learned Senior Counsel for Respondent No. 2 has cited

the judgment of Hon'ble Supreme Court in the case of Ebix

Singapore (P) Ltd. v. Educomp Solutions Ltd. (CoC), (2022 2

SCC 401) to emphasise that IBC provides for completion of CIRP

'unswayed by abstract conceptions of equity and contractual

freedom of the parties with unfettered discretion'. He referred to

the conduct of the Appellant by stating that the Appellant was

Company Appeal (AT) (Insolvency) No. 718 of 2022 -12-

allowed by the Adjudicating Authority vide order dated 13.4.2022

in IA No. 115/2022 to submit the scheme of compromise and

arrangement, which was not done in time of 3 weeks granted by

this order and thus, the Appellant has not been able to establish its

bonafide by timely submission of the scheme of compromise and

arrangement. He has pointed out such scheme was submitted on

24.5.2022, which is after almost six weeks from the date of order

dated 13.4.2022.

19. The Learned Senior Counsel for Respondent No. 2 has

adverted to the scheme of compromise and arrangement submitted

by the Appellant to rebut. He has pointed out that the said scheme

does not provide a better value to the legitimate stakeholders, since

the scheme proposes to make payments to a number of unrelated

parties, whose claims were not admitted during the CIRP and if

such claims are disregarded and taken out from the total payments

and then the Net Present Value (NPV) of the amount offered is

considered, it will show that the resulting payments will not be

better than the payments the bid offered by Respondent No. 2. He

has also pointed out that while the proposed scheme proposes to

make payment only to such homebuyers whose claims have been

admitted by the Liquidator, it makes provision for payment to many

other creditors, whose claims are not admitted during CIRP and

also who are related parties of the corporate debtor. The Learned

Senior Counsel for Respondent No. 2 has thus claimed that

Company Appeal (AT) (Insolvency) No. 718 of 2022 -13-

Appellant was never interested in submitting a serious and

meaningful scheme of compromise but to only derail and delay the

liquidation process. He has finally submitted that the Appellant's

case fails as the e-auction process was carried out in accordance

with the provision of law and also the demerits of the said scheme

of compromise and arrangement.

20. It is noted that the CIRP of the corporate debtor was initiated

with appointment of Interim Resolution Professional (IRP) on

16.4.2019. Since no resolution plan could be obtained in the CIRP,

the CoC in its 6th meeting decided for liquidation of the corporate

debtor, and the application for liquidation was filed before the

Adjudicating Authority on 6.2.2021. It is further noted that while

this application for liquidation was under consideration of the

Adjudicating Authority, Mr. Rakesh Kumar Agarwal showed

interest for the first time in submitting a resolution plan through

his company AIG Infratech Private Limited in April, 2021 and as the

Resolution Professional (in short 'RP') showed his inability to accept

such a plan for consideration, Mr. Rakesh Kumar Agarwal director

of the AKJ Realtech Private Limited filed IA No. 220/2021 seeking

directions for submission and consideration its resolution plan.

This IA 220/2021 was dismissed by the Adjudicating Authority on

the ground that no useful purpose would be served in considering

the request of the Applicant, when the CoC had already resolved to

Company Appeal (AT) (Insolvency) No. 718 of 2022 -14-

liquidate the corporate debtor. Thereafter, liquidation of the

corporate debtor was ordered and it commenced on 31.1.2022.

21. It is further noted that while the liquidation process was on,

Mr. Rakesh Kumar Agarwal again filed IA 115/2022 through the

company Bankey Bihari Infrahomes Private Limited (Appellant in

the present appeal), in which he is a director seeking directions of

the Adjudicating Authority for submission of a scheme of

compromise and arrangement with respect to the corporate debtor

on 7.4.2022. This IA 115/2022 was disposed of vide order dated

13.4.2022 with a direction to the Liquidator to consider the scheme

and a time period of three weeks from the date of order was allowed

for submission of the scheme and decision thereon.

22. It is further noted that, thereafter, a series of e-mails were

exchanged between Mr. Rakesh Kumar Agarwal and the Liquidator,

starting with e-mail dated 20.4.2022 whereby Mr. Rakesh Kumar

Agarwal requested certain information relating to claims from the

Liquidator in order to prepare the scheme of compromise and

arrangement. After a confidentiality undertaking was provided by

the Appellant, a list of claims was provided to Mr. Rakesh Kumar

Agarwal, the Appellant submitted a scheme to the Liquidator vide

e-mail dated 24.5.2022.

Company Appeal (AT) (Insolvency) No. 718 of 2022 -15-

23. It is relevant to note that the three weeks' time granted by

the Adjudicating Authority for submission of the scheme of

compromise and arrangement by the Appellant expired on

4.5.2022, and in view of complete silence on the part of Appellant

since 2.5.2022 regarding submission of the scheme, the Liquidator

was proceeding with the e-auction process. It was only on

21.5.2022, nineteen days after the last e-mail communication from

Mr. Rakesh Kumar Agarwal to the Liquidator that Mr. Rakesh

Kumar Agarwal sent an e-mail to the Liquidator, seeking more time

for finalisation of the scheme.

24. It is also noticed that when the Appellant did not submit the

scheme of compromise and arrangement within the allotted three

weeks' time, which expired on 4.5.2022, the Liquidator issued a

public notice on 20.5.2022 for auction of the land property of the

corporate debtor namely, land admeasuring 3542 sq. m. located in

GH Plot No. 2 in "Jaipuria Sunrise Greens" Township, Bamheta,

Ghaziabad.

25. The Appellant submitted the said scheme after considerable

delay on 24.5.2022, and thereafter he filed IA 154/2022 on

25.4.2022 for staying the auction process and directing the

Liquidator to place the scheme before the Stakeholders

Consideration Committee for consideration. This IA 154/2022 was

Company Appeal (AT) (Insolvency) No. 718 of 2022 -16-

dismissed vide the Impugned Order. The relevant part of the order

is as follows:-

"10. Considering this fact, we do not find any merit to intervene as of now as the object of maximization of value of assets can be achieved during the liquidation process also. We also make it clear that the Liquidator shall act with a view to maximize the value of the corporate debtor and in case the value offer is found to be below the value offered made by the applicant herein, the auction process may be reinitiated.

11. With these directions, this application stands disposed of in terms indicated above."

26. A perusal of the order of the Adjudicating Authority dated

1.6.2022 shows that the Adjudicating Authority, after considering

the past proceedings in the liquidation process and also the

inability of the Appellant to submit a scheme of compromise and

arrangement in the given time of three weeks from 19.4.2022,

ordered that the e-auction process may be continued. The

Adjudicating Authority further ordered that if the Appellant offers a

better value for the land of the corporate debtor than what is

discovered in the e-auction, the e-auction could be reinitiated.

27. A perusal of the series of events during the liquidation

process makes it clear that the Appellant, through Mr. Rakesh

Kumar Agarwal, made an attempt through the company AIG

Infratech Private Limited to submit a resolution plan much after the

CoC had decided to liquidate the corporate debtor and the

application for liquidation has been filed by the Resolution

Company Appeal (AT) (Insolvency) No. 718 of 2022 -17-

Professional before the Adjudicating Authority. This IA 220/2021,

was filed in July, 2021 through the company AIG Infratech Private

Limited for seeking order to submit a resolution plan, was

dismissed by the Adjudicating Authority on the ground that "no

useful purpose would be served in keeping IA 220/2021, when the

COC had already resolved to liquidate the Corporate Debtor."

28. Thereafter, after the commencement of liquidation process

vide order dated 31.1.2022, Mr. Rakesh Kumar Agarwal again sent

a letter to the Liquidator on 3.3.2022, after passage of more than

one month from the date of commencement of liquidation

requesting to submit a scheme of compromise and arrangement,

and upon the Liquidator expressing inability to accept such a

scheme in view of the commencement and progress of liquidation,

Mr. Rakesh Kumar Agarwal filed IA 115/2022 through another

company 'Bankey Bihari Infrahomes Private Limited' seeking

permission of the Adjudicating Authority for submission of a

scheme of compromise and arrangement. This interlocutory

application was disposed of by the Adjudicating Authority vide order

dated 13.4.2022 with the following observations: -

"This is an application filed by the "Bankey Bihar Infrahomes Private Limited" seeking a direction to the liquidator to consider the scheme propounded by the Applicant herein.

Ms. Babita Jain, learned counsel for the Applicant present. Ms. Snehal Sharda, learned counsel appearing on behalf of the liquidator present.

Company Appeal (AT) (Insolvency) No. 718 of 2022 -18-

The liquidator is expected to act in accordance with the Liquidation Process Regulations. The decision on the proposed scheme be taken within a period of three weeks' from today. No other directions are called for in IA No. 115/2022 and hence the same shall stand disposed."

29. It is noted that after exchange of a number of e-mails between

the Appellant and the Liquidator, starting with e-mail dated

20.4.2022, the Appellant finally submitted the requisite scheme

vide e-mail dated 24.5.2022 (The e-mails exchanged between the

Appellant and the Liquidator are attached at pp. 98-122 of the

appeal paperbook). It is noted when the information regarding

claims which was sought by the Appellant was provided by the

Liquidator vide e-mail dated 4.5.2022 (attached at pp. 103-104 of

the appeal paperbook), the Appellant forwarded the confidential

information to erstwhile directors of the corporate debtor, which

was in breach of the confidentiality undertaking provided by the

Appellant.

30. The Liquidator, on not receiving no further information from

the Appellant about submission of the scheme of compromise and

arrangement after his e-mail dated 2.5.2022, and when the three

weeks' time starting from 13.4.2022 granted by the Adjudicating

Authority had expired on 4.5.2022, proceeded to publish the

auction notice on 20.5.2022.

Company Appeal (AT) (Insolvency) No. 718 of 2022 -19-

31. It appears that on publication of this auction notice, the

Appellant sent an e-mail dated 21.5.2022 seeking more time for

submission and finalization of the scheme on which the Liquidator

expressed his inability to provide more time vide e-mail dated

24.5.2022. The Appellant, thereafter, submitted the requisite

scheme to the Liquidator on the evening of 24.5.2022 and

immediately thereafter filed IA 154/2022 before the Adjudicating

Authority requesting for stay of the auction process and directions

to place the proposed scheme before the Stakeholders Consultation

Committee.

32. The above-stated actions of Mr. Rakesh Kumar Agarwal make

it absolutely clear that he, through different corporate entities, has

attempted to intervene in the process of liquidation by filing the

three interlocutory applications viz. IA 220/20221, (which was

dismissed by the Adjudicating Authority), IA 115/2022 and IA

154/2022. We also note that Mr. Rakesh Kumar Agarwal in utter

disregard to the confidentiality agreement provided to the

Liquidator to keep the information supplied to him by the

Liquidator confidential, went ahead and shared such information

with the counsel of Mr. Prince Jain, a creditor whose claim was not

admitted during CIRP of the corporate debtor.

33. We also note that the Liquidator and the Adjudicating

Authority have with due regard to fairness, natural justice and in

Company Appeal (AT) (Insolvency) No. 718 of 2022 -20-

consonance with the objectives of IBC, provided an opportunity

through order in IA 115/2022, giving three weeks' time for the

submission and decision on the purported scheme of compromise

and arrangement as claimed by the Appellant which the Appellant

failed to do in the time limit provided and was, thus, unable to

establish his bonafide about his seriousness in proposing such a

scheme. This has to be seen in the context of the fact that the

liquidation order was passed on 31.1.2022, and that the prescribed

time period for completing liquidation process was substantially

over by this time.

34. Thus, in view of the fact that the Appellant neither submitted

the scheme of compromise and arrangement within the stipulated

time which was upto 4.5.2022 nor did he inform the Liquidator

about the delay in submitting the scheme or seek any extension of

time limit from the Adjudicating Authority, the intention and

seriousness of the Appellant in submitting a scheme as prayed by

him appears to be doubtful.

35. In view of the above-stated situation and the turn of events,

we are of the clear opinion that the Liquidator, being duty bound to

proceed in accordance with the provisions of IBC and Liquidation

Process Regulations when the purported scheme was not submitted

in three weeks, acted quite appropriately and in consonance with

the provisions of law by issuing the auction notice dated 19.5.2022

Company Appeal (AT) (Insolvency) No. 718 of 2022 -21-

which was published in newspapers on 20.5.2022. The submission

of the said scheme by the Appellant on 24.5.2022 after a delay of

twenty days and the filing of IA No. 154/2022 on 25.5.2022, should

therefore, be viewed in this context. The order of the Adjudicating

Authority dated 1.6.2022 in IA 154/2022, whereafter a fresh

auction notice was published by the Liquidator are also events that

follow the correct course as stipulated in the liquidation process of

the corporate debtor.

36. We now turn our attention to the features of the scheme

submitted by the Appellant, albeit after much delay, to understand

whether the Appellant was interested in providing a credible

scheme of compromise and arrangement.

37. A perusal of the scheme (attached with the Affidavit of the

Liquidator, filed vide Diary No. 40689 dated 1.11.2022) tells us that

the total payments proposed to all the stakeholders is provisioned

at Rs. 11,48,56,758. This amount includes a figure of Rs. 1.5 crores

for payment to the creditors whose claims were not admitted by the

RP during CIRP. Another amount of Rs. 1.32 crores has been

provisioned for payment to other creditors/stakeholders,

unsecured financial creditors who are related parties and other

creditors/stakeholders. Thus, an amount of approximately Rs.

2.82 crores is proposed as payment to creditors, who may not be

entitled to any payment in the liquidation process of the corporate

Company Appeal (AT) (Insolvency) No. 718 of 2022 -22-

debtor or would come lower down in 'waterfall mechanism' and may

not even get such large payments. Further the very important

financial creditors in class, who are 33 homebuyers in number and

have filed a total claim of Rs. 2.68 crores during the CIRP of the

corporate debtor, are proposed to be paid within 90 days from the

date of approval of the scheme whereas other creditors are to be

made 100% payments irrespective of whether their claims are

admitted or not by the Liquidator. The flats are supposed to be

completed in 24 months and provided to the homebuyers against

their claims filed with the Liquidator. It is not at all clear as to how

the homebuyers who have only paid part of the total cost will be

treated and whether they will be required to pay any extra amount

and what would be its quantum.

38. It is, therefore, noted that the purported scheme proposes to

make payments to a number of related parties/unsecured

creditors/not submitted claims upto an extent of 100% of admitted

claimed amounts. Another issue in the proposed scheme is that it

proposes to make payments within 90 days of approval of scheme

whereas in the event of auction-sale the payments would be made

promptly to claims in accordance with the 'waterfall mechanism'

under section 53 of IBC.

39. The Learned Counsel for Appellant has cited the judgments

of this Tribunal in the matters of S.C. Sekaran vs Amit Gupta &

Company Appeal (AT) (Insolvency) No. 718 of 2022 -23-

Ors. [CA (AT)(INS) 495-496/2018] and Y. Shivram Prasad vs.

S. Dhanapal & Ors. [CA(AT)(Ins) 224/2018] wherein the

Tribunal held that steps should be taken for the revival and

continuance of the Corporate Debtor by protecting the Corporate

Debtor from its management and from corporate death by

liquidation. We distinguish this judgment on the ground that

while it affirms the spirt and ethos of the IBC in that "the primary

focus of the legislation is to ensure revival and continuation of

the corporate debtor by protecting the corporate debtor from its

own management and from a corporate death by liquidation",

and also "even in liquidation, the liquidator can sell the business

of the corporate debtor as a going concern" but it doesn't hold

that the any scheme of compromise or arrangement if proposed

in breach of regular timelines of the liquidation process has to be

necessarily considered.

40. We also note that only 33 allottees have filed a total claim

of Rs. 2.68 crores during the CIRP of the corporate debtor which

means that, on an average, each allottee has claimed Rs. 8.10

lakhs. Considering this full amount to have been used for

construction of flats, it is quite understandable that the level of

construction would not be significant. How then the Appellant,

as proponent of the scheme of compromise and arrangement,

proposes to bring in additional funds to complete construction

and how he will bring in the extra funds is unclear on a deeper

Company Appeal (AT) (Insolvency) No. 718 of 2022 -24-

examination of the scheme. The said scheme, therefore, appears

to be a 'fictional one' ostensibly to appropriate the land to the

benefit of a select few who are related parties of the corporate

debtor.

41. Both the Learned Counsel for Appellant and the Learned

Counsel for Respondent No. 2 have cited the judgment of Hon'ble

Supreme Court in the matter of Arun Kumar Jagatramka vs.

Jindal Steel and Power Limited & Anr. [(2021) 7 Supreme

Court Cases 474] in support of their rival contentions with

regard to any ineligibility that would attach to the Appellant in

providing a scheme of compromise and arrangement under

section 230 of the Companies Act, 2013 with reference to section

29-A of IBC which pertain to ineligibility of related persons to

submit resolution plan and section 35(1)(f) of IBC, which is a

provision applicable during liquidation. It is instructive to have

a look at the relevant portion of the Arun Kumar Jagatramka

judgment (supra), which is as hereunder :-

"71.....In the context of the statutory linkage provided by the provisions of Section 230 of the 2013 Act with Chapter III IBC, where a scheme is proposed of a company which is in liquidation under the IBC, it would be farfetched to hold that the ineligibilities which attach under Section 35(1)(f) read with Section 29-A 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 29-A and Section 35(1)(f) IBC to a scheme of compromise and arrangement under Section

Company Appeal (AT) (Insolvency) No. 718 of 2022 -25-

230 of the 2013 Act 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 2013 Act. 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 2013 Act, 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."

42. A perusal of the above-mentioned observation in the Arun

Kumar Jagatramka judgment (supra) makes it very clear that

the promoter or those in the management of the company under

liquidation cannot be allowed a 'backdoor entry' into the company

and hence, would be considered ineligible to submit a proposal

under section 230 of the Companies Act, 2013. When we view

the continuous efforts of Mr. Rakesh Kumar Agarwal in seeking

to 'takeover' the corporate debtor through various stratagems,

and also the finding that he is in 'collusion' or acting in concert

with the erstwhile management of the corporate debtor, the

motive or intention in putting forward a useless scheme of

compromise and arrangement in respect of the corporate debtor

becomes seriously doubtful. The observation of Hon'ble Supreme

Court regarding 'backdoor entry' in the corporate debtor by the

erstwhile management then appears to be a very distinct,

something that we should not disregard. In this background, the

Company Appeal (AT) (Insolvency) No. 718 of 2022 -26-

judgment of this tribunal in the matter of Y. Shivram Prasad

(supra) should also be viewed, so that following such a judgment

should not lead to undesirable consequences as are pointed out

in the Arun Kumar Jagatramka Judgment (supra) of Hon'ble

Supreme Court.

43. The Learned Counsel for Appellant has also cited the

judgment of this Tribunal in the matter of Punjab National Bank

vs. EVA Agro Feeds Pvt. Ltd. & Anr. [CA(AT)(INS.) No. 757 of

2021], wherein it is held that "the successful bidder in the auction

sale does not acquire any vested right in law to enforce the

auction." We are conscious of the fact that the issue in this

appeal is not about any right of the successful bidder, but where

the Adjudicating Authority has considered all the related facts

and circumstances concerning the request of the Appellant in

proposing a scheme of compromise and arrangement, and

thereafter passed an order which balances the liquidation

process with the need to avoid liquidation of the corporate debtor.

This judgment, therefore, does not support the case of the

Appellant.

44. The Senior Learned Counsel for Respondent No. 2 has

adverted to the judgment of the Hon'ble Supreme Court in the

matter of Ebix Singapore (P) Ltd. v. Educomp Solutions Ltd.

[(CoC), (2022) 2 SCC 401], wherein it is held that the "if the CIRP

Company Appeal (AT) (Insolvency) No. 718 of 2022 -27-

is not completed within the prescribed timeline, the corporate

debtor is sent into liquidation.....We cannot afford to be swayed by

abstract conceptions of equity and 'contractual freedom' of the

parties." We note that the Adjudicating Authority in the present

case has struck a fine balance between the right of the Appellant

in proposing the scheme for compromise and arrangement and

the timely and successful completion of the liquidation process

of the corporate debtor, a move that would be in accordance with

the ruling in the Ebix Singapore judgment (supra).

45. In view of the above-noted detailed discussion, it is clearly

established that the Adjudicating Authority provided reasonable

and sufficient opportunity to the Appellant to submit a credible

scheme of compromise and arrangement, and the fact that the

scheme so presented by the Appellant was prima-facie found to

inflate the total payments by provisioning payments to creditors

who are either related to the corporate debtor or for such creditors

who had not filed legitimate claims in the liquidation process and

thus, the proposed payments were in effect not of greater value than

the amount being offered by the successful bidder in the e-auction.

46. We, therefore, hold the clear opinion that the Adjudicating

Authority has not committed any error in disposing of the IA

154/2022 by the Impugned Order allowing the Liquidator to

proceed with the e-auction and not allowing any more time for

Company Appeal (AT) (Insolvency) No. 718 of 2022 -28-

consideration of the scheme proposed under section 230 of the

Companies Act, 2013. In view of this inescapable conclusion that

the Adjudicating Authority has not erred in passing the Impugned

Order, the appeal is dismissed, and is accordingly disposed of.

47. There is no order as to costs.

[Justice Ashok Bhushan] Chairperson

[Dr. Alok Srivastava] Member (Technical)

[Mr. Barun Mitra] Member (Technical)

New Delhi 6th December, 2022

/aks/

Company Appeal (AT) (Insolvency) No. 718 of 2022