Bimalesh Bhardwaj & Ors vs Value Infratech Private Limited ...

Page 1 of 28 8. Praveen Bhardwaj Through Authorized Representative R/oA-125, Ground Floor, Surya Nagar, Ghaziabad, Uttar Pradesh

9. Manisha Pandey Through Authorized Representative R/o B-3, Plot No.:849, Green Street, Sector 5, Vaishali, Ghaziabad - 201012

10. Vesal Dev Chauhan Through Authorized Representative Slo Mr. Rajendra Kumar Chauhan, R/o 1/172, Surendra Nagar, Aligarh (U.P.) Pin 202001

11. Shashank Shekhar Through Authorized Representative S/o Dharam Sheel Mishra , R/o 196, Pocket D, Dilshad Garden, New Delhi-110095

12. Yogendra Kumar Bhardwaj Through Authorized Representative R/o A-125 Surya Nagar Ghaziabad (UP)

13. Ankit Tiyagi Through Authorized Representative R/o D-35, Rameshwar Park Loni Ghaziabad (U.P.)201102

14. Tarkeshwar Rai Through Authorized Representative R/o E4/151 Gali No. 05 Pusta, 5 Sonia Vihar, Delhi 110094

Company Appeal (AT) (Ins) No. 112 of 2021

Page 2 of 28 15. Kunwar Pal Singh Through Authorized Representative R/o A-78/5 Om Kunj (Near Post Office) Dilshad Garden,, Delhi110095

16. Rita Goyal Through Authorized Representative W/o Air Cmde Jagdish Chandra Goyal (Retd) R/O 606 Gulmohar Apartment,Plot 3 B, Sector11, Dwarka New Delhi-110075

17. Lalit Kumar Through Authorized Representative R/o T-403,Raj Nagar Extension, Ghaziabad UP-201017

18. Dr. Rekha Bhuwalka, Through Authorized Representative W/o Dr.Ashok Bhuwalka R/o KJ-15 Kavi Nagar, Ghaziabad U.P. 201002

19. Dr. Anil Kumar Rathi Through Authorized Representative R/o C/o Jai Nursing Home 2 G, Sewa Nagar, Meerut Road Ghaziabad-201001 U.P.

20. Manju Seghal, Through Authorized Representative R/o C- 6 GF-2 Chander Nagar Panchwati Ghaziabad -201011

21. Vijendra Kumar Yadav Through Authorized Representative R/o 505, Street No 6 Bramihpuri,Ghookna Mod,,Ghaziabad -201001

Company Appeal (AT) (Ins) No. 112 of 2021

Page 3 of 28 22. Vijay Kumar Jha Through Authorized Representative R/o 80 Savarkar Apt Plot No-39 I.P. Extn., Patparganj,Delhi

23. Ved Prakesh Chaturvedi Through Authorized Representative R/o B-104, Dwarkesh Plaza Viratnagar,Virar West -401303

24.Sudha Tiwary Through Authorized Representative R/o SMQ 81/8 Vayu Vihar Air Force, Akkulam, Trivandrum Kerala-695031

25. Pratibha Wadhwa Through Authorized Representative R/o Moradabad,, Uttar Pradesh.

..... APPELLANTS VERSUS

1. VALUE INFRATECH INDIA PVT LTD (Through its Resolution Professional Mr.. Sanjay Kumar Singh) Having its Registered Office at: 715,Navrang House, 7th Floor, 21 K.G.Marg, Connaught Place,New Delhi - 110001 ..

. ....RESPONDENT NO. 1

2.VALUE INFRACON INDIA PVT LTD (Through its Resolution Professional Mr. Sanjay Kumar Singh) Having its Registered Office at:

715, Navrang House, 7th Floor, 21 K.G.Marg, Connaught Place New Delhi - 110001

...RESPONDENT NO. 2

Company Appeal (AT) (Ins) No. 112 of 2021

Page 4 of 28

3. VALUE INFRABUILD INDIA PVT LTD Having its Registered Office at:

715,Navrang House, 7th Floor, 21 K.G.Marg, Connaught Place, New Delhi - 110001 ....RESPONDENT NO. 3

4. CAPRI GLOBAL CAPITAL LTD.

Hang its Registered Office at:

502, Tower A, Peninsula Business Park, Senapati Bapat Marg,, Lower Parel, , Mumbai, Maharashtra - 400013 ...RESPONDENT NO. 4

Present:

For Appellant: Mr. Mayank Mittal, Mr.Piyush Singh and Ms.Aditi Sinha, Advocates

For Respondents: Mr. Sanjay Kumar Singh (RP - in person), Ms.AkanshaMathur, Advocates for1 and 2.

Mr.SaurabhKalia and Mr.Siddharth Tandon, Advocates for R-4.

Judgment (Date: 29.11.2021) (Through Virtual Mode)

{Per: Dr. Alok Srivastava, Member (T)}

This appeal has been filed by the Appellants aggrieved by the

order dated 4.1.2021 delivered by the Adjudicating Authority

(NCLT, New Delhi) in CP (IB)-771(PB)/2018 (hereinafter called

Impugned Order) for liquidation of the Corporate Debtor

Company Appeal (AT) (Ins) No. 112 of 2021

Page 5 of 28 (Respondent No. 1 Value Infratech India Pvt. Ltd.) under Section

61 of the Insolvency and Bankruptcy Code, 2016 (in short IBC).

2. The Appellants, who are homebuyers in the project

„SKYWALK RNE‟ being developed by Respondent No. 1, have stated

in the appeal that the Resolution Professional (RP in short) has

clubbed the claims of Respondent No.1, Respondent No.2 and

Respondent No.3, amounting to Rs.30.70 crores alongwith

compound interest @ 24%, thereby giving Respondent No. 4 (Capri

Global Capital Limited) undue advantage of much higher voting

share than was permissible to the Respondent No. 4, in the

constitution of the Committee of Creditors (in short CoC) in the

Corporate Insolvency Resolution Process (CIRP in short). The

first meeting of the CoC of Corporate Debtor (Respondent No. 1)

was held on 31.01.2020. Thereafter the second meeting of the CoC

was held on 10.12.2020 which was adjourned after some

deliberations and reconvened on 12.12.2020, wherein decision for

liquidation of Respondent No. 1 was taken despite objection put

forth by Vineet Agarwal, Authorized Representative (AR) of the

homebuyers, who are financial creditors in class. The Appellants

have claimed that the RP has shown undue favour to Respondent

No. 4 (a financial creditor)by adding up all the loans provided by

Respondent No. 4 to Respondent No. 1, Respondent No. 2 and Company Appeal (AT) (Ins) No. 112 of 2021

Page 6 of 28 Respondent No. 3, thereby giving advantage of inflated vote share

in the CoC qua the CIRP of Respondent No.1. The Appellants have

also claimed that RP did not follow the procedure prescribed in the

IBC for inviting Expression of Interest for submission of Resolution

Plan for insolvency resolution of Respondent No. 1. In accordance

with the wish of Respondent No. 4, and in undue haste, the RP

Sanjay Kumar Singh submitted a proposal for liquidation of

Corporate Debtor (Respondent No. 1) before the CoC in its second

meeting. As Respondent No. 4 was given highly inflated voting

rights, resulting in majority voting right in the CoC, the resolution

for liquidation of the Corporate Debtor was approved in the COC

meeting. This decision, the Appellants have claimed, is illegal as

the constitution of CoC and allocation of highly inflated voting

rights, much in excess of its actual financial credit, to Respondent

No. 4 is ab-initio illegal.

3. The Appellants have made the following prayers in the

appeal:-

(i) Set aside the Impugned Order dated 4.1.2021 passed

by the Adjudicating Authority in CP No. (IB)/771

(PB)/2018.

Company Appeal (AT) (Ins) No. 112 of 2021

Page 7 of 28

(ii) Replace the present Resolution Professional for

Respondent No. 1 with any other Resolution

Professional, who will act without conflict of interest

and in a fair manner.

(iii) Direct the Resolution Professional to not club the

claim of Respondent No. 1 in the present CIRP and to

collate claims of all the creditors as per the provision

of the IBC.

(iv) Initiate CIRP proceedings on project-wise basis.

4. The issues that are pertinent in this appeal are as

hereunder: -

(i) Whether the CoC was constituted by the Resolution

Professional in accordance with IBC provisions? and,

(ii) Whether the recommendation for liquidation of

Respondent No. 1 was taken by the CoC in contravention of

IBC provisions?

5. The relevant actions/dates relating to this matter are as

follows:-

Company Appeal (AT) (Ins) No. 112 of 2021

Page 8 of 28 CIRP initiated against Corporate Debtor 3.1.2020 (Respondent No. 1) First meeting of the CoC 31.1.2020 Second meeting of the CoC 10.12.2020/12.12.2020 Public announcement for submission of 8.1.2020 claims Next filing of application under section 11.3.2020 21 (a) for appointment of authorized representative of home buyers and exclusion of time spent in litigation Order of Adjudicating Authority for 27.11.2020 appointment of Authorized Representative (AR)

6. The Learned Counsel for Appellants has argued that the

Capri Global Capital Limited (Respondent No. 4) had sanctioned a

loan of Rs. 37.50 crores to Respondents No. 1, 2 and 3 vide a

common loan agreement dated 17.9.2014 (attached at pp.133-165

of the Appeal Paperbook). He has stated that the Respondents No.

1, 2 and 3 are three separate companies who were disbursed

separate loan amounts on the basis of the common loan

agreement, whereas in the present matter wherein insolvency

resolution of Value Infratech India Pvt. Ltd. (Respondent No. 1) is

under consideration and, therefore, the claim of Respondent No. 4

should have been based on the loan disbursed only to Respondent

No. 1. He has stated that the loan disbursed by Respondent No. 4

Company Appeal (AT) (Ins) No. 112 of 2021

Page 9 of 28 to Respondent No. 2 was Rs.29.55 crores and to Respondent No. 3

was Rs. 1 crore, while Respondent No. 1 was disbursed an amount

of Rs. 6.65 crores only.

7. The Learned Counsel for Appellants has stated that CIRP of

the Corporate Debtor was initiated on 3.12.2020 after admission of

application under section 7 of IBC against the Corporate Debtor

Value Infratech India Pvt. Ltd. (Respondent No. 1). Thereafter

claims were invited from creditors vide public announcement on

8.1.2020, and the Appellant submitted his claim on 22.1.2020. He

has stated that after the first meeting of CoC, which was held on

30.1.2020, an application under section 19(2) of IBC bearing IA

No. 827/2020 was filed by the RP before the Adjudicating

Authority for directing the ex-directors and promoters of the

Corporate Debtor to provide him documents and records and

account details pertaining to Corporate Debtor. Thereafter

another application bearing IA No. 1898 of 2020 was filed on

11.3.2020 by the Resolution Professional under section 21-A of the

IBC for appointment of Authorized Representative for homebuyers

(who are financial creditors in class). The Adjudicating Authority

Company Appeal (AT) (Ins) No. 112 of 2021

Page 10 of 28 gave order on this application on 27.11.2020 for appointment of

Vineet Agarwal as Authorized Representative of homebuyers.

8. The Learned Counsel of the Appellants has further stated

that in the second meeting of the CoC held on 10th December 2020

and reconvened on 12th December 2020, the RP provided

information to the members regarding applications filed by him.

He has argued that the voting share of Respondent No. 4 Capri

Global Capital Limited as calculated by RP was wrongly fixed at

96.77%, after considering the total claim of Capri Global Capital

Limited as Rs. 1,490,868,70/- which was the total of the three

loans provided by Capri Global Capital Limited to Respondents No.

1, 2 and 3 and the voting share of homebuyers was fixed at 3.23%.

9. The Ld. Counsel for Appellants has referred to the order

dated 17.12.2018 of the Adjudicating Authority in the matter

Daimler Financial Private Limited vs. Value Infracon India

Private Limited [CP (IB) 22 (PB) 2018], wherein it was held as

hereunder:-

"......The Resolution Professional could not have allocated voting share to Capri Global Capital Ltd. in taking the total of all the 3 companies whereas only one of them is involved in the present proceedings. The CoC would tilt in favour of Capri Company Appeal (AT) (Ins) No. 112 of 2021

Page 11 of 28 Global Capital Ltd. as against the voting share of the home buyers, if the whole loan amount of 3 copies is clubbed. We expect the Resolution Professional to act fairly and dispassionately, which is found wanted in the present case because he was aware after the filing of the present application that aforesaid two matters are pending consideration before the NCLT, as he has given consent to act as IRP even in those two matters."

10. He has also cited Hon‟ble NCLAT‟s judgment dated

14.5.2019 in the appeal Capri Global Capital Limited vs. Value

Infracon India Pvt. Ltd. (through its Resolution Professional

Mr. Sanjay Kumar Singh & Anr.) [CA(AT)(Ins) No. 29 of 2019]

against the above mentioned order in [CP (IB) 22 (PB) 2018] whose

relevant paragraphs affirming the order of the Adjudicating

Authority are reproduced below:-

"9. The amount having been separately disbursed as per request of three different entities who signed jointly, it is clear that individual entities like „Value Infrabuild India Pvt. Ltd.‟ received a sum of Rs. 29,55,00,000/-; „Value Infracon India Pvt. Ltd.‟ received a sum of Rs. 1,00,00,000/- and „Value Infratech India Pvt. Ltd. received a sum of Rs. 6,65,00,000/- in their respective Bank Accounts. Having received such amounts separately, the appellant cannot claim all the payments from the „Corporate Debtor‟ pursuant to the Loan Agreement dated 17th September, 2014 whereinafter 19th September, 2014 letter was issued as extracted above.

10. In view of the fact that the three entities were provided separately in their respective Bank Accounts, the Adjudicating Authority rightly held that the Appellant as a „Financial Creditor‟ can claim its voting shares based on the amount actually disbursed in favour of Value Infracon India Pvt. Ltd. (Corporate Debtor)."

Company Appeal (AT) (Ins) No. 112 of 2021

Page 12 of 28

11. Citing the judgment of Hon‟ble NCLAT (supra), he clarified

that since the loan amount and consequently voting rights of Capri

Global Capital Ltd. (Respondent No. 4 in this appeal) in the CIRP of

Value Infracon India Pvt. Ltd. is based on the common Loan

Agreement dated 17.9.2014 (supra), hence the vote share of

Respondent No. 4 Capri Global in the CoC/CIRP of Respondent No.

1 will be based on the actual loan disbursed to Respondent No. 1,

which is Rs. 6.65 crores and not Rs. 149.09 crores. By wrongly

taking the total loan figure of Rs, 149.09 crores, the RP has fixed

the vote share of Respondent No. 4 at 96.77% in the CoC relating

to Respondent No. 1‟s CIRP.

12. The Ld. Counsel for Respondents No. 1 and 2 has argued

that the loan disbursed by Respondent No. 4 is on the basis of a

common Loan Agreement dated 17.9.2014 (supra). Moreover, the

loans are provided to three sister companies who are part of the

same group of companies, and the loans have been secured by the

same properties. The disbursement request was made vide a

common letter dated 19.9.2014, signed by the directors of all the

three companies (Respondents no. 1, 2 and 3) (attached at pg. 170

of Appeal paperbook) and hence the repayment should also

Company Appeal (AT) (Ins) No. 112 of 2021

Page 13 of 28 happen together. Therefore, the claim of Capri Global Capital Ltd.,

and its vote share in CoC should be based on the total loan

disbursed to the three companies.

13. The Learned Counsel for Respondents No. 1 and 2 has also

argued that the Appellants did not challenge the admission order

under section 7 of IBC passed against the Corporate Debtor, and

admission of claims or constitution of CoC at any time earlier.

Therefore, challenging the liquidation order now is not in

accordance with legal procedure. He has claimed that the

allegations leveled against the RP are false, baseless and not based

on facts. In fact, the RP has conducted the process in a very fair

and transparent manner providing details at every step to the

members of CoC. He has also argued that the liability to repay the

disbursed loan amount falls of Respondents No.1, 2 and 3 jointly

and severally and, therefore, the fixing of Respondent No.1‟s vote

share at 96.77% in the CoC is justified.

14. The Learned Counsel for Respondents No. 1 & 2 has cited

the judgments of Hon‟ble Supreme Court in Chittoori Subbanna

vs. Kudappa Subbanna and Ors [SC 1965 2 SCR 661] and in the Company Appeal (AT) (Ins) No. 112 of 2021

Page 14 of 28 matter of Phoenix Arc (P) Ltd. vs. Spade Financial Services

Limited [2021 3 SCC 475]in support of his contention. On the

basis of these judgments, he has contended that if no challenge

was made to the constitution of CoC and the fixing of vote share in

CoC earlier, these issues cannot be raised in the appeal now.

15. The Learned Counsel for Respondent No. 4 has argued that

Respondent No. 1(Corporate Debtor Value Infratech India Pvt.

Ltd.), along with two other companies from the same group, Value

Infracon India Pvt. Ltd. and Value Infrabuild Pvt. Ltd. (all co-

borrowers), executed a loan agreement on 17.9.2014 with

Respondent No. 4 for providing a loan facility to all the three

aforementioned companies upto Rs. 37.50 crores in lieu of

mortgage/ hypothecation of properties of all the three borrowers.

Therefore, the claim of Capri Global Capital Ltd. should be the

total loan amount disbursed to all the three co-borrowers since it

is based on a common loan agreement. He has also argued that

the Appellants submitted their claim to the Resolution Professional

in March, 2020, which is much after the last date for submission

of claims which was 22.1.2020. The Learned Counsel for

Respondent No. 4 has contended that the matter pertaining to

Company Appeal (AT) (Ins) No. 112 of 2021

Page 15 of 28 filing of application for exclusion of time and to consider financial

evaluation matrix and invitation of EOI was taken up in the 2nd

meeting of the CoC held on 10.12.2020. Thereafter, on the request

of the representative of Respondent No. 4, the said meeting was

adjourned to 12.12.2020 and in the said meeting all matters

relating to exclusion of time, invitation for EOI and liquidation

were discussed and action was initiated/taken by the RP in

accordance with these decisions. He has claimed that the

Appellants cannot challenge such acts that they did not challenge

at the appropriate time in an appeal against the liquidation order.

16. The Learned Counsel for Respondent No. 4 has cited the

judgment of Hon‟ble NCLAT in State Bank of India vs. Athena

Energy Venture [CA (AT) (Ins) No. 663 of 2020] dated

24.11.2020 wherein the claim of the principal borrowers and

guarantors of the same amounts were allowed. On the other hand,

in the present case, it is not a question of the principal borrowers

and guarantors and CIRPs against both of them but relates to

clubbing of the loans provided by Respondent No. 4 to

Respondents No. 1, 2 and 3 in the CIRP of Respondent No. 2 to

Company Appeal (AT) (Ins) No. 112 of 2021

Page 16 of 28 give Respondent No. 4 an unfair and undue advantage in the

voting percentage in CoC.

17. The Learned Counsel for Respondent No. 4 has also cited the

judgments of Hon‟ble Supreme Court in the matters of K.

Sashidhar vs. Indian Overseas Bank [2019 SCC Online SC 257]

and Ebix Singapore Pvt. Ltd. vs. Committee of Creditors of

Educomp Solutions Limited [2021 SCC Online SC 707]. In both

the judgments, the Hon‟ble Apex Court has held that once the

Successful Resolution Plan has been approved by the Adjudicating

Authority on the recommendation of CoC and implemented

thereafter, the resolution plan achieved finality and cannot be

reopened, unless the plan suffers from legal infirmity.

18. We have perused the loan agreement dated 17.9.2014 qua

which Value Infrabuild India Pvt. Ltd. (Respondent No.3), Value

Infracon India Pvt. Ltd. (Respondent No.2) and Value Infratech

India Pvt. Ltd. (Respondent No.1) were sanctioned financial

assistance up to Rs. 37.50 crores by Capri Global Capital Limited

(Respondent No. 4).(Loan agreement attached at pp.138-165 of

Appeal Paperbook). The request for drawdown of the loan amounts Company Appeal (AT) (Ins) No. 112 of 2021

Page 17 of 28 was sent by Directors of three above mentioned companies to

Respondent No. 4 vide a common letter dated 19.9.2014, which

was separately signed by the directors of all three companies. This

letter is reproduced in the judgment of Hon‟ble NCLAT in CA (AT)

(Ins) No. 29 of 2019 (attached at pp. 166-167 of Appeal

paperbook).

19. Regarding the matter of the Appellant not getting a realistic

opportunity to challenge the issues of constitution of CoC and the

admission of claim of Capri Global Capital Ltd. anytime earlier, it

is recalled that the Authorized Representative for homebuyers was

appointed vide order dated 27.9.2020. The vote share of Capri

Global and homebuyers and the claim amounts of Capri Global

and homebuyers came to the knowledge of the Authorized

Representative of homebuyers in the2nd meeting of CoC on 10

December 2020 and despite vehement objection of the Authorized

Representative of homebuyers, the CoC went ahead to take

decisions for not submitting application for exclusion of time

(spent in judicial intervention), framing of Information

Memorandum and liquidation of the corporate debtor. It was for

the first time the Authorized Representative of the Appellants

Company Appeal (AT) (Ins) No. 112 of 2021

Page 18 of 28 attended the CoC meeting and the proposals that were discussed

in reconvened CoC meeting on 12.12.2020 without any prior

circulated agenda. No reason was provided by the representative of

Respondent No. 4 or Resolution Professional for the adjournment

of this meeting to 12.12.2020.Moreover, the Authorized

Representative could not have responded to the proposals without

consulting the homebuyers who he was representing. Soon

afterwards, the RP filed application before the Adjudicating

Authority seeking order for liquidation of the Corporate Debtor.

Hence we do not think the homebuyers, who are a diverse lot and

who needed to get together with the AR to formulate their response

on these issues had a realistic chance to challenge the constitution

of CoC and admission of claim amounts at an early time.

20. We find that, while the CoC took a decision for going for

liquidation of the Corporate Debtor, the Appellants have

challenged the very basis of constitution of CoC and fixing of voting

rights by labeling it illegal, done to provide undue and unfair

advantage to Respondent No. 4. Moreover, the Appellants have

also claimed that the CoC took a decision for liquidation without

following the procedure under CIRP stipulated in the IBC. The

Company Appeal (AT) (Ins) No. 112 of 2021

Page 19 of 28 basic reason for seeking Resolution Plan under CIRP is to ensure

that the Corporate Debtor can continue to function as a going

concern, while taking care of interests of its creditors. Liquidation

is the last resort which implies corporate death of the company.

For the Corporate Insolvency Resolution Process to result in

successful resolution of the corporate Debtor, preparation of a

correct information memorandum is a must, which may result in

work able resolution plans. In the present case, we find that

information memorandum was not prepared with full and correct

details of assets and liabilities of the Corporate Debtor. The RP

also did not pursue his application u/s 19(2). As a result the CoC

decided to abandon the step of inviting of EOI for Resolution Plan.

Thereafter in undue haste, the CoC decided to go for liquidation of

the Corporate Debtor. Since the CoC consisted of two members -

Capri Global and homebuyers - with Respondent No. 4 being given

inflated voting share, the decisions by CoC was completely swayed

by the Respondent No. 4 and its selfish interests. The decisions of

CoC was a blotted one, since it was taken in the CoC, in which

Respondent No. 4 was given voting right much in excess of its real

and correct share.

Company Appeal (AT) (Ins) No. 112 of 2021

Page 20 of 28

21. It is quite surprising that the Resolution Professional filed IA

No. 827/PB/2020 under Section 19(2) of the IBC for issuing

directions to the ex-Directors and promoters to provide documents

and records including account details of Corporate Debtor.

Without obtaining any order under section 19 (2) from the

Adjudicating Authority, the Resolution Professional goes ahead

and submits an Information Memorandum to the members of the

CoC as recorded in paragraph 8 in the minutes of the second

meeting dated 10/12/12/2020 of CoC (pg. 176 of Appeal

paperbook). Furthermore, a statement is recorded in the minutes

of the meeting which reads as follows:-

"It is being informed that the Corporate Debtor has discontinued its operations and have permanently closed is office, the Directors of the Corporate Debtor have resigned from office. The resolution Professional has filed an application under section 19(2) of the IBC for cooperation from the directors and promoters to deliver data. The application is not heard by Hon‟ble NCLT. The Resolution Professional placed the copy of the Office Memorandum before the CoC for taking note of the same."

22. A duty has been cast on the RP under section 25 of IBC

where he has to take immediate custody and control of assets of

Corporate Debtor, including the business record of the Corporate

Debtor; and furthermore a duty has been passed on the Resolution

Professional under section 25(2)(g) to prepare an information Company Appeal (AT) (Ins) No. 112 of 2021

Page 21 of 28 memorandum in accordance with the provisions of IBC.. Section

29 of the IBC requires the Resolution Professional to prepare an

information memorandum in such form and manner contain such

relevant information as may be specified in the Insolvency and

Bankruptcy Board of India (Insolvency Resolution Process for

Corporate Persons) Regulation, 2016 for formulating a Resolution

Plan. Regulation 36 of the Insolvency and Bankruptcy Board of

India (Insolvency Resolution Process for Corporate Persons)

Regulation, 2016 provide in detail what should be contained in the

Information Memorandum. In brief, the information memorandum

should contain details of assets and liabilities of the Corporate

Debtor, latest annual financial statement, audited financial

statement of the Corporate Debtor, list of creditors, particulars of

debt due from or to the corporate debtor and some other

information. It is surprising as to how the Resolution Professional

could prepare an information memorandum without getting access

to the records and documents of the Corporate Debtor, as he had

sought through IA No. 827/PB/2020, and on which orders could

be obtained from the Adjudicating Authority. In addition, the

Resolution Profession did not even attempt to obtain details of

assets and liabilities, financial statement from other records that

Company Appeal (AT) (Ins) No. 112 of 2021

Page 22 of 28 have to be statutorily filed in relation to the company under the

provisions of the Companies Act.

23. We are of the clear and firm opinion that in view of the

judgment of this tribunal in Capri Global Capital Limited vs. Value

Infracon India Pvt. Ltd. (through its Resolution Professional Mr.

Sanjay Kumar Singh) & Anr. (supra), it was the RP‟s responsibility

to fix financial creditors‟ claim amounts and vote shares properly

and in accordance with law, moreso, when the NCLAT had already

given its verdict in CA (AT)(Ins) 29 of 2020 (supra). He has been

sadly remiss and found wanting in the performance of his duties

as per the provisions of IBC. The hasty manner in which the items

were taken up for discussion in the 2nd CoC meeting, and no

action was taken to pursue the application u/s 19(2) and file an

application for exclusion of time spent in judicial intervention, are

stark pointers to the irresponsible handling of these issues by the

RP, for which he can‟t be absolved of blame. An independent

enquiry in his acts of omission and commission while carrying out

the CIRP of the corporate debtor by the Insolvency and Bankruptcy

Board of India can either absolve him of the allegation of his

collusion with Respondent No. 4 or establish his involvement. We

find that the RP did not take adequate interest in securing the

Company Appeal (AT) (Ins) No. 112 of 2021

Page 23 of 28 records and account details of the Corporate Debtor and took a

hasty view that in the absence of records, and disappearance of its

ex-directors of the Corporate Debtor should be sent into

liquidation.

24. Thus the Resolution Professional, after wrongly fixing the

vote share of Respondent No. 1 at 96.77% led the CoC into taking

a malafide decision for liquidation of the Corporate Debtor by

playing along with the intentions of Respondent No. 1, even though

he had not taken requisite steps as required under IBC to call for

Expression of Interests and submission of Resolution Plans which

could have saved the Corporate Debtor from liquidation, which

means corporate death and is not a desirable situation. He has

claimed that, thus, a hasty decision for liquidation of the

Corporate Debtor (Respondent No. 1) was taken by the CoC. In

such a situation, he has claimed, the entire proceedings in the 2nd

meeting of the CoC were hijacked in its favour by Capri Global

Capital Limited‟s representative with the Resolution Professional

playing into his hands, and abandoning his duty, as enshrined in

the IBC.

Company Appeal (AT) (Ins) No. 112 of 2021

Page 24 of 28

25. The Learned Counsel for Respondent No. 4 has cited NCLT,

Mumbai‟s order in the matter of State Bank of India vs PE

Electronic Limited [CP (IB) 528/MB/2018] wherein simultaneously

Resolution Process against the associate Videocon Group was

allowed is in support of his argument in going for liquidation.

Suffice to say that consolidation of CIRPs was ordered for

companies of Videocon Group which meant that all claims and

liabilities as well as assets will be grouped together for resolution

of all the companies.

26. From the minutes of second meeting of the CoC, it is clear

that the Resolution Professional has resorted to very novel and

ingenious way of circumventing the duties imposed upon him in

the IBC for preparation of information memorandum, exclusion of

time to extend CIRP period and inviting Expression of Interest for

Resolution Plan for the Corporate Debtor. He, with active support

of Nitin Goel, representation of Respondent No. 4, managed to deal

with these important issues in a very superficial and objectionable

manner. Such action of RP betrays of prejudicial action reeking of

favourtism for Respondent No. 4.

Company Appeal (AT) (Ins) No. 112 of 2021

Page 25 of 28

27. Thus we find that the CoC was not constituted in

accordance with the provisions of IBC. In the matter, the CIRP

was not pursued with fairness and due diligence by the Resolution

Professional and the resolution for liquidation of the Corporate

Debtor was taken in a meeting with an improper voting share

ascribed to Respondent No. 4 and taken in unseemly haste. These

are actions of omissions and commissions, which we cannot

absolve the Resolution Professional from his conduct should be

investigated by Insolvency and Bankruptcy Board of India and

action as appropriate may be taken against the present Resolution

Professional.

28. In the result, we direct the following:-

(i) The CoC as constituted in the CIRP of the Corporate

Debtor was not in accordance with provisions of IBC,

therefore its constitution is quashed.

(ii) The claims of various financial creditors including

home buyers should be appropriately fixed, keeping in view

the order of this Tribunal in CA (AT) (Ins) 29 of 2020.

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(iii) The application IA No. 1898 of 2020 wherein an

application for exclusion of time spent in pursuing the

application before the Adjudicating Authority under sections

19(2) and 21-A of the IBC should be preferred before the

Adjudicating Authority for appropriate order.

29. The action of the Resolution Professional Sanjay Kumar

Singh in this matter cannot be said to have been above board. He

can‟t be absolved of certain actions of omission and commission,

which have caused prejudice to homebuyers. He should,

therefore, be replaced with immediate effect and a suitable

Resolution Professional be appointed in the CIRP of Respondent

No. 1 by the Adjudicating Authority. As pointed out earlier in this

judgment, the Insolvency and Bankruptcy Board of India should

investigate the conduct of the Resolution Profession Sanjay Kumar

Singh in observing various provisions of IBC and take appropriate

action.

30. With the above directions, we remand the matter to the

Adjudicating Authority for taking action as directed, in accordance

with the provisions of IBC and law.

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31. No order as to costs.

(Justice Jarat Kumar Jain) Member (Judicial)

(Dr. Alok Srivastava) Member (Technical) New Delhi 29th November, 2021

/aks/

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