Fourth Dimension Solution Limited vs Ricoh India Limited & Ors

FOURTH DIMENSION SOLUTIONS LTD. DSM - 340, DLF Trade Tower, Shivaji Marg, New Delhi 110015 Email id: contactus@fdsindia.co.in Through Resolution Professional ....Appellant

Vs.

1. RICOH INDIA LTD. 801, 8th Floor, Ackurti Star, Midc, Central Road, Near Marol Telephone Exchange, Midc, Andheri East, Mumbai 400093 Email Id: Ril.Info@Ricoh.Co.In ...Respondent No. 1

2. MR. KALPRAJ DHARAMSHI Quest, 1073 Rajabhau Desai Marg, Prabhadevi, Mumbai 400024 Email Id: Kalpraj@Dharamshi.Net ... Respondent No. 2

3. MS. REKHA JHUNJHUNWALA 16-17c Il Palazzo Chs, Little Gibbs Road, Malabar Hills, Mumbai 400006 ... Respondent No. 3

Present

Company Appeal (AT) (Insolvency) No. 1471 of 2019 2

For Appellant: Mr. P.P Chaudhary, Sr. Advocate with Mr. David Rao, Mr. SanjeetPurohit, Mr. Vishnu Shankar and Mr. Atul Sharma, Advocates.

For Respondents: Mr. ArunKathpalia, Sr. Advocate with Ms. Pooja Mahajan, Ms. Mahima Singh, Ms. Avni Srivastava, Advocates for R-1. Mr. AbhinavVasisht, Sr. Advocate with Mr. Prateek Kumar, Ms. Raveena Rai, Mr. Rohit Ghosh, Advocates for R-2&3, SRA. Coram : Mr. Jarat Kumar Jain, (Judicial) Mr. Kanthi Narahari, (Technical)

JUDGMENT

Jarat Kumar Jain: J.

The Appellant "Fourth Dimension Solutions Ltd." (FDSL) filed the

Appeal against the final order dated 28.11.2019 passed by the Adjudicating

Authority (National Company Law Tribunal, Mumbai Bench) in CP No.

156/I&BC/MB/MAH/2017, whereby approved the Resolution Plan

submitted by Kalpraj Dharamshi and Ms Rekha Jhunjhunwala (the

Respondent No. 2 & 3).

2. Brief facts of this case are that since the year 2013 there is business

relationship between the Appellant and the Corporate Debtor (Respondent No.

1). The Appellant entered into more than 90 different contracts for various

projects with the Corporate Debtor (Respondent No. 1). The total value of all

different contracts is more than 2400 Crores. The dispute arose between the

Appellant and Corporate Debtor (Respondent No. 1) in respect of six different

contracts for different projects. Therefore, the Appellant invoked the

arbitration agreement and the arbitration proceedings were commenced

Company Appeal (AT) (Insolvency) No. 1471 of 2019 3

before the Sole Arbitrators. On 29.01.2018 the Corporate Debtor filed an

Application CP No. IBC/156/MB/MAH/2017 under Section 10 of the IBC

before the Adjudicating Authority for initiation of Corporate Insolvency

Resolution Process (CIRP). Ld. Adjudicating Authority vide order dated

14.05.2018 admitted the Application and directed the moratorium to

commence as prescribed under Section 14 of the IBC and Mr. Krishana

Chamadia was appointed as Interim Resolution Professional (IRP). Thereafter,

in view of moratorium period the arbitration proceedings were adjourned sine-

die. On 28.05.2018 the IRP issued Form No. A for submissions of claim. On

05.06.2018 the Appellant filed six claims of Rs. 511,58,39,247/- alongwith

interest @ 18% per-annum in Form-A before the IRP. On 15.06.2018 Mr.

Krishna Chamadia was confirmed as Resolution Professional by the CoC. On

24.08.2018 the RP issued list of creditors. The Name of the Appellant was

mentioned in the list of Operational Creditors. On 29.11.2018 the RP

published an updated list of the Creditors of the Corporate Debtor, wherein

the admitted claims of the Appellant was indicated as 'Nil', with an appended

note 2, wherein it was stated that the claims of the Appellant were disputed

and the pending Adjudication in Arbitration Proceedings the liability is subject

to outcome of these proceedings. This was followed by an updated list of

Creditors published by the RP on 10.12.2018 and 24.01.2019 wherein it was

again recorded that the admitted claims of the Appellant as 'Nil' with the

aforesaid appended note.

3. The RP vide notification dated 09.07.2018 invited Expression of Interest

(EOI) to submit a Resolution Plan from the interested Resolution Applicants.

The EOI was required to be submitted to the RP on or before 08.08.2018. On

Company Appeal (AT) (Insolvency) No. 1471 of 2019 4

the said date i.e. 09.07.2018 analogous to be the first Form-G also came to

be notified vide the said order. The last date for submission of Resolution Plan

was on or before 21.09.2018. The 2nd Form-G came to be issued on

24.08.2018 which required the Resolution Plans to be submitted on or before

28.09.2018.3rd Form-G came to be issued on 28.09.2018 which required the

Resolution Plans to be submitted on or before 25.10.2018.4th Form-G came

to be issued on 09.11.2018 which required the Resolution Plans to be

submitted on or before 13.12.2018. The 5th and the last Form-G came to be

issued on 11.12.2018 which required the Resolution plans to be submitted

on or before 08.01.2019.

4. The Kotak Investment Advisors Ltd. (KIAL) and one Karvy Data

Management Systems Ltd. submitted their Resolution Plans on the last date

as stipulated in the last and 5th Form-G i.e. on 08.01.2019. Mr. Kalpraj

Dharamshi submitted its EOI and Resolution Plan to the RP on 27.01.2019.

On 29.01.2019 KIAL sent an email to the RP raising its objection permitting

Kalpraj Dharamshi to submit its Resolution Plan beyond the prescribed time

limit. During the CoC meeting held on 30.01.2019 the Resolution Plan of

Kalpraj Dharamshi was placed before the CoC and the CoC resolved to direct

all the Applicants to submit the revised plan. Accordingly, all the Applicants

submitted the revised Resolution Plan. In the CoC meeting held on

13/14.02.2019 the plan of Kalpraj Dharamshi came to be approved by a

majority.

5. After CoC had approved the plan of Mr. Kalpraj Dharamshi, RP applied

for approval of plan before the Adjudicating Authority on 18.02.2019 vide M.A.

No. 691 of 2019 in CP No. 156/MB/2018. After coming to know about the RP

Company Appeal (AT) (Insolvency) No. 1471 of 2019 5

applying for approval of plan of Kalpraj Dharamshi, KIAL filed an Application

on 14.03.2019 being M.A. No. 1039 of 2019 objecting the plan of Kalpraj

Dharamshi. The objection was on the ground that the RP was not justified in

permitting Kalpraj Dharamshi to submit the Plan beyond the date prescribed

in Form-G and the decision of CoC to approve the plan submitted by Kalpraj

Dharamshi was not in accordance with the IBC. Vide impugned order dated

28.11.2019 the Ld. Adjudicating Authority allowed M.A No. 691 of 2019 and

approved the Resolution Plan of Kalpraj Dharamshi and by a separate order

passed on the same date rejected the M.A. No. 1039 of 2019, which was filed

by KIAL objecting the decision of CoC to approve the plan submitted by

Kalpraj Dharamshi.

6. Being aggrieved with the impugned order, the Appellant (FDSL) filed

present Appeal, whereas KIAL has filed Appeal CA (AT) (Ins) No. 344-345 of

2020 against the rejection of the Application M.A. No. 1039 of 2019 before this

Appellate Tribunal. This Appellate Tribunal vide order dated 05.08.2020

allowed the Appeal of KIAL and set aside the impugned order and the matter

was remanded back to the CoC to decide on the Resolution Plan submitted by

KIAL within 10 days and during the event no decision to be taken by the CoC.

The Ld. Adjudicating Authority was directed to proceed with the liquidation of

the Company.

7. The Aforesaid Judgment pronounced by this Appellate Tribunal dated

05.08.2020 came to be challenged before the Hon'ble Supreme Court by way

of three Appeals filed by Kalpraj Dharamshi, Deutsche Bank and Krishna

Chamadia.

Company Appeal (AT) (Insolvency) No. 1471 of 2019 6

8. The Appellant "FDSL." also preferred an Appeal challenging the order

passed by this Appellate Tribunal dated 05.08.2020 specifically to obtain the

view from the Hon'ble Supreme Court. Hon'ble Supreme Court vide Judgment

dated 10.03.2021 has decided the aforementioned bunch of Appeals wherein

the Appeal filed by Kalpraj Dharamshi was allowed. However, the Hon'ble

Supreme Court directed this Appellate Tribunal to decide the Appellant's

present Appeal. Pursuant to the order of Hon'ble Supreme Court, we

proceeded to decide the Appeal.

9. It is not out of context to mention that on 25.07.2019 Adjudicating

Authority admitted the Application under Section 7 of the IBC of M/s

American Express Banking Corporation and initiated CIRP against the

Appellant (FDSL). Mr. Jashwant Singh was then appointed as IRP.

Subsequently, Ld. Adjudicating Authority vide order dated 27.11.2019 had

appointed Ms. Pooja Bahry as RP. She filed an Application (I.A No.

2159/ND/2020) under Section 30(6) of the IBC for approving the Resolution

Plan. The Application was allowed vide order dated 25.09.2020 resultantly,

the Resolution Plan of Link Star Infosys Pvt. Ltd. and Mr. Dhaval Jitendra

Kumar Mistry (Resolution Applicants) was approved and Ms. Pooja Bahry was

discharged. The present Appeal was filed by RP Pooja Bahry on 19.12.2019

and during the pendency of this Appeal she has been discharged.

10. The Adjudicating Authority vide order dated 28.11.2019 approved the

Resolution Plan for Corporate Debtor which was submitted jointly by Kalpraj

Dharamshi and Ms. Rekha Jhunjhunwala (Successful Resolution Applicants)

and in terms of the approved Resolution Plan a monitoring committee

comprising three Members - one nominated by the Successful Resolution

Company Appeal (AT) (Insolvency) No. 1471 of 2019 7

Applicants, one nominated by CoC and the erstwhile Resolution Professional

has been appointed to supervise the implementation of the Resolution plan

and to conduct the day to day functioning of the Corporate Debtor. Further as

per the terms of the approved Resolution Plan Mr. Krishna Chamadia

(erstwhile RP) has been appointed as the monitoring agent, acting on the sole

instructions of the monitoring committee. Thus, after approval of the

Resolution Plan, the Corporate Debtor (R-1) is represented by the monitoring

committee.

11. Ld. Sr. Counsel for the Appellant submitted that as per Section 18 (1)

(b) and (g) r/w Section 25 (2) (e) of the IBC, the IRP/RP shall receive and collate

all the claims submitted by the Creditors and shall maintain an updated list

of claims. The RP clearly failed to discharge his mandatory duties by

adjudicating the legitimate claim of the Appellant more so when the said claim

was substantiated by all the supporting documents and proofs. The IRP/RP

has no adjudicatory powers, however, he should have called for such evidence

or documents as provided under Regulation 10 of IBBI (Insolvency Resolution

Process for Corporate Persons) Regulation, 2016(Regulations) as held by the

Hon'ble Supreme Court in the case of Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union

of India & Ors. (2019) 4 SCC 17. He submitted that in the present matter the

act of RP in disregarding the claim of the Appellant is clearly in gross violation

of the scheme under the IBC and the Regulations thereto. It is submitted that

the RP deliberately avoided the entire claim of the Appellant on the basis of a

pending Arbitration proceedings without even verifying the claim by

corroborating with the available records/documents. Moreover, instead of

putting the disputed amount/claim in the contingency provision the RP has

Company Appeal (AT) (Insolvency) No. 1471 of 2019 8

mechanically deferred the entire claim. Where the amount of the claim cannot

be or has not been determined at the time the claim is to be submitted, many

Insolvency laws allow a claim to be admitted provisionally, subject to giving it

a notional value. It is submitted that admittedly the RP has neither admitted

nor rejected the claims of the Appellant despite of knowing that the claims of

the Appellant were to the tune of Rs. 511 Crores approximately.

12. Ld. Sr. Counsel for the Appellant submitted that the RP is to examine

each Resolution Plan received by him in order to ascertain that each

Resolution Plan is inconformity with the requirement as provided under

Section 30(2) of the IBC. However, the RP failed to examine the Resolution

Plan and deliberately placed such erroneous plan before the CoC for the

approval. Even clause 4.3 of the addendum to the Resolution Plan neither

provides any payment to the Appellant nor it provides any Clause for the claim

of the Appellant.

13. Ld. Sr. Counsel for the Appellant submitted that the Resolution Plan

proposes to fully satisfy the Operational Creditor, other than the Appellant,

satisfying their 100% claim but not offering any single penny to the Appellant.

Therefore, such plan is an eye wash and fraud played upon the stakeholders

since the Resolution Plan proposes to pay nil to the Appellant despite being

the highest Operational Creditor.

14. It is submitted that as per Section 24(3) (c) of the IBC the Appellant was

entitled to participate in the CoC meeting, being the highest Operational

Creditor having aggregate dues of not less than 10%. That non-inclusion of

the Appellant in the CoC by the RP malafidely, rendered the constitution of

CoC illegal and all the proceedings undertaken by such incomplete CoC are

Company Appeal (AT) (Insolvency) No. 1471 of 2019 9

not tenable in the eye of law and have caused grave injustice to the highest

Operational Creditor like the Appellant.

15. Ld. Sr. Counsel for the Appellant submitted that the RP had erred in not

taking into consideration the claim of the Appellant on the basis of Arbitration

proceedings being pending in respect of the dispute claim. The RP had again

failed to validate his stand by not admitting the claims of the Appellant despite

the fact with the moratorium being declared and the continuation of the

Arbitration proceedings comes to stand still as per the expressed provision of

Section 14(1) (a) of the IBC.

16. Ld. Sr. Counsel for the Appellant submitted that the RP has committed

gross misconduct and fraud during the course of entire CIRP which is evident

from the following instances and actions.

(i). The RP had committed gross violation by act of non-

determination/deferment of the legitimate claim of the Appellant. Instead of

determining the Appellant's claim to the best estimate value in terms of

Regulation 14 of the CIRP Regulations, the RP had kept it in abeyance.

(ii). The RP had not made any effort to take recourse of the

documents/material supplied by the Appellant in Form-B and had also not

sought additional relevant documents to substantiate the claim.

(iii). The RP has neglected the legitimate claim of the Appellant despite being

the highest Operational Creditor.

(iv). The RP appears to have prepared incomplete/false information

memorandum which does not depict the true picture of affairs/financial

status of the Corporate Debtor thereby facilitating the Resolution Applicant to

Company Appeal (AT) (Insolvency) No. 1471 of 2019 10

escape from the material liability of payment to the highest Operational

Creditor.

(v). In grave dereliction of the duties provided under the IBC, the RP has

deliberately not examined the Resolution Plan in terms of Section 30(2) of the

IBC.

(vi). The RP has purposefully overlooked the grave infirmities and

discrepancies of the Resolution Plan submitted by the Resolution Applicant

and presented the same before the CoC.

(vii). The RP had intentionally presented such Resolution Plan before the CoC

which was apparently in gross violation of the scheme enshrined under the

IBC and had validated such Resolution Plan which was much below the

liquidation value and negligible in comparison to fair market value.

(viii). In view of the averments made above the entire CIRP has been initiated

due to bias malafide illegal and fraudulent conduct of the RP.

17. Ld. Sr. Counsel for the Appellant submitted that the CoC has exercised

its power in contrary to the provisions under the IBC. The CoC and Ld.

Adjudicating Authority denied the claims of the Appellant on the ground that

the claims of the Appellant have been disputed and are in proceedings before

the Arbitrators/Appellant Authorities and the liability is subjected to the

outcome of these proceedings. It is submitted that the Operational Creditor

cannot be paid 'Nil' incontravention of the provisions under Section 30(4) of

the IBC. Ld. Adjudicating Authority failed to appreciate that the Arbitration

proceedings between the Appellant and the Corporate Debtor are pending

Adjudication before the Arbitrators. The RP in the updated list of the Creditors

as on 24.01.2019 specifically mentioned that the claims of the Appellant have

Company Appeal (AT) (Insolvency) No. 1471 of 2019 11

been disputed and are in the proceedings before the Arbitrators and the

liability is subjected to outcome of these proceedings. He submitted that Ld.

Adjudicating Authority failed to appreciate as on date a sum of Rs.

511,58,39,247/- is due and payable by the Corporate Debtor to the Appellant

towards hardware and services delivered and provided by the Appellant to the

Corporate Debtor (Respondent No. 1).

18. It is submitted that Ld. Adjudicating Authority erred in approving the

Resolution Plan of the Respondent No. 2 & 3 for waiver of claims against the

Respondent No. 1 on the date of approval of the Resolution Plan. Ld.

Adjudicating Authority erred to hold that the Resolution Applicant will not be

held responsible for any outstanding claims for the period before the

commencement of CIRP. He submitted that Ld. Adjudicating Authority failed

to appreciate that the CoC being a custodian of public interest is under

statutory duty to exercise its power under Section 30(4) of the IBC reasonably

and fairly. The CoC cannot be allowed to approve the Resolution Plan

arbitrarily without considering the claims of the Appellant. The CoC be

directed to reconsider the Resolution Plan submitted by the Respondent No. 2

& 3 keeping in view the claims of the Appellant.

19. Ld. Sr. Counsel for the Appellant submitted that the CoC had

erroneously approved the Resolution Plan as presented by the RP despite the

same being not inconformity with the mandatory requirements of the IBC as

provided under Section 30(2), 53 of the IBC and in Regulation 38 (1A) of the

CIRP Regulations. Therefore, the entire CIRP being carried out and the

decision taken by the CoC were illegal.

Company Appeal (AT) (Insolvency) No. 1471 of 2019 12

20. Ld. Sr. Counsel for the Appellant submitted that the CoC is vested with

the jurisdiction to approve the Resolution Plan by exercising their commercial

wisdom. However, exercise of such commercial wisdom by the CoC cannot be

arbitrary and discriminatory. The Hon'ble Supreme Court in Land Mark Case

of CoC of Essar Steel India Ltd. Vs. Satish Kumar Gupta 2019 SCC Online SC

1478 has laid down the parameters to be taken into account by the CoC while

exercising its commercial wisdom in the process of approving the Resolution

Plan. The Hon'ble Supreme Court has clearly observed that the CoC while

approving the Resolution Plan shall necessarily take into account the interest

of all the stakeholders including the Operational Creditor. In the present case,

the CoC instead of applying this commercial wisdom in fair and transparent

manner has proceeded on its whims and fancies and in order to give undue

advantage to the Resolution Applicant has disregarded genuine claims of the

Operational Creditors including the Appellant.

21. It is submitted that the Ld. Adjudicating Authority failed to appreciate

that the impugned order extinguishing the claims along with abetment of any

related legal proceedings pending against the Respondent No. 1 will deprive

the Appellant from their rights in respect of their claims against Respondent

No. 1. It is submitted that Ld. Adjudicating Authority failed to appreciate that

this Appellate Tribunal in the case of M/s Prasad Gempex Vs. Star Agro

Marine Exports Pvt. Ltd. & Ors. (CA (AT) (Ins) No. 291 of 2018) allowed the

Appellant to file its claim against the Corporate Debtor, if the Resolution Plan

is approved and if it does not take care of the Appellant's claims. He submitted

that Ld. Adjudicating Authority failed to appreciate that where the claim of

Operational Creditor involves a disputed question of fact as it cannot be

Company Appeal (AT) (Insolvency) No. 1471 of 2019 13

decided by the RP or Ld. Adjudicating Authority, such Operational Creditor

can raise such issue and claim at an appropriate stage i.e. after moratorium

is over. For this proposition, placed reliance on the Judgment of this Appellate

Tribunal in the case of M/s Roma Enterprises Vs. Martin S. K. Golla RP (CA

(AT) (Ins) No. 232 of 2018).

22. It is submitted that the Resolution Plan was erroneously approved by

the Adjudicating Authority without application of mind and without being

satisfied regarding the compliance of the requirements referred in Section 30

(2) of the IBC. Section 31 (1) of the IBC requires the Adjudicating Authority to

record its satisfaction regarding compliances of the Section 30(2) of the IBC.

As per the intent of the IBC such satisfaction should not be mere subjective

satisfaction of the Adjudicating Authority rather objective satisfaction

regarding fulfilment of the requirements under Section 30(2) of the IBC. Ld.

Adjudicating Authority failed to appreciate that due to collusive conduct of the

RP, CoC and the Successful Resolution Applicant have illegally prioritised the

interest of few Operational Creditors and has led to a situation where the

Successful Resolution Applicant has held the entire CIRP to ransom at the

cost of the Operational Creditors including the Appellant and have caused

grave miscarriage of justice. The Resolution Plan being gross, illegal, arbitrary

and discriminatory, ought to have been rejected by the Adjudicating Authority.

23. Ld. Sr. Counsel for the Appellant submitted that the Resolution Plan is

also incontravention with Section 14 of the IBC which provides only a

temporary calm period for the purpose of initiation of any suit or continuation

of the pending suits and proceedings against the Corporate Debtor. Whereas

in the present case on one hand the claim of the Appellant was pending

Company Appeal (AT) (Insolvency) No. 1471 of 2019 14

adjudication before the Arbitrator and was stayed due to subsistence of

moratorium period, however, on the other hand under the guise of approval

of Resolution Plan the Appellant's claim was permanently extinguished.

24. Ld. Sr. Counsel for the Appellant submitted that the Resolution Plan is

an eye wash and detrimental to the interest of stakeholders including the

Appellant. The Successful Resolution Applicant proposes to pay a meagre

amount of Rs. 73.73 Crores in toto against the total outstanding debt of Rs.

2519.61 Crores. It is surprising that against the fair market value of the

Corporate Debtor i.e. to be tune of Rs. 843 Crores the RP actually proposed

only 20.24 Crores to non-related Creditors. The Appellant despite being the

highest Operational Creditor is paid nothing, however, to the contrary in terms

of the Resolution Plan, it is wrongly demonstrated that all the Operational

Creditors are fully satisfied by way of others Resolution Plans. The Resolution

Plan is arbitrary and discriminatory in nature as it proposes to discriminate

the Creditors placed within the same Clause.

25. Thus, by virtue of such approved Resolution Plan, the pending

Arbitration proceedings after lifting of the moratorium would be futile under

Section 14 r/w 60(6) of the IBC. In such circumstances, it is submitted that

the impugned order may be set aside and protect the claims of the Appellants

in view of order dated 16.11.2020 passed by Hon'ble Supreme Court in the

case of NTPC Limited (Simhadri Project) Vs. Rajiv Chakraborty (Civil Appeal

No. 2798 of 2020)

26. Per Contra Ld. Sr. Counsel for monitoring committee representing

Respondent No. 1 submitted that in terms of Regulation 6 of the Insolvency

and Bankruptcy Board of India (Insolvency Resolution Process of Corporate

Company Appeal (AT) (Insolvency) No. 1471 of 2019 15

Persons) Regulations 2016 (Regulations, 2016) a public announcement in

Form-A was issued on 28.05.2018 in various newspapers. Pursuant to the

public announcement claims of various Financial Creditors, Operational

Creditors and other Creditors and the Corporate Debtor were received which

were collated and verified by the IRP/RP. Further as per Regulation 13 of the

Regulations 2016 a list of Creditors of the Corporate Debtor was prepared and

filed with the Adjudicating Authority and the same list was also displayed on

the website and was updated periodically. During the CIRP a total claim of INR

511,58,39,247 was received from the Appellant claiming to be an Operational

Creditor of the Corporate Debtor. It is further submitted that the Appellant's

claim was examined by the RP and took to verification against the books and

records of the Corporate Debtor, whereupon it claimed that the said claim was

disputed by the Corporate Debtor in various Arbitrations/Appellate

Authorities and the liability is subjected to the outcome of this proceedings.

This fact was disclosed in the list of the Creditors by the RP. The non-

admission of its claim by the RP was never challenged by the Appellant before

the Adjudicating Authority. Thus, the RP has done his duty in terms of the

Code and Regulations bonafidely.

27. Ld. Sr. Counsel for the Respondent No. 1 submitted that the Appellant

having failed to challenge the non-admission of its claim before the

Adjudicating Authority, the Appellant cannot challenge the non-admission of

the claim now at this belated stage directly before this Appellate Tribunal

under the garb of challenging the Resolution Plan which was approved by the

Adjudicating Authority and subsequently by the Hon'ble Supreme Court. Now

Company Appeal (AT) (Insolvency) No. 1471 of 2019 16

the Resolution Plan has already been implemented, therefore, this Appeal

rendered infructuous and the Appellant is not entitled to any relief.

28. Ld. Sr. Counsel for the Respondent No. 1 submitted that upon

examination of books and accounts of Ricoh (Corporate Debtor) during the

CIRP period, the RP determined that the transactions entered into by the Ricoh

(Corporate Debtor) with the Appellant prior to initiation of the CIRP required

detailed investigation. Pursuant to this determination the RP exercised his

powers under Section 25 (2) (d) r/w in conjunction with Sections 43, 45, 49,

50 and 66 of the IBC and appointed Alvarez and Marsal India Pvt. Ltd. (A&M)

on 13.07.2018 to assist him in investigating and examining the potential

fraudulent extortionate credit and undervalued transactions which took place

between Ricoh and third parties including the Appellant.

29. Ld. Sr. Counsel for the Respondent No. 1 submitted that on 16.08.2018

with respect to the ongoing investigation into transactions between FDSL and

Ricoh (Corporate Debtor), SEBI passed interim orders under Sections 11 (1),

11(4) and 11 B of the SEBI Act and Regulation 11 of the PFUTP Regulations

holding inter alia that there are large scale irregularities in the business

transactions between the erstwhile management of Ricoh and Appellant

(FDSL), including manipulation in its books of accounts, which amounted to

fraud. SEBI in the above referred order has held that on investigation, it has

been uncovered that the erstwhile management and key managerial personnel

of the Appellant prominently figured the fraudulent practices and

manipulations in the books of accounts of Ricoh.

30. Ld. Sr. Counsel for the Respondent No. 1 submitted that on 24.08.2018

the RP published the updated list of the Creditors along with admitted claims

Company Appeal (AT) (Insolvency) No. 1471 of 2019 17

and verification of the claims done till date. It is submitted that on 29.11.2018

the RP published an updated list of the Creditors for the Corporate Debtor

wherein the admitted claims of the Appellant in annexure B was indicated as

'Nil' with an appended note 2 wherein it is stated that the claims of the

Appellant were disputed and pending adjudication in the Arbitration

Proceedings.

31. It is also submitted that the RP had filed before the Adjudicating

Authority an Application (M.A 262 of 2019) under Section 50, 51 and 66 of

the IBC for avoidance of certain extortionate, fraudulent and wrongful trading

practices by the Corporate Debtor in connivance with various persons/entities

including the Appellant. The Appellant was also a party in the said

Application. However, despite presence of its counsel on various dates before

the Adjudicating Authority the Appellant did not raise any objection before the

Adjudicating Authority. This being so the Appellant has no right or locus to

challenge the approved Resolution Plan directly before this Appellate Tribunal

at this belated stage. It is pertinent to note that in the rejoinder the Appellant

has not denied this fact, however, it is stated that the said Application has no

relevance to the determination of the issues involved in the present Appeal.

32. Ld. Sr. Counsel for the Respondent No. 1 submitted that a Successful

Resolution Applicant cannot suddenly be faced with 'undecided' claims after

the Resolution Plan submitted by him and the same has been accepted. As

this would amount to a hydra head popping up which would throw into

uncertainty amounts be payable by the Prospective Resolution Applicant. For

this proposition, he placed reliance on the Judgment of the Hon'ble Supreme

Court in the Case of CoC Essar Steel India Ltd. Vs. Satish Kumar Gupta &

Company Appeal (AT) (Insolvency) No. 1471 of 2019 18

Ors. 2019 SCC Online SC 1478. For this preposition, he also placed reliance

on the Judgment of this Appellate Tribunal in the case of JSW Steel Ltd. Vs.

Ashok Kumar Gulla & Ors. 2019 SCC Online NCLAT 854

33. Ld. Sr. Counsel in support of the aforesaid arguments also placed

reliance on the Judgment of Hon'ble Supreme Court in the case of Swiss

Ribbons Pvt. Ltd. (2019) 4 SCC 17, K. Shashidhar 2019 SCC Online SC 257,

Jaypee Kingston Boulevard Apartments 2021 SCC Online SC 253, Kalpraj

Dharamshi vs. Kotak Investments 2021 SCC Online SC 204, Maharashtra

Seamless Ltd. (2020) 11 SCC 467, Ghanshyam Mishra & Sons Pvt. Ltd. Vs.

Edelweiss Asset Reconstruction Company Ltd. (Civil Appeal No. 8129 of 2019),

Chittoori Subbanna Vs. Kudappa Subanna & Ors. AIR 965 SC 1325 and

Yeswant Deorao Deshmukh Vs. Walchand Ramchand Kothari AIR 1951 SC

16.

34. Ld. Sr. Counsel for the Respondent No. 1 submitted that the Appellant

without any basis in the argument has made allegations against the RP which

are uncalled for. The Appellant has failed to point out any material irregularity

in exercise of powers by the RP during the CIRP, therefore, there is no merit

in this Appeal and is liable to be dismissed.

35. Ld. Sr. Counsel appearing for the Respondent Nos. 2 & 3 submitted

that in view of the findings of the Hon'ble Supreme Court in the case of Kalpraj

Dharamshi (Supra) wherein the validity of the impugned order has been

upheld and with the Resolution Plan having been successfully and irreversibly

implemented by Respondent No. 2 & 3. Accordingly, the present Appeal is

rendered non-maintainable, infructuous, and non-est, and thereby ought to

be dismissed.

Company Appeal (AT) (Insolvency) No. 1471 of 2019 19

36. Ld. Sr. Counsel for the Respondent Nos. 2 & 3 submitted that the claims

of the Appellant were not admitted and the same reflected in the list of

Creditors published by the RP on three occasions i.e. 29.11.2018, 10.12.2018

and 24.01.2019. However, the Appellant failed to challenge the non-admission

of its claim by the RP in the first instance before the Adjudicating Authority

and thereby acquiesced to this determination. The Appellant is estopped from

challenging the non-admission of its claims at a belated stage in the present

Appeal. In fact, it may be noted that on 31.01.2021, the Respondent Nos. 2 &

3 had successfully and irreversibly implemented the Resolution Plan, thereby

completing the takeover of the control, operations, and management of the

Corporate Debtor. These facts have been duly considered by the Hon'ble

Supreme Court and upheld the impugned order.

37. Ld. Counsel for the Respondent Nos. 2 & 3 submitted that the Appellant

has approached this Appellate Tribunal seeking reliefs under Section 61 of the

IBC with the impugned order be set aside on various grounds including inter

alia that the Appellant's claims have not been admitted by the RP, but this

determination of the RP was never challenged by the Appellant at the first

instance before the Adjudicating Authority in accordance with the provisions

of the IBC. It is also submitted that the claims of the Appellant having been

rejected and not being recognized as an Operational Creditor, no vested

substantive right would accrue to the benefit of the Appellant in terms of the

treatment and payment made by the Respondent Nos. 2 and 3 under the

Resolution Plan.

38. Ld. Sr. Counsel for the Respondent No. 2 & 3 submitted that the

impugned order has approved the Resolution Plan of the Respondent Nos. 2

Company Appeal (AT) (Insolvency) No. 1471 of 2019 20

& 3 which in turn has been upheld by the Hon'ble Supreme Court. In view of

this no further challenge can be made to the Resolution Plan and the findings

in this regard operate as res-judicata against the Appellant.

39. It is submitted that the determination of the claims of the Appellant was

reached by RP upon due examination and verification of books of accounts.

RP had also filed the avoidance application before the Adjudicating Authority

arraying the Appellant as Respondent. Which was based upon the findings in

the Alvarez& Marsal India Pvt. Ltd. (A & M) Report dated 15.01.2019 as well

as the observations made by the SEBI in various interim orders against the

Appellant and its ex-management in respect of fraudulent and extortionate

credit transactions between the Corporate Debtor and the Appellant including

various violations of the SEBI Act and its allied Rules and Regulations. Hon'ble

Supreme Court in Anuj Jain IRP for Jaypee Infratech Ltd. Vs. Axis Bank Ltd.

&Ors. 2020 SCC Online SC 237 at Para 16.2, 28.1, 28.2 and 28.3 has held

that the RP is duty bound under Section 25(2) (j) of the IBC to identify potential

avoidance transaction including preferential transaction under Section 43 of

the IBC and to institute the appropriate Application before the Adjudicating

Authority. Thus, based on the above material the RP has arrived at the

determination that the ex-management of the Corporate Debtor and the

Appellant had entered into fraudulent and extortionate credit transaction and

accordingly, the claim of the Appellant was not admitted. This attained finality

as the Appellant did not pursue the appropriate remedy at the first instance

by challenging the determination of RP before the Adjudicating Authority.

Admittedly, the claims of the Appellant has not been admitted by the RP and

Company Appeal (AT) (Insolvency) No. 1471 of 2019 21

determined to be fraudulent and extortionate credit transactions and in view

of this no payment was provided under the Resolution Plan to the Appellant.

40. It is submitted that there is no substance or merit to the allegations of

the Appellant on the grounds of discrimination in the treatment provided

under the Resolution Plan, alleged fraud illegality or any contravention of law

by or attributable to the Respondent Nos. 2 & 3 and such allegations in the

Appeal ought to be summarily rejected by this Hon'ble Appellate Tribunal.

41. It is submitted that the Resolution Plan by the Prospective Resolution

Applicants prepared on the basis of information memorandum and evaluation

matrix. The Respondent Nos. 2 & 3 were duly provided with a copy of

information memorandum and evaluation matrix and the Appellant's claim

was not admitted therein and that fact was duly taken into consideration by

the Respondent Nos. 2 & 3 when the Resolution Plan was submitted before

the CoC on 12.02.2019 and subsequently, approved on 14.02.2019 by a

thumping majority by the CoC in exercise of its commercial wisdom. The CoC

has comprehensively considered the provisions of the Resolution Plan and

duly considered the feasibility and viability of the Resolution Plan. It is well

settled that the matter of distribution of amounts under a Resolution Plan is

within the exclusive domain of the Commercial wisdom of the CoC, which is

not amenable to judicial review, in the decisions of the Hon'ble Supreme Court

in K. Sashaidhar Vs. Indian Overseas Bank & Ors. (2019) 12 SCC 150 at Para

32, 34, 35, 37, 52, 53, 55 to 64 and in CoC of Essar Steel (India) Ltd. Vs.

Satish Kr. Gupta (2020) 8 SCC 531 at Para 54,56,60 to 73.

42. It is submitted that as per Section 31 (1) of the IBC, a Resolution Plan

once approved by the Adjudicating Authority shall be binding on all the

Company Appeal (AT) (Insolvency) No. 1471 of 2019 22

stakeholders and creditors of the Corporate Debtor. In this regard reference

may be made to Article 4.1, 9.2(e) & (f) of the Resolution Plan, which provides

that it shall be binding on all the stakeholders of the Corporate Debtor upon

approval by the Adjudicating Authority. In addition, the Adjudicating

Authority in the impugned order has granted reliefs and concessions under

the aforesaid Articles of the Resolution Plan providing for extinguishment of

all pending proceedings against the Corporate Debtor prior to the approval

date including all the respective liabilities/obligations accruing thereunder

against the Corporate Debtor or the Respondents No. 2 & 3.

43. Ld. Sr. Counsel for the Respondent Nos. 2 & 3 submitted that the

Appellant has relied upon the judgment of Hon'ble Supreme Court in NTPC

Ltd. Vs. Rajiv Chakrabarty & Ors. (Supra) which has no relevance to the facts

of present case and distinguishable on facts and law. In the facts of that case,

the Hon'ble Supreme Court had held that the factum of Arbitration

Proceedings pending between Corporate Debtor and the Operational Creditor

will have to be recorded in the information memorandum by the Resolution

Professional, with the statement that the claim will be subject to outcome of

the Arbitration Proceedings, and this IM must be provided to Prospective

Resolution Applicants, who will consider the same into account while

submitting their respective Resolution Plans. Due notice whereof has to be

taken by the CoC, and will be dealt with by the Resolution Applicant

appropriately in the final Resolution Plan.

44. Ld. Sr. Counsel in support of aforesaid arguments placed reliance on

the Judgment of Hon'ble Supreme Court in the case of Maharashtra Seamless

Ltd. Vs. Padmanabhan Venketesh & Ors. (2020) 11 SCC 467 and Jaypee

Company Appeal (AT) (Insolvency) No. 1471 of 2019 23

Kensington Boulevard Apartments Wellfare Association & Ors. Vs. NBCC

(India) Ltd. & Ors. Civil Appeal No. 3395 of 2020 decided on 24.03.2021 and

B.L. Sreedhar and Ors. Vs. K.M. Munireddy (2003) 2 SCC 355,and also place

reliance on the Judgement of this Appellate Tribunal in the case of Santosh

Wasantrao Walokar Vs. Vijay Kr. V. Iyer & Anr. 2020SCC Online NCLAT 128.

45. Ld. Sr. Counsel for the Respondent Nos. 2 & 3 submitted that the

Appellant has failed to establish any of the grounds for interference with the

impugned order passed by Adjudicating Authority. Thus, the Appeal must be

dismissed.

46. After hearing Ld. Sr. Counsels for the parties we have gone through

voluminous record.

47. Admittedly, the Appeal has been filed against the impugned order

approving a Resolution Plan under Section 31 of the IBC. Against an order

approving a Resolution Plan under Section 61 (3) Appeal may be filed on the

grounds specified in (i) to (v). From the grounds projected in memo of Appeal

it seems that the Appeal is filed on the following grounds:

(i) Whether there has been material irregularity in exercise of powers by the

Resolution Professional during the Corporate Insolvency Resolution Period?

(ii) Whether the debts owed to the Operational Creditor (Appellant) of the

Corporate Debtor have not been provided for in the Resolution Plan in the

manner specified by the Board?

(iii) Whether this Appellate Tribunal can grant the relief as prayed in the

Appeal?

Issue No. (i)

Company Appeal (AT) (Insolvency) No. 1471 of 2019 24

Whether there has been material irregularity in exercise of powers by the

Resolution Professional during the Corporate Insolvency Resolution Period?

48. On 14.05.2018 Mr. Krishna Chamadia was appointed IRP, on

28.05.2018 in terms of Regulation 6 of the Regulations a public

announcement in Form-A was issued in various newspapers, inviting

submission of claims with proof from the Creditors of the Corporate Debtor.

Pursuant to the public announcement on 05.06.2018, the Appellant filed six

claims of Rs. 511,58,39,247/- in Form - A before the IRP. On 15.06.2018 Mr.

Krishna Chamadia was confirmed as Resolution Professional by the CoC. On

24.08.2018 the RP issued list of Creditors as per the Regulation 13 of CIRP

Regulations. The Name of the Appellant was mentioned in the list of

Operational Creditors. On 29.11.2018 the RP published updated list of

Creditors of the Corporate Debtor, wherein the admitted claims of the

Appellant was indicated as 'Nil' with an appended note: "2. The claims

pertaining to FDSL have been disputed and are in proceedings before the

Arbitrators/Appellate Authorities. The liability is subjected to outcome of

these proceedings".

49. The list of Creditors of the Corporate Debtor was issued and also

displayed on the website and was updated periodically i.e. on 10.12.2018 and

24.01.2019 wherein admitted claims of the Appellant was shown as 'Nil' with

the aforesaid appended note. Admittedly, the Appellant has not raised any

objection before the RP and CoC with regard to the fact that the Appellant's

claims were not admitted and the claims were shown as disputed and pending

adjudication in Arbitration Proceedings.

Company Appeal (AT) (Insolvency) No. 1471 of 2019 25

50. The RP published preliminary list of the Creditors on 15.06.2018 which

was intimated to BSE as required under Schedule III of the SEBI (Listing

obligation and disclosure requirements) Regulations, 2015 r/w Regulation

13(2) (c) of Regulations 2016. The RP upon examination of the books and

accounts of Corporate Debtor during the CIRP, determined that the

transactions entered into by the Corporate Debtor with the Appellant prior to

initiation of CIRP required detailed investigation. Pursuant to this

determination, the RP exercised his powers under Section 25(2) (d) read in

conjunction with Sections 43, 45, 49, 50 and 66 of the IBC and appointed,

Alvarez and Marsal India Ltd. 'A & M' on 13.07.2018 to assist him in

investigating and examining potential fraudulent, extortionate credit and

undervalued transactions which took place between Corporate Debtor and

third parties, including the Appellant.

51. On 16.08.2018 in respect ongoing investigation into transactions

between Appellant (FDSL) and the Corporate Debtor, SEBI passed an interim

order under Sections 11(1), 11 (4) and 11B of the SEBI Act and Regulation 11

of the PFUTP Regulations holding inter alia that there is large-scale

irregularity in the business transactions between the erstwhile management

of Corporate Debtor and the Appellant (FDSL), including the manipulation in

its books and accounts, which amounted to fraud. SEBI in the above referred

order has held that on investigation, it has been uncovered that the erstwhile

management in key managerial personnel of FDSL prominently figured in

respect of fraudulent practices and manipulated books and accounts of the

Corporate Debtor. The copy of the SEBI order dated 16.08.2018 is annexed

Company Appeal (AT) (Insolvency) No. 1471 of 2019 26

as Annexure R-8 with the Reply filed on behalf of the Respondent Nos. 2 & 3

at pg. 87 to 131 we would like to refer certain paragraphs and findings of SEBI

which are as under:

"(h) In most instances, the customers' Pos were received through an email by Smriti Pandey, Senior Executive -ITS Operations from Amalendu Mukherjee, MD of Fourth Dimension Solutions Limited (FDSL) or AS Jindal, Director, Jindal Infra Solutions Limited and not directly from the respective customers. Similarly, the corresponding invoices from Ricoh were sent by Smriti Pandey to Amalendu Mukherjee or AS Jindal and not to the customers. It was not clear as to why Smriti Pandey was the focal point of most of the communication with respect to the suspect transactions since she was not in a role which required interaction with customers and vendors.

..............................................................................................

(j) Review of tax returns filed by FDSL and Redhex indicated that Redhex's total purchases during the half-year ended September 30, 2015 was Rs. 197 Crores out of which Rs. 196.59 Crores (99.7%) was purchased from Ricoh. It was observed that all sales made by Ricoh to Redhex were back to back trades as the purchases with respect to these sales were made from FDSL for an aggregate of Rs. 169 Crores. FDSL in turn purchased goods amounting to Rs. 79 Crores from Redhex during the half year ended September 30, 2015. It indicated that substantial portion of sales by Redhex had originated from FDSL, part of which appeared to have been sold back to FDSL thereby indicating that these transactions were likely to be circuitous in nature. .............................................................................................. (30) I note that Shri Amalendu Mukherjee and FDSL have inter alia sought interim relief from the directions contained in the interim order on the ground that the directions are against Shri Amalendu Mukherjee and not against FDSL. However, I note that FDSL's name prominently figures in respect of the alleged fraud pertaining to the suspect transactions and manipulated books and accounts of Ricoh. Thus, in the larger interest of investors in the securities market, I do not deem fit to grant any interim relief, as requested by Shri Amalendu Mukherjee and FDSL."

52. As per the mandate dated 13.07.2018 of the RP stated above A & M

completed forensic auditor investigation into transactions of the Corporate

Company Appeal (AT) (Insolvency) No. 1471 of 2019 27

Debtor of three preceding years to the commencement of the CIRP and

submitted the final report dated 15.01.2019 containing the findings of

fraudulent and collusive transactions between the ex-management of FDSL

and the Corporate Debtor, which was intended to defraud the Corporate

Debtor. It is the matter of record that receivable of huge amounts accruing to

the Corporate Debtor under these transactions where written off illegally by

the Appellant and its ex-management. The RP on verification of the

Appellant's claims came to the reasoned determination that all the

transactions between the Appellant and the Corporate Debtor were vitiated by

fraud and illegality as confirmed by the findings of the 'A & M' report dated

15.01.2019 and the findings of the SEBI in its interim order dated

16.08.2018.

53. On 19.01.2019 the RP taking serious note of the findings of 'A&M'

report dated 15.01.2019, filed an Application being M.A No. 262 of 2019

under Sections 50, 51, 56 r/w Section 60(5) of the IBC before the Adjudicating

Authority seeking reliefs against the fraudulent and undervalued transactions

entered by the Corporate Debtor and third party including the Appellant. The

avoidance application is annexure R-8 of the Reply filed by the Respondent

No. 2 & 3 at page 224 to 290.Reliefs sought in the Application is as under:

"Only the reliefs against the Appellant are mentioned here:

(a) ...................

(b) Direct Manoj Kumar/R-1, Arvind Singhal/R2, Anil Seni/R3, (FDSL)/R4 and Redhex/R6 to contribute amount of INR72.29 Crores to the Corporate Debtor.

(c) Direct Manoj Kumar/R-1, Arvind Singhal/R2, Anil Seni/R3, (FDSL)/R4 and Veda Vaag/R7 to contribute amount of INR 41.37 Crores to the Corporate Debtor.

Company Appeal (AT) (Insolvency) No. 1471 of 2019 28

(d) Direct Manoj Kumar/R-1, Arvind Singhal/R2, Anil Seni/R3, (FDSL)/R4 and Jatalia/R8 to contribute amount of INR 12.41 Crores to the Corporate Debtor.

(e) Direct Manoj Kumar/R-1, Arvind Singhal/R2, Anil Seni/R3, (FDSL)/R4 and Rudra/ R9 are jointly severally liable to contribute amount of INR 8.32 Crores to the Corporate Debtor.

(f) Direct Manoj Kumar/R-1, Arvind Singhal/R2, Anil Seni/R3, (FDSL)/R4 and new code/R10 to contribute amount of INR 0.59 Crores to the Corporate Debtor.

(g) Direct Manoj Kumar/R-1, Arvind Singhal/R2, Anil Seni/R3, (FDSL)/R4 to contribute amount of INR 112 Crores to the Corporate Debtor.

(h) Direct Manoj Kumar/R-1, Arvind Singhal/R2, Anil Seni/R3, (FDSL)/R4 to contribute amount of INR 55.31 Crores to the Corporate Debtor."

54. The aforesaid application M.A No. 262 of 2019 along with M.A. No. 691

of 2019 (for approval of Resolution Plan) were listed on various dates before

the Adjudicating Authority. Appellant's Counsel was present before the

Adjudicating Authority, however, he has not contested these Applications.

Therefore, the Adjudicating Authority vide impugned order approved the

Resolution Plan.

55. The main grievance of the Ld. Sr. Counsel for the Appellant is that the

RP deliberately avoided the entire claim of the Appellant on the basis of

pending arbitral proceedings without even verify the claims. Moreover, instead

of putting the dispute amount and claim in the contingency provisions the RP

has mechanically deferred the entire claim of the Appellant. As per the

Regulation 14 where the amount claimed by the Creditors is not précised due

to any contingency or other reasons, the IRP or RP shall make the best

estimate of amount of the claim based on the information available with him.

56. In the present case Mr. Krishna Chamadia on the basis of documents

found that the claims of the appellant are disputed and are pending

adjudication before the Arbitrators but when he received the report of forensic

Company Appeal (AT) (Insolvency) No. 1471 of 2019 29

auditor, 'A&M' and also received the interim order of SEBI that the

transactions are not only disputed but are fraudulent and extortionate.

Therefore, as per the Regulation 14 it was not required to put estimate value

of amount of the claim. On the other hand, Mr. Krishna Chamadia found that

receivable of huge amounts accruing to the Corporate Debtor under these

transactions were written off illegally by the Appellant, therefore, Krishan

Chamadia has filed the Application M.A No. 262 of 2019. With the aforesaid,

we are of the view that Mr. Krishna Chamadia has done his duty bonafidely

as per the IBC and Regulations and Ld. Sr. Counsel for the Appellant unable

to convince us that Mr. Krishna Chamadia has committed dereliction in the

duties provided the IBC.

57. The Appellant in his argument made allegations against the RP that he

has committed gross violation of the act of non-determination and neglected

the legitimate claim of the Appellant. There are also allegations against the RP

that due to collusive conduct of the RP, CoC and the Successful Resolution

Applicants have illegally prioritised the interest of few Operational Creditors

and has laid to a situation where the Successful Resolution Applicants has

held entire CIRP to ransom at the costs of Operational Creditors including the

Appellant. We are of the view that there is no material to substantiate the

aforesaid allegations against the RP.

58. On the other hand, the Appellant has not answered following questions:

(i). The RP has published the list of creditors on 24.08.2018, 29.11.2018,

10.12.2018 and finally on 24.01.2019 and in these lists the claims of the

Appellant were shown as disputed claims. These lists were displayed on

Company Appeal (AT) (Insolvency) No. 1471 of 2019 30

website, however, the Appellant has not raised any objection before the RP

and CoC that the estimate of the amount of claims has not been shown in the

lists.

(ii). When the Application M.A. No. 691 of 2019 was filed by the RP before the

Adjudicating Authority for approval of plan and RP has also filed an

Application M.A. No. 262 of 2019under Section 50, 51, 60 r/w section 60(5)

of the IBC for reliefs against certain fraudulent and wrongful trading by the

Corporate Debtor and certain undervalued transactions. The Appellant was

made Respondent No. 4 in the said Application which is in the form of Affidavit

(See Annexure R-8 page 224-290 of Reply filed by the Respondent No. 2 & 3).

In this Application in Paras 16, 17, 21 to 30 there are specific allegations that

the Appellant's claims fall within the scope of fraudulent trading and wrongful

trading transactions under Section 66 of the IBC. However, the Appellant has

not contested these applications before the Adjudicating Authority.

(iii) The Appellant in rejoinder did not dispute the aforesaid facts, however,

stated that the Application has no relevance to the determination of the issues

involved in the present Appeal.

(iv) The Appellant has not challenged the findings of the A & M report dated

15.01.2019 and SEBI interim order dated 16.08.2018.

59. With the aforesaid we are of the view that the Appellant has failed to

convince that the RP has committed any material irregularity in exercise of

powers during the CIRP.

Issue No. (ii)

Company Appeal (AT) (Insolvency) No. 1471 of 2019 31

Whether the debts owed to the Operational Creditor (Appellant) of the

Corporate Debtor have not been provided for in the Resolution Plan in the

manner specified by the Board?

60. We have to see that as per Regulation 38 (1A) the Resolution Plan has

dealt with the interest of Operational Creditor. Regulation 38 (1A) reads as

under: -

"38(1A) The Resolution Plan shall include a statement as to how it dealt with the interests of all stakeholders including Financial Creditors and the Operational Creditors, of the Corporate Debtor"

61. Such Amendment was inserted w.e.f. 05.10.2017. In the light of the

Regulation 38 (1A), we have examined the Resolution Plan. The Resolution

Plan Para 3.3 treatment of Operational Creditors (Other than

workman/employees) reads as under: -

"(3.3) As per the list of Creditors, the total amount of claims of Operational Creditors admitted by the RP is INR 790.17 Cr. (Indian Rupees Seven Hundred Ninety Crores and Seventeen Lakhs only). We have sub-categorized this amount and propose the payments as follows:

Definition Particulars Claim Amount Admitted (INR) Ricoh Company Ltd., Japan 2,60,95,176 Ricoh Asia Pacific Operations Ltd., 7,66,00,83,908 Hong Kong "Related Ricoh Asia Pacific Ptd Ltd, Singapore 1,05,91,830 Party OC" Ricoh Australia Pty Ltd 7,19,732 Ricoh Europe PLC 1,34,65,045 "Non- Other non-related party Operational 19,07,33,409 Related Creditors of Ricoh India Limited Party OC" Total 7,90,16,89,100

As a part of the Resolution Plan, the Resolution Applicant shall pay in full i.e. INR 19.07 Cr. (Indian Rupees Ninteen Crores Seven Lakhs Only) to the non-related party OC as a full and final

Company Appeal (AT) (Insolvency) No. 1471 of 2019 32

settlement towards their claims. The payment shall be made from the money infused in the Corporate Debtor as per clause 5.2.4 and clause 5.2.5. The amount will be paid as per the timelines of the Resolution Plan given in clause 5.3. For settlement/payment of related party OC please refer clause 4.2. above.

The Resolution Applicants, at their sole discretion, intend to pay INR 150 Cr. (Indian Rupees one hundred and fifty crore only) to RCL at any time after the expiry of 9 years from the transfer date to obtain operational support necessary to run the business."

62. After submitting the Resolution Plan before the Adjudicating Authority

the RP has submitted addendum to the Resolution Plan which reads as under:

-

"The following shall be inserted in clause 4.3. Treatment of Operational Creditors (Other than workmen/employees): We understand that Connect Residuary Pvt. Ltd. has submitted a claim of INR 25.52 Cr. Which has been admitted by the RP. The Resolution Applicant proposes to pay NIL to Connect Residuary Pvt. Ltd. (and any other Operational Creditors whose claim does not form a part of the admitted claims in the list of Creditors) as a part of the Resolution Plan. This shall apply even if any such claims, include but limited to claim made by Connect Residuary Pvt. Ltd., are admitted at a later date by RP before the Adjudicating Authority."

63. With the aforesaid provisions in the Resolution Plan we can say that

there is a specific provision as per Regulation 38(1A) for the debts owed to the

Operational Creditors of the Corporate Debtor. So far as the claims of the

Appellant are concerned these are not only disputed claims but are the

fraudulent and extortionate credit transactions as per the forensic auditor

report 'A&M' and SEBI interim order dated 16.08.2018. Therefore, the

Appellant's claims not included in the Resolution Plan.

64. Ld. Sr. Counsel for the Appellant heavily placed reliance on the

Judgment of Hon'ble Supreme Court in the case of NTPC Ltd (Simhadri Company Appeal (AT) (Insolvency) No. 1471 of 2019 33

Project) (Supra). In this Appeal, the limited issue placed before Hon'ble

Supreme Court is about the claims of the Appellant not been reflected under

the heading 'claims of Operational Creditors' in the information memorandum.

According to the Appellant, the claims of the Appellant was pending

adjudication before the Arbitrator, therefore, according to the Appellant, the

claim amount should have been reflected under the heading 'Claims of

Operational Creditors'. The Hon'ble Supreme Court do not agree with this

submission and held that the Appellant's claims has rightly been described in

the memorandum as other creditors' claims (Claims under Adjudication). The

Appellant has raised this objection before the approval of Resolution Plan. In

the present Appeal, the facts are quite different the Appellant's claims are not

only disputed claims but are the fraudulent extortionate credit transactions.

Thus, this Judgment is not helpful to the Appellant.

65. We find no force in the argument advanced by the Ld. Sr. Counsel for

the Appellant.

Issue No. (iii)

Whether this Appellate Tribunal can grant the relief as prayed in the Appeal?

66. Now, we have considered whether we can grant relief which is sought in

the Appeal. The Appellant has sought relief in the Appeal that the impugned

order dated 28.11.2019 passed by the Adjudicating Authority whereby

approved the Resolution Plan be set aside. The order dated 28.11.2019 upheld

by the Hon'ble Supreme Court in the Civil Appeal No. 2943-2944 vide

Judgement dated 10.03.2021. The Appellant is also aware of this fact that

once the impugned order is upheld by the Higher Court then this Appellate

Company Appeal (AT) (Insolvency) No. 1471 of 2019 34

Tribunal cannot set aside or quash the impugned order. For this purpose, it

is useful to refer the grounds of the Appeal (CA No. 847-848 of 2021) filed by

the Appellant, even during pendency of this Appeal, before Hon'ble Supreme

Court. Copy of Memo of the said Appeal is filed by the Appellant before this

Appellate Tribunal.

67. The background of the said Appeal is that the Resolution Plan of Kalpraj

was approved by the Adjudicating Authority vide impugned order. Against the

impugned order Kotak Investment Advisors Ltd. filed an Appeal (CA (AT) (Ins)

No. 344 - 345 of 2020) before this Appellate Tribunal. This Appellate Tribunal

vide Judgment dated 05.08.2020 allowed the Appeal. Thereafter, against this

Judgment Kalpraj filed Appeal before the Hon'ble Supreme Court and the

Appellant (FDSL) also filed the Civil Appeal No. 847-848 of 2021. In the memo

of Appeal following questions of law are framed by the Appellant:

"(a)...............................................................

(b). Whether the impugned order now deprive the Appellant fair and reasonable opportunity to get his Appeal filed against the order of the Adjudicating Authority, adjudicated and hence, violative of Rule of Audi Alteram Partemas the NCLT, after deciding the Appeal filed by the Kotak Investment Advisors Ltd., will not be in a position to adjudicate against the same order in the Appeal of the Appellant"

(c) Whether the order impugned might operate as constructive res-judicata as against the Appeal preferred by the Appellant and thus, renders the pending Appeal of the Appellant technically infractuous?

68. Thus, Ld. Sr. Counsel for the Appellant is unable to convince us that

when the impugned order has been upheld by the Hon'ble Supreme Court

then how the impugned order can be set aside in this Appeal.

69. Hon'ble Supreme Court in the case of Ghansyam Mishra and Sons

(Supra) examining the issue as to whether after approval of Resolution Plan

Company Appeal (AT) (Insolvency) No. 1471 of 2019 35

by the Adjudicating Authority, a creditor including the Central Government,

State Government or any local Authority is entitled to initiate any proceedings

for recovery of any of the dues from the Corporate Debtor, which are not part

of the Resolution Plan approved by the Adjudicating Authority. Hon'ble

supreme court in Para 95 of the Judgment held as under: -

"CONCLUSION

95. In the result, we answer the questions framed by us as under:

(i) That once a resolution plan is duly approved by the Adjudicating Authority under sub- section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan;

(ii) 2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect;

(iii) Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued."

...................................................................................................................................................... ..........................

130. In the foregoing paragraphs, we have held, that 2019 amendment to Section 31 of I&B Code is clarificatory and declaratory in nature and therefore will have a retrospective operation. As such, when the resolution plan is approved by NCLT, the claims, which are not part of the resolution plan, shall stand extinguished and the proceedings related thereto shall stand terminated. Since the subject matter of the petition are the proceedings, which relate to the claims of the respondents prior to the approval of the plan, in the light of the view taken by us, the same cannot be continued. Equally the claims, which are not part of the resolution plan, shall stand extinguished."

70. With the aforesaid preposition of law laiddown by the Hon'ble Supreme

court it is clear that when the Resolution Plan is approved by the Adjudicating

Company Appeal (AT) (Insolvency) No. 1471 of 2019 36

Authority the claims of the Appellant which are not part of the Resolution Plan

shall stand extinguished and the proceedings related thereto shall stand

terminated. Therefore, the Appellant cannot pursue such claims at such

belated stage before this Appellate Tribunal. The Appellant has not pursued

such claims, when the Resolution Plan was pending for approval before the

Adjudicating Authority.

71. Now, we have considered the another aspects of the matter, the plan

has already been implemented by the Successful Resolution Applicants and

RP has already been discharged. Therefore, the monitoring committee of Ricoh

India Ltd. (Corporate Debtor) has filed the Reply on behalf of the Respondent

No. 1.They submitted that now the Appellant cannot pursue its claim against

the Corporate Debtor after implementation of the plan and the Appellant's

claim deserves out right dismissal. In the light of the ruling of Hon'ble

Supreme Court in the case of CoC of Essar Steel India Ltd. Vs. Satish Kr.

Gupta 2019 SCC Online SC 1478, wherein Hon'ble Supreme court has inter

alia held as under: -

67. For the same reason, the impugned NCLAT judgment in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6)of the Code, also militates against the rationale of Section 31of the Code. A successful resolution applicant cannot suddenly be faced with "undecided" claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into amount payableinty amounts payable by a prospective resolution applicant who successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove.

Company Appeal (AT) (Insolvency) No. 1471 of 2019 37

72. Hon'ble Supreme Court has held that the Successful Resolution

Applicants cannot suddenly be faced with undecided claims after the

Resolution Plan submitted by him has been accepted as this would amount to

a hydra head popping up which would throw into uncertainty amounts

payable by a Prospective Resolution Applicant who successfully take over the

business of the Corporate Debtor. All claims are submitted and decided by the

RP so that a Prospective Resolution Applicant knows exactly what has to be

paid in order that it may then take over and run the business of the Corporate

Debtor. Thus, the Successful Resolution Applicant does on a fresh slate. In

para 39 of the impugned order Ld. Adjudicating Authority rightly held that:

"The Resolution Applicant, who will step into the shoes of Corporate Debtor

subsequent to approval of Resolution Plan by the Bench, shall not be held

responsible for any outstanding statutory dues and other claims for the period

before commencement of CIRP."

73. It is one of the significant fact which cannot be overlooked that the

Appellant Company was also under CIRP vide order dated 25.07.2019 and the

present Appeal filed by Ms. Pooja Bahry (RP) of FDSL on 19.12.2019.

Thereafter, the Resolution Plan of Link Star Infras Pvt. Ltd. and Mr. Dhaval

Jitendra Kr. Mistry was approved and Ms. Pooja Bahry (RP) of FDSL who has

filed the present Appeal has been discharged. The Successful Resolution

Applicants of FDSL have not filed any Application for permission to continue

this Appeal.

74. With the aforesaid, we are of the considered view that the Appellant has

failed to make out a case for interference in the impugned order, which is

Company Appeal (AT) (Insolvency) No. 1471 of 2019 38

already upheld by the Hon'ble Supreme Court. Thus, there is no merits in this

Appeal. Hence, the Appeal is dismissed, however, no order as to costs.

[Justice Jarat Kumar Jain] Member (Judicial)

The Appeal is heard by the Bench Comprising Justice Mr. Jarat Kumar Jain Member (Judicial) and Mr. Kanthi Narahari Member (Technical). Mr. K. Narahari is not readily available today, however, he requested to pronounce the Judgment on behalf of the Bench, therefore, as per Rule 92 of NCLAT Rules, 2016. The Judgment is pronounced for and on behalf of the Bench.

[Justice Jarat Kumar Jain] Member (Judicial)

New Delhi 26th July, 2021 SC

Company Appeal (AT) (Insolvency) No. 1471 of 2019