Govind Prasad Todi & Anr vs Satya Narayan Guddeti & Ors

[Arising out of Order dated 17.08.2022 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench, Court IV in I.A. 1528/ND/2022 in C.P. No. IB-1526/ND/2019]

IN THE MATTER OF:

1. Govind Prasad Todi C 757, New Friends Colony New Delhi - 110025.

2. Siddhartha Todi C 757, New Friends Colony New Delhi - 110025. ...Appellants

Versus

1. Satya Narayan Guddeti (Liquidator/ Erstwhile Resolution Professional of Ajanta Offset & Packaging Limited) Plot No. 23, First Floor, Durganangar Colony, Punjagutta, West Marredpally, Telangana, 500 082.

2. Canara Bank Parliament Street Branch Jeevan Bharti Building New Delhi - 110 001.

3. Corporation Bank Overseas (SAMV) Branch M-93 Connaught Circus, New Delhi - 110 001.

4. State Bank of India (SAM) Branch-II, 12th Floor, Jawahar Vyapaar Bhawan, Tolstoy Marg, New Delhi - 110 001.

5. Exim Bank

Cont'd.../ -2-

7th Floor, Office Block Tower 1, Adjacent Ring Road, Kidwai Nagar (East), New Delhi - 110 023.

6. Todi Investors (India) Pvt. Ltd. 225D, A. J. C. Bose Road, Kolkata, West Bengal - 700 020.

7. Vinayak Dealers Pvt. Ltd. Ideal Plaza, 11/1, Sarat Boase Road, South Block, S-207, Kolkata - 700 020.

8. South City Projects (Kolkata) Ltd. 375 Prince Anwar Shah Road, Kolkata - 700 068.

9. EDCL Infrastructure Ltd. EDCL House, IA Elgin Road, Kolkata - 700200.

10. Amritvani Exim Pvt. Ltd. 21-B, Gurusaday Road Kolkata - 700 019. ...Respondents

Present: For Appellants: Ms. Aditi Sharma and Mr. Karan Valecha, Advocates. For Respondent: Mr. Vaibhav Gaggar, Mr. Dhruv Mwehta, Mr. Mrityunjay M., Mr. Shashwat Anand and Mr. Dev Karn, Advocates for R-1. Ms. Richa Sandilya and Ms. Nita Sharma, Advocates for R-2 to 5. Mr. Abhishek Parmar, Advocate for RP.

JUDGMENT

ASHOK BHUSHAN, J.

This Appeal has been filed against the order dated 17.08.2022 passed

in I.A. 1528/ND/2022 in C.P. No. IB-1526/ND/2019 by which order the

Company Appeal (AT) (Insolvency) No. 1125 of 2022 -3-

Adjudicating Authority (National company Law Tribunal), New Delhi Bench,

has dismissed the I.A. 1528/ND/2022 filed by the Resolution Professional

for approval of the Resolution Plan and has directed for liquidation of the

Corporate Debtor namely Ajanta Offset packaging Limited. Brief facts of

the case giving rise to this Appeal are:

(i) The Adjudicating Authority vide order dated 04.02.2020

initiated CIRP process against the Corporate Debtor.

(ii) On 19.08.2020, the Resolution Professional issued Form G

calling for Expression of Interest (EOI) from interested

Resolution Applicants. In response to which two EOIs were

submitted.

(iii) Both the plans were discussed by the CoC in its 3rd meeting

and were found to be not feasible and viable. The Resolution

Applicants were called for negotiation.

(iv) In the 4th meeting of the CoC, decision was taken to put the

plans to e-voting, however, none of the plan can be approved.

(v) On 01.06.2021, the Resolution Professionals filed an I.A. No.

1992/2021 seeking exclusion of 222 days. The Adjudicating

Authority allowed certain extension.

(vi) The CoC in the 5th meeting held on 05.06.2021 and

09.06.2021 unanimously passed a resolution for liquidation of

the Corporate Debtor. I.A. No. 2710/2021 was filed by the

Resolution Professional praying for liquidation, on which

notices were issued by the Adjudicating Authority.

Company Appeal (AT) (Insolvency) No. 1125 of 2022 -4-

(vii) On 06.09.2021, Suspended Directors of the Corporate Debtor

appeared before the Adjudicating Authority and submitted

that they are interested in submitting Resolution Plan for

revival of the Corporate Debtor and they shall be filing an

application for above purpose.

(viii) I.A. No. 4388/2021 was filed by the Appellant seeking direction

that the Resolution Plan submitted by the Appellant be placed

before the CoC for consideration. The Appellant's case was

that the Corporate Debtor has been registered as MSME on

30.08.2021 and Appellants are now eligible to file Resolution

Plan by virtue of Section 240A of the Code.

(ix) The Adjudicating Authority passed an order on 28.09.2021

allowing the I.A. No. 4388/2021 filed by the Appellant. The

Resolution Professional to call for a lenders meeting for taking

appropriate decision and to deliberate on whether more

Resolution Applicants can be invited. The Adjudicating

Authority also extended the period of CIRP for 150 days.

(x) Appellants submitted Resolution Plan on 19.10.2021. CoC in

6th meeting held on 20.10.2021, deliberated and decided to

consider the Resolution Plan submitted by the Promoters.

(xi) The Resolution Plan was approved by the e-voting with the

requisite majority on 30.12.2021.

(xii) An application by the Resolution Professional for seeking

further extension of CIRP was rejected. This Tribunal vide its

Company Appeal (AT) (Insolvency) No. 1125 of 2022 -5-

order dated 23.03.2022 allowed extension of 15 days to submit

performance guarantee by the Resolution Applicant and for

filing application for approval of Resolution Plan.

(xiii) Performance guarantee was submitted and application for

seeking approval of Resolution Plan being I.A. No.

1528/ND/2022 was filed by the Resolution Professional which

was heard and rejected by the impugned order.

2. The Adjudicating Authority in the impugned order has held that

Appellants were not eligible to submit the Resolution Plan under Section

29A read with Section 240A since the date when application for submitting

EOI was issued, the Appellants were not eligible. It is further observed that

registration of the Corporate Debtor cannot operate retrospectively making

them eligible. It is further held by the Adjudicating Authority that although

Adjudicating Authority vide its order dated 28.09.2021 directed for

deliberation as to whether Resolution Applicants may be invited but the

CoC did not invite other Resolution Applicants which has denied level

playing field to other Resolution Applicants. After coming to the aforesaid

conclusion, the Adjudicating Authority held that the Appellants' Resolution

Plan is not in compliance with the Code and CIRP Regulations. After

coming to the said conclusion, the approval of Resolution Plan was set

aside and order of liquidation was passed.

Company Appeal (AT) (Insolvency) No. 1125 of 2022 -6-

3. In this Appeal notices were issued by this Tribunal on 14.09.2022,

where an interim order was also passed directing the Liquidator not to take

further steps in pursuance of the impugned order.

4. Learned counsel for the Appellant challenging the order impugned

contends that the Adjudicating Authority having directed on 28.09.2021 to

consider the Resolution Plan submitted by the Appellant which was duly

considered by the CoC and approved, the said approval cannot have been

set aside by the Adjudicating Authority. After registration of the Corporate

Debtor as MSME on 30.08.2021 by virtue of Section 240A the Appellant

has become eligible to submit a Resolution Plan. It is submitted that the

Adjudicating Authority having directed to submit Resolution Plan on

28.09.2021, cannot take contrary view in the impugned order. It is

submitted that there was no objection filed to the approval of the Resolution

Plan by any of the parties. There being no objection to the Resolution Plan,

the Resolution Plan could not have been rejected. In the CIRP process

when no Resolution Plan was approved and the Promoter wanted to revive

the Corporate Debtor by submitting a Resolution Plan, the Adjudicating

Authority ought to have approved the decision of the CoC. The decision of

the CoC approving the Resolution Plan was a decision taken in the

commercial wisdom of the CoC which ought not to have been interfered

with.

5. Learned counsel for the Liquidator has filed a reply, where it

supported the resolution of the CoC approving the Resolution Plan. It is

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submitted that the Resolution Professional has proceeded to consider the

Resolution Plan submitted by the Appellant in pursuance of the order

passed by the Adjudicating Authority on 28.09.2021. It is submitted that

on e-voting the Resolution Plan was approved with 67.34% voting share.

6. Learned counsel appearing for Respondent No.10, one of the

Financial Creditor who has initiated proceedings against the Corporate

Debtor has opposed the submission of the Appellant. It is submitted that

Appellant was not eligible to submit the Resolution Plan since his name

was not included in the list of Prospective Resolution Applicants which was

published by the Resolution Professional after issuance of Form G. It is

submitted that MSME registration of the Corporate Debtor shall not give

any benefit to the Appellant. In the reply which has been filed by the

Respondent No.10, it is further submitted that after the order dated

28.09.2021 Resolution Professional ought to have issued fresh Form G and

considered the Resolution Applicants who would have come to file plans to

revive the Corporate Debtor. It is submitted that Respondent No.10 has

also earlier filed Resolution Plan and is still desirous of submitting a plan.

7. We have considered the submissions of learned counsel for the

parties and perused the record.

8. From the facts as noted above, it is clear that Form G was issued by

the Resolution Professional on 19.08.2020 in pursuance of which two

Resolution Applicants filed the Resolution Plan which were considered but

were not approved by the CoC and Resolution was also passed by the CoC

Company Appeal (AT) (Insolvency) No. 1125 of 2022 -8-

on 05.06.2021 for liquidation and an application was filed for liquidation

by the Resolution Professional on 02.07.2021, on which application notices

were issued and it was only at that stage when Appellants have filed I.A.

No. 4388/2021 seeking direction to permit the Appellants - Suspended

Directors to submit Resolution Plan for revival of the Corporate Debtor.

The Adjudicating Authority passed an order on 28.09.2021. It is useful to

notice the order dated 28.09.2021, which is to the following effect:

"ORDER

Application filed by the proposed Resolution Applicant who is the ex- management of the Corporate Debtor seeking to allow the Resolution Plan of the ex-management to be placed before CoC for consideration and also seeking extension of CIRP by further 90 days or such from time which the Tribunal may deem fit. Learned Counsel for the applicant states that CIRP of 330 days has expired on 18.06.2021. At this stage, Learned Counsel for the Resolution Professional states that after the liquidation application was filed which is pending and listed today. The ex-management approached with this plan and Resolution Professional unless the adjudicating authority permits cannot entertain which plan after expiry of 330 days of CIRP. Since the CIRP is expired, no CoC Meeting can be held. Hence, the Plan cannot be put before the CoC. Learned Counsel for the ex-management states that the apart from money, the undertaking is given by Learned Counsel of proposed

Company Appeal (AT) (Insolvency) No. 1125 of 2022 -9-

Resolution Applicant not to transfer any of the employees and at present there are around seventy employees working for the Corporate Debtor.

In our view, Resolution should always be considered that at any stage and interest of employees and workers if is being taken on record by running company further should be considered as a prime concern.

We direct Resolution Professional to call a Lender's Meeting for taking appropriate decision and deliberate on whether more Resolution Applicants may be invited. While going through application, it is seen that the present application seeking 90 days' extension if granted from the date of expiry of 330 days also has expired on 16.09.2021 and present application is filed on 23.09.2021. Be that as it may, while considering the Resolution and probably the maximization of value and also the interest of employees and workmen, we direct that the extension of CIRP will be granted for 150 days from the expiry of 330 days which will now offer roughly 50 days period to complete the process and achieve Resolution. Prayer 'd' cannot be considered at this stage seeking dismissal of liquidation application as if the Resolution Plan is approved by CoC, then the same will be considered. Application is disposed of in terms of the above order."

Company Appeal (AT) (Insolvency) No. 1125 of 2022 -10-

9. From the order passed by the Adjudicating Authority, it is clear that

the Adjudicating Authority also extended the CIRP period and directed the

Resolution Professional to call a lenders meeting for taking appropriate

decision and deliberate on whether more Resolution Applicants can be

invited. After the order of the Adjudicating Authority dated 28.09.2021,

meeting of CoC took place on 20.10.2021, where it was decided to consider

the Resolution Plan submitted by the Appellants. However, CoC did not

decide to issue any fresh Form G and invite any other Resolution

Applicants, which act of the CoC has been adversely commented by the

Adjudicating Authority.

10. The Adjudicating Authority has rightly taken the view that the order

dated 28.09.2021 of the Adjudicating Authority directing consideration of

Resolution Plan of the Appellants was required but the CoC has to consider

other Resolution Applicants also. We have already noticed that registration

of MSME of Corporate Debtor obtained on 30.08.2020 that is much after

issuance of Form G. We are of the view that the Adjudicating Authority

vide order dated 28.09.2021 gave opportunity to the Resolution

Professional and the CoC to take steps to revive the Corporate Debtor. The

Adjudicating Authority is right in its observation that the CoC ought to

have taken steps in accordance with provisions of CIRP Regulations. In

Para 42 of the impugned order, the Adjudicating Authority made following

observations:

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"42. On perusal of Resolution Plan submitted by the Successful Resolution Applicant specifically clause 4.2 of the plan, we observe that with regard to the Compliance of Section 29A of Code, 2016, it was mentioned that the Resolution Plan has been considered under specific directions passed by the Hon'ble NCLT, New Delhi Bench vide order dated 28.09.2021. At the cost of repetition, we reiterate that this Tribunal vide order dated 28.09.2021 had directed the COC to consider whether more Resolution Applicants may be invited and no specific direction to consider the Resolution Plan proposed by the Suspended Directors was given. Therefore, the RP, COC as well as the promoters were duty bound to follow the procedure as laid down by the IBBI in the Code and CIRP Regulations."

11. In the facts of the present case, we are of the view that the order

dated 28.09.2021 was not followed in its true spirit resulting in non-

approval of Resolution Plan approved by the CoC on 30.12.2021. The

Respondent No.10 who was also one of the Financial Creditor, who had

filed Resolution Plan in the CIRP which was not approved, in his reply has

also stated that Respondent No.10 is still interested in submitting a

resolution plan for the Corporate Debtor and make sincere efforts to revive

its business. In Para 43 of the reply of the Respondent No.10 such

submission has specifically been made to the following effect:

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"43. It is stated that the Answering Respondent, being a PRA earlier, is still interested in submitting a resolution plan for the Corporate Debtor and make sincere efforts to revive its business. It is stated that by virtue of the increase in land prices in Faridabad, the value of the Corporate Debtor has increased a lot and the Answering Respondent is confident that if a fresh Eol is published, more PRAS, including the Answering Respondent, would express their interest in submitting a resolution plan."

12. After considering the submissions of learned counsel for the parties

and facts on record, we are of the view that the decision of the Adjudicating

Authority not approving the resolution of the CoC dated 30.12.2021

approving the Resolution Plan cannot be faulted. We, thus, affirm the order

of the Adjudicating Authority insofar as it disapproves the CoC decision

dated 30.12.2021 and reject I.A. No. 1528/2022 seeking approval of the

Resolution Plan. We, however, in the facts of the present case are of the

view that one more opportunity be given for revival of the Corporate Debtor,

for which Resolution Professional may issue a fresh Form G and take steps

for considering willing Resolution Applicants including the Appellants

before us, who has filed the Resolution Plan on the strength of registration

of the Corporate Debtor as MSME dated 30.08.2021. Opportunity to the

Resolution Professional and the CoC has to be time bound opportunity to

make one more effort to revive the Corporate Debtor, the liquidation being

Company Appeal (AT) (Insolvency) No. 1125 of 2022 -13-

the last resort. We, thus, are inclined to keep the order of the Adjudicating

Authority directing for liquidation of the Corporate Debtor in abeyance to

make one effort for revival, failing which liquidation order shall stand

revived.

13. In result, Appeal is disposed of in following manner:

(i) The order of the Adjudicating Authority dismissing the I.A. No.

1528ND/2022 is upheld.

(ii) The order of the Adjudicating Authority directing liquidation of

the Corporate Debtor is kept in abeyance to make one effort to

revive the Corporate Debtor as indicated above, failing which

order of liquidation shall stand revived.

(iii) Resolution Professional may proceed from the stage of

issuance of Form G and complete the entire process upto

decision of the CoC within 90 days from today.

14. The Appellant may also submit its Resolution Plan in response to the

Form G issued by the Resolution Professional as indicated above. In event,

the CoC approves a Resolution Plan, the Resolution Professional is directed

to file an application before the Adjudicating Authority within a period of

two weeks thereafter. In event, any Resolution Plan is approved the order

of liquidation shall become inoperative.

15. In event, no Resolution Plan is approved by the CoC within the 90

days' time, as allowed, the Corporate Debtor shall be put into liquidation

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and the Liquidator shall proceed in accordance with law. Parties shall bear

their own costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

NEW DELHI

14th February, 2023

Archana

Company Appeal (AT) (Insolvency) No. 1125 of 2022