Jaydip Ghosh & Ors vs Niraj Agarwal & Ors

Both the aforesaid appeals arise out of the same order dated

29.06.2022 passed by the Adjudicating Authority, National

Company Law Tribunal (hereinafter referred to as 'Adjudicating

Authority') passed in IA(IB) No.277/KB/2021 in CP(IB)

No.438/KB/2018. Both the appeals were heard together and on

22.05.2023 judgement was reserved.

2. By the impugned order the learned Adjudicating Authority

was pleased to approve the Resolution Plan submitted on behalf of

Respondent No.2/Square Four Housing and Infrastructure

Development Pvt Ltd, submitted by RP/R1.

3. The three appellants in Company Appeal (AT)(Ins)

No.839/2022 are suspended directors of Board of Directors of the

Corporate Debtor i.e. Castal Extrusion Pvt Ltd whereas appellant

in Company Appeal (AT)(Ins) No.861/2022 had claimed to be

tenant of the major portion of the land of the Corporate Debtor and

the appellant in this appeal whose resolution plan was not

approved has also assailed the approval of the Plan by the

impugned order.

5

4. In Company Appeal (AT)(Ins) No.839/2022 the appellants

have prayed for following reliefs:-

a) Quash and set aside the impugned judgement dated 29th

June, 2022 passed by the Learned Adjudicating Authority,

Kolkata Bench in IA (IB) No.277/KB/2021 in CP (IB)

No.438/KB/2018; and

b) Call for the records of CP (IB) No.438/KB/2018; and

c) Pass any other order which this Hon'ble Appellate Tribunal

deems fit in the facts and circumstances of the instant case.

5. Whereas in Company Appeal (AT)(Ins) No.861/2022 the

appellant have prayed for following reliefs:-

a) Impugned order/judgement dated 29th June, 2022 passed

by the Learned National Company Law Tribunal, Kolkata

Bench in IA(IB) No.277/KB/2021 in CP(IB)

No.438/KB/2018, be set aside.

b) Stay of operation of the impugned order/judgement dated

29th June, 2022 passed by the Learned National Company

Law Tribunal, Kolkata Bench in IA(IB) No.277/KB/2021 in

CP (IB) No.438/KB/2018, till the disposal of the instant

appeal.

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c) An order of injunction be passed restraining the

respondents either by himself and/or his men or agents or

assigns or otherwise howsoever from taking any step or

further steps or giving any effect or further effect to the

impugned order/judgement dated 29th June, 2022.

d) Ad-interim orders in terms of the prayers above.

e) Pass such order or further orders which this Hon'ble

Appellate Tribunal deems fit in the facts and

circumstances of the instant case.

6. Before proceeding it would be necessary to delineate certain

facts which are necessary for adjudication in the present appeal

which has emerged from materials available on record. It is

evident that long back on 06.05.2013, the Castal Extrusion Pvt

LTd (CEPL/CD) provided corporate guarantee to the Vijaya Bank

(now Bank of Baroda) for the loan availed by one Tantia

Construction Pvt Ltd (TCL). The Corporate Debtor also furnished

the industrial free hold land admeasuring 2.209 acres situated at

Mouze-Gopalpur, P.S. Rajarhat, Distt. 24 Parganas (North) as

security towards the loan availed by TCL. Since the loan account

was irregular, on 10.03.2014 the account of the borrower was

declared as NPA by the Vijaya Bank and Notice under Section 7

13(2) of SARFEASI Act, 2002 was issued by the Bank for

enforcement of security interest on the subject land. In the

meanwhile on 12.07.2014, one Mr. Harshvardhan Tantia, who was

holding 6.22% shares in the Corporate Debtor on 12.07.2014 gave

his consent for being appointed as Director of the appellant in

Company Appeal (AT)(Ins) No.861/2022 and subsequently on

17.7.2014 the appellant was incorporated under the Companies

Act, 2013 and Mr. Harshvardhan Tantia became the Director with

50% shareholding. Immediately thereafter, on 27.7.2014, the

Corporate Debtor entered into an unstamped and unregistered

lease rent agreement (Annexure A-2) with the appellant and lease

hold right over 1.90 acres of subject land was created in favour of

the appellant for a period of five years on monthly rental of

Rs.55000/- Thereafter on 01.08.2014, Notice under Section 13(4)

of the SARFEASI Act, 2002 was issued by the Vijaya Bank for

enforcement of security interest over the subject land. Mr.

Harshvardhan Tantia, who on the date of execution of the

unregistered lease agreement dated 27.07.2014 was holding

6.22% shares in the Corporate Debtor, on 14.03.2016 resigned

from the directorship of the Corporate Debtor. It is further evident

that on 26.02.2018 Vijaya Bank invoked the bank guarantee 8

against the Corporate Debtor and asked the Corporate Debtor to

pay an amount of Rs.57.34 crores alongwith interest. Even

thereafter on 26.07.2019 the Corporate Debtor entered into an

unstamped and unregistered rent agreement (Annexure A-1) with

the appellant whereas lease hold right over 1.90 acres of the

subject land was created in favour of the appellant for further

period of five years. We may deal with in detail in respect of

aforesaid two lease agreement subsequently.

7. Since the financial debt was not cleared by the Corporate

Debtor, the financial creditor i.e. Vijaya Bank (now Bank of

Baroda) was constrained to file an application under Section 7 of

the Insolvency & Bankruptcy Code, 2016 which, finally on

19.03.2020, was admitted and Corporate Insolvency Resolution

Process (CIRP) was initiated against the Corporate Debtor and

Respondent No.1, Mr Niraj Agarwal, was appointed as Interim

Resolution Professional. After the initiation of CIRP on 20.03.2020

IRP made the public announcement inviting claims from the

creditors of the Corporate Debtor. In the first meeting of

Committee of Creditors (CoC) which was held on 18.08.2020 the

IRP was confirmed as Resolution Professional (RP) and then on

06.10.2020 RP issued Form G for the invitation of Expression of 9

Interest (EOI) from the prospective Resolution Applicants.

Thereafter on 08.10.2020 RP issued a notice terminating the lease

created in favour of the Appellant and asked the appellant to

vacate the subject land/premises, upon expiry of 15 days from

date of receipt of this notice. The said notice was purported to be

notice issued under Section 106 of the Transfer of Property Act.

8. After issuance of Form G, RP received 7 EOIs. The appellant

also filed EOI whereupon RP shared information of memorandum

and other information with them. Since notice was issued by the

RP to the appellant for vacating the premises the appellant

subsequently approached the Civil Court (Jr. Division) North 24

Parganas against the eviction notice dated 08.10.2020 and on

27.11.2020 the Learned Civil Judge, Jr Division restrained the RP

from disturbing the peaceful possession of the appellant.

9. The RP on 15.12.2020 received proposal from 4 PRAs which

are as follows:-

i) Mangalkari Manufacturing & Marketing LLP.

ii) Square Four Housing & Infrastructure Development Pvt

Ltd (Respondent No.2).

iii) T-RMC Pvt Ltd (appellant)

iv) Vakunthpati Constructions Pvt Ltd.

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10. In the 4th CoC Meeting on 16.12.2020 sealed cover of four

Resolution Plans were opened. RP also informed the CoC that the

liquidation value of the CD is Rs.8.93 crores and the fair value is

Rs.11.76 crores. In the meanwhile on 23.12.2020 Transactional

Auditor submitted its report to the RP stating that the rent

arrangement between the appellant and Corporate Debtor was

under valued transaction. As per audit report the fair rent of the

subject land is Rs.4.85 lakhs per month whereas the Corporate

Debtor gave the subject land to the appellant for Rs.55000/- per

month.

11. Finally on 12.02.2021 e-voting on the Resolution Plan was

concluded and plan submitted by R2 was approved with 100%

voting share and resolution plan submitted by the appellant was

rejected by the CoC. Thereafter on 15.02.2021 RP issued letter of

intent to Respondent No.2 and same was accepted. Subsequently

RP filed an application i.e. Application No.IA(IB) No.277/2021

under Section 30(6) of the IB Code seeking approval of the

resolution plan. Finally by the impugned order dated . 29.06.2022

the Adjudicating Authority allowed the IA(IB) No. 277/2021 and

approved the plan submitted by Respondent No.2 as approved by

the CoC. The Adjudicating Authority also allowed IA No.107/2021 11

filed by the RP for directing the appellant herein to vacate the land

within a period of 30 days and also make payment to the Corporate

Debtor at the rate of Rs.2 lakhs per month.

12. Aggrieved with the order dated 29.06.2022 to the extent of

approval of plan the present Company Appeal (AT)(Ins)

No.861/2022 has been preferred by the appellant. Whereas

against the approval of the resolution plan and allowing IA

No.277/2021 three directors of the suspended Board of Directors

have preferred the appeal i.e. Company Appeal (AT) (Ins)

no.839/2022.

13. Though both the appeals were taken together, we had firstly

taken Company Appeal (AT)(Ins) No.861/2022 in which Mr.

Rudreshwar Singh, learned counsel had appeared on behalf of the

appellant. At the time of argument Mr. Singh submitted that on

27.07.2014 some portion of the land of the Corporate Debtor was

taken on rent by the appellant in view of a lease agreement which

was created for five years and expiring on 26.07.2019. Before

expiry of the lease agreement again on 26.07.2019 another lease

agreement was entered in between the parties and it was leased

out for further period of five years which was to be terminated on

25.07.2024. However, in the meanwhile in the month of March, 12

2018 Vijaya Bank (now Bank of Baroda) filed an application under

Section 7 of the IB Code and on 18.03.2020 it was admitted and

CIRP was initiated. Mr. Singh further submits that on 08.10.2020

eviction notice was issued by the RP which was replied by the

appellant on 12.10.2020.

14. Mr. Singh submits that by 15.12.2020 four resolution plans

were submitted to the RP and on 23.12.2020 CoC in its 5th Meeting

granted all the four proposed persons further time to re-consider

and submit revised plans. On 31.12.2020 revised plans were

submitted. Thereafter on 31.12.2020 CoC granted further time for

submission of the resolution plans. After receipt of fresh

resolution plans on 18.01.2021 and 27.01.2021, CoC discussed

all the four resolution plans and finally on 05.02.2021 resolution

plans were put for voting in which plan of Respondent No.2 was

declared as successful.

15. While assailing the impugned order, Mr. Rudreshwar Singh,

learned counsel for the appellant has drawn our attention to

running page 84 of the impugned order at para 9.2.3 and

submitted that the plan which has been approved had completely

changed the nature of the business. He submits that approved

plan reflects that on the approval of the resolution plan the 13

Resolution Applicant shall apply to the concerned Department for

conversion of the nature of factory land from industrial land to

residential/commercial land for Real Estate Project. He submits

that in view of Section 5(26) of the IB Code the said resolution plan

on this score alone appears to contrary to the statutory provisions

and as such the learned Adjudicating Authority has committed

error in approving the said plan. In course of arguments he has

also drawn our attention to running page 91 of the impugned order

and referred to Sl.No.6 para 10.2. It is better to reproduce para

10.2 as follows which is from running page 91 to 94:-

6 10.2 Title in respect of immovable property held by the Corporate Debtor The RP has argued that the 10.2.2 Based on the information received from impugned the Information Memorandum and during due transaction vide diligence, it is revealed that one T-RMC Pvt. 2014 Agreement Ltd. having its registered office at 35A, Dr. was covered Sarat Banerjee Road, 2 nd Floor, Kolkata- within the 700029, has been carrying on its business purview of activities of ready-mix concrete in a Section 46 (1) (ii) substantial portion of the Land/Premises of of IBC. It has the Corporate Debtor as an occupier. It has been brought on also been transpired that there are several record by the RP number of workers are engaged in the that at the business activities of the said T-RMC Pvt. Ltd. relevant time of execution of the In this regard, the RA proposes for passing an 2014 Agreement, order by the Hon'ble NCLT, Kolkata Bench the CD and T-

directing eviction of the said T-RMC from the RMC were aforesaid Land/Premises of the Corporate related parties Debtor along with its within the establishment/machineries/staffs/employees meaning of Section 5 (24) (d) 14

/raw materials and all other things of IBC. This is whatsoever. since Harshvardhan It is clarified that the RA shall not be in any Tantia, one of the manner liable to take any responsibility promoters of both and/or liability in respect of the said T-RMC the CD and T-

including its RMC, was a suppliers/contractors/vendors/employees/w director of T-RMC orkers/staffs or any other entities whatsoever and held more and the amount of Rs. 10.70 crore as offered than 2% shares by the RA shall remain unchanged. in the CD at the time of the For the purpose of smooth and uninterrupted execution of the take over, possess and occupy the assets and purported 2014 properties of the Corporate Debtor by the RA, Agreement. In necessary order is to be passed by the Hon'ble this regard, the NCLT directing the concerned District RP has drawn Administration, Police Authorities, Local our attention to Authorities and all other Statutory Authorities the following to provide full co-operation and assistance as relating to may be required and sought for by the RA. The Shareholding Hon'ble NCLT shall also pass an order pattern:

directing the said T-RMC to remove its  Shareholding establishment completely from the aforesaid of T-RMC in FY property immediately upon passing the order 2014-15 at and communication of the same to them. page 43 of the Application:

10.2.3 Based on the information available to Harshvardha the Resolution Applicant following assumption n Tantia held has been made relating to ownership, title and 50% shares of status of the immovable properties: and in T-RMC at the relevant i.all documents of title, deeds, and writings in date.

respect of all immovable properties of the  Shareholding Corporate Debtor, are complete title documents of CD in FY constituting all immoveable properties held in 2014-15 at the name of Corporate Debtor, wherever page 107, situated Application:

Harshvardha ii.the properties together with the buildings n Tantia and other structures is owned by the company personally and that no other charge exists on such held 6.22% properties other than in favour of the Financial shares of and Creditors who are part of the Committee of in the CD at Creditor ("CoC") and that all the properties are the relevant in exclusive possession as on the Effective date at the date. time of execution of 15

iii.save and except the occupation of T-RMC in the 2014 a portion of the said Property of the Corporate Agreement. Debtor as stated herein above, that there are  Details of no encumbrances, encroachment or existing appointment lease, sub-lease or rent, on the property owned and or leased to the Corporate Debtor, except to the resignation of Secured Financial Creditors forming part of the Harshvardha Committee of Creditor ("CoC") as disclosed n Tantia from above and in the information memorandum. If, T-RMC (Form as on the Effective date any encumbrances, No. DIR-11) at encroachment or existing lease, sub-lease or pages 105- rent, on the property owned or leased to the 106:

Corporate Debtor is found, the same shall be Harshvardha deemed to be vacated w.e.f. approval of the n Tantia was Resolution Plan and all such contract in this the director of respect, would be deemed to be cancelled. The T-RMC since Resolution Applicant accordingly expects the 17.07.2014 vacant & peaceful of the property subsequent 14.03.2016. to the approval of the Resolution Plan.

The said tenancy arrangement was subsisting, and being acted upon, as at 18.03.2018, i.e. two years preceding the date of insolvency commencement.

Accordingly, the arrangement pursuant to the 2014 Agreement was continuing within 2 years preceding the Insolvency Commencement Date, 18.03.2020, and as such, falls within the purview of Sections 46 (1) (ii) of IBC. 16

The RP has also submitted a valuation report, which shows that the fair monthly rent should have been Rs.4.85 lakh instead of Rs. 55,000/- and as such there was a shortfall of Rs.4.30 lakh per month.

Upon perusing the documents filed by the RP and considering submissions by the parties, it is ordered that the T-RMC Private Limited and any other entity, if there be any, is directed to remove its establishment along with employees, staffs, officers, workmen engaged by them including all its machineries from the subject land/premises of CEPL within 15 days from the date of approval of the Resolution Plan and handover vacant peaceful possession of the land/premises to Resolution Applicant. 17

It is further directed that the Resolution Applicant shall not be in any manner liable to take any responsibility and/or liability in respect of the said T-RMC including its suppliers/ contractors/ vendors/ employees/ workers / staffs or any other entities whatsoever.

It is further directed that in the event the said T-RMC fails and/or neglects to remove its entire set-up along with all officers, employees, staffs and workmen engaged by them including all its machineries from the subject land/premises of CEPL as stated above within the stipulated period, the concerned District Administration, Police Authorities, Local Authorities and all other Statutory 18

Authorities to provide full co- operation and assistance as may be required and sought for by the Resolution Applicant.

Though the Valuation Report shows that the fair rent for the subject land/premises of the Corporate Debtor should be Rs.4.85 lakh but for the ends of justice, it is ordered that the said T-RMC shall make a further payment to the Corporate Debtor at the rate of Rs.2,00,000/- per month to be calculated from the date of creation of such tenancy in its favour till the date of handing over peaceful vacant possession of the land to Resolution the Applicant within the period stipulated above. In the event of failure to make such payment within the stipulated period, the Corporate Debtor and/or 19

the Resolution Applicant shall be at liberty to claim and realise mesne profit from T-RMC at such rate as may be reasonably decided by the Corporate Debtor and/or the Resolution Applicant. The Corporate Debtor and/or the Resolution Applicant shall be at liberty to take appropriate step against T- RMC for their eviction and realisation of the said dues in the event their failure to comply this order.

The said I.A. (IB) 107//KB/2021 and I.A. (IB) 1302//KB/2020 IN C.P (IB) No. 438/KB/2018 is thus disposed of with the directions as above.

10.2.4 Any dues, liabilities, charge, interest, penalty or cost on the Corporate Debtor relating to any period prior to the insolvency commencement date is deemed to Granted. All waived/written-off with respect to the dues, liabilities, immovable property. Such dues for the period charge, interest, prior to the insolvency commencement date penalty or cost on shall form part of the Operational Creditor the Corporate (other than workmen/ employees) and if claim Debtor relating to has been filed by the concerned authorities any period prior then the same to be paid on pro-rata basis from to the the total payment envisaged under the commencement 20

resolution plan for Operational Creditors date of (Other than workmen/ employees). insolvency are to Accordingly, if no such dues are claimed upto be the Effective Date by the concerned authority waived/written-

then the Resolution Applicant cannot be held off with by the liable for any dues outstanding prior to the concerned insolvency commencement date and no authorities payment will be made by Resolution Applicant relating to the in that respect in addition to the amount as immovable envisaged under the plan. property.

10.2.5 Upon approval of the Resolution Plan, the Department shall cause to convert the nature of the land from industrial purpose to Allowed. The residential/commercial purpose upon an concerned Application made by the Resolution Applicant Authority is in that respect. The said conversion of land is directed to grant an integral part for the success of the conversion of the Resolution Plan. nature of land in terms of the application for conversion to be made by the Resolution Applicant.

16. In sum and substance it has been argued by Mr. Singh that

the learned Adjudicating Authority in view of complete change of

the nature of business of the Corporate Debtor as incorporated in

the resolution plan has committed serious error in approving the

same. He has also submitted that right from the very beginning

the RP had not taken any step for revival of the Corporate Debtor.

To substantiate his submission he has placed reliance on para 86

of a judgement of Hon'ble Supreme Court reported in (2019) 2 SCC 21

1 Arcelormittal India Pvt Ltd Vs Satish Kumar Gupta & Ors

which is reproduced hereinbelow:-

"83. Given the fact that both the NCLT and NCLAT are to decide matters arising under the Code as soon as possible, we cannot shut our eyes to the fact that a large volume of litigation has now to be handled by both the aforesaid Tribunals. What happens in a case where the NCLT or the NCLAT decide a matter arising out of Section 31 of the Code beyond the time limit of 180 days or the extended time limit of 270 days? Actus curiae neminem gravabit - the act of the Court shall harm no man - is a maxim firmly rooted in our jurisprudence (see Jang Singh V. Brijlal & Ors. S.C.R. at page 149, and A.R. Antulay V. R.S. Nayak & Ors. S.C.R. at page 71). It is also true that the time taken by a Tribunal should not set at naught the time limits within which the corporate insolvency resolution process must take place. However, we cannot forget that the consequence of the chopper falling is corporate death. The only reasonable construction of the Code is the balance to be maintained between timely completion of the corporate insolvency resolution process, and the corporate debtor otherwise being put into liquidation. We must not forget that the corporate debtor consists of several employees and workmen whose daily bread is dependent on the outcome of the corporate insolvency resolution process. If there is a resolution applicant who can continue to run the corporate debtor as a going concern, every effort must be made to try and see that this is made possible.3 A reasonable and balanced construction of this statute would therefore lead to the result that, where a resolution plan is upheld by the Appellate Authority, either by way of allowing or dismissing an appeal before it, the period of time taken in litigation ought to be excluded. This is not to say that the NCLT and NCLAT will be tardy in decision making. This is only to say that in the event of the NCLT, or the NCLAT, or this Court taking time to decide an application beyond the period of 270 days, the time taken in legal proceedings to decide the matter cannot possibly be excluded, as otherwise a good resolution plan may have to be shelved, resulting in corporate death, and the consequent displacement of employees and workers."

17. Learned counsel for the appellant has placed reliance on an

unreported judgement of this Appellate Tribunal in Company

Appeal (AT) (Ins) No.141 of 2018, Industrial Services Vs. Burn

Standard Company Ltd & Anr. He submits that the resolution

plan approved by the Adjudicating Authority reflects that the main 22

business of the Corporate Debtor was to be closed and it was

decided to retrench all the workmen/employees which is not in

consonance with the law particularly as held in Industrial

Services case (Supra). He has placed reliance on para 27, 28 and

29 of the aforesaid judgment which are reproduced hereinbelow:-

"27. In "Y. Shivram Prasad Vs. S. Dhanapal & Ors. ─ Company Appeal

(AT) (Insolvency) No. 224 of 2018 etc." this Appellate Tribunal by its

judgment dated 27th February, 2019 while referring the decision of the

Hon'ble Supreme Court including the provisions of the 'I&B Code' held

that the 'Resolution Professional' and the 'Liquidator' are to ensure that

the company remains a going concern. Steps should be taken for

resolution at different stages including the liquidation stage to keep the

Company a going concern in the interest of the employees. On failure, at

the last stage the death of the 'Corporate Debtor' be made by liquidation.

28. The Hon'ble Supreme Court in "Swiss Ribbons Pvt. Ltd. & Anr. vs.

Union of India & Ors" (Supra) specifically held that the closure of the

Company is against the Preamble of the Code, which reads as follows:

21. It can thus be seen that the primary focus of the legislation is

to ensure revival and continuation of the corporate debtor by

protecting the corporate debtor from its own management and from

a corporate death by liquidation. The Code is thus a beneficial

legislation which puts the corporate debtor back on its feet, not

being a mere recovery legislation for creditors. The interests of the 23

corporate debtor have, therefore, been bifurcated and separated

from that of its promoters / those who are in management. Thus,

the resolution process is not adversarial to the corporate debtor

but, in fact, protective of its interests. The moratorium imposed by

Section 14 is in the interest of the corporate debtor itself, thereby

preserving the assets of the corporate debtor during the resolution

process. The timelines within which the resolution process is to

take place again protects the corporate debtor's assets from further

dilution, and also protects all its creditors and workers by seeing

that the resolution process goes through as fast as possible so that

another management can, through 40 its entrepreneurial skills,

resuscitate the corporate debtor to achieve all these ends."

29. In view of the aforesaid fact, as the 'Resolution Plan' is against the

object of the Code and the application under Section 10 was filed with

intent of closure of the 'Corporate Debtor' for a purpose other than for the

resolution of insolvency, or liquidation, we hold that the part of the

'Resolution Plan' which relates to closure of the 'Corporate Debtor'/

'Corporate Applicant' being against the scope and intent of the 'I&B Code'

is in violation of Section 30(2)(e) of the 'I&B Code'."

18. Mr Rudreshwar Singh has also referred to paras 37 and 38

of judgement reported in (2022) 4 SCC 617 K.N. Rajakumar Vs

Nagarajan & Others which is reproduced hereinbelow:-

"37. It could thus be seen that one of the principal objects of the IBC is providing for revival of the Corporate Debtor and to make it a going 24

concern. Every attempt has to be first made to revive the concern and make it a going concern, liquidation being the last resort.

38. From the order of NCLT dated 4.6.2021, it could be seen that the Corporate Debtor has already settled the issue with the erstwhile financial creditors, who have resolved to withdraw the CIRP proceedings and by virtue of withdrawal of CIRP proceedings, the Corporate Debtor now is a going concern."

19. Mr Singh has also placed reliance on paras 20.1 and 21 of

judgement reported in (2020) 15 SCC 1 Babulal Vardharji Gurjar

Vs Veer Gurjar Aluminium Industries Pvt Ltd and another

which is reproduced hereinbelow:-

"20.1. As noticed from Preamble, the Code came to be enacted to

consolidate and amend the laws relating to reorganisation and

insolvency resolution of corporate persons and even of partnership firms

and individuals in a time bound manner; the objectives, inter alia, being

for maximisation of value of assets of such persons and balance of

interest of all the stakeholders."

21. The expositions abovementioned make it clear that the Insolvency

and Bankruptcy Code, 2016 has been enacted to consolidate and amend

the laws relating to reorganisation and insolvency resolution of corporate

persons and other entrepreneurs in a time bound manner so as to ensure

maximisation of value of assets of such persons and to balance the

interest of all the stakeholders. As regards corporate debtor, the primary

focus of the Code is to ensure its revival and continuation by protecting it

from its own management and, as far as feasible, to save it from

liquidation. As tersely put by this Court in Swiss Ribbons (supra), the 25

Code is thus a beneficial legislation which puts the corporate debtor back

on its feet, not being a mere recovery legislation for creditors."

20. Mr Singh, learned counsel for the appellant further submits

that it is true that law settled on the point that commercial wisdom

of the CoC may not be interfered with but at the same time if in

the garb of commercial wisdom a decision is taken by the CoC

which is per se contrary to the statutory provision then the same

can be looked into and interfered with in an appeal. In support of

his submission he has placed reliance on 2022 SCC Online NCLAT

289 63 Moons Technologies Ltd Vs Administrator of Dewan

Housing Finance Corporation Ltd and others.

21. Mr. Kumarjit Banerjee, learned counsel has appeared on

behalf of Respondent No.1/RP and opposed the appeal. He

submits that the appeal is fit to be rejected primarily on the ground

that the appellant appears to have connived with the Corporate

Debtor in frustrating the CIRP. He submits that even after account

of the Corporate Debtor was declared NPA the appellant entered

into an unlawful lease agreement with the Corporate Debtor and

major portion of the land Corporate Debtor was occupied on the

strength of such untenable lease agreement for several years. He 26

submits that since the appellant has not approached this Tribunal

with clean hands, the appellant is not entitled to get any relief.

22. Mr. Banerjee, learned counsel for the Respondent has also

referred to page 4 of the minutes of 6th COC Meeting dated

02.01.2021 to show that condition of the corporate debtor was in

such a dilapidated state that Insurance company had even refused

to insure factory premises and plant and machinery of the

Corporate Debtor. Page 4 of the minutes of the 6 CoC Meeting

deals with insurance which is required to be reproduced:-

"Insurance:

The Chairperson informed the Committee that he had sought quotations

from three Insurance Companies viz Cholamandalam MS General

Insurance, Tata AIG and National Insurance Co Ltd for insuring the

factory premises and the plant and machinery of the CD at Narayanpur.

The representatives of the insurance companies had visited the factory

site of the CD for survey. However, subsequently, they have verbally

refused to underwrite the insurance of the factory premises and the plant

and machinery therein citing that the operations of the factory is closed

for many months now. Consequently, the CD's assets at the Narayanpur

factory location remain un-insured despite the best efforts of the RP and

the CoC Member."

27

23. Mr. Banerjee, learned counsel for the Respondent further

submits that change of nature of business of the Corporate Debtor

may not be termed as being against the provision of law. He

submits that the provisions in the Code as well as Rules empowers

for transfer of property/land of a Corporate Debtor. He further

submits that material on record suggest that the factory which was

being run by the appellant was not in running condition and

equipments were much older. He further submits that in view of

situation prevailing nothing was surviving for revival of the

business of the Corporate Debtor. The factory was completely in

dilapidated condition having old technology. Moreover, the factory

was not in running condition. He also submits that the factory

was established long back and area within which presently the

said factory was situated had come into Municipal area which is

residential one. He also submits that licence of the factory was

not renewed for several years and more so factory was uninsured

for several years. In such situation it was impossible to initiate for

revival of the said business of the Corporate Debtor and as such

in accordance with law established the approved plan was

submitted and every care has been taken in the said plan. In

support of his submission regarding change of the business Mr. 28

Banerjee, learned counsel has placed reliance on a judgement of

this Tribunal reported in (2021) 130 taxmann.com 147(NCLAT) in

Next Orbit Ventures Fund Vs Print House (India) Pvt Ltd. He

has referred to paras 3(50), 37 and 38 of the said judgement which

are reproduced hereinbelow:-

"3.50. We are of the view that there is nothing the Code that inhibits a

Resolution Applicant from pursuing a line of business that is different to

the erstwhile business of the 'Corporate Debtor'. If this proposition is

accepted, then it would mean that there can never be a situation where

the successful Resolution Applicant can revive a 'Corporate Debtor' by

pursuing a different line of business. We can easily conceive a situation

where the business of the 'Corporate Debtor' is overtaken by technology

- examples that come to mind are the pager business, fax business, telex

business etc., which were consigned to the dustbin of history when

technology overran them. Besides, the Code only contemplates that to the

extent possible, the 'Corporate Debtor' shall be continued to be run as a

going concern. That, by no means, is enough to bind the Resolution

Applicant to the erstwhile business of the 'Corporate Debtor', especially

when there is obsolescence of the business pursued by the 'Corporate

Debtor'."

"37. In today's scenario, in the Printing Industry, change is the biggest determiner. The amount and pace of change is unprecedented. Together, 'Printing' and 'Online' are greater than the sum of their parts. We are seeing a continuing movement towards automation and robotics, opening up a lot of new ideas and challenges. The Printing Industry is feeling the force of the digital age where new areas of innovation are being entered 29

into for protecting the business and making products relevant in today's digital age. It is oft repeated that 'Companies rarely die from moving too fast, and they frequently die from moving too slowly'. Merely because the 'Resolution Plan' does not stick to the core printing business, in its truest sense, it cannot be said that the approved 'Resolution Plan' lacks the right vision and proposition specially in the light of the converging market forces and refocused business models. Further, it has been agreed by the 'Resolution Applicant' that the new management will upgrade the skills of the workmen and employees for this business cycle. In 'Arcelor Mittal Company Appeal (AT) (Insolvency) No. 417 of 2020 with Company Appeal (AT) (Insolvency) No. 744 of 2020 India Private Limited' (Supra) it has been observed by the Hon'ble Apex Court that 'if there is a 'Resolution Applicant' who can continue to run the 'Corporate Debtor' as a going concern every effort must be made to try and see if this is possible'. 'Going concern' does not mean that the nature of the business cannot be changed with an objective to 'add value' or 'create synergy'. If it is viewed in this perspective, it would be interpreting the word 'going concern' in a very narrow compass which is not the scope and objective of the Code.

38. The Hon'ble Supreme Court has observed that paramount importance is to be given to the decision of CoC, which is taken on the basis of commercial wisdom which cannot be interfered with excepting under the limited scope as provided under Sections 30 & 31 of the I&B Code. At the cost of repetition 'IBC' provides for restructuring of the 'Corporate Debtor' change in technology, change in portfolio of goods and services produced or rendered by the 'Corporate Debtor' as long as the scope and objective of the Code is not hampered and therefore we are of the considered view that if the Resolution Plan contemplates a change in the nature of business to another line when the existing business is obsolete or non-

viable, it cannot be construed that the Resolution Plan is not 'feasible or viable'. It can be seen from the aforenoted Sections 30(2) & 31 and Regulations 37, 38 and 39 that there is nothing in the Code which prevents a 'Resolution Applicant' from changing the present line of business to adding value or creating 'Synergy' to the existing assets and converting an obsolete line of business to a more 'viable and feasible' option. Keeping in view the ratio laid down by the Company Appeal (AT) (Insolvency) No. 417 of 2020 with Company Appeal (AT) (Insolvency) No. 744 of 2020 Hon'ble Supreme Court in the recent Judgement 'Kalpraj Dharamshi & Anr.' (Supra), and the fact that there is no 'material irregularity in the exercise of powers' by the Resolution Professional; and the approved 'Resolution Plan' is not in contravention of any law for the time being in force, we are of the view that there is no illegality or infirmity in the Impugned Order of the Learned Adjudicating Authority." 30

24. On the aforesaid ground, it was submitted by Mr. Banerjee,

learned counsel that there is nothing in appeal warranting

interference with the impugned order and it is fit to be rejected.

25. Learned counsel for the Respondent has also referred to

Information Memorandum which is Annexure A to the reply filed

on behalf of Respondent No.1. He has referred to running page

34-37 i.e. Notes 4, 8 and 11 which is reproduced hereinbelow:-

"4. Tangible assets of Rs.20,36,496/- comprises of land property, plant

and equipment.

Land Rs.11,37,701/-

Plant and Machinery Rs.6,49,132/-

Factory Shed and Building Rs.2,32,070/-

Others Rs. 17,593/-

8. Municipal Taxes and Khazana liability w.r.t. factory premises remains

unpaid for more than 15 years. The same has not been provided for in

the books of accounts.

11. Factory premises including the plant and machinery has not been

insured for the last few years and continues to remain uninsured as on

date. Steps have been taken to get the insurance done." 31

26. On the aforesaid facts also it was argued by Mr. Banerjee,

learned counsel, that in such a situation there was no reason for

taking steps for revival of the same business.

27. Mr. Banerjee, learned counsel has also drawn our attention

to paras 2b, c, d, f, h, I, m, n and o of reply filed on behalf of R1

which are reproduced hereinbelow:

"b. It is stated that the Corporate Debtor was at all relevant times prior to insolvency commencement date engaged in the business of aluminium extrusion and selling of aluminium profiles to customers in market. Corporate Debtor at present is not a going concern and that it ceased to carry on any business operation on account of obsolescence of its plant and machinery rendering its products uncompetitive and carriage of business economically unviable and unfeasible. It is pertinent to note that the Information Memorandum (hereinafter "IM") issued by the RP in course of the CIRP of the Corporate Debtor clearly mentions that the plant and machinery of the Corporate Debtor is extremely old. It specifically mentions that the 600 MT capacity hydraulic press machine, the principal component of the plant and machinery, is 40 years old and is in urgent need of repairing in order to start functioning. Furthermore, it would be evident from the perusal of the said IM that the factory premises and plant and machinery had not been insured for past several years leading up to insolvency commencement date and continued to remained uninsured as on the date of preparation of the IM. In this connection, a relevant extracts from the IM issued by the RP, the Respondent No. 1 herein, on 19th September, 2020 is annexed hereto and marked as Annexure "A".

c. In fact, it would also be evident from the perusal of the IM that the last payment in respect of the Municipal Taxes and Khazna liability of the Corporate Debtor was made for the period of 2005- 06 to 2007-08, and it remains unpaid for entire period of 15 years thereafter. The said liability has not even been provided for in the books of accounts of the Corporate Debtor. In this connection, copy of the receipt for last payment of Khazna by the Corporate Debtor is annexed hereto and marked as Annexure "B".

d. Furthermore, as per the information and documents in possession and custody of the answering respondent herein, there is no factory license necessary for running the factory of the Corporate Debtor, and the 32

extrusion unit was running without the requisite license and approval(s) for the past several years. No copy of the last license was available to the RP.

f. On account of the obsolescence of the Corporate Debtor's plant and machinery, and the corresponding cost of overhauling the existing plant and machinery and economic and financial viability of the same, the Committee of Creditors (hereinafter the "CoC") in their commercial wisdom deemed it appropriate to approve the proposal to shut down the existing business line of the Corporate Debtor with an intent of reviving the business of the Corporate Debtor contained in the approved resolution plan submitted by the Respondent No. 2 herein by 100% voting share. It is submitted that shutting down an existing business line of Corporate Debtor does not tantamount to dissolution and/or corporate death of the Corporate Debtor. In fact Regulation 37 of IBBI (Insolvency Resolution Process of Corporate Persons) Regulations, 2016 (hereinafter "CIRP Regulations") itself envisages that an existing line of business and/or bucket(s) of goods and services provided by the Corporate Debtor can be altered. As such, it would be evident from the perusal of the provisions of the CIRP Regulations that alteration of the existing business line of the Corporate Debtor, and the corresponding shutting down of existing undertaking of the Corporate Debtor, is permissible in law and in fact is one of the envisaged modalities for revival of the Corporate Debtor. The present state and condition of the plant and machinery of the Corporate Debtor located at the subject premises exposed to the elements would be evident from the representative photographs taken at the site, copies whereof are annexed hereto and marked as Annexure "D".

h. It is also pertinent to note that the fact that reviving the undertaking of the Corporate Debtor as a going concern was unfeasible and unviable would also be evident from the fact out of the 3 resolution plans submitted in course of the CIRP of the Corporate Debtor, 2 plans proposed to alter the business line of the Corporate Debtor by shutting down the extrusion undertaking whereas the third plan proposed to first conduct a Techno Economic Viability ("TEV") study to ascertain if revival of the extant undertaking was at all viable. i. Furthermore, the question pertaining to alteration of the business line of the Corporate Debtor is no longer res integra and this Hon'ble Tribunal has already unequivocally held that alteration of business line of the Corporate Debtor and the corresponding shut down of an existing undertaking, to be permissible under the provisions of the Code and/or regulations framed thereunder.

m. The purported tenant is the beneficiary of a fraudulent transaction perpetrated at the behest of the promoters of the Corporate Debtor in favour of the said T-RMC, which at the relevant time was a related party of the Corporate Debtor and it has been held by the Hon'ble Adjudicating 33

Authority that the entire transaction was carried into effect with the sole mala fide intent of keeping the subject asset out of the reach of the creditors of the Corporate Debtor in so far as the said transaction was given effect to post issuance of 13 (2) notice on 10 March, 2014 and 4 days prior to issuance of 13(4) notice on 02 August, 2021. It is stated that the purported tenancy has been held to be a fraudulent transaction under section 49 of IBC and the said finding has not been challenged in the present appeal and such the Appellants have no locus whatsoever to aver, allege and/or impugn the subject resolution plan on account of the fact that there is a purported tenant at the subject premises,

n. It is further pertinent to note that the aforementioned purported tenancy divesting the substantially whole of the sole immovable asset of the Corporate Debtor to a related party was given effect to without any requisite resolution passed by the Board of Directors of the Corporate Debtor or the shareholders in a general meeting of the company. The absence of requisite resolution(s) for encumbering/ divesting substantially whole of the immovable asset of the Corporate Debtor further buttress the ex facie illegal nature of the purported transaction. In this connection copies of minutes of meeting of Board of Directors of the Corporate Debtor and the minutes of General Meeting are annexed hereto and collectively marked as Annexure "E".

o. It is stated that the subject Resolution Plan does not envisage eviction in its terms and the eviction of the purported tenant is being claimed pursuant to the order of the Adjudicating Authority holding the entire transaction to be fraudulent and/or undervalued transaction. In this connection, it is pertinent to note that the said purported tenancy was created:

(v) by an unregistered and unstamped document;

(vi) with a then related party;

(vii) post receipt of notice under Section 13 (2) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 (hereinafter the "SARFAESI Act") and 4 days prior to issuance of the notice under Section 13 (4) of the SARFAESI Act upon incorporation of T-RMC on 26 July 2014:

(viii) divesting 1.90 out of 2.21 acres of the sole immovable asset of the Corporate Debtor, and accordingly essentially alienating the whole of the undertaking of the Corporate Debtor,"

28. Mr. Banerjee, learned counsel has also drawn our attention

to running page 245-299 of Volume II of Memo of Appeal which is 34

copy of resolution plan submitted by the appellant/tenant. He has

specifically drawn our attention to running page 258 relating to

employees of the Corporate Debtor. It reflects that it has been

incorporated that "Retention of employees-Post acquisition of CD by

RA all the existing workman and staff shall be released/laid

off/terminate with outstanding dues of gratuity and PF, as stated

in the resolution plan. The amount dues to be existing employees

and workman shall be paid by the new management. Further RA

may re-appoint or appoint some of the employees and workman on

the basis the requirement on new terms and conditions." In the plan

submitted by the appellant page 263 reflects that there is 'Nil'

against workman dues. He has also drawn our attention to

running page 259 which is part of the resolution plan submitted

by appellant T-RMC Pvt Ltd to show that plant operation of the

Corporate Debtor was shut down for long period and further the

appellants' plan was not specific on the point of revival. The

proposal for take over as incorporated in the plan of the appellant

was referred by the learned counsel for the appellant which is

reproduced hereinbelow:-

"Proposal for the takeover 35

On payment of the Upfront Payment under the Proposed

Resolution Plan, RA will do the Techno Economic Viability (TEV)

of the Plant and estimate the cost of refurbishment and

Maintenance of the Plant and other critical Machinery in the

Factory as the entire Plant of the CD has been in Shut Down

mode for many months. Basis the TEV study, RA will be

decided whether to restart the Plant or put the land to

alternate use or both. The said action will be the basis on

which the pipeline of the orders for execution can be build up

or some alternate plan can be put in place. The Inventory

requirements for execution of the Sale Orders may be also from

the existing network or Suppliers of the CD/Resolution

Applicant."

29. Mr Banerjee, learned counsel submits that on the one hand

the appellant is assailing the approved plan on the ground of

change of the business whereas the plan submitted by the

appellant also reflects that in view of fact that the plant operation

was shut down since long the appellant was also of the view to put

the land to alternate use.

36

30. Mr. P. Nagesh, learned senior counsel appearing on behalf of

Respondent No.2, whose resolution plan has been approved,

submitted that the appeal has been filed maliciously only with a

view to drag the issue. He also highlighted that the account of the

Corporate Debtor was declared as NPA on 10.03.2014 and only

thereafter on 17.07.2014 the appellant was incorporated under the

Companies Act, 2013 and immediately thereafter on 27.07.2014

the Corporate Debtor entered into unregistered lease agreement

with the appellant. Though CIRP was initiated on 18.03.2020,

application under Section 7 of the IBC was filed on 03.04.2018,

Still thereafter 2nd unregistered lease agreement was executed

between the appellant and Corporate Debtor wherein for further

five years lease agreement was executed, that too without

authorisation by the Board of Directors of the Corporate Debtor.

He submits that after initiation of CIRP notice for termination of

the tenancy was also issued by the RP to the appellant with a

request to vacate the premises/land by its notice dated

08.10.2020. However, still one way or the other the appellant is

enjoying benefits as tenant over the major portion of the land of

the Corporate Debtor.

37

31. In reply to the plea taken on behalf of the appellant that

change of the business was not permissible, Mr. Nagesh has firstly

referred to Section 5(26) of the IBC and also relied on Regulation

37 of IBBI (Insolvency Resolution Process for Corporate Person)

Regulation 2016. He has also referred to resolution plan

submitted by Respondent No.2 which starts from running Page

340 of Volume II of the Memo of Appeal. He has drawn our

attention to business plan incorporated in the resolution plan of

the Respondent No.2 which is at running page 358 to 360 and

reproduced herebelow:

"4 BUSINESS PLAN Estimated reasons for the present position of the Company M/s Castal Corporation Private Limited (CCPL) purchased 2.209 acres of land situated and lying at Narayanpur, P.O.-R. Gopalpur, Dist. 24 Parganas (North), West Bengal by two registered deeds of conveyance dated 19.05.1964. CCPL thereafter constructed sheds, buildings, etc, over the said plot of land from time to time and started non-ferrous metal factory therein. CCPL was amalgamated with G. Das & Company Private Limited w.e.f. 01.07.1985. On 08.09.1988, G. Das & Company Private Limited became a public company.

On 31.10.1988, G. Das & Company Limited entered into an agreement to sell the factory along with land, plant & machinery etc. to the Corporate Debtor - Castal Extrusion Private Limited at a total price of Rs. 25 lakhs and the date of sale was 01.02,1989, The property comprised of freehold land measuring 6.7 Bighas or says about 8,840 Sq. Meters with a pucca boundary wall all around, all covered spaces Including shads, structures, apartment and quarters, garages and other open land boundary. After acquiring of the factory, CEPL developed the factory site and the commercial production started from 20.03.1990.

CEPL is part of the Tantia Group. Tantia Constructions Limited (TCL) was the flagship company of the Tantia Group. TCL had takan loan from 38

Vijaya Bank (now Bank of Baroda) and in relation to that loan. M/s Castal Extrusion Private Limited (CEPL") provided Corporate Guarantee on 08.05.2013. Bank Invoked the Corporate Guarantee and sent a notice of demand dated 26.02.2018 asking CEPL to pay the entire outstanding amount of Rs. 57.34 crores+ interest. CEPL did not pay the amount as demanded.

In March 2018, Bank filed an application u/s 7 of IBC, 2016 with Hon'ble NCLT - Kolkata Bench against CEPL. Hon'ble NCLT-Kolkata Bench admitted the application u/s 7 of the Insolvency & Bankruptcy Code, 2016 on 18.03.2020 and appointed Mr. Niraj Agrawal as the Interim Resolution Professional. Public announcement was made in 2 newspapers on 20.03.2020 asking creditors of CEPL to submit their claims with IRP. Mr. Niraj Agrawal was confirmed as the Resolution Professional in the 1st meeting of the Committee of Creditors.

In the Interim TCL was also under CIRP and Resolution Plan was approved by Hon'ble NCLT in February 2020. As per the latest update, the successful Resolution Applicant is yet to fulfil its commitment as per the approved Resolution Plan.

Resolution applicant through various measures detailed under the section "Various aspect of the Plan" proposes to revive the Corporate Debtor and to take over the management of the company. Operation of the Company is currently disturbed, mainly due to old machinery requiring maintenance/ renovation, labour problems, piled up dues of workmen/labour/statutory dues/pf/esi, capital expenditure required availability of the quality management to manage the affairs of the Factory and Invocation of Corporate Guarantee. The Resolution Applicant intends to address these concerns and revive the Corporate Debtor.

Following are the brief action plan for building the capability required (technical, financial, manpower, turnaround expert etc) to revive CD:

TURNAROUND STRATEGY

The Resolution Applicant proposes to change the business of CEP Land convert it into a real estate company as a revival plan of the company.

As a part of the turnaround strategy, Resolution Applicant shall undertake the Following exercise,being:

a) Creation of SPV- Formation of a Special Purpose Vehicle (SPV) wherein SFHIDPL will own 100% of the SPV. However, the Resolution Applicant reserves the right to induct other shareholders in the SPV. The Resolution Applicant will infuse funds into CEPL to the tune of Rs. 6.50 Lakhs, SPV will be used to hold the shares of CEPL;

39

b) Conversion of Nature of Factory Land -The Resolution Applicant proposes to convert the nature/use of the Factory Land from Industrial purpose to Residential/Commercial purpose. The Resolution Applicant has studied that the nearby areas of the Factory have been developed into a residential area with many residential properties being developed in the recent past, hence, it will be very difficult to restart or carry out any other new industrial activity in this area. The Resolution Applicant accordingly proposes to convert the industrial land into residential/commercial land.

c) Termination & Settlement of Labour & Staff - The workforce of CEPL as on Insolvency Commencement Date comprised of 38 labours and 5 employees, none of whom have the required skill set for working in a real estate company. Accordingly, the Resolution Applicant does not intend to retain the workforce of the company. The Resolution Applicant thus proposes for the retrenchment/termination of the workforce and any amount payable under such circumstances including on account of Gratuity would be dealt with as envisaged in the Resolution Plan.

d) Development of the Residential/Commercial Project - The Resolution Applicant also proposes as part of this Resolution Plan to develop a residential/commercial project on the Factory Land post its conversion into a residential/commercial land.

The Resolution Applicant expects to generate employment during the course of the construction of the residential/commercial project. The residential/commercial project will also help in extracting value out of the land owned by the CD and thus helping in the revival of the CD. The total outlay for the said residential project is expected to be around Rs. 67 Crores (Rupees Sixty-Seven Crores) with a total construction area of around 2,90,000 sqft. The said usage of the property as proposed by the Resolution Applicant would generate employment for more than 500 workers/employees in the locality against the termination/retrenchment that is proposed for around 40 employees/workers. In addition to the generation of employment this huge capital investment would generate huge economical value in the local area."

32. He submits, by way of referring to aforesaid facts, that

resolution plan submitted by the Respondent No.2 was viable and

this was the reason that learned Adjudicating Authority on

examining the resolution plan which was approved by the CoC has 40

finally approved the same. He submits that in normal course after

approval of the plan by the Adjudicating Authority which has been

approved as per the commercial wisdom of the CoC the said plan

is not required to be interfered with.

33. Mr. Nagesh, learned senior counsel has also drawn our

attention to Page 245 of Volume II of the Memo of Appeal i.e. part

of the resolution plan submitted by the appellant that statutory

licences as well as association licences had expired and not

renewed. Mr. Nagesh has also placed reliance on Next Orbit

Ventures Fund (Supra) and submits that in view of situation

which was prevailing it was difficult to take any steps for

proceeding with the same business of the corporate debtor and it

was viable to change the nature of business and as such a

reasonable approach was adopted in the resolution plan of the

Respondent No.2 which on commercial wisdom of the CoC was

considered for its approval and finally the same has been approved

by the learned Adjudicating Authority.

34. Mr Arun Agarwal, learned counsel has appeared on behalf of

Respondent No.3/CoC. Besides adopting arguments advanced by

Mr. P. Nagesh, learned senior counsel for Respondent No.2 as well 41

as Mr. Banerjee, learned counsel for Respondent No.1 he tried to

persuade the Court that lease agreement itself was fictitious and

it was created only with a view to put the financial creditor to loss

by illegal means. He submits that the perusal of the lease

agreement itself makes it clear as to what was the object for

creating such a document. By way of referring to lease agreement

dated 27.07.2014 which is at running page 119 to 122 he submits

that one of the Directors of Corporate Debtor namely Jaydeep

Ghosh had executed the agreement as landlord on behalf of the

Corporate Debtor and on behalf of M/s T-RMC Pvt Ltd (tenant), it

was signed by Mr. Harshvardhan Tantia. This lease agreement

was only notarised but not registered whereas the lease agreement

was for a period of five years and land measuring 1.90 acres out of

2.209 acres of Corporate Debtor was leased out, that too for a

monthly rent of Rs.55000/-. He has also drawn out attention to

para 9 of the lease agreement dated 27.07.2014 at running page

121. It would be necessary to reproduce it as follows:-

"9.Subject to fulfilment of the terms and conditions of these

presents, the TENANT will have the option to extend the

tenure of this Agreement for a further period of 5 years

on the expiry of this agreement on the same terms and 42

conditions given herein on giving the Landlord a notice to the

same effect at least three months before the expiry of this

tenure."

35. As per the agreement lease was valid upto 26.07.2019.

Thereafter again on 26.07.2019 another lease agreement was

executed on behalf of the Corporate Debtor in which one of the

signatory of Corporate Debtor was Mr. Jaydeep Ghosh and in this

agreement also lease was for a period of five years commencing

from the date of agreement i.e. 26.07.2019. In this agreement also

Mr. Agarwal, learned counsel for R3 submits that same condition

was imposed in Clause 8 of the Agreement which is at running

page 126 and is reproduced hereinbelow:-

"8.Subject to fulfilment of the terms and conditions of these

presents, the TENANT will have the option to extend the

tenure of this Agreement for a further period of 5 years

on the expiry of this agreement on the same terms and

conditions given herein on giving the Landlord a notice to the

same effect at least three months before the expiry of this

tenure."

43

36. Mr. Agarwal has highlighted that in both the aforesaid lease

agreement monthly rent is same i.e. Rs.55000/- which was the

rent on the commencement of the agreement in the year 2014 and

at the time of second agreement which was entered into on

26.07.2019 i.e. after five years the same rent was permitted i.e.

Rs.55000/- and a condition which is alien to the lease agreement,

the tenant was given option to extend the tenure of the agreement

for further five years. On aforesaid ground it was submitted that

both lease agreements appear to be forged documents which were

created without written permission of the Bank i.e. financial

creditor where a charge was created in favour of the Bank. On

aforesaid plea it was argued that the present appeal is required to

be rejected outrightly. Moreover in the Transaction Audit Report

rent of the land was determined at Rs.4.85 lakhs per month

against Rs.55000/- per month.

37. Mr Rudereshwar Singh also argued in rejoinder and

reiterated that the Corporate Debtor was running the industry of

aluminium production and as such there was no reason for

alteration of the business.

44

38. In Company Appeal (AT)(Ins) No.839/2022 three suspended

directors of the Board of Directors of the Corporate Debtor are

three appellants. One of the appellant namely Mr. Jaydeep Ghosh

is the signatory of the lease rent agreement dated 27.07.2014 and

26.07.2019.

39. Mr Prakhar Tandon, learned counsel has appeared on behalf

of the appellant in the present appeal CA(AT)(Ins) No.839/2022.

He assailed the resolution plan on several grounds including the

ground that the approved resolution plan was conditional and

vague. He emphasised that resolution plan has not discussed

about the revival of the Corporate Debtor and decided for closure

of the business of the Corporate Debtor. However, on being asked

as to whether the appellants had also submitted any resolution

plan, the learned counsel for the appellant accepted that no plan

was submitted on behalf of the appellant.

40. Mr. P Nagesh, learned senior counsel appearing on behalf of

Respondent No.2 raised preliminary objection on the point of

maintainability of the appeal filed by the directors of the

suspended Board of Directors of the Corporate Director. He

submits that after initiation of the CIRP the Board of Directors was 45

put under suspension and the IRP and RP was taking all steps

regarding the Corporate Debtor. He submits that on earlier

occasions the appellants, particularly at the time of filing the

resolution plan, had never raised any objection. It was the

consensus decision of the CoC to accept the plan submitted by

Respondent No.2 and thereafter said Plan was finally approved by

the Learned Adjudicating Authority. He submits that it is settled

that suspended Board of Directors have got no locus to assail

approval of the resolution plan which has been approved by

commercial wisdom of the CoC and thereafter finally approved by

the Adjudicating Authority. On this very issue he has placed

reliance on a judgement of Hon'ble Supreme Court reported in

Innoventive Industries Ltd Vs ICICI Bank reported in (2018) 1

SCC 407 and he has specifically referred to para 11 of the

judgement which is quoted hereinbelow:-

"11. Having heard learned counsel for both the parties, we find

substance in the plea taken by Shri Salve that the present appeal at the

behest of the erstwhile directors of the appellant is not maintainable. Dr.

Singhvi stated that this is a technical point and he could move an

application to amend the cause title stating that the erstwhile directors

do not represent the company, but are filing the appeal as persons

aggrieved by the impugned order as their management right of the 46

company has been taken away and as they are otherwise affected as

shareholders of the company. According to us, once an insolvency

professional is appointed to manage the company, the erstwhile directors

who are no longer in management, obviously cannot maintain an appeal

on behalf of the company. In the present case, the company is the sole

appellant. This being the case, the present appeal is obviously not

maintainable. However, we are not inclined to dismiss the appeal on this

score alone."

41. Learned counsel for all the Respondents have raised objection

on the locus of the directors of suspended Board of Directors of the

Corporate Debtor who are appellants in the one of the present

appeals. Besides raising preliminary issue they have further

argued that the detailed submission has been made regarding

viable plan submitted by Respondent No.2 and no error in the

impugned order particularly by replying submission of counsels in

Company Appeal (AT)(Ins) No.861/2022.

42. Mr. Nagesh, learned senior counsel on the question of law in

both the appeals has taken the same stand. He submits that it is

settled that Resolution Applicant has no vested right regarding his

resolution plan. It is upto the commercial wisdom of the CoC to

consider the plan which may not be interfered with. On this very

issue he has placed reliance on para 79 of judgement reported in 47

(2019) 2 SCC Page 1 Arcelormittal India Pvt Ltd Vs Satish

Kumar Gupta and others which is quoted hereinbelow:-

"79. Given the timeline referred to above, and given the fact

that a resolution applicant has no vested right that his

resolution plan be considered, it is clear that no challenge can

be preferred to the adjudicating authority at this stage. A writ

petition under Article 226 filed before a High Court would also

ne turned down on the ground that no right, much less a

fundamental right, is affected at this stage. This is also made

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

Professional may only invite fresh resolution plan, if no other

resolution plan has passed muster."

43. To corroborate his aforesaid submission he has further

placed reliance on para 5 of a judgement of this Appellate Tribunal

passed in Company Appeal (AT)(Ins) No. 272/2020 IMR

Metalllurgical Resources AG Vs Ferro Alloys Corporation Lt &

Anrs which is reproduced hereinbelow:

"5. It is essential to mention that the Resolution applicant has

no vested right that his Resolution Plan must be considered. It

is settled position of law as laid down by Hon'ble Supreme 48

Court in (2019) 2 SCC 1 in case of Arcelor Mittal India Pvt Ltd

Vs Satish Kumar Gupta that the resolution applicant does not

have any vested right that his Resolution Plan must be

considered."

44. He has referred to para 2 of judgement of this Tribunal

reported in 2020 SCC Online NCLAT 1106 Hindustan Oil

Exploration Co Vs Erstwhile Committee of Creditors JEKPL

Pvt Ltd & Ors. Which is reported hereinbelow:

"2. After hearing Mr. Abhijeet Sinha, Advocate for the Appellant, we are

of the considered opinion that the Appellant has no locus to question the

implementation of the approved Resolution Plan of the Successful

Resolution Applicant. Admittedly, appeal preferred against approval of

the Resolution Plan of the Successful Resolution Applicant stands

dismissed by this Appellate Tribunal. Direction given in terms of the

impugned order on the application filed under Section 60(5) of the 'I&B

Code' to the Successful Resolution Applicant follows as a necessary

corollary to the dismissal of appeal filed against approval of Resolution

Plan of the Successful Resolution Applicant to implement the approved

Resolution Plan on or before the extended date of 30th September, 2020.

Once the Appellant is out of the fray, it has neither locus to call in question

any action of any of the stakeholders qua implementation of the approved

Resolution Plan nor can it claim any prejudice on the pretext that any of 49

the actions post approval of the Resolution Plan of Successful Resolution

Applicant in regard to its implementation has affected its prospects of

being a Successful Resolution Applicant. If the terms of the approved

Resolution Plan of Successful Resolution Applicant have been varied or

time extended to facilitate its implementation and the creditors have not

claimed any prejudice on that count and the Committee of Creditors

comprising of the creditors as stakeholders has not objected to same

rather been privy to it on account of hardship due to prevailing

circumstances, the Appellant cannot be permitted to cry foul. It is not a

case of alleged material irregularity in the Corporate Insolvency

Resolution Process which is in final stages with the approved Resolution

Plan being under implementation. Outbreak of COVID-19 pandemic has

slowed down the economic activity and operations have been adversely

impacted. Viewed in that context some necessary changes in the agreed

terms and extension of time for implementation would not be uncalled for.

Be that as it may, the Appellant has no locus to maintain that the change

in terms of the approved Resolution Plan in regard to extension of time

for induction of upfront amount as also implementation of the Resolution

Plan has jeopardized its legal rights qua consideration of its Resolution

Plan which has been rejected."

45. Similarly learned counsel for the Respondents have referred

to para 31 of a judgement of this Appellate Tribunal passed in an

unreported IA No.215/2023 in Company Appeal (AT)(CH)(Ins)

No.58 of 2023 which is reproduced hereinbelow:- 50

"31.On a careful consideration of the respective contentions

advanced on either side, this Tribunal, keeping in mind of a

vital fact that the Petitioner/Appellant being an Unsuccessful

Resolution Applicant, has no locus to assail a Resolution Plan

or its implementation, coupled with a candid fact that he is not

a Stakeholder, as per Section 31(1) of the I&B Code, 2016, in

relation to the Corporate Debtor, this Tribunal, without any

haziness, holds that the Petitioner/Appellant, is not aggrieved

person, coming within the ambit of Section 61(1) of the I&B

code, 2016, especially, when he is not a Privy, to the

Resolution Plan. Viewed in that perspective the Leave, sought

for in IA No.214/2023 in Comp. app (AT)(CH)(Ins) No.58 of

2023, sans merits.

Result

In fine, IA No.215/2023 in comp app (AT)(CH)(Ins) No.58/2023

is dismissed. No costs."

46. On the point that the approval of the plan firstly by CoC is

considered as commercial wisdom which is not required to be

interfered with and also regarding change of nature of business of

Corporate Debtor, Mr Nagesh has placed reliance on para 28, 37 51

and 38 of judgement reported in 2021 SCC Online NCLAT 122

Next Orbit Ventures Fund Vs Print House (India) Pvt Ltd.

47. On aforesaid ground it has been pleaded that both the

appeals are required to be dismissed.

48. Besides hearing learned counsel for the parties we have

perused the material available on record. Before proceeding we

may reiterate that one who does not come to a Court with clean

hands, may not get any relief. In the present case, primarily we

are satisfied that conduct of the appellants in both the appeals is

not transparent. We have also noticed that more than Rs.57 crores

with interest was outstanding. The principal borrowers' account

was declared NPA on 10.03.2017. Charge in respect of entire land

of the Corporate Debtor was created in favour of financial creditor

i.e. Vijaya Bank. Even thereafter one of the directors of the

appellant namely Mr. Harshvardhan Tantia of Company Appeal

(AT)(Ins) No.861/2022 who was also having 6.22% shares holding

in the Corporate Debtor company entered into lease agreement on

27.07.2014 with CD in respect of major portion of the land of the

Corporate Debtor. The lease agreement was signed by Mr. Jaydeep

Ghosh on behalf of the Corporate Debtor and Mr. Harshvardhan 52

Tantia signed as one of the directors of T-RMC Pvt Ltd who is

appellant in Company Appeal (AT)(Ins) No.861/2022. The lease

agreement dated 27.07.2014 was for a period of five years which

was to end on 26.7.2019. It is mandatory that if a tenancy is

created on the basis of an agreement/lease agreement for one year

or more then the said deed is required to be registered. However,

it is not disputed that in the present case the lease agreement

which was for five years was only notarised, not registered.

Further it has been pleaded and not disputed by the appellant that

Mr. Jaydeep Ghosh one of the directors who signed on behalf of

the Corporate Debtor was never authorised by the resolution

passed by the Corporate Debtor. Mr. Harshvardhan Tantia who

put signature on the agreement, on behalf of tenant, i.e. T-RMC

Pvt Ltd on the date of execution was also having about 6.22%

shareholding in the company i.e. Corporate Debtor. It is also not

in dispute that a charge had been created on the whole land of the

corporate debtor in favour of the financial creditor/Bank. Once

charge in respect of the said land was created in favour of the Bank

it was mandatorily required on the part of the Corporate Debtor to

get first permission/consent of the Bank for executing lease rent

agreement that too for five years. One of the condition in lease 53

agreement i.e. 26.07.214 is at Clause 9 which gives a right on the

tenant in respect of lease to extend the period of lease agreement

for further five years. Same condition was included while

executing second lease rent agreement which was executed on

26.07.2019 for further period of five years. Such conditions are

alien to a lease agreement which reflects ill intention of both the

parties. The outstanding loan was more than Rs.57 crores

excluding interest. If in such a situation such type of lease

agreement is created and major portion of the land is given to the

possession of a related party i.e. by the present Corporate Debtor

to Appellant T-RMC Pvt Ltd in Company Appeal (AT)(Ins)

No.861/2022, certainly it suggests that with a view to obtain

undue and illegal gain and to deprive the bank such act was done

on basis of conspiracy hatched between the parties.

49. We have noticed that law is settled on the point that the

suspended Board of Directors have got no locus to file an appeal

against the approval of the plan by CoC and finally approved by

the Adjudicating Authority and as such Company Appeal (AT)(Ins)

No.839/2022 is liable to be rejected on this sole ground besides

the facts relating to fraudulent lease rent agreement which we have

noticed hereinabove. So far as plea taken on behalf of the 54

appellant in Company appeal (AT)(Ins) No.861/2022 that change

of business of the Corporate Debtor was not permissible, we are of

the view that it is necessary to examine Regulation 37 of IBBI

(Insolvency Resolution Process for Corporate Persons) Regulations

2016 which is reproduced hereinbelow:

"37. Resolution plan-A resolution plan shall provide for the

measures, as may be necessary, for insolvency resolution of

the corporate debtor for maximization of value of its assets,

including but not limited to the following-

(a) Transfer of all or part of the assets of the corporate debtor

to one or more persons;

(b) Sale of all or part of the assets whether subject to any

security interest or not;

(ba) restructuring of the corporate debtor, by way of merger,

amalgamation and demerger;

(c) The substantial acquisition of shares of the corporate

debtor, or the merger or consolidation of the corporate debtor

with one or more persons;

55

(ca) cancellation or delisting of any shares of the corporate

debtor, if applicable.

(d) Satisfaction or modification of any security interest;

(e) Curing or waiving of any breach of the terms of any debt

due from the corporate debtor;

(f) Reduction in the amount payable to the creditors;

(g) Extension of a maturity date or a change in interest rate or

other terms of a debt due from the corporate debtor;

(h) Amendment of the constitutional document of the corporate

debtor;

(i) Issuance of securities of the corporate debtor, for cash,

property, securities, or in portfolio of goods or services

produced or rendered by the corporate debtor.

(j) Change in portfolio of goods or services produced or

rendered by the corporate debtor.

(k) Change in technology used by the corporate debtor; and

(l) Obtaining necessary approvals from the Central and State

Governments and other authorities.

50. Section 5(26) of the IBC is also necessary to be reproduced as

follows:

56

"5(26) "resolution plan" means a plan proposed by

resolution applicant for insolvency resolution of the corporate

debtor as a going concern in accordance with Part II.

(Explanation:For the removal of doubts, it is hereby clarified

that a resolution plan may include provisions for the

restructuring of the corporate debtor, including by way of

merger, amalgamation and demerger.)

51. The aforesaid provision particularly Section 5(26) of the IBC

permits a resolution plan that entails restructuring. Similarly

Regulation 37(ba) also permits restructuring, whereas Regulations

37(a)and (b) even permit for transfer of all or part of the assets and

also sale of all or part of the assets of the CD. Only requirement

is to see whether situation permits to do the same in the interest

of the concerned creditors. In the present case it has been noticed

that CD was not doing any business. Licence for running the

factory had lapsed and not renewed for several years. There was

no insurance of the factory premises since several years and even

Insurance Company has refused to insure such factory/plant. It

has also been noticed that for several years municipal tax were not

paid by the CD. Even during CIRP the factory was non- 57

operational. The factory which was dealing with aluminium and

its plant was very old one. It is also a fact that factory premises

was in the municipal area. It was pleaded that by lapse of time the

factory area was surrounded by residential area.

52. After examining all the aforesaid facts we are of the opinion

that it was commercial wisdom of the CoC to accept the plan which

has been noticed by way of change of the business of the CD. It

has already been held that an unsuccessful resolution plan

applicant has got no vested right and also settled that acceptance

of plan is commercial wisdom of the CoC. Accordingly, there is no

reason to entertain both the appeals particularly in view of the fact

that the plan has finally been approved by Adjudicating Authority.

In normal course after approval of the Resolution plan by the

Adjudicating Authority there is very narrow scope for the Appellate

Tribunal to interfere in the matter and as also considering the fact

that the appellants in both the appeals have not approached this

Tribunal with clean hands as well as the fact that on exercising

commercial wisdom the CoC approved the plan and same was

endorsed by the Adjudicating Authority, there is no reason to

interfere with the impugned order. Accordingly, both the appeals

are dismissed.

58

53. Before parting with the judgement considering the fact that

so called two lease agreements dated 27.07.2014 and 26.7.2019

have been brought on record in the present proceeding which

appear to be prepared for unlawful gain and with a view to take

undue pecuniary advantage and depriving the interest of the

Financial Creditor/Bank by illegal means, we feel this issue should

not be left untouched. We are of the opinion that creation of

aforesaid two doubtful and suspicious lease agreements which

have been used in the court proceeding to defeat the objective of

IBC, requires enquiry. As such we propose to request Delhi Police

Commissioner to get the issue relating to aforesaid two lease rent

agreements, its effect and also conspiracy, if any, enquired into

and if materials are collected showing commission of cognisable

offence, then in that event a regular FIR may be lodged and case

may be investigated to its logical end. It is upto the Delhi Police

Commissioner to entrust enquiry/investigation either to Economic

Offences Wing or any other appropriate investigation wing of Delhi

Police for taking the inquiry/investigation to its logical end.

54. Let a copy of this order be sent to the Delhi Police

Commissioner for its compliance.

59

55. The Ld. Registrar of this Tribunal is directed to provide all

assistance/material/authenticated copies of the appeals and other

documents if asked by the investigating team.

56. With abovementioned directions, both the appeals are

dismissed.

(Justice Rakesh Kumar) Member (Judicial)

(Dr. Alok Srivastava) Member (Technical) bm