Kridhan Infrastructure Pvt Ltd vs Venkatesan Sankaranarayan & Anr

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI Company Appeal (AT) (Insolvency) No. 202 of 2020 [Arising out of Order dated 16.01.2020 passed by the National Company Law Tribunal, New Delhi, Principal Bench in C.A. No. 2683(PB)/2019 in Company Petition No. (IB)-197(PB)/2017].

IN THE MATTER OF: Kridhan Infrastructure Pvt. Ltd. (Now Known as Krish Steel And Trading Private Limited) & Anr. ...Appellants

Versus Venkatesan Sankaranarayan & Anr. ...Respondents

Present:

For Appellant: Mr. Krishnendu Datta & Mr. Udit Chauhan, Advocates

For Respondent: Mr. Ashwini Kumar Singh, Advocate for R-1 Ms. Misha, Ms. Charu Bansal, Advocates for EARC Mr. Ashish Makhija, Advocate for Liquidator Mr. Rupesh Gupta, Intervenor

Venugopal M. J

Preamble

The Appellant(s) / Resolution Applicant have preferred the instant

Company Appeal (AT)(Ins.) No. 202/2020 being aggrieved as against the order dated 16.01.2020 in C.A. No. 2683(PB)/2019 in Company Petition No.

(IB)-197(PB)/2017 passed by the 'National Company Law Tribunal', Principal

Bench, New Delhi in partly allowing the application by ordering liquidation

of the 'Corporate Debtor', viz. 'Tecpro Systems Ltd.' in the manner laid down

in Chapter III of part II of 'I&B' Code, 2016 and issuing necessary directions

thereto.

2. Earlier, the Adjudicating Authority, 'National Company Law Tribunal',

Principal Bench, New Delhi while passing the impugned order on 16.01.2020

at paragraph 3 to 12, and at paragraph 15 and 16 had observed the

following:-

"3. Respondent No. 1 M/s

Kridhan Infrastructure Private

Limited had submitted an updated

Resolution Plan in respect of

Corporate Debtor, which was

approved by the Committee of

Creditors in their 15th CoC meeting

held on 08.03.2019 with majority

vote of 89.92%. Subsequently the

Adjudicating Authority also

approved the resolution Plan under

2 Company Appeal (AT) (Insolvency) No. 202 of 2020 Section 31 of the Code vide order

dated 15.05.2019.

4. It has

been alleged that there has been

inordinate delay in implementation of

the Resolution Plan, as the

successful resolution applicant, M/s

Kridhan Infrastructures Private

Limited has miserably failed to

infuse equity funds as per the terms

of the Resolution Plan. Besides the

successful resolution applicant has

not taken over the control of

management even after passage of

long about 8 months from the date of

approval of the resolution plan. It is

alleged that the secretarial

compliance documents/returns

have not been filed with the RoC.

There has been non-compliance and

non-implementation of the approved

resolution plan.

3 Company Appeal (AT) (Insolvency) No. 202 of 2020

5. It is submitted that after due

deliberations and pursuant to its

meeting held on 11th November 2019

and being satisfied of the non-

compliance in relation to

implementation of Resolution Plan by

Resolution Applicant, the erstwhile

CoC members have asked the

Resolution Professional to put the

following resolutions for vote which

was passed with requisite majority of

99.28% voting shares.

"Resolution for Liquidation of Corporate

Debtor":

RESOLVED THAT due to inordinate

delay in implementation of the Resolution

Plan of Techpro Systems Limited

("Corporate Debtor") by Kridhan

Infrastructures Private Limited, the

successful Resolution Applicant ("RA") and

non-compliance thereby, it is not feasible or

viable to grant any further extensions or

4 Company Appeal (AT) (Insolvency) No. 202 of 2020 expect implementation of the said

Resolution Plan and consequently

liquidation proceedings of the Corporate

Debtor shall be initiated in terms of the

applicable provisions of law.

RESOLVED FURTHER THAT

pursuant to Regulation 36B(4A) of the

Insolvency and Bankruptcy Board of India

(Insolvency Resolution Process for

Corporate Persona) Regulations, 2016 the

Performance Guarantee of Rs. 5 Crores

submitted by Kridhan Infrastructures

Private Limited be forfeited and

appropriated as per terms of the same.

RESOLVED FURTHER THAT the

erstwhile Resolution Professional be and

is hereby authorized to take necessary

steps for filing application before the

Adjudicating Authority for annulment of

the successful Resolution Plan and for an

application for liquidation of the Corporate

Debtor under Section 33 of the Insolvency

5 Company Appeal (AT) (Insolvency) No. 202 of 2020 and Bankruptcy Code, 2016 and for any

other proceedings related or incidental to

the matter.

Resolution for appointment of Liquidator:

"RESOLVED THAT subject to the

order of the Adjudicating Authority

under Section 34 of the Insolvency

and Bankruptcy Code, 2016, Mr.

Ramachandran Subramanian,

Registration Number:- IBBI/IPA-

001/IP-PO1440/2018-

2019/12136 shall act as the

liquidator during the liquidation of

the Corporate Debtor.

RESOLVED FURTHER THAT

pursuant to Section 34(8) of the

Insolvency and Bankruptcy Code,

2016, Regulation 39D of the

Insolvency and Bankruptcy Board

of India (Insolvency Resolution

Process for Corporate Persons)

Regulations, 2016, the fee payable

6 Company Appeal (AT) (Insolvency) No. 202 of 2020 to the Liquidator and support team.

(Ey Restructuring LLP) shall be as

approved by the erstwhile CoC as

follows:

Months Fees as a % of 0-12 12-24 More Receipts from than 24 Sale of Fixed 1.00% of 0.75% of 0.50% Assets the the of the amount amount amount realized realized realized Return of live 0.50% of BGs the amount returned

Months

Fees as a % of 0-24 24-60 More than Receipts from 60 Arbitration 1.25 1.00% proceedings/claim % of of the s/projects recovery the amoun amo t unt realize reali d zed OPE, GST and other taxes as applicable, is not

included in the above fee proposal and will be

billed in addition to the above.

7 Company Appeal (AT) (Insolvency) No. 202 of 2020 Fee also does not include cost of any External

Advisors such as Legal, Valuation, Bid Process

Advisory, etc. basis for the provisions of the Code.

Fee also does not include employee salaries

(Corporate Office & Project Sites) which are

required for maintaining Going Concern status of

the Company.

Resolution for approval of liquidation costs:

RESOLVED THAT Regulation 2A of IBBI

(Liquidation Process) Regulations, it is hereby

approved to contribute the excess of the

liquidation costs over the liquid assets of the

corporate debtor, as estimated by the liquidator,

in proportion to the financial debts owed to the

lenders by the Corporate Debtor, and the

contributions shall be deposited in a designate

escrow account to be opened and maintained in a

scheduled bank, within seven days of the passing

of the liquidation order as given below:-

Particulars (in INR) Estimated for Liquidation Process Liquidators & Support To be approved by CoC team

8 Company Appeal (AT) (Insolvency) No. 202 of 2020 OPE for Liquidator and 13,00,000 team(against actuals) RP's Legal Counsel 20,62,500 IT Services Provider 4,09,500 Statutory Audit Fees 12,00,000 Liquidation Process 11,00,000 costs* Others 1,50,000 Sub-total(A) 62,22,000 Salaries, admin 59,06,394 overheads and statutory dues Admin Overheads 34,64,000 Fees for continuing 1,00,00,000 arbitration proceedings Sub-Total(B) 1,93,70,364 Total (A+B) 2,55,92,394

Liquidation Process costs includes fees for

liquidation valuers, public announcements cost,

EOI costs, MCA Filing fees etc.

Resolution for RP to continue till further order the

Adjudicating Authority

RESOLVED THAT the erstwhile RP Mr. Venkatesan

Sankaranarayan, to act as the Resolution

Professional from the date of filing of the liquidation

application with the Adjudicating Authority until

further orders/directors, as may be, received from

Adjudicating."

9 Company Appeal (AT) (Insolvency) No. 202 of 2020

6. During hearing on 18.12.2019 an opportunity

was afforded to respondent No. 1 to 3 to file reply

within one week thereof. However, neither any

reply was filed nor it could be shown as to how the

approved resolution plan could at all be

implemented.

7. Admittedly the resolution applicant has failed to

adhere to any of their timelines for equity infusion

even after a period of about 8 months since approval

of the resolution plan. There is force in the contention

that the respondents have repeatedly failed to honour

their own commitments and there was delay in

infusion of equity, upfront payment and taking control

of the management of the Corporate Debtor, which has

threatened the going concern status of the corporate

debtor severely.

8. In the facts the erstwhile CoC in its meeting held

on 11.11.2019 has passed a resolution for liquidation

of the Corporate Debtor with overwhelming majority

of 99.28% voting share.

10 Company Appeal (AT) (Insolvency) No. 202 of 2020

9. It is pertinent to refer here the provisions of sub-

section (3) of Section 33 of the Insolvency and

Bankruptcy Code, 2016 which envisages as follows:

"(3) Where the resolution plan

approved by the Adjudicating Authority is

contravened by the concerned corporate debtor, any

person other than the corporate debtor, whose

interests are prejudicially affected by such

contravention, may make an application to the

Adjudicating Authority for a liquidation order as

referred to in sub-clauses (i),(ii)and (iii) of clause (b) of

sub-section (1)."

10. Hon'ble 'NCLAT' in the case of Yavar Dhala

Vs JM Financial Asset Reconstruction Company Ltd. &

Ors. in Company Appeal (AT)(Ins) No. 13 of 2019

decided on 08.03.2019 has observed that on failure of

the Resolution Applicant to implement the terms of the

resolution plan, liquidation has to follow. The relevant

findings of the Hon'ble Appellate Tribunal runs as

under:

"3. In the situation where a Resolution Applicant

succeeds as Corporate Debtor but it fails to comply

11 Company Appeal (AT) (Insolvency) No. 202 of 2020 its assurances in terms of the resolution plan what

step is to be taken has been already been laid down

in Sub-Section (3) of Section 33 of the I&B Code,

which reads as follows:-

"33. (3) Where the resolution plan approved by

the Adjudicating Authority is contravened by the

concerned corporate debtor, any person other than the

corporate debtor, any person other than the corporate

debtor, whose interests are prejudicially affected by

such contravention, may make an application to the

Adjudicating Authority for a liquidation order as

referred to in sub-clauses (i), (ii) and (iii) of clause (b) of

sub-section (1)."

4. In view of the specific provision made under the

I&B Code, we are of the view that the Adjudicating

Authority had no option but to pass order of liquidation

and could not have resorted to revival of the Corporate

Debtor by taking fresh resolution plans."

11. Adherence to statutory requirement has to be in

toto. When the language of the Code is clear and explicit

the Adjudicating Authority must give effect to it

whatever may be the consequences.

12 Company Appeal (AT) (Insolvency) No. 202 of 2020

12. As a sequel to the aforesaid discussions and in

view of non-implementation of the approved resolution

plan by Resolution Applicant; Liquidation has to follow

in terms of the provisions of Section 33(3) of the Code.

15. Regulation 36B(4A) of the Insolvency and

Bankruptcy Board of India (insolvency Resolution

Process for Corporate Persons) Regulations, 2016

clearly provides that performance security shall stand

forfeited if the resolution applicant fails to implement the

approved resolution plan in accordance with the terms

of the plan and its implementation schedule. Therefore,

as the respondent resolution applicant has failed to

implement the approved resolution plan in accordance

with the terms of the plan and its implementation

schedule. Therefore, as the respondent resolution

applicant has failed to implement the approved

resolution plan, the performance guarantee of Rs. 5

Crore furnished by the respondent resolution applicant

stands forfeited in terms of Regulation 36B(4A) of CIRP

Regulations.

16. There is an additional prayer for restraining the

encashment of 'Bank Guarantees' executed by the

13 Company Appeal (AT) (Insolvency) No. 202 of 2020 'Corporate Debtor'. However, the concerned Banks and

the recipients of Performance Guarantees have not been

made party. This prayer, therefore, cannot be considered

at the back of the recipients of the bank guarantees

without giving opportunity of hearing to them. The

liquidator, however, is given the liberty to file proper

application on the self-same issue, if so advised".

and resultantly partly allowed the Company Application by ordering

liquidation of the 'Corporate Debtor' viz. 'Tecpro Systems' in the manner laid

down in Chapter III of part II of 'I&B' Code, 2016 by issuing necessary

directions like appointing Mr. Ramachandran Subramanian as liquidator

(proposed by COC) in terms of Section 34(1) of the Code.

Summary of Facts

3. According to the Appellant(s) one of the 'Financial Creditors', viz.

'Edelweiss Asset Reconstruction Company Ltd.' had filed an application u/s

7 of the 'I&B' Code for the initiation of 'Corporate Insolvency Resolution

Process' against 'Corporate Debtor', viz. 'Tecpro Systems Ltd.' As a matter of

fact, the said application came to be admitted on 07.08.2017, imposing a

moratorium u/s 14 of the 'I&B' Code and the 1st Respondent/Mr.

Venkatesan Sankaranarayan was appointed as an 'Interim Resolution

Professional'.

14 Company Appeal (AT) (Insolvency) No. 202 of 2020

4. In fact, the 1st Meeting of 'Committee of Creditors' took place on

13.09.2017 wherein Mr. Venkatesan Sankaranarayan, the 'Interim

Resolution Professional' was appointed as 'Resolution Professional' in

accordance with Section 22(3)(a) of the Code. The 'Resolution Professional'

had engaged two registered valuers as per Regulation 27 of the regulations

to decide the 'Fair Value' and liquidation value of the 'Corporate Debtor' in

accordance with Regulation, 35. The date of appointment of the registered

valuers was on 17.08.2017 and as per 'Average Valuation' the 'Fair Value'

was evaluated at Rs. 390.15 crores and the 'Liquidation Value' of the

'Corporate Debtor' was assessed at Rs. 347.28 crores.

5. Because of the delay in completion of the statutory audit of the

financial statements of the 'Corporate Debtor' an extension was sought to

extend the 'Corporate Insolvency Resolution Process' for a further period of

90 days which was allowed on 09.01.2018.

6. It comes to be known that the 1st Appellant/'Resolution Applicant'(now

known as Krish Steel and Trading Pvt. Ltd.') had submitted an updated

'Resolution Plan' in respect of the 'Corporate Debtor' which was approved by

the COC meeting on 08.03.2015 with majority vote of 89.92%. Resting on

the approval of the 'Committee of Creditors', the Adjudicating Authority had

also approved the 'Resolution Plan' u/s 31 of the Code as per order dated

15.05.2019.

15 Company Appeal (AT) (Insolvency) No. 202 of 2020

7. As per the 'Resolution Plan', duly 'Approved' by the Adjudicating

Authority, the 1st Appellant /'Resolution Applicant' had formed a special

purpose vehicle viz. 'Kridhan Projects Private Limited' to bid for the

'Corporate Debtor'. As per the said approved 'Resolution Plan' and after

reduction of capital in terms of the plan as well as all regulatory approvals /

execution of all definitive documents required to give effect to this 'Resolution

Plan', the 'Corporate Debtor' will issue 15 crores Equity Shares to the

'Kridhan Projects Private Limited' (special purpose vehicle) at a price of INR

1 (Rupee one) per share, for an aggregate sum of INR 15 crores.

8. It is the stand of the Appellant(s) that the 'Resolution Plan' required

the incorporation of 'Kridhan Projects Private Limited' (SPV) as well as the

approval of the plan by the Adjudicating Authority pursuant to which the

said 'Kridhan Projects Private Limited' shall perform and observe the terms

of this 'Resolution Plan' and assume the performance obligations of the

'Resolution Applicant'.

9. It is brought to the fore that the 'Kridhan Projects Private

Limited'(SPV) was duly incorporated on 27.04.2018 with an authorised and

paid up share capital of 10,00,000/- however, the operations of the special

purpose vehicle' were to initiate only upon approval of the 'Resolution Plan',

execution of all documentation and all regulatory approvals.

10. The version of the Appellant(s) is that by virtue of the order dated

15.05.2019 passed by the Adjudicating Authority, the approval of 'Resolution 16 Company Appeal (AT) (Insolvency) No. 202 of 2020 Plan' would confer the change in the management and ownership of the

'Corporate Debtor' and the control of the 'Corporate Debtor' shall vest with

the new Management. Further, the said order had directed the Appellant to

submit a performance bank guarantee of an amount of Rs. 5/- crores within

30 days from the date of receipt of order. In due compliance of the order of

the Adjudicating Authority ('NCLT'), Principal Bench, New Delhi an amount

of Rs. 5/- crores was transferred by the Appellants in favour of the 'Corporate

Debtor' which was deposited in an 'Escrow Account'' of the 'Corporate Debtor'

which is in control of the Financial Credit Edelweiss.

11. The specific case of the Appellant(s) is that they have duly complied

with the conditions to be followed by them, as per order dated 15.05.2019,

but the direction in the said order of the vesting of the ownership, control

and management of the affairs of the 'Corporate Debtor' was never complied

with the 1st Respondent thereby depriving the Appellant(s) from the vesting

its control and management upon the 'Corporate Debtor' for its

implementation of the 'Resolution Plan'.

12. It is the Appellant(s) plea that they never got an opportunity of being

heard and project its grievances before the 'Adjudicating Authority', 'NCLT'

Principal Bench, New Delhi which enlists the various violations of the

'Resolution Plan by the 1st Respondent. Moreover, before the Adjudicating

Authority the Appellant(s) sought some more time to file a detailed reply

which was not granted to them and instead, a liquidation order' was passed

17 Company Appeal (AT) (Insolvency) No. 202 of 2020 based on the observation that a considerable time has elapsed and the

'Resolution Plan' had not been executed.

Appellant(s) Submissions

13. The Learned Counsel for the Appellant(s) submits that a pre-requisite

to the infusion of the initial equity of Rs. 15/- crores, as per the approved

plan was the reduction of the share capital which was to be done by the

monitoring committee formed by the Adjudicating Authority' and 'Vesting of

the Management' is in the hands of 'Resolution Applicant'. In this

connection, the contention of the Appellant(s) is that neither the formalities

of the 'share capital reduction' was done by the 'Monitoring Committee'

nor was the 'Resolution Applicant' was given the management and control of

the Company despite the 'Resolution Applicant' specifically informing that it

would infuse the funds upon the 'Reduction of the Share Capital' .

14. The Learned Counsel for the Appellant(s) proceeds to point out that

this Tribunal, on 03.02.2020, (at the time of admission date of the instant

Appeal) had directed the Appellant(s) to file an additional affidavit by giving

one opportunity by specifying the time frame for compliance of the approved

'Resolution Plan'.

15. The Learned Counsel for the Appellant(s) puts forward contention that

preference is to be given to a 'Resolution' over a 'Liquidation' and further

'Liquidation' can only be seen as a last resort.

18 Company Appeal (AT) (Insolvency) No. 202 of 2020

16. The Learned Counsel for the Appellant(s) cites the decision of Hon'ble

Supreme Court 'Arcelor Mittal India Pvt. Ltd.' V. 'Satish Kumar Gupta

& Ors.', AIR, 2018 at page 5646 wherein the scope of the words

'Adjudicating Authority' in Section 33 pertaining to approval of 'Resolution

Plan' was interpreted to be wide enough to include 'National Company Law

Appellate Tribunal' also and the Hon'ble Supreme Court had observed at

paragraph 82 and 83 as under:-

"82. One thing that must be made

clear at this stage is that one Section

33 speaks of the 'Adjudicating

Authority' in sub-section (1) it is

referring to both the Adjudicating

Authority as well as the Appellate

Authority. An Adjudicating Authority

may decide in favour of a 'Resolution

Plan' which order may then be set

aside by the Appellate Authority.

This order of the Appellate Authority,

setting aside the order of the

Adjudicating Authority, would then

be the order which rejects the

'Resolution Plan' for the purposes of

19 Company Appeal (AT) (Insolvency) No. 202 of 2020 Section 33. The same would apply to

an ultimate order of rejection by the

Supreme Court under Section 62.

This is on the principle, that, as

stated in 'Lachmeshwar Prasad

Shukul and Ors.' V. 'Keshwarlal

Chaudhury and Ors.' AIR, 1941

FC 5 and followed in our

judgements, an appeal is a

continuation of the original

proceedings'.

"83. 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 in

a corporate death. The only a

reasonable construction of the Code

is the balance to be maintained

between timely completion of the

20 Company Appeal (AT) (Insolvency) No. 202 of 2020 '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. 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 time taken in

litigation ought to be excluded. This

is not to say that the 'NCLT' and 21 Company Appeal (AT) (Insolvency) No. 202 of 2020 'NCLAT' will be tardy in decision

making''.

17. The Learned Counsel for the Appellant(s) refers to the decision 'Liberty

House Group Pte. Ltd.' V. 'State Bank of India & Ors.' reported in

MANU/NL/0168/2020 wherein at paragraph 20 it is observed as under: -

"20. In the present case as we

find that both the 'Resolution Plan'

are now being implemented and

'Liberty House Group Pte. Ltd.' on

our suggestion has paid additional

amount of Rs. 10/- crores, we are

inclined to interfere with the

impugned order of liquidation. We, in

exercise of powers conferred under

Rule 11 of 'NCLAT' Rules, 2016 and

to ensure that the 'Corporate

Insolvency Resolution Process' of

both the 'Corporate Debtors'- 'M/s.

Adhunik Metallics Ltd.' and 'M/s

Zion Steel Ltd.' now reaches finality,

the 'Committee of Creditors' other

creditors etc.; now have no objection

22 Company Appeal (AT) (Insolvency) No. 202 of 2020 and the liquidation will not be in the

interest of both the 'Corporate

Debtors' - 'M/s. Adhunik Metallics

Ltd.' and 'M/s Zion Steel Ltd.' its

employees etc. set aside the

impugned order dated 9th July, 2019.

Both the 'Resolution Plans' be

implemented in its latter and spirit.

The claim of all the creditors stand

settled. Control and records of both

the 'Corporate Debtors' - 'M/s.

Adhunik Metallics Ltd.' and 'M/s

Zion Steel Ltd.' have already been

handed over to the 'Successful

Resolution Applicant' by 'Committee

of Creditors'/'Monitoring

Committee'/'Resolution

Professional'. 'Committee of

Creditors'/'Monitoring

Committee'/'Resolution Professional'

stand discharged."

18. The Learned Counsel for the Appellant(s) contends that Rule 11 of

'NCLAT' Rules specifically provides wide powers to this Tribunal to pass orders 23 Company Appeal (AT) (Insolvency) No. 202 of 2020 in upholding the principles laid down by the 'Hon'ble Supreme Court' in

making all efforts to save the 'Corporate Debtor' from a corporate death of

liquidation and in this regard refers to the decision 'Vijaykumar vs.

Gopalsamy Ganesh Babu and Ors.' reported in (MANU/NL/0150/2020)

whereby and whereunder this Tribunal while invoking the powers under Rule

11 had observed the following: -

"7. Considering the object of IBC which

is the resolution and that effort should

be made to revive the 'Corporate Debtor'

rather than to eliminate the same, we

find that this is a fit case to revive the

'Corporate Debtor' rather than to

eliminate the same, we find that this is

a fit case for us to exercise inherent

powers under Rule 11 of 'National

Company Law Appellate Tribunal Rules,

2016('NCLAT', Rules, 2016-in short) to

do justice. It is necessary to set aside

the liquidation order as well as the CIRP

proceedings".

19. The Learned Counsel for the Appellant(s) refers to the decision

'Amritsar Swadeshi Woollen Mills Private Limited' V. 'Vinod Krishan

24 Company Appeal (AT) (Insolvency) No. 202 of 2020 Khanna and Ors.' reported in MANU/NL/0127/2019 wherein it is observed

that it is a settled law when a matter is before 'NCLT' or before this Appellate

Tribunal arising u/s 241 and 242 of new Act read with Rule 11 irrespective

of what the parties plead, say or do, the paramount consideration of the

Tribunal is to keep in view as to what is in the interest of the Company. The

interest of parties is subservient to the interest of the Company. It is

necessary for the Tribunal to first consider interests of the Company. The

health of the Company reflects on the health of economy and that is what it

matters.

20. The Learned Counsel for the Appellant(s) cites the decision 'Dhiraj

Prabhu V. Rajeev Shetty and Ors.' (MANU/NL/0088/2020) wherein it is

observed that "as we find that the parties have been negotiating and almost

reached the final settlement and on merit the Appellant has also raised

certain issues, taking into consideration that the 'Corporate Debtor' is an

infrastructure Housing Company on which large number of allottees are

dependent and if the 'Corporate Debtor' goes on 'Corporate Insolvency

Resolution Process' then it may delay the completion, we in exercise of powers

conferred under Rule 11 of the 'National Company Law Appellate Tribunal

Rules, 2016 accept the settlement reached between the parties and allow Mr.

Rajiv Shetty to withdraw the application u/s 9".

21. The Learned Counsel for the Appellant(s) points out that the 'Lenders'

of the 'Corporate Debtor' as well as 'Operational Creditors' are pressing for,

25 Company Appeal (AT) (Insolvency) No. 202 of 2020 as they are interested in resolution' as against liquidation and further that

'Edelweiss Asset Reconstruction Company Ltd.', being the 85% 'Financial

Creditor' of the 'Corporate Debtor' was present during the last hearing had

requested for resolution of the 'Corporate Debtor' rather than its Liquidation.

Apart from that, an 'Operational Creditor' had filed an 'Impleadment

Application' in the instant Appeal and are claiming 'Resolution' over

'Liquidation' and in the best interest of all stakeholders, 'Liquidation' is to be

avoided and a 'Resolution Order' is to be passed.

22. The Learned Counsel for the Appellant(s) submit that pursuant to the

letter received by the erstwhile 'Resolution Professional' of the 'Corporate

Debtor' (Tecpro Systems Ltd.) from one Mr. Gautam Joginderlal Suri claiming

to be the authorized signatory of the 'Kridhan Infrastructure Pvt. Ltd.'

(Resolution Applicant/RA) the meeting was called by the liquidator on

25.02.2020 at 'Edelweiss House, Mumbai and discussions took place in the

said meeting and that the representatives of the 'Resolution Applicant' inform

the erstwhile COC members that they intend to implement the 'Resolution

Plan', given a chance by the erstwhile COC members and the plan was

presented was under:-

"i. RA will infuse equity of

INR 15 crore within seven

working days from the date

26 Company Appeal (AT) (Insolvency) No. 202 of 2020 of order passed by 'NCLAT'

in the appeal filed by RA;

ii. Upon infusion of this

equity, RA would like to

assume 100% control of the

operations of the Corporate

Debtor by appointing the new

Board of Directors;

iii. Upfront payment of INR 50

crore to the 'Financial

Creditors' will be paid within

three months from the date of

order passed by the 'NCLAT'

in the appeal filed by

'Resolution Applicant';

iv. INR 15 crore of equity

infusion will be kept in escrow

lien-marked to the

representative of erstwhile

COC till such time by which the

upfront payment of INR 50

crore is paid to the 'Financial

27 Company Appeal (AT) (Insolvency) No. 202 of 2020 Creditors' by the 'Resolution

Applicant';

v. INR 5 crore of performance

security encashed to be kept in

a escrow and shall not be used

for payment of unpaid CIRP/MC

period cost".

23. The Learned Counsel for the Appellant(s) points out that the erstwhile

'Committee of Creditors' Members deliberated on the proposal placed by the

representatives of the 'Resolution Applicant' on 25.02.2020 meeting held with

the erstwhile 'Committee of Creditors'(COC) and erstwhile 'Resolution

Applicant' and held that the COC members after deliberations, the erstwhile

'Committee of Creditors' had informed the undermentioned views to the

representatives of the 'Resolution Applicant' which run as under:-

"a. the 'Resolution Applicant'

must show their commitment to

implement the 'Resolution Plan'

by showing proof of funds for INR

15 crore for infusion of the said

funds in an account towards

equity and source of funds for INR

50 crore upfront payment to 28 Company Appeal (AT) (Insolvency) No. 202 of 2020 'Financial Creditors', in the

additional affidavit to be filed

before 'NCLAT', as there should

not be another similar instance of

non-implementation of 'Resolution

Plan' by the 'Resolution

Applicant'.

b. once INR 15 crore of

equity is infused and kept in an

account marked under lien to the

representative of erstwhile COC, the

Resolution Applicant can assume

control of operations of the Corporate

Debtor by appointing the new Board

of Directors as per the Resolution Plan

approved by the NCLT'

c. INR 1,81,46,035/- or any

other amount of debt to the 'Financial

Creditors shall be converted into equity

shares of the Company (at a

conversion price of INR 1/- per share)

on the date of equity infusion to ensure

29 Company Appeal (AT) (Insolvency) No. 202 of 2020 20% equity holding with 'Financial

Creditors' as per the Resolution Plan

approved by NCLT;

d. In the event of failure to

make upfront payment of INR 50 crore

to Financial Creditors, then INR 15

crore of equity infused and kept in an

account marked under lien shall stand

forfeited and no further opportunity

shall be granted to the 'Resolution

Applicant'. Financial Creditors can

approach the Adjudicating Authority to

take further steps in this matter;

e. Till balance INR 415 crores

is paid to the Financial Creditors, the

Resolution Applicant must strictly

follow the cash sweep mechanism

stipulated in Section 5.3 of the

approved plan;

f. INR 5 crores performance

security as per order dated 16.01.2020

of NCLT already was utilized by the 30 Company Appeal (AT) (Insolvency) No. 202 of 2020 liquidator for the payment of unpaid

CIRP /MC period costs (incurred prior to

liquidation commencement date) which

shall be recouped from the upfront

funds infused (Rs. 15 crores + Rs. 50

crore) and held in fixed deposit as per

order of NCLT;

g. All other terms of the

approved Resolution Plan remain

unchanged and the Resolution

Applicant shall strictly adhere to and

complied with all other terms and

conditions of the approved Resolution

Plan."

24. The Learned Counsel for the Appellant(s) submits that the

representatives of the 'Resolution Applicant' had confirmed the erstwhile

'Committee of Creditors' that there were no changes to the shareholding

pattern, but there were some changes in the 'Directorship' and further that

the representatives of the 'Resolution Applicant' had informed the COC

members that there would not be any issues on the section 29A compliance

check. Besides this, the representatives of the 'Resolution Applicant' had

informed the erstwhile COC members that they had secured funding from a

31 Company Appeal (AT) (Insolvency) No. 202 of 2020 High Net Worth Individual (HNI) and that erstwhile COC members had

advised the representatives of the 'Resolution Applicant' to share this letter of

confirmation of funding from the concerned HNI.

25. The Learned Counsel for the Appellant(s) points out that following were

the list of participants as seen from the Minutes of Meeting with erstwhile

'Committee of Creditors' and erstwhile 'Resolution Applicant' that took place

on 25.02.2020 and the same is as follows: -

Name of Participants Name of Representative Liquidator of Tecpro Systems Limited (Chairperson) Ramachandran Subramanian Edelweiss Asset Reconstruction Company Ltd. (EARC) Vineet Aggarwal, Vipul Gupta, Pranika Bhatia Standard Chartered Bank (SCB) Himanshu Tandon DBS Bank Nitin Parmar (through Audio Conference) Vijaya Bank Did not attend Pegasus Asset Reconstruction Company Ltd. (PARC) Did not attend RIICO Did not attend Kridhan Infrastructures Private Limited (Erstwhile Dinesh Agarwal, Mathew Antony Resolution Applicant or RA) Erstwhile Resolution Professional (RP) Did not attend Liquidator's team (EY Restructuring LLP) Aditya Vishwanathan, Vashist Sudarsan, Karthik V Liquidator's Legal counsel (Indian Law LLP) Shiju PV, Puja Agarwal (through Audio Conference)

26. The Learned Counsel for the Appellant(s) contends that the Appellant had

already taken the 1st step towards the capital infusion as per the approved

'Resolution Plan' under clause 5.1 of the Plan i.e. that deposit of an amount of Rs.

15 crores pursuant to which the capital reduction is to take place and the issuance

of shares' is to be made in favour of the 'Resolution Applicant'. Besides this, the

32 Company Appeal (AT) (Insolvency) No. 202 of 2020 sum of Rs. 15 crores, as deposited by the Appellant would be used for the infusion

of the equity, upon the order reversing the liquidation order dated 16.01.2020.

1st Respondent's Contentions

27. In response, the Learned Counsel for the 1st Respondent submits that the

instant appeal is filed arraying the erstwhile 'Resolution Professional' as a

Respondent and that Mr. Ramachandran Subramanian, liquidator appointed by the

Adjudicating Authority as per order dated 16.01.2020 has not been arrayed as a

party to the present appeal.

28. The Learned Counsel for the 1st Respondent / Erstwhile 'Resolution

Professional' submits that the modified 'Resolution Plan' was approved by the

Adjudicating Authority on 15.05.2019 and the impugned order of liquidation was

passed on 16.01.2020 but in the intervening period, the Appellant had miserably

failed to comply with the approved 'Resolution Plan' by failing to infuse Rs. 15 crores

of upfront equity within a week and a payment of Rs. 50 crores within three months

thereafter.

29. The Learned Counsel for the 1st Respondent points out that numerous

extensions to infuse capital were given and the last one was given on 19.10.2019,

when a 5th extension seeking time till 15.11.2019 was sought by the Appellant and

further the 1st Appellant or its Representative did not attend the 'Committee of

Creditors' meetings or the 'Monitoring Committee's meeting' after 04.10.2019.

33 Company Appeal (AT) (Insolvency) No. 202 of 2020

30. The Learned Counsel for the 1st Respondent contends that even if it is

presumed that the Appellant has source of finances and is permitted by this

Tribunal to comply with the terms of the 'Resolution Plan', thus, giving charge of

the affairs of the 'Corporate Debtor' to the Appellant, then also, there is no guarantee

that the Appellant would not be indulging in the same act that has brought the

'Corporate Debtor' to the current stage and again not fail to comply with the

'Resolution Plan'. Apart from that, the Appellant was part of the management

through the representative in the Monitoring Committee whose lack of clarity in

decision making has caused the 'Corporate Debtor' a sum of Rs. 5.51 crores due to

(which force the client of the 'Corporate Debtor' 'Rashtriya Ispat Nigam Ltd.' to

invoke the Bank Guarantee for Rs. 5.51 crores).

31. In so far as the 'opportunity of being heard' not granted to the Appellant, it is

the submission of Learned Counsel for the 1st Respondent that the application for

annulment of 'Resolution Plan' and for passing liquidation order was filed by the

erstwhile 'Resolution Professional' u/s 65 read with Section 33(3) of IBC in second

fortnight of November, 2019 which was 1st listed on 02.12.2020 before the

Adjudicating Authority, Principal Bench and the Appellant was directed to file a

reply and when the matter was later listed on 18.12.2019, the Appellant again

sought time to file reply which was permitted and subsequently the matter was

listed finally before the 'Adjudicating Authority' on 06.01.2020. In fact, the

Appellant(s) had failed to file the reply and failed to answer the queries and reasons

for not complying with the 'Resolution Plan' which perforced the 'Adjudicating

34 Company Appeal (AT) (Insolvency) No. 202 of 2020 Authority' to 'Reserve orders'. As such, the counter plea taken on behalf of the

Appellant that no opportunity of being heard was not provided to them is an

incorrect one.

32. The Learned Counsel for the 1st Respondent submits that there is no

allegation of material irregularity or fraud and in the absence of such averment

made in the appeal, the Order of Liquidation' is an 'irreversible one' unless there

has been some material irregularity or fraud, albeit, Section 230 of the Companies

Act, 2013 permits for the scheme of arrangement between the 'Corporate Debtor'

and its Creditors.

33. Continuing further, it is represented on behalf of the 1st Respondent that the

application for liquidation of 'Corporate Debtor' u/s 33(3) r/w Section 60(5) was

moved before the Adjudicating Authority, after resolution was passed by the

erstwhile 'Committee of Creditors' with an overwhelming majority of 99.28% voting

share in the meeting that took place on 11.11.2019.

34. The Learned Counsel for the 1st Respondent adverts to the Reply Affidavit of

the 1st Respondent (filed on 06.03.2020) wherein at paragraph 9 it is observed as

under:-

"9. In the affidavit filed by the

Appellant a letter (which is annexed as

Annexure A/3) of the additional

affidavit) provided by Candid Wealth

35 Company Appeal (AT) (Insolvency) No. 202 of 2020 Management Pvt. Ltd.('Guarantor')

committing to infuse equity of Rs. 15

crores along with its associates,

towards the source of equity infusion of

Rs. 15 crores has been submitted by the

Appellant. However, the following

points are noteworthy to point out:-

 The Guarantor has reported turnover of

Rs. 3,38,000/- and a net loss of Rs.

5,455/- for the year ended 31st March,

2019.

 The financial status of the guarantor for

the last 5 years is as follows:-

For the YE Particulars (inINR) 31-Mar-19 31-Mar-18 31-Mar-17 31-Mar-16 31-Mar-15 Total Revenue 5,83,753 4,61,352 14,35,000 6,55,167 9,26,255 Total expenses 4,66,037 3,21,590 13,44,472 4,76,489 8,68,337 Tax expenses 1,23,171 970 23,774 55,213 17,797 Profit/(Loss) (5,455) 1,38,792 66,754 1,23,465 40,021 After tax Total Assets 1,33,06,030 1,32,19,466 1,21,35,673 1,21,59,410 1,19,48,150 Total Liabilities 1,74,060 82,041 37,041 1,27,532 39,737 Equity 1,31,31,970 1,31,37,425 1,20,98,632 1,20,31,878 1,19,08,413

 The Guarantor's highest revenue in its last 5 years

is Rs. 14.35 lakhs and the Guarantor has no other

source of revenue.

36 Company Appeal (AT) (Insolvency) No. 202 of 2020  The Guarantor has reserves of Rs. 1.31 crores and

total assets of Rs. 1.33 crores.

35. The Learned Counsel for the 1st Respondent submits that the instant Appeal

is not maintainable since the Appellant(s) had miserably failed to demonstrate

before this Tribunal any instance of material irregularity or fraud in the order of

liquidation passed by the 'Adjudicating Authority' and an 'Appeal' is maintainable

as per Section 61(4) of IBC, only on the ground of material irregularity or fraud.

Liquidator's Stand

36. The Learned Counsel for the Liquidator contends that an opportunity to

submit reply was provided by the Adjudicating Authority to the Appellant /

'Resolution Applicant' and the 1st Appellant /'Resolution Applicant' had failed to file

the reply or prove its bonafide and correctly an order of liquidation was passed by

the Adjudicating Authority resting upon an unanimous decision of the 'Monitoring

Committee' and lenders.

37. The Learned Counsel for the Liquidator submits that the 'Resolution

Applicant' in its communication dated 15.08.2019 addressed to Bombay Stock

Exchange and National Stock Exchange had admitted that it has two Singapore

based subsidiary companies viz. 'Ready-Made Steel Pte Ltd.', and its step-down

subsidiary 'KG Foges Pvt. Ltd.' and as per the knowledge of the Liquidator, the

aforesaid subsidiaries, under the management of 'Mr. Anil Agarwal' and 'Mr.

37 Company Appeal (AT) (Insolvency) No. 202 of 2020 Gautam Joginder Lal Suri'(common Directors) had defaulted to the tune of INR

750/- crores appox. to the 'Union Bank of India', Hongkong Branch. Added further,

both the Companies, because of financial 'Mis-management' and 'Non-performing

Asset' are presently under 'compulsory winding up' by the 'Singapore Authorities',

which is equivalent of creditors induce liquidation in our country. Moreover, the

'Accounts' with the 'Union Bank of India' reportedly continued to be 'Non-

performing Asset' which disqualify them to act as 'Resolution Applicant' and these

facts having deliberately suppressed before this Tribunal, by the Appellant(s).

38. The Learned Counsel for the Liquidator contends that the eligibility of the 1st

Appellant / 'Resolution Applicant' is to be tested as per Section 29A of the Code and

further that, the act of financial default of subsidiary companies to the lenders

disqualifies the 'Resolution Applicant' u/s 29A of the 'I&B' Code. That apart, it is

the crystalline stand of the Appellant that decision of the lenders to liquidate the

Company after the failure of the Appellant(s) to implement the 'Resolution Plan'

despite several opportunities provided to them is an irreversible one. Moreover, the

claim of Edelweiss Asset Reconstruction Pvt. Ltd. (one of the lenders) that the

Appellant is financially viable is a malafide one and conveniently ignores the huge

default of the subsidiaries of the Appellant.

39. The Learned Counsel for the Liquidator points out that the 'Lenders' have

no locus-standi before this Tribunal, at this stage, since there is no 'Committee of

Creditors' and that the stakeholders 'Consultation Committee' under the

Liquidation process, unlike 'Committee of Creditors' under resolution process does

38 Company Appeal (AT) (Insolvency) No. 202 of 2020 not have any power to determine. In fact, such a Committee is formed for

consultation only and none of the consultations is binding on the 'Liquidator'.

40. The Learned Counsel for the Liquidator brings it to the notice of this Tribunal

that as on 31.03.2020 (quarterly result) the 'Resolution Applicant' had reported a

turnover of Rs. 21.17 crores and incurred a loss of Rs. 12.11 crores which indicates

that the financial position of the 'Resolution Applicant' that it is not in a fit position

to implement the plan. Also, that the 1st Appellant / 'Resolution Applicant' is

incapable to bring in the required funds as seen from the documents available on

public domain and one more Company controlled by the same group - 'Swee Hong

Pvt. Ltd.' which is under restructuring in Singapore which is equivalent to

'Corporate Insolvency Resolution Process' under the code.

41. The Learned Counsel for the Liquidator submits that the 'Resolution Plan' is

for Rs. 470/- crores and the affidavit dated 18.08.2020 filed by the Director of the

1st Appellant /'Resolution Applicant' does not demonstrate that it is financially

capable to implement the 'Resolution Plan' nor it is supported with solvency

certificate from a competent professional and that the present endeavour of the

Appellant(s) is merely a ruse to take over the Company's assets with an intention to

sell and generate assets.

42. The Learned Counsel for the Liquidator refers to the judgement of the Hon'ble

Supreme Court in 'Meghal Homes Pvt. Ltd.' V. 'Shree Niwas Girni KK Samidi

and Ors.' (civil appeal No. 3179-3181 of 2005, decided on 24.8.2007) wherein

it is observed as under:-

39 Company Appeal (AT) (Insolvency) No. 202 of 2020 "when a Company is ordered to be

wound up, the assets of it, are put in

possession of the official liquidator.

The assets become costodia legis

.......". Further, it is observed that

......"the court has to see the bonafide

of the scheme and to ensure that what

is put forward is not a ruse to dispose

of the assets of the company in

liquidation" and in the instant case,

the Appellant(s) are praying to quash

the order of liquidation without any

plan or scheme of arrangement and

without exhibiting the existence of

fraud or material irregularity in the

order of liquidation.

43. The Learned Counsel for the Liquidator refers to the judgement of Hon'ble

Supreme Court in 'Arcelor Mittal India Pvt. Ltd.' V. 'Satish Kumar Gupta' (civil

appeal no. 9402-9405 of 2018 decided on 01.04.2018) wherein the Hon'ble

Supreme Court had exercised its powers under Article 142 of the Constitution of

India and allowed the 'Resolution Applicants' time to file resolution plans afresh,

40 Company Appeal (AT) (Insolvency) No. 202 of 2020 but also mentioned that if none of the plans is accepted, the Company will

automatically go into liquidation.

44. The Learned Counsel for the Liquidator points out that the BLRC committee

in its report had noted this aspect in Chapter 5 which reads "the liquidation process

is an irreversible process from within a fixed period after the liquidation order is

passed. An appeal to stay the liquidation will not be considered by the Adjudicator".

45. The Learned Counsel for the Liquidator submits that Rule 11 of 'NCLAT' Rules

cannot be invoked for setting aside the liquidation order when there is a specific

provision under Section 61(4) of the 'I&B' Code.

46. In this connection, the Learned Counsel for the Liquidator contends that

'Inherent Powers' cannot be invoked or utilised in violation of the statutory

provisions of the Code and refers to the decision of Hon'ble Supreme Court 'Govt.

of Andhra Pradesh' V. 'P. Laxmi Devi (Smt.) 2008 reported in 2008 4 SCC at

page 720 wherein it is observed and held that Rules are delegated forms of

legislation, hence, the invocation cannot be done in the face of statutory provisions.

47. The Learned Counsel for the Liquidator submits that the upfront payment'

which the 'Resolution Applicant' is offering to the Creditors is subjective in nature

and, therefore, there is no certainty that the balance amount of 50 crores as

promised by the 1st Appellant / 'Resolution Applicant' will be paid to the Creditors

within the time specified.

41 Company Appeal (AT) (Insolvency) No. 202 of 2020

48. The Learned Counsel for the 'Liquidator' points out that the 'Cash Flow

Details' as per the failed 'Resolution Plan' is as follows:-

Amount in Crores Qtr Amount Infused Otherwise Amount Infused through Sale of Assets Total Amount 2 3.61 33.25 37.22 3 4.33 42.75 47.08 4 Nil 28.50 28.50 TOTAL 7.94 104.50 112.80

and takes a plea that from the aforesaid 'Cash Flow' that it is clear that the

'Resolution Applicant' in the 'Resolution Plan' is dependent upon the sale of assets

and, therefore, the plan is subjective one.

49. The Learned Counsel for the Liquidator submits that the Appellant(s) had

failed to provide an undertaking of meeting the unpaid 'Resolution Process Cost'

and liquidation cost to the tune of Rs. 7.25 crores.

Reply Submissions of the Appellant(s)

50. The real grievance of the Appellant(s) is that they never got an opportunity of

being heard and represent its grievance before the Adjudicating Authority and in fact

the Appellant(s) sought more time to file a detailed reply which was not granted to

them. However, the Adjudicating Authority without providing an opportunity to the

Appellant(s) passed an order of liquidation resting on the observation that a

consideration time has elapsed and the 'Resolution Plan' was not executed.

51. In the instant appeal, the Appellant(s) pray that the 1st Appellant/'Resolution

Applicant' is willing to revive the Company / 'Corporate Debtor' and hence, this

Tribunal may grant permission under 'inherent powers' an opportunity to revive, in

terms of the 'Resolution Plan'.

42 Company Appeal (AT) (Insolvency) No. 202 of 2020

52. It is the plea of the Appellant that the liquidator was not the part of the

proceedings when the 'Resolution Plan' was approved and that the liquidator is not

entitled to make any averments pertaining to the activities which took place prior to

the passing of the liquidation order. Also, that the liquidator was never a part of the

'Monitoring Committee' and that he has no 'locus' to challenge if another opportunity

is provided to the 1st Appellant/'Resolution Applicant' to revive the 'Corporate Debtor'.

A Liquidator cannot have a motive, contrary to the scheme of 'I&B' Code which is to

prefer revival over corporate death or liquidation of the 'Corporate Debtor'.

53. It is the case of the Appellant(s) that there is no question of going behind the

commercial wisdom of the 'Approved Resolution Plan' dissecting the present

revolution plan by the liquidator or for that matter any authority. In this regard, the

Learned Counsel for the Appellant(s) refers to the decision of Hon'ble Supreme Court

in Committee of Creditors of 'Essar Steel Ltd.' Vs. 'Satish Kumar Gupta and

Others' (reported in MANU/SC/1577/2019) while quoting 'K.Sashidhar' V.

'Indian Overseas Bank and Ors.'(MANU/SC/0189/2019) whereby and whereunder

it is observed as follows:-

"46. In our view, neither the Adjudicating

Authority (NCLT) nor the appellate authority

(NCLAT) has been endowed with a jurisdiction

to reverse the commercial wisdom of the

dissenting financial creditors and that too on

the specious ground that it is only an opinion of

the minority financial creditors. The fact that 43 Company Appeal (AT) (Insolvency) No. 202 of 2020 substantial or majority percent of financial

creditors have accorded approval to the

resolution plan would be of no avail, unless

approval is by a vote of not less than 75% (after

amendment of 2018 w.e.f. 6.6.2018, 66% of

voting share of the financial creditors. To put it

differently the action of liquidation process

postulated in chapter III of the 'I&B' Code is

avoidable, only if approval of the resolution

plan is by a vote of not less than 75%(as in

October, 2017) of voting share of the financial

creditors. Conversely, the legislative intent is to

uphold the opinion or hypothesis of minority

dissenting financial creditors. That must

prevail, if is not less than the specified percent

(25% in October, 2017; and now after the

amendment w.e.f. 6.6.2018 44%). The

inevitable outcome of voting by not less than

requisite percent of voting share of financial

creditors to disapprove the proposed the

resolution plan, de jure, entails in its deemed

rejection.

xxxxxxxxxx 44 Company Appeal (AT) (Insolvency) No. 202 of 2020

49.......No corresponding provision has been

envisaged by the legislature to empower the

resolution professional, the adjudicating

authority (NCLT) all for that matter the appellate

authority (NCLAT) to reverse the 'commercial

decision' of the COC much less of the dissenting

financial creditors for not supporting the

proposed resolution plan. Whereas from the

legislative history there is contra indication that

the commercial or business decisions of the

financial creditors are not open to any judicial

review by the adjudicating authority or the

appellate authority.

Xxxxxxxxxx

94. The NCLAT judgement which substitute its

wisdom for the commercial wisdom of the

committee of creditors and which also directs the

admission of a number of claims which was done

by the resolution applicant, without prejudice to its

right to appeal against the aforesaid judgement

must therefore be set aside."

54. The Learned Counsel for the Appellant(s) comes out with a plea that the role of

Section 29A of 'I&B' Code comes in to play only for deciding the disqualification at 45 Company Appeal (AT) (Insolvency) No. 202 of 2020 the time of submission of the bids and not after that. Further, the scope of Section

29A is limited to test the qualification or disqualification of a 'Resolution Applicant'

at the time of submission of a bid and in the instant case all that was already done,

the plan was approved and a test of Section 29A was cleared and nothing further was

left to be determined. In short, the contention of the Appellant is that the issue of

qualification / disqualification does not arise at this stage and cannot be legally

entertained, especially not on behalf of a liquidator.

55. The Learned Counsel for the Appellant(s) advances an argument that the

'Resolution Applicant' is only holding 12% equity in 'Kridhan Infra Limited' and

further that the 'Resolution Applicant' does not have any holdings in the Singapore

entities as mentioned. In fact, 'Kridhan Infra Limited' is not a subsidiary of the

resolution applicant.

Lenders' Pleas

56. The Learned Counsel for the Lenders contends that the Members of the

erstwhile COC(in exercise of the commercial wisdom) in the meeting held on 25.02.20

and on 24.08.2020 had decided to give an opportunity to the Appellant(s) to

implement the Resolution Plan with an object to achieve the value maximization of

the assets of the 'Corporate Debtor' and to save it from the death knell of liquidation.

In fact, the liquidation is to be only a last resort.

57. The Learned Counsel for the Lenders refers to the decision of 'Hon'ble

Supreme Court' 'Swiss Ribbon' Vs. 'Union of India', 2019 (4SCC page 17) wherein

it is among other things observed that the code is thus a beneficial legislation which

46 Company Appeal (AT) (Insolvency) No. 202 of 2020 puts the 'Corporate Debtor', back on its feet, not being a recovery legislation for

creditors....

58. The Learned Counsel for the Lenders contends that the intent of the 'I&B' Code

is clear to have lenders as a consultative body all through out liquidation process as

they are better equipped to take decisions in respect of the 'Corporate Debtor' and/or

the primary stakeholders to receive the payment from liquidation estate liquidated by

the liquidator during liquidation. Therefore, the amendments to the liquidation

regulations ensure that the stakeholders' consultation committee is constituted and

advise of the 'SCC' is to be considered by the liquidator and if the liquidator decided

differently from such majority decision of the 'SCC', he has to record reasons in

writing.

59. The Learned Counsel for the Lenders point out that during the pendency of the

instant appeal, before this Tribunal, the Liquidator was directed not to take any

action on confirmation of sale and that the liquidator went ahead and proceeded to

put the property on sale for the second time even for the conclusion of the 1st option.

Apart from that, through the advertisement, the stakeholders consultative committee

became aware of the fact that the property was put on sale again and that the

liquidator had reduced the reserve price by 25% during the second option a steep

reduction without consulting or discussing or even informing the members of the

SCC etc.

60. The Learned Counsel for the Lenders submits that a 'Scheme of Compromise'

or 'Scheme of Arrangement' post Liquidation order is permissible during liquidation

process, is, the 90 days period from the date of liquidation order, prescribed under 47 Company Appeal (AT) (Insolvency) No. 202 of 2020 the Regulations had already expired. Even assuming that the same can still be

undertaken, given that there is no maximum time limit prescribed under the

Companies Act, 2013 for completion of the process and in the absence of any enabling

provision under the Code or the Regulations for such compromise/arrangement there

might be anomalies / gaps in implementation of the process.

61. The Learned Counsel for the Lenders takes a stand that it is the collective

decision of the stakeholders consultation committee forming part of the erstwhile

committee of creditors to approve and implement the resolution plan which was not

only agreed upon during the meeting of the erstwhile COC members on 25.02.2020

but also stood re-affirmed in the meeting that took place on 24.08.2020.

62. The Learned Counsel for the Lenders contends that the 'Liquidator' is not acting

in the interest of resolution of the 'Corporate Debtor' and there appears to be no

bonafide reason for the 'Liquidator' to take a stand against the prospect of achieving

resolution of the 'Corporate Debtor', when the members of the erstwhile 'Committee

of Creditors' have decided to provide the Appellant an opportunity to implement the

'Resolution Plan'.

63. Appraisal

At the outset, it is pertinently pointed out by this Tribunal that the

'Corporate Debtor' 'Tecpro Systems Ltd.' was admitted on 07.08.2017 for

initiation of 'Corporate Insolvency Resolution Process' based on the

application (under Section 7 of the 'I&B' Code) filed by 'Edelweiss Asset

Reconstruction Company Ltd.' - one of the 'Financial Creditors' and that the

1st Respondent was appointed as an 'Interim Resolution Professional'. It is 48 Company Appeal (AT) (Insolvency) No. 202 of 2020 evident that the 'Resolution Professional' had received the 'Resolution Plan'

from i) 'Kridhan Infrastructure Private Ltd.' (Now Known as Krish Steel

and Trading Private Limited) ii) 'Eight Finance Pvt. Ltd.' (EFPL) iii)

Employees of the 'Corporate Debtor'. In fact, the 'Resolution Professional'

verified the 'Resolution Plan' as per Section 30(2) of the 'I&B' Code and

presented the same before the 'Committee of Creditors' for their

consideration. The 'Committee of Creditors' after deliberating and discussing

the 'Resolution Plans' submitted by the aforesaid 'Resolution Applicants' in

their 6th and 7th meetings and on 30.04.2018 the 'Committee of Creditors' in

its 8th meeting dated 30.04.2018 approved the 'Resolution Plan' submitted

by 'KIPL' (Now Known as Krish Steel and Trading Private Limited) by

a majority vote of 88.39%.

64. As a matter of fact, CA 368(PB)/2018 was filed on 3rd May, 2018 u/s

30(6) of the Code read with Regulation 39 of the 'Corporate Insolvency

Resolution Process' Regulations seeking approval of the 'Resolution Plan'.

On 10.03.2019, the modified 'Resolution Plan' was approved by a majority

vote of 89.92% through e-voting conducted between 10.03.2019 (11 A.M.) to

12.03.2019 (11 A.M.). The 'National Company Law Tribunal' Principal

Bench, New Delhi in CA 503(PB)/2019 on 15.03.2019 in Company Petition

No. (IB)-197/(PB)/2017 filed by the 1st Respondent / Applicant / 'Resolution

Professional' had approved the 'modified resolution plan' and observed that

it shall come into effect from the date of passing of the order.

49 Company Appeal (AT) (Insolvency) No. 202 of 2020

65. It is brought to the notice of this Tribunal that in the Impugned Order

in C.A. No. 2683(PB)/2019 in Company Petition No. (IB)-197(PB)/2017 (filed

by the 1st Respondent / Applicant / erstwhile 'Resolution Professional') the

'NCLT', Principal Bench, New Delhi had partly allowed the Company

application by ordering 'Liquidation' of the 'Corporate Debtor'/ 'Tecpro

Systems Ltd.' in the manner laid down in Chapter III of part II of the 'I&B'

Code, 2016. Further, as proposed by the 'Committee of Creditors' Mr.

Ramachandran Subramanian was appointed as 'Liquidator' as per Section

34(1) of the 'I&B' Code. Before this Tribunal, the primordial plea of the

Appellant is that it was not provided with an opportunity of being heard and

project its grievance before the Adjudicating Authority and since the

Appellant is very much is interested to implement the 'Resolution Plan' and

hence this Tribunal may allow the appeal thereby preferring the aspect of

'Resolution' and avoiding 'Liquidation'. Moreover, the Appellant agrees to

implement the 'Resolution Plan' and take all steps as mentioned in the

'Resolution Plan' immediately upon the order of reversal of liquidation.

Further, the Appellant agrees for the forfeiture of sum of Rs. 15 crores in

addition to the already forfeited sum of Rs. 5 crores, in case the 'Resolution

Applicant' fails to deposit the sum of Rs. 50 crores within the period of three

months from the date of reversal of liquidation order dated 16.01.2020. Also

that on behalf of the Appellant(s) it is fairly submitted that one of the lands

owned by the 'Corporate Debtor' which had a market value of INR 5 crore

and valued by the registered valuer @ INR 4.25 crores was sold by the 50 Company Appeal (AT) (Insolvency) No. 202 of 2020 Respondent for a consideration of INR 2.63 crores and in respect of the same

the Appellant(s) are not claiming any relief.

66. Be it noted, that 'speed' is the essence of the 'I&B' Code. A timely

resolution of insolvency can always be preferred and it is improper for a court

to stand over a winding up petition presented by a 'Creditor' for a very long

and indefinite period of time, as per decision 'Re Boston Timber Fabrication

Ltd.' (1984) BCLC 328(CA). In fact, the Legislature had made specific

provisions in 'public interest' and to facilitate good 'Corporate governance'.

It cannot be forgotten that the 'Bankruptcy Law Reforms Committee'

elected certain principles within which 'I&B' Code would function and one

such principle is that the 'I&B' code specifies the time bound process, which

will not be extended, to better preserve the 'Economic Value of the Asset'.

67. Time limit specified in 'I&B' Code is the essence of the triggering

process and the Insolvency Resolution Process. This is the prime reason

behind the enactment of the Code. If an Adjudicating Authority extends

the Insolvency Resolution Process beyond the time line mentioned u/s 12(3)

of the code, the same will be in negation of the underlying policy behind the

court of ensuring timely resolution of Company Insolvency. Per contra, the

exercise of this power, in violation of statutory provision may be desirable in

an exceptional / extraordinary circumstance(s). In fact, a 'Resolution

Applicant' has no vested right that his 'Resolution Plan' be considered.

68. Ordinarily, the 'Adjudicating Authority' is to follow the discipline of

'I&B' code enacted by the Parliament, especially to streamline the 51 Company Appeal (AT) (Insolvency) No. 202 of 2020 'Resolution' of 'Corporate Insolvency matters' involving 'Corporate

Insolvency' and the same require the experts' decision. Of course, it is not

open to an 'Adjudicating Authority' to take upon itself, the onus of

supervising the intricacies of 'Resolution Process'. Although, the resolution

of 'Corporate Insolvency' to ensure the survival of a company / enterprise as

a going concern is one of the key objectives of the 'I&B' code but the rider is

this must not come at the cost of efficiency, as opined by this Tribunal. To

put it succinctly, a 'Timely Liquidation' is preferred over endless 'Resolution

process'.

69. One cannot brush aside an important fact that longer the delay, more

likely it is the 'Liquidation' will only be the sensible answer. No doubt, the

'Liquidation value' tends to go down with an efflux of time as many 'Assets'

suffer from high economic depreciation value. Looking at from the point of

view of creditors a good realisation can generally be secured if a

company/firm is sold as a going concern. If one construes in the teeth of

the object sought to be achieved by the 'I&B' Code and in the light of

consequences provided by Section 33 of the Code, therefore, makes it

unerringly clear that the periods mentioned in Section 12 are mandatory and

cannot be extended. If time specified by statute is changed, then it will give

room for wider complications/implications, in the considered opinion of this

Tribunal.

70. Also, even in 'Liquidation', the realisation will be lower when there are

delays and in fact, delays cause value destruction/reduction. Moreover, the 52 Company Appeal (AT) (Insolvency) No. 202 of 2020 failure of some business plan is an integral part of the process of 'market

economy'.

71. It is to be pointed out that an administrator is in control of the affairs

of the Company and is in a position to offer an independent and detached

view of company affairs as per decision 'Re Newport County Association

Football Club Ltd.' (1987) BCLC 582(ChD). It is to be remembered that

the 'Liquidation Proceedings' cannot proceed incessantly, affecting /

damaging the interests of 'stakeholders'.

72. It is significant to point out that pre-occupation of 'I&B' Code with

'timely resolution of insolvency' is an important factor. In so far as

'Liquidation' is concerned it destroys the organisational capital etc. 'I&B'

Code allows 'Liquidation' only on failure of 'CIRP' and it facilitates /

encourages resolution in several manner. Undoubtedly, a liquidation order

shall also be a 'notice of discharge' to the offices, employees and workmen of

the 'Corporate Debtor' except when the business of the 'Corporate Debtor' is

continued.

73. It is to be pointed out that Section 230 of the Companies Act, 2013

deals with Tribunal's power to make an order on the application of the

Company or of any creditor or member of the Company or in case of company

which is being wound up, of the liquidator under this Act or under IBC as

the case may be that a meeting may be called for the proposed compromise

or arrangements including debt restructuring etc. between company, its

creditors and members. In fact, the Company or any other person by whom 53 Company Appeal (AT) (Insolvency) No. 202 of 2020 an application made shall disclose all material facts relating to Company

such as latest financial position of the Company, latest Auditor's Report,

'Reduction of Share Capital' of the company included in the compromise or

arrangement etc.

74. The Adjudicating Authority in the impugned order dated 16.01.2020

in C.A. No. 2683(PB)/2019 in Company Petition No. (IB)-197(PB)/2017 at

paragraph 6 had clearly observed that 'During hearing on 18.12.2019 an

opportunity was afforded to respondent no. 1 to 3 to file reply within one

week thereof. However, neither any reply was filed nor it could be shown as

to how the approved resolution plan could at all be implemented'. Further,

at paragraph 7 of the impugned order, the Adjudicating Authority had clearly

mentioned that even after period of eight months the 'Resolution Applicant'

has failed to adhere to any of the timelines for equity infusion, since approval

of the 'Resolution Plan'.

75. By diluting the speed specified in the code there is likelihood of

adversely affecting the interests of both sides. If the same is delayed,

maximization of value of assets of the 'Corporate Debtor' will weaken the

realisation of potential creditors. Moreover, the Company promoters' rights

or wrongs remain undischarged from the liability. A person who is to

proceed against the Company is suspended from exercising his rights for

'moratorium' remains in force as long as the CIRP period continues.

76. In regard to the exercise of 'inherent powers' it is to be pointed out

that inherent jurisdiction must be exercised subject to the rule that if the 54 Company Appeal (AT) (Insolvency) No. 202 of 2020 code does contain specific provision that would meet the necessities of the

case in question such provision should be followed and the inherent

jurisdiction should not be invoked, as per decision 'Arumuga Chettiar' V.

'K.R.S. Sevugan Chettiar' AIR 1950 Madras page 779'.

77. It is well settled principle in Law that an 'inherent power' cannot be

resorted to when there are specific provisions in Law to deal with the

situations. In this connection, this Tribunal worth recalls and recollects the

decision of Hon'ble Supreme Court in 'Durgesh Sharma' V. 'Jayshree'

reported in Air 2009 Supreme Court at page 285 wherein it is observed

and held that the inherent power cannot be exercised in contravention or in

conflict or ignoring express provision of Law, since law relating to transfer is

contained in Section 22 to Section 25 of the Code and they are exhaustive in

nature.

78. In the instant case, the 1st Appellant / 'Resolution Applicant' had

deposited Rs. 15 crores in the 'Escrow account' was permitted as per order

of this Tribunal on 29.07.2020 and further this Tribunal had directed that

the said amount so deposited in 'Escrow Account' shall not be appropriated

without prior approval of this Tribunal. Also, that the 1st Appellant /

'Resolution Applicant' had averred in the Affidavit in compliance of order

dated 18.08.2020 at paragraph 7 that it is agreeable for forfeiture of an

amount of Rs. 15 crores in addition to the already forfeited amount of Rs. 5

crores, in case it fails to deposit an amount of Rs. 50 crores within the three

months period, from the date of reversal of the liquidation order.

55 Company Appeal (AT) (Insolvency) No. 202 of 2020

79. At this stage, it is to be relevantly pointed out that the Liquidator

(although not arrayed as one of the parties to the present Appeal) was heard

through is counsel and the forceful objection on the side of Liquidator is that

the 'Resolution Applicant' through its subsidiaries had defaulted to the

Union Bank of India, Hongkong Branch to the tune of INR 750 crores approx.

and, therefore, is ineligible u/s 29A of the Code. In fact that after the failed

'Resolution Plan' the Appellant(s) want the period to recommence henceforth.

80. A perusal of Section 29A clause of the 'I&B' Code (i) indicates that it

disqualifies a person if he has been subject to any of disabilities stated in

clauses (a) to (h) of Section 29A in any jurisdiction outside India. In reality,

Section 29A (i) will have to be read as a disability which corresponds to

Section 29A(f) in view of the antecedent conduct on the part of a person

applying as a 'Resolution Applicant' in a jurisdiction outside India.

81. Section 29A(f) and (i) of 'I&B' Code speaks of persons prohibited by

foreign securities market regulator. It is seen from Section 29A(f) of the Code

that if any of the individuals mentioned therein is prohibited by SEBI from

either trading in securities are accessing the securities market, again

ineligibility of an individual furnishing the plan attaches. In fact, as per sub-

clause (i) if a person situate abroad is subject to any disability which

correspond to sub-clause (a) of the code such person also is forbidden.

Therefore, if a person is prohibited by a Regulator of the Securities market

in a foreign market of trading in security and accessing the security market

the then disability as per sub-clause (i) of section 29A would get attracted.

56 Company Appeal (AT) (Insolvency) No. 202 of 2020

82. In so far as the 'Locus Standi' of the 'Lenders' is concerned (before

this Tribunal) at this stage, there is no 'Committee of Creditors', to be

significantly borne in mind. However, in view of the fact that the 1st

Appellant / 'Resolution Applicant' in this appeal prays for an opportunity to

be provided to him to fulfill the obligations as per the approved Resolution

Plan and hence, it cannot be said in 'stricto sense' of the term that the

'Lenders' have no 'Locus' especially when the Appellants are endeavoring to

project their case of opportunity being provided to them to implement the

'Resolution Plan', notwithstanding the fact that numerous opportunities

were provided to them before the Adjudicating Authority.

83. In so far as the 'stakeholders' consultation committee under the

Liquidation process, unlike 'Committee of Creditors' under 'Resolution

process' they do not have any power to determine and even their consultation

is not binding on the liquidator, in the considered opinion of this Tribunal.

84. No wonder, timely Resolution of 'stressed Asset' is a key factor in the

successful functioning of the 'I&B' Code. As regards, the 'Liquidator' he has

to act in the interests of the 'collective Body of creditors' and there must be

sufficient and adequate grounds must exist before he is removed by the

Competent Authority. In so far as the conduct of 'Resolution Professional'

is concerned, in terms of Section 27 of the 'I&B' Code, a 'stakeholder'

aggrieved by the conduct of 'Resolution Professional' may file a complaint as

per IBBI (grievance and complaint handling procedure) Regulation, 2017.

57 Company Appeal (AT) (Insolvency) No. 202 of 2020

85. In the present Appeal, in an unnumbered interlocutory application

(vide Diary No(s). 34419 and 20770 of 2020 dated 23.07.2020) an 'Intervenor'

/ 'Operational Creditor' (Skyline Engineering Contracts (India) Pvt. Limited

has taken a stance that the continuation of liquidation proceedings is prima

facie prejudicial to the interests of all the stakeholders and further that the

revival / resolution of the 'Corporate Debtor' is indeed, the best possible

option, during the ongoing times of COVID 19. In fact, the aforesaid

interlocutory application is not entertained by this Tribunal.

86. Be that as it may, in the light of foregoing detailed discussions, this

Tribunal, taking note of the entire conspectus of the attendant facts and

circumstances of the instant case in an encircling manner and also keeping

in mind of the plea taken on behalf of the liquidator that the 'Resolution

Applicant(s)' cash flow mentioned in the failed 'Resolution Plan' is squarely

dependent upon the 'sale of assets' and hence it is 'subjective in character',

this Tribunal, bearing in mind that the 1st Appellant / 'Resolution Applicant'

is only said to be holding 12% equity in 'Kridhan Infra Limited' etc. and

added further in view of the specific plea taken by the Liquidator that the

'Resolution Applicant' through its subsidiaries had defaulted to Union Bank

of India, Hongkong Branch to an extent of INR 750 crores approx. and hence,

ineligible u/s 29A of the 'I&B' Code(although the same has been denied by

the Appellant(s) and as on 31.03.2020 the 'Resolution Applicant' had

reported a turnover of 21.17 crores and suffered a loss of Rs. 12.11 crores

and thereby the financial position of it is not in a favourable circumstance to 58 Company Appeal (AT) (Insolvency) No. 202 of 2020 implement the 'Resolution Plan', this tribunal comes to an inevitable,

irresistible and inescapable conclusion that an opportunity to revive the

'Corporate Debtor' as per terms of 'Resolution Plan' is not to be provided to

the Appellant(s)/ 'Resolution Applicant' to prevent an aberration of justice

and also to better preserve the 'economic value of assets' because of the

reason that the instant case is not an exceptional or extraordinary one to

invoke the ingredients of Rule 11 of 'NCLAT' Rules, besides the provisions of

'I&B' Code cannot be diluted in any manner whatsoever. (Based on the

attendant facts and circumstances of the instant case which float on the

surface). Also that, it cannot be said by any stretch of imagination that no

adequate opportunity was granted to the 'Resolution Applicant' before the

'Adjudicating Authority' to bring equity infusion. As a matter of fact, the

'Resolution Applicant' even after eight months of the approval of 'Resolution

Plan' had not followed the timelines for equity infusion and this was rightly

observed by the Adjudicating Authority in the impugned order.

Furthermore, even on merits, the impugned order passed by the Adjudicating

Authority is free from any Legal flaw, especially in the absence of any fraud

or material irregularity in the 'Liquidation Order' passed by the 'Adjudicating

Authority'. Resultantly, the Appeal fails.

87. In fine, the instant Appeal is dismissed. No costs. I.A. 529/2020 and

IA No. 1551/2020 are closed. The sum of Rs. 15 crores deposited by the 1st

Appellant / 'Resolution Applicant' in 'Escrow Account' shall be taken back

by it. I.A. No. 530/2020 seeking exemption from filing certified copies of 59 Company Appeal (AT) (Insolvency) No. 202 of 2020 the orders is closed with a direction to the Appellant(s) to file the certified

copy of the impugned order dated 16.01.2020 passed by the Adjudicating

Authority within 10 days from today.

[Justice Venugopal. M] Member (Judicial)

[Balvinder Singh] Member (Technical)

[Dr. Ashok Kumar Mishra] Member (Technical)

NEW DELHI

8th September, 2020

ss

60 Company Appeal (AT) (Insolvency) No. 202 of 2020