Kushal Limited And Ors vs Indian Overseas Bank Being The Leader Of ...

1. Kushal Ltd. A company incorporate under the Companies Act, 1956 Having its registered office at Plot No. 43, Beside Navneet Prakashan, Sukhramnagar, Gomtipur, Ahmedabad - 380023. Appellant No.1

2. Sandeep Tulsiram Agarwal Residing at 36, Royal Enclave, Near Asopalav Bungalows, Thaltej, Ahmedabad - 380059. Appellant No.2 Vs. 1. Kartik Baldwa A-7, 234, Royal Enclave, Near Jalsa Party Plot, Off S.G. Highway, Thaltej, Ahmedabad-380059. ....Respondent No. 1

2. Nitin Patil Flat 303, Silver Nest Apartment, Behind CIIGMA Hospital, Aurangabad-431001 ....Respondent No. 2

3. Runel Rathi E 14, Galaxy Apartment, S.G. Highway, Bodakdev, Ahmedabad-380054. ....Respondent No. 3

4. Bhavin Shah E 106, Haridham Society, Near Parshwanath Township, Naroda, Ahmedabad-382354. ....Respondent No. 4

5. Dinesh Pal C-201, Shivashrya Residency, Near KIRC College, Kalol- 382721 ....Respondent No. 5 -2- Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

6. Anil Patel 26, Suryay Bungalow, Opp. Saidham Temple, Sola, Ahmedabad- 380060. ....Respondent No. 6

7. Sanjeev Kumar Sharma Rajmoti-1, B3-204, Near Hariya Hospital, Vapi-396191. ....Respondent No. 7

8. Sunil Shah E 203, Shukan Platinum, Vandemataram Cross Road, Gota, Ahmedabad ....Respondent No. 8

9. Bijendra Sharma Samarpan Residency, Block F, Near Shindbad Hotel, Kalol- 383721 ....Respondent No. 9

10. Pankaj Sidhu F-308, Umiya Tirth Ville, Kalol, Gandhinagar ....Respondent No. 10

11. Hemant Vyas C-13, Madhava Apartment, ....Respondent No. 11 Maniyasa Society, Maninagar, Ahmedabad - 380008

12.Sanket Mukul ....Respondent No. 12 F-4, Mukul Park, Bhairavnath Road, Maninagar, Ahmedabad - 380028 ....Respondent No. 13 13. Urmila Guglani A-507, Suryavanshi Tower, Nehru Park, Vastrapur, Ahmedabad- 380015

14. Tapan Biswas ....Respondent No. 14 Vil. DharsaChoudhary Para, PO GIP Colony, Howrah, West Bengal - 711112

15. Arup Kumar ....Respondent No. 15 401, Riddhi Siddhi 2, Ravapar Residency, -3- Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

Morbi - 363641

16. Rajesh Nayak ....Respondent No. 16 3, Ranna Park Society, Kadi - 382715

17. Ajay Shah 9, Gitanjali Society, ....Respondent No. 17 Radhaswami Road, Ranip, Ahmedabad - 382480

18. Ujjal Chandra Giri B-43, Sundivine-1, ....Respondent No. 18 R.C. Technical Road, Gota, Ahmedabad - 382481

19. Rajendra Thakor 5, Ranna Park Society, ....Respondent No. 19 KadiKarannagar Road, Kadi

20. Prabir Das HP 4, Indraprastha Tower, ....Respondent No. 20 Drive In Road, Memnagar, Ahmedabad - 380052

21. Jaybhagwan Suhag ....Respondent No. 21 B/36, Sangath-3, Near Motera Stadium, Sabarmati, Ahmedabad - 380005

22. Haresh Patel ....Respondent No. 22 J/102, Samarpan Residency, Mehsana Ahmedabad Highway, Kalol

23. Harshad Oza Bungalow 15, Shreeji Park Society, ....Respondent No. 23 Dargha Char Rasta, Adalaj, Gandhinagar - 382721

24. Ramesh Trivedi ... E13, Sthapatya Apartment, .Respondent No. 24 Near Sterling Hospital, Memnagar, Ahmedabad - 380052

25. Kirti Patel ....Respondent No. 25 G- 308, Sudarshan Arcade, -4- Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

Panchvati Area, Kalol - 382721

26. Tapas Kapasi B-402, Akash IV, ....Respondent No. 26 Ankur Road, Naranpura, Ahmedabad - 380013

27. Sudhir Kumar Nilendu Maruti Nandan, ....Respondent No. 27 Room No. 15, Talagra District - 392130

28. Dharmendra Sharma 25, Hariomnagar Part 2, ....Respondent No. 28 Sabarmati, Ahmedabad - 380019

29. Dhirendra Thanki ....Respondent No. 29 Q 702, 7th Floor, Sardar Patel Housing Society, Ahmedabad - 380013

30. Yogesh Shah C- 38, Bapukrupa Society, ....Respondent No. 30 Gurukul Road, Memnagar, Ahmedabad - 380052

31. Anand Jayarama krishnan C- 52, Venus Apartment, ....Respondent No. 31 Near Sandesh Press, Bodakdev, Ahmedabad - 380054

32. Jyothy Menon E-32, Shivdhara Apartment, ....Respondent No. 32 Near Hind Super Market, Thaltej, Ahmedabad - 380059

33. Shailendra Singh D/22, Narayan Kunj Society, ....Respondent No. 33 Bharuch - 392001

34. Shrimali Prakash 5, Shiv Shakti Society, ....Respondent No. 34 IOC Road, Chandkheda, Ahmedabad - 382424 -5- Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

35. Pargesh Contractor A-10, New Madhavi Apartment, ....Respondent No. 35 Bhudarpura Road, Ambawadi, Ahmedabad

36. Biharilal Jangir H- 302, Kanchan Bhoomi Apartment, ....Respondent No. 36 Near Seema Hall, Ahmedabad - 380015

37. Dayashankar Sharma Galaxy Flat G1, ....Respondent No. 37 204, Borisana Road, Chhatral, Gandhinagar

38. Mukesh Patel 67, Rajdeep Park Society, ....Respondent No. 38 Odhav Road, Ahmedabad - 382415

39. Vinod Trivedi N- 14, Savita Park, ....Respondent No. 39 Opp. Lotus Schil, Isanpur, Ahmedabad - 382443

40. Dinesh Chhatrala Mota Goraiya, ....Respondent No. 40 Near Ramdevpir Temple, Taluka Viramgam - 382150

41. Jignesh Dave Dave Vaas, Post- Adalaj, ....Respondent No. 41 Gandhinagar - 382421

42. Gaurang Parmar Vraj Galaxy Flat No. 606, ....Respondent No. 42 NarodaDehgam Road, Ahmedabad - 382330

43. Rahul Shastri 89, Radheshyam Nagar Society, ....Respondent No. 43 Serisa Road, Kalol - 382721

44. Jitendra Nayak J- 106, SatyamdevChhavni- 5, ....Respondent No.44 Behind Balaji Agro Mall, -6- Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

Sugad - 382424

45. Nitesh Prajapati Opp. Reliance Hall, Kalol, ....Respondent No. 45 Gandhinagar - 382721

46. Kamlesh Tiwari B/5, New Laxminagar Society, ....Respondent No. 46 Village Borisana, Gandhinagar

47. Prem Jha 1, Amrut Complex, ....Respondent No. 47 Opp. Snehkunj Society, Highway Road, Kalol- 382721

48. Pravinkumar Patel 7, Green City Society, ....Respondent No. 48 Vibhag 1, Kalol

49. Pramod Rajput 405, Anjani Avenue, ....Respondent No. 49 Near Ganesh Party Plot, Kalol - 382721

50. Hasmukh Dholariya 147, Radheshyam Nagar Society, ....Respondent No. 50 Near Borisana Village, Gandhinagar - 382721

51. Popatbhai Prajapati Vamaj, Taluka Kadi, ....Respondent No. 51 Mehsana - 382715

52. Bharatkumar Solanki 13, Gayatri Row House, ....Respondent No. 52 Near Water Tank Railway, East Kalol

53. Pankaj Patel 7, Green City Society, ....Respondent No. 53 Vibhag 1, Kalol

54. Mangal Parmar Bechraji Taluka, ....Respondent No. 54 Mehsana -7- Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

55. Harshad Jadhav KothivaliChaul, Opp. BOB, Kalol, ....Respondent No. 55 Gandhinagar - 382721

56. Chandrakant Prajapati Prajapati Vas, Near Water Tank, ....Respondent No. 56 Kalol, Gandhinagar -382735

57. Hitesh Prajapati Prajapati Vas, Near Water Tank, ....Respondent No. 57 Kalol, Gandhinagar - 382735

58. M. Gadhavi 19, Ramvadi Township, ....Respondent No. 58 Panchvati Area, Kalol, Gandhinagar - 382721

59. Brijmohan Dwivedi 243, Gali No. 3, Vinod Vihar Colony, ....Respondent No. 59 Khadi Road, Rishikesh, Uttrakhand - 249204

60. Bharat Shah 19, Krishnapark Society, ....Respondent No. 60 Opp. Gaganvihar, Khanpur, Ahmedabad - 380001

61. Arvind Thakur Srinagar Society, Nandini Apartment, ....Respondent No. 61 Kalol- 382721

62. Utkarsh Gadhavi 21, Simraj Status Bungalow, ....Respondent No. 62 Near Kisan Petrol Pump, Kudasan, Gandhinagar - 382421

63. Pramod Singh Rajsaphhire Society Co. Op. Hsg. Society, ....Respondent No. 63 Koparli Road, Valsad- 396195

64. Dharmendra Nirala House No. B 150, ....Respondent No. 64 Kota, Rajasthan -8- Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

With

Comp. App. (AT) (Ins.) No. 680 of 2022

IN THE MATTER OF:

1. Kushal Ltd. A company incorporate under the Companies Act, 1956 Having its registered office at Plot No. 43, Beside Navneet Prakashan, Sukhramnagar, Gomtipur, Ahmedabad- 380023. .... Appellant No.1

2. Sandeep Tulsiram Agarwal Residing at 36, Royal Enclave, Near Asopalav Bungalows, Thaltej, Ahmedabad - 380059. .... Appellant No.2

3. Manoj Agrawal Residing at 3, Royal Crescent, Thaltej, Ahmedabad .... Appellant No.3

4. Kushal Agrawal, Residing at 3, Royal Crescent, Thaltej, Ahmedabad .... Appellant No.4

Vs.

Indian Overseas Bank Being the Lead Bank of The Lenders of M/s. Rainbow Papers Ltd. (Corporate Debtor in CIRP) ....Respondent Having its office at Ashram Road Branch, Chinubhai Tower, Ashram Road, Ahmedabad

With -9- Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

Comp. App. (AT) (Ins.) No. 681 of 2022

IN THE MATTER OF:

1. Kushal Ltd. A company incorporate under the Companies Act, 1956 Having its registered office at Plot No. 43, Beside Navneet Prakashan, Sukhramnagar, Gomtipur, Ahmedabad - 380023. ....Appellant No. 1

2. Sandeep Tulsiram Agarwal Residing at 36, Royal Enclave, Near Asopalav Bungalows, Thaltej, Ahmedabad - 380059. ....Appellant No. 2

Vs.

1. Committee of Creditors of Rainbow Papers Ltd. (Corporate Debtor in CIRP) Represented through lead bank Indian Overseas Bank, Large Corporate Branch, 1st Floor, Chinubhai Tower, Ashram Road, Ahmedabad - 380009 ....Respondent No. 1

2. Ramchandra Dallaram Choudhary, Resolution Professional of the Corporate Debtor Rainbow Papers Ltd. 9-B, Vardan Complex, Near Vimal House, Lakhudi Circle, Navrangpura, Ahmedabad - 380014. ....Respondent No. 2

Present:

For Appellants:Mr. Salil Thakore, Ms. Stuti Sharma and Mr. Prabhat Chaurasia, Advocates. For Respondent: - 10 - Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

JUDGMENT

[21st July, 2022]

(Per Hon'ble Mr. Justice M. Satyanarayana Murthy)

All the three appeals have been filed aggrieved by the common

order dated 24.03.2021 passed by Hon'ble National Company Law

Tribunal, Ahmedabad Bench at Ahmedabad in Interlocutory

Application Nos. 229, 230 and 231 of 2020.

I.A. No. 230 of 2022

The Insolvency Resolution Applicants filed I.A.No. 230 of 2020

requesting the Adjudicating Authority to recall the order dated

27.02.2019 passed by the Tribunal in I.A. No. 224 of 2018 in CP (IB)

No. 88/NCLT/AHM/2017 and to issue a direction for return of Rs.

30.5 crores paid by the Applicant pursuant to the resolution plan

approved by the order dated 27.02.2019 passed in I.A.No.224 of

2018 in CP (IB) No. 88/NCLT/AHM/2017 and other consequences.

I.A. No. 230 of 2020 was dismissed by the Adjudicating Authority

having found no misrepresentation or fraudulent

misrepresentation in issuing Information Memorandum calling for the

expression of interest for submitting insolvency resolution plan.

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

I.A. No. 229 of 2022

I.A. No. 229 of 2020 was filed under Section 60 (5) of

Insolvency and Bankruptcy Code, 2016 (for short 'IB Code') read with

Rule 11 of National Company Law Tribunal, Rules 2016 ('NCLT

Rules') and Regulation No. 39 (9) of Corporate Insolvency Resolution

Process ('CIRP') regulations for issue of appropriate direction against

the Respondent to implement the resolution plan including the

direction for deposit of balance amount, allotment of debentures,

giving of guarantees by Respondent Nos. 2 to 4 etc. as approved by

the Adjudicating Authority vide order dated 27.02.2019 made by the

Adjudicating Authority in I.A. No. 224 of 2018 and as confirmed by

the Hon'ble NCLAT New Delhi by its order dated 19.12.2019 passed

in Comp. App. (Ins.) No. 354 of 2019 and allied appeals. The

Petitioner also sought an alternative relief to recommence the period

of CIRP, for such period as may be deemed appropriate by the

Adjudicating Authority and permit the Applicant to engage the

services of Resolution Professional for the purposes of bringing about

resolution of the Corporate Debtor and to achieve the object of going

concern and for other consequential reliefs.

The Tribunal granted relief as claimed by the Petitioner

directing implementation of resolution plan dated 27.02.2019.

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

I.A. No. 231 of 2020

I.A. No. 231 of 2020 was filed by employees of Corporate Debtor

claiming the following reliefs:

(a) Order and direct the Respondent to make payments due to the applicants forthwith and evolve mechanism to ensure that future payments are made ad and when they fall due and/or;

(b) Initiate action against the Respondent under Section 74 of the Code for willful contravention of the resolution plan approved on 27.02.2019.

I.A. No. 231 of 2020 was resisted by the Respondents therein

on various grounds, but the Adjudicating Authority allowed the

application directing the Corporate Resolution Applicant for

implementation of resolution plan dated 27.02.2019.

Aggrieved by the orders in all three Interlocutory Applications,

the Appellants herein i.e the Insolvency Resolution Applicants

preferred these company Appeals Comp. App (AT) (Ins.) No. 678 of

2022, Comp. App (AT) (Ins.) No. 680 of 2022 and Comp. App (AT)

(Ins.) No. 681 of 2022 on various grounds.

Comp. App. (AT) (Ins.) No. 681 of 2022

In view of the allegations made, in the grounds raised, as the

result in the other appeals depends upon the decision in the appeal,

we find it appropriate to take up Comp. App. (AT) (Ins.) No. 681 of

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

2022 as a leading case for adjudication since the result of other

appeals is a consequence of decision in the Comp. App. (AT) (Ins.)

No. 681 of 2022.

The factual matrix in nutshell is that, the Adjudicating

Authority admitted CP (IB) No. 88/NCLT/AHM/2017 by order dated

12.09.2017 filed by Operational Creditor against the Corporate

Debtor i.e. Rainbow Papers Ltd. On appointment of Insolvency

Resolution Professional, the Resolution Professional after

exercising due diligence to complete the corporate insolvency

resolution process, issued Information Memorandum calling for

expression of interest, after its approval. In pursuance of invitation,

the appellants herein submitted the resolution plan and the same

was placed before the Committee of Creditors for voting on 6.6.2018

and 7.6.2018, the same was approved by the Committee of Creditors.

The Resolution Applicants/ Appellants herein filed I.A. 224 of

2018 in CP (IB) No. 88/NCLT/AHM/2017 to approve the resolution

plan under Section 30 of I&B Code, 2016 before the Adjudicating

Authority.

The application was allowed by the Tribunal i.e. Adjudicating

Authority upon hearing both the parties to the petitions, including

objections, by order dated 27.02.2019. Thus, the Corporate Debtor

was merged into applicant No. 1 company i.e. the first Appellant

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

herein. As per the approved plan submitted by the Applicants/

Appellants, the applicant is required to make payment as per plan in

the specified manner at different intervals as agreed by Committee

of Creditors, but the Appellants paid an amount of Rs. 30.50 crores

as on the date of disposing the applications.

The contention of the appellants is that, they have also spent

Rs. 3.67 crores as CIRP cost. It is further alleged that, despite

complying with its obligation, applicant has not been given

possession of the office premises and the same is continued to be in

possession of Rainbow Papers Ltd. No data, books of accounts and

other records of Rainbow Papers Ltd. were handed over till today.

The Resolution Professional as well as Committee of Creditors

have also not shared the forensic audit report which would disclose

the performance of Corporate Debtor.

It is also contended that Information Memorandum in

Annexure-B of the application contains column for disclosure of the

list of ongoing cases, but CIRP did not disclose the ongoing

assessment proceedings under the Income Tax Act 1961 for the

assessment year 2016-17, though they were pending at the time of

issuance of Information Memorandum, calling for expression of

interest. It resulted in an income tax liability of Rs. 5.22 crores, as

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

evident from the order dated 4.2.2020 passed by Dy. Commissioner,

Central Circle 2 (4).

The applicant got report made by GITCO with an object to find

out the condition of plant and machinery etc. The team of GITCO

consisting of technical experts inspected the premises and thereafter

submitted a report on conducting detailed expert examination.

The main grievance of this petitioner is that, as per

Information Memorandum, the production capacity of Corporate

Debtor is 3,59,100 metric tonnes per annum (which is equivalent to

1088 tonnes per day). However, as per the report of GITCO it is only

1,99,650 metric tonnes per annum (equivalent to 605 metric tonnes

per day). The daily rate has been calculated by taking 330 working

days in year.

The applicants submitted the resolution plan based on

production, turnover and profitability projections and believing

bonafide the details furnished in Information Memorandum i.e.

production capacity as 3,59,100 metric tonnes per annum, but it

was only 1,99,650 metric tonnes per annum as per the report,

therefore, on account of misstatement or misrepresentation made by

the Resolution professional, the appellants were made to part with

huge amount.

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

On account of the misrepresentation which is made

intentionally by the CIRP, the appellants are not under obligation to

proceed further to comply the plan and thus the resolution

professional fraudulently misrepresented the production capacity of

the industry i.e. Corporate Debtor and on the basis of such

fraudulent misrepresentation, the appellants were made to submit

the resolution application along with plan, got approved from the

Adjudicating Authority as per the orders in I.A. No. 224 of 2018 by

order dated 27.02.2019, thus, the order was obtained by fraudulent

misrepresentation which is avoidable or it can be avoided by the

Appellants herein since the fraud or misrepresentation vitiates the

entire proceedings and requested to recall the order passed in I.A.

No. 224 of 2018 dated 27.02.2019 relying on the judgment in

Kundan Care Products Ltd. vs. Amit Gupta 1.

The respondents opposed the appeals on various grounds. The

Resolution Professional contended that the joint lenders meeting of

Rainbow Paper Ltd. was held on 01.08.2017 accepted, the liability of

Corporate Debtor as estimated by the applicant and that Information

Memorandum was issued after exercising of due diligence by visiting

the plant of Rainbow Papers Ltd. and only after visiting, after

compliance of statutory procedure, the Information

Memorandum was issued. On the basis of Information Memorandum,

the appellants submitted the resolution plan and approved by the

1 Comp. App. (AT) (Ins.) No. 653 of 2020 dated 30.09.2020

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

Committee of Creditors, later accepted by the Adjudicating Authority

by order dated 27.02.2019 in I.A. No. 224 of 2018.

After hearing the arguments of both the counsel, the

Adjudicating Authority having come to the conclusion that the

Appellants herein GITCO appointed by the Appellants did not

calculate the capacity as per the formula for calculation of

production capacity, calculated the capacity based on the report of

GITCO and came to a conclusion that the capacity is equivalent to

the production capacity as stated in Information Memorandum. As

such the Resolution Professional did not make any

misrepresentation, much less, fraudulent misrepresentation

in Information Memorandum to invite expression of interest from the

public, thereby no illegality is committed by CIRP.

Finally, the adjudicating authority concluded that NCLT has no

power to recall its own orders and none of rules and regulations

under IBC or Rules of NCLT, 2016 permit to exercise such power.

Rule 11 of NCLT, 2016 and Section 420 (2) of Companies Act, 2013

do not permit, recall of any order passed by the Adjudicating

Authority, dismissed the petition.

Aggrieved by the order passed by the Adjudicating Authority,

the present appeals are filed raising several contentions more

particularly about the misrepresentation and fraudulent

misrepresentation allegedly made by the Resolution Professional,

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

while issuing Information Memorandum calling for expression of

interest. In response to the invitation, the

Appellants/Resolution Applicants submitted a resolution plan and

addendum which was accepted by Committee of Creditors and

approved by Adjudicating Authority by order dated 23.02.2019 in

I.A. No. 224 of 2018.

It is specifically contended by the Appellants that dismissal of

an application to recall the order passed by the Adjudicating

Authority in I.A. No. 224 of 2018 on the ground that the Tribunal/

Adjudicating Authority cannot exercise power to recall its own order,

as none of the provisions much less Rule 11 of IBC Rules, 2016 and

Section 420 (2) of Companies Act, 2013 is erroneous ex-facie, in view

of the law declared by the Hon'ble Apex Court. In support of their

contentions, the appellants relied on the judgments of Hon'ble

Supreme Court in United India Insurance Co. Ltd. vs. Rajendra

Singh2; Roshan Deen vs. Preeti Lal3; Indian National Congress

vs. Institute of Social Welfare4; Indian Bank vs. Satyam Fibres

(India) Pvt. Ltd5; Deepa Gourang Murdeshwar Katre vs.

Principal, V.A.V. College of Arts6; Revandas Ranchhodhbhai

2 (2000) 3 SCC 581 3 (2002) 1 SCC 100 4 (2002) 5 SCC 685 5 (1996) 5 SCC 550 6 (2007) 14 SCC 108

- 19 -

Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

Rathod vs. Jyotiben Wd/o Rameshbhai Madhusudan Thakar7;

Bindeshwari Pd. Chaudhary V. Debendra Pd. Singh8.

The Adjudicating Authority on erroneous appreciation of law

arrived at such conclusion, on the ground that the Adjudicating

Authority is not vested with power to recall its own orders.

It is further contended that the question of merger does not

arise as the Appellants did not prefer any appeal before the Appellate

Authority on the ground of misrepresentation or fraudulent

misrepresentation made by Resolution Professional but filed appeal

on different ground and the other aggrieved parties also preferred

appeals before the Appellate Tribunal and Hon'ble Supreme Court,

but the order was confirmed with certain modifications. Such order is

not deemed to have been merged with the order and thereby,

dismissal of the application of these Appellants on the ground of

merger of the judgment of the Appellate Court into the judgment of

Adjudicating Authority is erroneous and thereby, the approach of

the Adjudicating Authority is illegal and placed reliance on the

judgments of the Hon'ble Supreme Court in State of Madras vs.

Madurai Mills Co. Ltd9; Kunhayammed vs. State of Kerala10 and

7 2011 SCC online GUJ 2552 8 AIR 1958 Patna 618 9 AIR 1967 SC 681 10 (2000) 6 SCC 359

- 20 -

Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

Khoday Distilleries Ltd. Vs. Shri Mahadeswara Sahakara

Sakkare Karkhane Ltd11

Yet, another contention of the appellants is that, on account of

fraudulent misrepresentation, entire transaction is vitiated since the

Resolution Professional did not exercise due diligence in issuing

Information Memorandum which amounts to misrepresentation,

thereby the submission of resolution plan which was approved by

the Adjudicating Authority in I.A. No. 224/2018 is vitiated by

fraudulent misrepresentation thereby the order is liable to be

recalled, exercising inherent power by the Tribunal, but instead of

exercising such power, dismissed the application erroneously and

requested to allow the appeal, setting aside the order passed by the

Adjudicating Authority.

During hearing, learned Counsel for the appellants requested

for remanding the case to the Adjudicating Authority (National

Company Law Tribunal, Ahmedabad Bench) with the direction to

dispose of the applications, considering the law laid down by the

Hon'ble Apex Court in various judgments referred above.

Learned counsel for the Respondents supported the impugned

order totally and would contend that the order does not warrant any

interference of this Court while exercising jurisdiction under Section

11 (2019) 4 SCC 376

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

61 of IB Code, as the jurisdiction of the Tribunal under the IB code is

summary in nature, since the adjudicating Authority exercised due

diligence while issuing Information Memorandum based on the

previous reports of Indian Agro & Recycled Paper Mills Association

(IARPMA) and MITCON, and requested to dismiss the appeals.

Considering rival contentions, perusing the material available

on record, the point that arises for consideration in Comp. App. (AT)

(Ins.) No.681 of 2022 is:-

"Whether the Resolution Professional made any misrepresentation or fraudulent misrepresentation, while issuing Information Memorandum, inviting expression of interest to submit resolution plan? If not, whether the order passed by the Adjudicating Authority refusing to recall the order passed in I.A. No. 224 of 2018 dated 27.02.2019 be sustained?"

Indisputably, Rainbow Papers Limited filed an application to

undergo process of the insolvency resolution and in that process

Resolution Professional was appointed for completion of the

insolvency resolution process. Later, he issued Information

Memorandum inviting expression of interest from the public. In

response to the Information Memorandum calling for expression of

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

interest, the resolution applicants/appellants herein submitted their

plan for resolution.

The Resolution Professional undisputedly issued the

Information Memorandum calling for expression of interest dated

21.2.2018, disclosing the profile of Corporate Debtor in Annexure I,

the same is extracted hereunder:

"A Company Profile document provided by the company is shown as Annexure - 1. As per the total installed capacity of India of 22.15 Million MTs of Paper, the installed capacity of the Corporate Debtor (herein after also termed as Company) is 0.359 Million MTs equivalent to 1.6% of the Country's production capacity. Important information related to the Corporate Debtor are provided herein below:"

Though Annexure -1 is referred it was not filed. After 18

months from the date of approval of resolution plan by the

Adjudicating Authority and after disposal of appeals filed by both

Appellate Tribunal and the Hon'ble Supreme Court, the Appellant

herein resorted to second round of litigation, filed petition on the

ground that the CIRP made a false representation as to production

capacity of the Corporate Debtor and on the basis of report of

GITCO, the appellants herein filed the petition making serious

allegation of fraudulent misrepresentation against the Resolution

premises and thereafter submitted a report on conducting

Professional.

The applicant got report made by GITCO with an object to find

out the condition of plant and machinery etc. The team of GITCO

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

consisting of technical experts inspected the detailed expert

examination, the conclusions of GITCO are as follows:

The Rainbow Papers Ltd. is having adequate land and factory

building. The infrastructure in the form of building and sheds is

sufficient to support the projected production.

⮚ The report is aimed at assessing the condition of the plant and machinery through inspection and optical observations, possibility of restarting the manufacturing operations as the plan is closed for more than 18 months, technical up gradation required and to estimate the cost crude form and timeline required for the same.

⮚ Rainbow is having adequate land and factory building. The infrastructure in the form of building and sheds is sufficient to support the projected production.

⮚ Power arrangement through captive power plan of 35 MW and water management from the bore wells within the premises is available which is sufficient for projected production.

⮚ Provisions of machineries, unities and miscellaneous assets equipment as envisaged in the report are adequate.

⮚ After proposed CAPEX/overhauling/ Up gradation of ETP, plant will be fully operational and produce good quality products where the yield will be reasonably good. And in turn will help Rainbow to earn EBITDA margin matching to industry standards and even better than industry standards with the operational efficiency.

⮚ Based on the date provided and observations during the site visit, the project is considered to be technically feasible subject to completion of ETP up gradation/CAPEX/ overhauling

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

⮚ Total installed capacity of plant no. 7, 8 around 360 MTs per day

⮚ Plant has been closed since July, 2016, however, the machineries in reasonable good condition of the plant

⮚ The machineries and its part are in place

According to the report and as per Column No. III of the

Information Memorandum, it is mentioned that the company profile

document provided by the company show the installing capacity of

the Corporate Debtor is 0.359 MTs is equivalent to 1.6% of Country

Production Capacity.

Based on this Information Memorandum issued by the

Resolution Professional, the Resolution applicants/appellants herein

submitted their resolution plan and approved by COC and

adjudicating authority, however, they got appointed GITCO for the

purposes mentioned in the earlier paragraphs. The inspection was

done unilaterally without the presence of CIRP or his representatives.

However, the adjudicating authority calculated the production

capacity based on GITCO report as follows:

We found that the production capacity of the industry is

minimum, the same is shown as under: -

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

Assumption 1- Assumption 2- Calculation of daily production Assumption 3 - Calculation of daily production Considering the capacity by factoring in to the production capacity by factoring in to the production daily capacity calculation formula the gsm, speed, machine calculation formula the gsm, speed, machine as shown in the hours, Machine deckle as per the basis shown hours, Machine deckle as per the basis shown GITCO Report in the GITCO study report of every individual in the GITCO study report of every individual machines machines Paper Machin GSM Design Opera Respective Daily Capacity Daily Production Capacity,* based on the basis Calculation of installed production capacity by Machin e Range Speed ting Page as shown in shown by GITCO itself in the configuration of formula ** based on the findings of GITCO e Deckle Speed Number of GITCO Report every individual paper machines (in MT) itself about the machine statistics viz. Design (in Mtr.) GITCO Report speed, GSM, Machine Deckle etc. (in MT) on which the capacity is shown GSM Spe Hou Deckl Producti GSM Speed Hou Dec Producti ed rs e on rs kle on 2 2.15 60-180 250 220 Page no. 23 50 100 195 22.5 2.15 57 100 250 24 2.15 73 3 2.13 180-550 120 110 Page no. 27 60 220 105 22.5 2.13 66 220 120 24 2.13 76 4 2.13 230-550 150 130 Page no. 30 80 260 105 22.5 2.13 79 260 150 24 2.13 112 5 1.75 230-700 150 110 Page no. 34 80 290 115 22.5 1.75 79 290 150 24 1.75 103 6 1.60 20-130 120 100 Page no. 57 4 4 4 7 4.46 40-100 850 750 Page no. 37 180 48 650 22.5 4.46 188 48 850 24 4.46 246 8 4.46 45-100 1100 800 Page no. 42 225 80 700 22.5 4.66 35.2 80 1100 24 4.46 530 9 4.46 40-120 Page no. 59 250 250 250 Master Air Knife Coater (1.6 m Deckle), ALR, Knife Page 62 37 37 37 Cote Coater (1.5 Deckle) air knife coater (1.5 m Deckle) Cast coater 1 & 2 Total 966 1111 1430 Annual Capacity (Assuming 365 days in a year) 352590 405685 521911

Formula for calculation of production capacity

* Daily Operating Production

(GSM × Machine Deckles in Meters × Operating Speed × Daily Operating hours)/ (1000 × 1000)

** Installed capacity

(GSM × Machine Deckles in Meters × design speed × 24 hours)/ (1000 × 1000) Installed capacity means the design production capacity to run the machine at highest efficiency i.e. 24 hours × 365 days

As per the details mentioned above, the capacity was calculated

by the Adjudicating Authority and found that the installing capacity

as 5,21,911 MTs as shown in last column of the table.

Thus, the Tribunal on accessing the installing capacity i.e. the

production capacity, the capacity of the industry of the Corporate

Debtor, as mentioned in the Information Memorandum is equivalent

to the capacity noted by GITCO after due inspection. Therefore, there

is no misrepresentation, much less fraudulent misrepresentation.

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

The production capacity of Corporate Debtor as calculated by the

adjudicating authority in the order under challenge was not

questioned in the appeals by the Appellants in the present case.

However, this Court while deciding this appeal under Section 61 of

the IB Code need not undertake the process of calculating the

production capacity of the Corporate Debtor.

Learned counsel for the Appellants in the written submission

contended that the Appellants submitted resolution plan based on

the information furnished by CIRP, submitted a resolution plan and

addendum, at Clause (G), wherein, it is specifically stated that the

resolution applicant submitted his resolution plan. However, I find no

such clause in the addendum, but at Page No. 206 a specific

mention is made as under:

"total amount of outstanding dues to secure financial creditors of Rainbow Papers Ltd. as per Information Memorandum being Rs. 1437.11 crores (claimed received and admitted Rs. 1437.11 crores) as per the table".

The above extracted paragraph it is not relating to production

capacity of the industry.

From the above, it is clear that, based on the Information

Memorandum, the amount due to the financial creditors is arrived at,

therefore, the contention of the Appellants that they submitted

resolution plan based on the details as to production capacity of the

industry is without any substance.

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

Another contention of the Appellants is that, pending tax

proceedings are not disclosed in the Information Memorandum by

CIRP, in fact, the CIRP disclosed the tax liability and the appellants

at Point No. 51 of the resolution plan agreed as follows:

"51. "Taxes" or "Tax" shall means any and all present and future, direct or indirect, claims for tax, levy, impost, duty, cess, statutory dues or other charge of a similar nature (including any penalty or Interest payable in connection with any failure to pay or any delay in paying any of the same) including on gross receipts, sales, turnover, value addition, use, consumption,, property, service, franchise, capital, occupation, license, excise, documents (such as stamp duties) and customs and other taxes, duties, assessments, or fees, however imposed, withheld, levied, or assessed by any Governmental Authority."

As the appellants themselves agreed to pay the future liability

of taxes, non-disclosure of any pending cases as to assessment is not

a ground. On the other hand, CIRP is under obligation to disclose

pending cases but not the assessments. Hence, non-disclosure is not

a ground to conclude that the CIRP made any misrepresentation.

In view of specific findings recorded by the Adjudicating

Authority regarding the production capacity based on Information

Memorandum and GITCO report, so also Point No.51 of resolution

plan, it is difficult to accede to the request of the learned counsel for

the Appellants.

'Misrepresentation' and 'fraud' are not defined in IBC. The word

'Fraud' is defined under Section 17 and 'Misrepresentation' is defined

under Section 18 of the Indian Contract Act, 1872.

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

"Section 17. 'Fraud' defined.-- „Fraud' means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract:

(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;

(2) the active concealment of a fact by one having knowledge or belief of the fact; (3) a promise made without any intention of performing it;

(4) any other act fitted to deceive;

(5) any such act or omission as the law specially declares to be fraudulent. Explanation.--Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence, is, in itself, equivalent to speech."

Section 18. "Misrepresentation" defined- „Misrepresentation‟ means and includes-

(1) the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;

(2) any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or any one claiming under him, by misleading another to his prejudice or to the prejudice of anyone claiming under him;

(3) causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement."

In the instant case, representation was made by the Resolution

Professional in Information Memorandum inviting expression of

interest. To constitute fraudulent misrepresentation, there must be

material on record that CIRP has not exercised due diligence as a

reasonable man and intentionally made such misrepresentation. But,

no such material is place that misrepresentation was made

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

intentionally, consequently failed to establish none of the ingredients

to constitute misrepresentation or fraudulent misrepresentation.

To constitute a fraudulent misrepresentation, the appellant has

to plead and prove that CIRP made such representation with an

intent to deceive the Appellants herein and the petitioner would have

suffered any damage.

In the present facts of the case, there is absolutely no allegation

that the Resolution Professional made any representation with

fraudulent intention or with an intent to deceive the resolution

applicants i.e. appellants herein. In the absence of such allegation

and proof of it, by producing prima facie material, it is difficult for

this Court to accept the contention of the Appellants, that the

appellants have submitted the resolution plan based on such

fraudulent misrepresentation made by Resolution Professional.

At this stage it is relevant refer to the provisions of IBC, as

referred by the appellants in the grounds of the appeal.

Section 18 (1) (a) of IBC deals with duties of interim resolution

professional. The IRP has to:

(a) collect all information relating to the assets, finances and operations of the Corporate Debtor for determining the financial position of the Corporate Debtor, including information relating to; business operations for the previous two years;

(b) financial and operational payments for the previous two years;

list of assets and liabilities as on the initiation date; and such other matters as may be specified. But this provision is

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

irrelevant since the appellants did not submit any resolution plan based on the IM issued by IRP.

Section 25 (2) (G) of IBC obligates the Resolution Professional

to prepare the Information Memorandum in accordance with section

29, whereas Section 29 deals with preparation of information

memorandum and the contents of information memorandum. The

contents are as follows:

"(a) The Resolution Professional shall prepare an information memorandum in such form and manner containing such relevant information as may be specified by the board for formulating a resolution plan, the Resolution Professional shall provide to the resolution applicant access to all the relevant information in physical and electronic form provide such a resolution applicant undertakes to comply with previous provisions of law for the time being enforce relating to confidentiality.

(b) to protect any intellectual property of Corporate Debtor it may have access to (c) not to share relevant information with 3 party rd

unless (a) & (b) of the section."

In the explanation annexed to Section 29, the word 'relevant

information' is explained. It means the information required by the

resolution applicant to make the resolution plan for the Corporate

Debtor which shall include financial position of the Corporate Debtor.

All information relating to dispute against the Corporate Debtor on

any other matter pertaining to the Corporate Debtor as may be

specified. Therefore, the word 'relevant information' referred in

Section 29 (1) of IBC is only an information required by the

resolution applicant i.e. appellants herein to make resolution plan

for the Corporate Debtor. Here, the Resolution Professional disclosed

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

the information based on the report of MITCON available and he is

not an expert to make an assessment of the production capacity of

the industry, therefore, he only disclosed those details regarding

production capacity based on earlier report submitted by MITCON,

such information is relevant for the purpose of making a resolution

plan for the Corporate Debtor by the Resolution Applicant.

Thus, the Resolution Professional disclosed relevant

information enabling the resolution applicants/ appellants to make

appropriate application by submitting resolution plan for the

Corporate Debtor. Such act would not amount to fraudulent

misrepresentation.

Learned counsel for the Appellants also drawn the attention of

this Court to Regulation Nos. 32, 36 (2) (a) which states about

contents of Information Memorandum i.e. assets and liabilities with

such description as on insolvency commencement date. The word

'description' includes the details such as cost of acquisition

information useful like identification numbers, depreciation of charge

etc., as per the explanation under Regulation 36 (2) (a). The

contention of the Appellant is that the report was submitted for

obtaining loans and it is confidential. Based on such report,

disclosure of production capacity is impermissible. But

this contention is not acceptable, for the reason that the report was

submitted by MITCON to Corporate Debtor within reasonable time

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

before commencement of insolvency resolution process. Thus, the

CIRP made every endeavor to disclose the relevant information as

required under law. The appellants themselves obtained a certificate

from stock exchange and placed on record. Even according to the

certificate, the production capacity of corporate debtor is same as

mentioned in Information Memorandum, as such, the information

disclosed by CIRP is based on material. Hence the finding of

Tribunal cannot be interfered by this Appellate Tribunal.

Viewed from any angle, the Resolution Professional prima facie

did make no misrepresentation or false representation, much less,

fraudulent misrepresentation as alleged by the Appellants.

The Adjudicating Authority dismissed the application on the

ground that the Adjudicating Authority has no power to recall its own

order, which is prima facie erroneous, in view of the law laid down by

the Apex Court in various judgments. At this stage, it is relevant to

refer judgment of Apex Court in United India Insurance Co. Ltd. vs.

Rajendra Singh12 where the Apex Court held that:

"Fraud and justice never dwell together" (Frans et jus nunquam cohabitant) is a pristine maxim which has never lost its temper over all these centuries. Lord Denning observed in a language without equivocation that "no judgment of a Court, no order of a Minister can be allowed to stand if it has been obtained by fraud, for, fraud unravels everything."

12 2000 ACJ 1032

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

"Therefore, we have no doubt that the remedy to move for recalling the order on the basis of the newly discovered facts amounting to fraud of high degree, cannot be foreclosed in such a situation. No court or tribunal can be regarded as powerless to recall its own order if it is convinced that the order was wangled through fraud or misrepresentation of such a dimension as would affect the very basis of the claim."

The same principle is reiterated in United India Insurance Co.

Ltd. vs. Rajendra Singh; Roshan Deen vs. Preeti Lal; Indian

National Congress vs. Institute of Social Welfare; Indian Bank

vs. Satyam Fibres (India) Pvt. Ltd; Deepa Gourang Murdeshwar

Katre vs. Principal, V.A.V. College of Arts; Revandas

Ranchhodhbhai Rathod vs. Jyotiben Wd/o Rameshbhai

Madhusudan Thakar13; Bindeshwari Pd. Chaudhary V.

Debendra Pd. Singh (referred supra).

We are not disputing the power of the Tribunal to recall its

own order. The Tribunal held that it is not vested with the power to

recall its own order on any ground but it is erroneous and

therefore dismissal of the I.A. No. 230 of 2020 filed by these

Appellants, on the ground that no such power is vested with the

Tribunal is hereby set aside, while holding that Tribunal is competent

to recall its own orders in view of the perspective pronouncements

referred above.

The Adjudicating Authority also concluded that the order of

primary Tribunal merged with the order of Supreme Court and NCLT.

13 2011 SCC online GUJ 2552

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

No doubt, normally the order of the Appellate Tribunal will be merged

with the order passed by the Tribunal etc. The fraud allegedly

detected in year 2020 appointing GITCO for assessing the production

capacity of Corporate Debtor company and by the time the appeals

were filed by the Appellants, so no such fraud was detected and no

findings were recorded by the Appellate Tribunal or the Supreme

Court in the appeals filed by the other creditors.

'Doctrine Of Merger' was laid down by the Hon'ble Apex Court

in State of Madras V. Madurai Mills Company Ltd14, wherein the

Supreme Court held as follows:

"But the doctrine of merger is not a doctrine of rigid and universal application and it cannot be said that wherever there are two orders, one by the inferior Tribunal and the other by a superior Tribunal, passed in an appeal or revision, there is a fusion or merger of two orders irrespective of the subject matter of the appellate or revisional order and the scope of the appeal or revision contemplated by the particular statute. In our opinion, the application of the doctrine depends on the nature of the appellate or revisional order in each case and the scope of the statutory provisions conferring the appellate or revisional jurisdiction. For example in Amritlal Bhogilal & Co‟s. (1) case it was observed by this Court that the order of registration made by the Income-tax officer did not merge in the appellate order of the Appellate Commissioner, because the order of registration was not the subject-matter of appeal before the appellate authority. It should be noticed that the order of assessment made by the Income-Tax Officer in that case was a composite order viz., an, order granting registration of the firm and making an assessment on the basis of the registration. The appeal was taken by the assessee to the Appellate Commissioner against the composite order of the Income-tax- Officer. It was held by the High Court that the order of the Income-tax- Officer granting registration to the respondent must be deemed to be merged in the appellate order and that the revisional power of the Commissioner of Income-tax cannot, therefore, be exercised in respect of it. The view taken by the High Court was over- ruled by this Court for the reason that the order of the Income-tax officer granting registration cannot be deemed to have merged in the order of the Appellate Commissioner in an appeal taken against the composite order of assessment. Similarly, in The State of Uttar

14 AIR 1967 SC 681

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

Pradesh V. Mohammed Nooh (2), it was held by this Court that the principle of merger cannot apply in the case of an order of dismissal of a public servant which was made by the departmental Tribunal on the 20 April, 1948 and against which the appeal was dismissed by th

the Appellate Authority on the 7 May, 1949, and the revisional th

application was rejected on the 22 April, 1950. In the circumstances nd

of the present case, it cannot be said that there was a merger of the order of assessment made by the Deputy Commercial Tax Officer dated the 28 November, 1952 with the order of the Deputy th

Commissioner of Commercial Taxes dated the 21 August, 1954 st

because the question of exemption on the value of yarn purchased from outside the State of Madras was not the subject-matter of revision before the Deputy Commissioner of Commercial Taxes. The only point that was urged before the Dy. Commissioner was that the sum of Rs. 6,57,971-4-9 collected by the respondent by way of tax should not be included in the taxable turnover. This was the only point raised before the Dy. Commissioner and was rejected by him in the revision proceedings. On the contrary, the question before the Board of Revenue was whether the Dy. Commercial Tax Officer, Madurai was right in excluding from the net taxable turnover of the respondent the sum of Rs. 7,74,62,706-1-6 which was the value of cotton purchased by the respondent from outside the State of Madras. We are, therefore, of opinion that the doctrine of merger cannot be invoked in the circumstances of the present case."

The above principle is reiterated in Kunhayammed vs. State of

Kerala15; Khoday Distilleries Ltd. vs. Shri Mahadeswara

Sahakara Sakkare Karkhane Ltd16; A.V. Papayya Sastry vs.

Govt. of AP17; Vijay Shekhar vs. Union of India18; Venture Global

Engineering LLC vs. Tech Mahindra Ltd19; Ganpatbhai

Mahijibhai Solanki vs. State of Gujarat20; Vijay Shekhar vs.

Union of India21, Venture Global Engineering LLC vs. Tech

Mahindra Ltd.22.

15 (2000) 6 SCC 359 (2019) 4 SCC 376 16

17 (2007) 4 SCC 221 18 (2004) 4 SCC 666 19 (2018) 1 SCC 656 20 2008 (3) SCALE 556 21 2007 (9) SCALE 442 22 (2018) 1 SCC 656

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

However, applying with principles laid down in the above

judgments to the present facts of the case, we hold that dismissal of

application of these appellants by the Tribunal on the ground of

merger is erroneous, for the reason that, there was no challenge to

the resolution plan approved by the Tribunal on the ground of

misrepresentation or fraudulent misrepresentation.

In view of law laid down by the Apex Court in the judgements

referred above, the dismissal of the application on the ground of lack

of power to recall the orders and on the principle of doctrine of

merger, the order of the Adjudicating Authority is liable to set aside,

as it is ex facie erroneous. Accordingly, the findings are hereby set

aside.

In any view of the matter, based on fact situation, more

particularly about the calculation of production capacity by specific

formula extracted above and for the failure of these appellants to

inspect the premises before making expression of interest for

submitting resolution plan indicates that the appellants are not

diligent in submitting the resolution plan.

In Ebix Singapore Private Limited vs. Committee of

Creditors of Educomp Solutions Ltd. and Anr23 and Kundan Care 23 2021 SCC Online SC 707

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

Products Ltd. vs. Amit Gupta etc24, the Supreme Court considered

the duties of Resolution Professional in para 185 with reference to

Section 29 of IBC, BLRC report and the duties of Resolution

Professional, held as follows:

"1. The RP must provide the most updated information about the entity as accurately as is reasonably possible to this range of solution providers. In order to do this, the RP has to be able to verify claims to liabilities as well as the assets disclosed by the entity. The RP has the power to appoint whatever outside resources that she may require in order to carry out this task, including accounting and consulting services.

2. The information collected on the entity is used to compile an information memorandum, which is signed off by the debtor and the creditors committee, based on which solutions can be offered to resolve the insolvency. In order for the market to provide solutions to keep the entity as a going concern, the information memorandum must be made available to potential financiers within a reasonable period of time from her appointment to the IRP. If the information is not comprehensive, the RP must put out the information memorandum with a degree of completeness of the information that she is willing to certify.

For example, as part of the information memorandum, the RP must clearly state the expected shortfall in the coverage of the liabilities and assets of the entity presented in the information memorandum. Here, the asset and liabilities include those that the RP can ascertain and verify from the accounts of the entity, the records in the information system, the liabilities submitted at the start of the IRP, or any other source as may be specified by the Regulator.

3. Once the information memorandum is created, the RP must make sure that it is readily available to whoever is interested to bid a solution for the IRP. She has to inform the market (a) that she is the RP in charge of this case, (b) about a transparent mechanism through which interested third parties can access the information memorandum, (c) about the time frame within which possible solutions must be presented and (d) with a channel through which solutions can be submitted for evaluation. The code does not specify details of the manner or the mechanism in which this should be done, but rather emphasis that it must be done in a time-bound manner and that it is accessible to all possible interested parties."

Similarly, the Apex Court also adverted to UNCITRAL Guide

notes, which is as follows:-

24

Civil Appeal No.3560 of 2020 dated 28.07.2021

- 38 -

Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

" 5. Duties and functions of the insolvency representative [....]

(e) Obtaining information concerning the debtor, its assets, liabilities and past transactions (especially those taking place during the suspect period), including examining the debtor and any third person having had dealings with the debtor....."

In para 189 of the judgment the Apex Court concluded that

under the IBC, duty is cast upon a Resolution Professional to collect

as much information about the Corporate Debtor as is accurately

possible to him. Then, such information is communicated through an

Information Memorandum. The Resolution Professional must be

careful to clarify when its information is not comprehensive and what

facts may cause change.

The word 'relevant information' is required under Section 29

to formulate its resolution plan. When once the Resolution

Professional disclosed relevant material in Information Memorandum

based on MITCON Report which is equivalent to the information

collected by GITCO, which the Appellants relied on is sufficient to

conclude that the Resolution Professional did make no

misrepresentation or fraudulent misrepresentation, therefore, when

the appellants failed to make necessary investigation in the matter

and proceeded to submit its resolution plan, this the act of the

Resolution Professional cannot be held to be the fraudulent

misrepresentation. On the other hand, it appears that this

application was filed after 18 months from the date of approval of

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

resolution plan with an intention to delay the proceedings and to

avoid resolution plan submitted by resolution applicants/appellants.

If the contention of the Appellants is accepted at this belated stage

and permitted the Tribunal to recall such orders after approval of the

resolution plan by order of the Adjudicating Authority, it would

amount to opening flood gates which would frustrate the very

intention of IBC where timely resolution is required at every stage.

Therefore, for the reasons stated above, we find no ground to

interfere with the order passed by the Adjudicating Authority in I.A.

No. 230 of 2020 (NCLT, Ahmedabad Bench) and consequently the

appeal deserves to be dismissed as the appeal is devoid of merits.

Accordingly, Comp. App. (AT) (Ins.) No. 681 of 2022 is dismissed.

Comp. App. (AT) (Ins.) No. 678 of 2022

In Comp. App. (AT) (Ins.) No. 678 of 2022, the simple issue is

about implementation of resolution plan by the Appellants.

This application was filed by the employees of Corporate

Debtor to direct the Respondent to make payments due to the

applicants forthwith and evolve mechanism to ensure that future

payments are made and initiate action against the Respondent under

Section 74 of code for willful contravention of resolution plan

approved on 27.02.2019. The Tribunal allowed the petition; directed

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

the respondent to implement the resolution plan forthwith and to

pay the dues to the employees. The same is now challenged on the

ground that the resolution plan was submitted due to

misrepresentation made by interim resolution professional and

therefore no direction be issued against the appellants herein.

In Comp. App. (AT) (Ins.) No. 681 of 2022, a specific finding is

recorded by this Tribunal that no fraudulent misrepresentation was

made by the CIRP and the CIRP had undertaken an exercise to

calculate the production capacity of the industry and concluded that

no fraudulent misrepresentation was made by CIRP while issuing

Information Memorandum, calling for expression of interest.

As the application to recall the order passed by the Tribunal in

I.A. No. 224 of 2018 was dismissed, the appellants are under

obligation to implement the resolution plan. In fact, these appellants

and others are challenging the order passed by the Tribunal in

I.A.No.224 of 2019 preferred the appeals which were dismissed by

this Tribunal. In Paragraph No. 45 of the order, the

Appellate Tribunal held as follows:-

"45. Therefore, we direct the „Successful Resolution Applicant‟- 2 nd

Respondent („Kushal Ltd.') to release full provident fund and interest thereof in terms of the provisions of the „Employees Provident Fund‟ and Miscellaneous Provision Act 1952' immediately, as it does not include as an asset of the „Corporate Debtor'. The impugned order dated 27 February, 2019 approving th

the „Resolution Plan' stands modified to the extent above."

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

Aggrieved by the order, an Appeal was preferred under Section

62 of the Code before the Apex Court in Civil Appeal and the same

was dismissed holding as follows:-

"we find no ground to interfere with the impugned order passed by the/ Tribunal the appeal is, accordingly, dismissed."

In view of the concurrent findings recorded by the Appellate

Tribunal and Supreme Court, the Appellants have no other option

except to implement the resolution plan submitted by the resolution

applicants/appellants and approved by the Tribunal in I.A. No. 224 of

2018, consequently the Appellants are under obligation to discharge

the liability, i.e. the amount due to the applicants.

The Tribunal rightly issue direction for payment of dues and the

finding recorded by Tribunal does not call for interference of this

Appellate Tribunal, while exercising the power under section 61 of

IBC. Hence, the finding recorded by NCLT is upheld. Accordingly, the

Comp. App. (AT) (Ins.) No. 678 of 2022 is dismissed.

Comp. App. (AT) (Ins.) No. 680 of 2022

This Comp. App. (AT) (Ins.) No. 680 of 2022 is filed challenging

the order in I.A. No. 229 of 2020 was filed by the lead man of the

lenders of the Rainbow Papers Ltd. under Section 60 (5) of IBC read

with Rule 11 of NCLT, Rules and Regulation 39 of CIRP, with a

request to issue appropriate direction against the Appellants herein

to implement the resolution plan including the direction for deposit

of balance allotment of debentures, giving of guarantees by the

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Company Appeal (AT) (Ins.) Nos. 678, 680 & 681 of 2022

Respondent Nos. 2 to 4 in the application and also made an

alternative prayer. However, the Tribunal allowed the application

issuing a direction for deposit of amount and issue of debentures etc.

aggrieved by the order, Comp. App. (AT) (Ins.) No. 680/2022 is filed.

When the resolution plan is approved and the petition filed for

recall of the order of approval by the NCLT was dismissed, it is for

the appellants to implement the resolution plan, thus rightly the

NCLT allowed the application of lead man of lenders.

In view of our foregoing discussion, this Appellate Tribunal is

not required to adjudicate further the matter. Hence, the Comp. App.

(AT) (Ins.) No. 680 of 2022 filed by these Appellants is devoid of

merits and liable to be dismissed. Accordingly, dismissed.

In the result, the Appeals are dismissed, confirming the orders

passed by Hon'ble National Company Law Tribunal, Ahmedabad in

I.A. Nos. 229 of 2020, 230 of 2020 and 231 of 2020 dated

24.03.2021, but however, without costs.

[Justice Ashok Bhushan] Chairperson

[Justice M. Satyanarayana Murthy] Member (Judicial)

[Barun Mitra] Member (Technical) NEW DELHI SA