Laxmi Narayan Sharma vs Mr. Subodh Kumar Agarwal

Comp. App. (AT) (Ins.) No. 438 of 2020 & I.A. No. 1440 of 2020 (Arising out of the Order dated 07.02.2020 passed by the National Company Law Tribunal, Hyderabad Bench, Hyderabad, in I.A No. 433, 447 & 448/2018 & I.A. No. 32, 61, 950, 960 & 961 of 2019 in C.P. (IB) No. 248/7/HDB/2017.)

IN THE MATTER OF:

Laxmi Narayan Sharma (Suspended director/ promoter) Promoter of Corporate Debtor, Plot. No. 105, 8-2-120/117/2/105, B Block, Park View Enclave, Banjara Hills, Hyderabad 500033, Telangana ...Appellant

Versus

1 Subodh Kumar Agrawal Former Resolution Professional of Golden Jubilee Hotels Private Limited, 1, Ganesh Chandra Avenue, 3rd Floor, Room No. 301, Kolkata - 700013. ...Respondent No. 1

2. Bank of Baroda, Baroda House, Mandvi, Baroda- 390006, Gujarat Corporate office at Corporate Financial Services Branch 1st Floor, 3-6-262/2, Thirumala Estates Building, Himayatnagar, Hyderabad-500029, Telangana, India. Represented by its Deputy General Manager. ...Respondent No. 2

3. Dena Bank, Share Bazar Branch, Dena Bank House, 31/33, Ambala Doshi Marg, Mumbai - 400023 Represented by its Deputy General Manger. ...Respondent No. 3 -2- Comp. App. (AT) (Ins.) No. 438 of 2020

4. Punjab National Bank Large Corporate Branch, Represented by its Deputy General Manger. Sifi Chambers, Road No. 1, Banjara Hills, Hyderabad - 500034. ...Respondent No. 4

5. Syndicate Bank Corporate Finance Branch, Represented by its Assistant General Manager 1st Floor, Opposite to NIMS, Punjagutta, Hyderabad - 500082. ...Respondent No. 5

6. Corporation Bank, Large Corporate Branch, Represented by its Assistant General Manager Plot No. 8, Road No. 1, 2nd Floor, Film Nager, Hyderabad - 500033. ...Respondent No. 6

7. Jammu and Kashmir Bank, Represented by its Assistant General Manager 22-7-110, SYJ Shopping Mall, Pathergatti, Hyderabad - 500002. ...Respondent No. 7

8. Punjab and Sind Bank Represented by it's the Branch Manager Abids Road, Metro Estate, Hyderabad - 500001. ...Respondent No. 8

9. Bank of Maharastra, Represented by it's the Branch Manager Safilguda Branch, R.K. Nagar, Malkajgiri, Hyderabad - 500047. ...Respondent No. 9

10.BREP Asia II Indian Holding Co. II (NQ) Pte. Ltd. 77, Robinson Road #13-00 Robinson 77, Singapore - 068896 Email: vijay.kaundal@srgrlaw.com ...Respondent No. 10

11.EIH Limited. Promoter of Corporate Debtor and hotel -3- Comp. App. (AT) (Ins.) No. 438 of 2020

operator under Operation and management. ...Respondent No. 11

Present For Appellants: Mr. Suraj Prakash, Mr. Mrinal Litoria & Ms. Priyanka Solanki, Advocates. For Respondents: Mr. Arun Kathpalia, Sr. Advocate with Mr. Pankaj Vivek, Advocate for R-2,3,5 6, 8 and 9. Dr. Abhishek Manu Singhvi, Sr. Adv. with Mr. Gyanendra Kumar, Mr. Aviral Singhal, Mr. D. Kapila, Adv. for SRA Mr. Abhijeet Sinha, Sr. Adv. with Mr. Arijit Mazumdar, Ms. Akanksha, Ms. Anushka Dey, Adv. for R-11

JUDGEMENT

(11.12.2024)

NARESH SALECHA, MEMBER (TECHNICAL)

1. This appeal has been filed by Laxmi Narayan Sharma who is the

Suspended Director/ Promoter of the Corporate Debtor against the Impugned

Order dated 07.02.2020, passed in I.A. No. 433, 447 & 448/2018 & I.A. No. 32,

61, 950, 960 & 961 of 2019 in CP (IB) No. 248/7/HDB/2017.

Subodh Kumar Agrawal is the Respondent No. 1 herein who is former

Resolution Professional of M/s Golden Jubilee Hotels Private Limited/

Corporate Debtor.

There are eight Financial Creditors i.e., Bank of Baroda, Dena Bank,

Punjab National Bank, Syndicate Bank, Corporation Bank, Jammu and Kashmir -4- Comp. App. (AT) (Ins.) No. 438 of 2020

Bank, Punjab and Sind Bank and Bank of Maharashtra of the Corporate Debtor,

who are Respondent No. 2 to Respondent No. 9 herein.

BREP Asia II Indian Holding Co. II (NQ) Pte. Ltd. is the Respondent

No.10 herein who is the Successful Resolution Professional ('SRA') of the

Corporate Debtor.

EIH Limited is one of the Promoters of the Corporate Debtor and hotel

operator under operation and management and is Respondent No. 11 herein.

2. The Appellant stated that he is the promoter / suspended director of

corporate debtor who is controlling majority shareholder holding 84% of the

paid up capital of Corporate debtor, Golden Jubilee Hotels Pvt Ltd, (in short

"GJHPL") through holding company, Core Hotel Venture Pvt Ltd., (in short

"Core") where in remaining 16% in equity is held by EIH Limited/ Respondent

No. 11. The Appellant explained that the GJHPL, prior to commencement of

CIRP, was under common board of directors nominated by appellant and ETH

Limited in the ratio of 84:16. The Appellant submitted that the Corporate

debtor is engaged in the business of hospitality and is running five star hotel

under the brand name "Trident" at Madhopur, Hyderabad and is going concern

with annual turnover of around Rs. 130 Crores and operational profit of around

Rs. 50 Crores declared even during CIRP.

3. The Appellant stated that the shareholder agreement was executed among

the stakeholders i.e. GJHPL, Core, Maha Hotels Projects Pvt. Ltd. ('MHPPL'), -5- Comp. App. (AT) (Ins.) No. 438 of 2020

and EIH on 28.08.2009, wherein parties agreed that the Corporate Debtor will

be under joint control and management. The Appellant stated that under section

2(69) of Companies Act, 2013, the Appellant and Respondent No. 11 are the

promoters of the Corporate Debtor and gets covered by the provisions of

Section 29A of the Code.

4. The Appellant stated that the shareholder agreement was reflected in the

Article of Association ('AoA') of the GJHPL and as per Article 107, the

quorum for the meeting of board would not be complete without participation of

one of the nominated directors of EIH/ Respondent NO. 11 herein, whereas as

per Article 110, important decisions regarding affairs of Corporate Debtor

cannot be taken without specific consent of EIH i.e, Respondent No. 11 herein.

The Appellant submitted that in the arbitration award passed by Arbitral

Tribunal dated 26/02/2020 in the proceedings filed by EIH challenging

termination of management agreement by GJHPL, it was held that affirmative

consent of EIH as provided in the articles of GJHPL is contrary to provisions of

Companies Act.

5. The Appellant gave the background of the Corporate Debtor and stated

that the Hotel Project was envisaged by Government of Telangana (erstwhile

Govt of AP) and competitive bids were invited for development of hotel on plot

of land on leasehold basis and project was awarded to consortium which include

the Appellant and EIH and lease was executed by Youth Advancement Tourism -6- Comp. App. (AT) (Ins.) No. 438 of 2020

and Culture Department ('YATCL') on 09.05.2007 in favour of corporate

debtor for a period of 33 years, i.e. upto 2040. Corporate debtor also executed

development and management agreement with YATCL on 09.05.2007, executed

by the Corporate Debtor as Lessee on behalf of Consortium. Subsequently, on

11.06.2009 another lease was executed between corporate debtor and the

Shilparaman Arts, Crafts and Cultural Society ('Society') for additional plot of

land. Both the leasehold lands form part of the hotel project consisting two

towers out of which only one tower is in operation and the Appellant was

making all efforts to complete second tower to make it operational which got

stalled, due to commencement of CIRP. The Appellant highlighted that

Corporate Debtor entered into two separate lease agreement with YATCL and

Society, which are two separate entities.

6. The Appellant stated that for the construction of the said Hotel, over the

period of 2009 to 2016, GJHPL availed various financial assistance and credit

facilities from a consortium of Banks i.e., the Respondent No. 2 to Respondent

No. 9 herein. The said Consortium of Banks executed various Facilities

Agreements, dated 02.09.2009, 02.02.2013, 13.09.2014 and 29.03.2016 and also

entered into inter se agreements governing the terms of the consortium, being

the "Agreements Inter se Participating Banks" dated 02/09/2009, 02/02/2013,

13/09/2014 and 29/03/2016. GJHPL's Hotel has become operational in the -7- Comp. App. (AT) (Ins.) No. 438 of 2020

month of September, 2013 and achieved huge recognition and reputation in

short spam of period.

7. The Appellant submitted that in terms of sanctioned loans, the Corporate

Debtor was obligated to route the entire sales turnover through Trust and

Retention Account ("TRA") which was done upto 30.09.2015, however, after

October, 2015 EΙΗ limited/ Respondent No. 11 in collusion with Bank of

Baroda/ Respondent No. 2 opened new account in the name of corporate debtor

with United Bank of India and sale proceeds of approximately Rs. 80 Crores

were diverted through this account with consent of Bank of Baroda. The

Appellant alleged that Bank of Baroda/ Respondent No. 2 permitted siphoning

off of Rs. 80 Crores contrary to loan agreements stipulating that these funds

were to be deposited in TRA account for repayment to lenders.

8. The Appellant informed that the Corporate debtor filed Writ Petition No.

12041/2016 against United Bank of India for recovery of loss of Rs. 80 Crores

which is being pursued by Resolution Professional. Diversion of funds by EIH

remained the prime reason of delay in servicing the debt which culminated into

commencement of CIRP. The Appellant submitted that the Writ petition filed is

pending adjudication.

9. The Appellant submitted that diversion of funds by EIH for other

activities is against the interest of Corporate Debtor. The Appellant assailed the

conduct of EIH who, despite being partner, deceived the Corporate Debtor -8- Comp. App. (AT) (Ins.) No. 438 of 2020

therefore, the Corporate Debtor was forced to terminate operation and

management agreement executed with EIH which culminated into initiation of

arbitration proceedings by EIH Limited wherein GJHPL and CORE filed

counter claims. Appellant submitted that award in the arbitration proceedings

was written prior to commencement of CIRP but could not be signed and

delivered due to commencement of moratorium and on vacation of moratorium

by impugned order, the Arbitral Tribunal pronounced its award on 26.02.2020,

without taking into account of the developments post CIRP.

10. The Appellant stated that in the JLF meeting held on 27.09.2017, after

discussion with the joint lenders, GJHPL offered a revised proposal of OTS of

Rs. 505 Crores for fund base facilities and the banks after discussion with the

joint lenders, indicated that the resolution which was being positively

considered by the Consortium members i.e., Dena Bank, Syndicate Bank,

Corporation Bank, Punjab National Bank, The Jammu and Kashmir Bank,

Punjab & Sind Bank and Bank of Maharashtra. However, the Respondent No. 2

Bank i.e., Bank of Baroda made it clear in the meeting that they wanted to

approach the Adjudicating Authority for proceeding CIRP against the Corporate

Debtor.

11. The Appellant submitted that the Respondent No 2 inclination to

approach the Adjudicating Authority was not approved by the JLF, as all other

members of the JLF were inclined towards accepting the proposed Corrective -9- Comp. App. (AT) (Ins.) No. 438 of 2020

Action Plan of GJHPL. The Appellant stated that in spite of not having the

requisite approval by the JLF, on 17.10.2017, Respondent No 2 approached the

Adjudicating Authority, by way of an application under Section 7 of the Code.

12. The Appellant stated that on getting notice from the Adjudicating

Authority, Corporate debtor unsuccessfully challenged filing of Section 7

application before Hon'ble High court under writ jurisdiction, where the Bank of

Baroda/ Respondent No. 2 before the Hon'ble High court contended that "the

petitioner has not provided effective measures on repayment to the satisfaction

of lender consortium more particularly to 1st Respondent/lead banker and the

remedy under the code was pursued. It was further contended that the scheme of

consideration or adjudication before NCLT and stated that the petitioner will

have reasonable opportunity by the interim resolution professional and the

petitioner can come up with remedial measure / mechanism to clear the

outstanding debt for holding the application filed before NCLT." The Bank of

Baroda further stated that "the SETTLEMENT can be placed before the IRP

under the code for consideration and decision." The Appellant emphasised that

Hon'ble High court did not adjudicate or gave any finding on the OTS and writ

was dismissed on the sole ground that filing of petition under section 7 of the

Code is one of the statutory remedies available and adjudication of disputed

question of facts is outside the writ jurisdiction.

-10-

Comp. App. (AT) (Ins.) No. 438 of 2020

13. The Appellant submitted that as more than 75% of the lenders by number

and 70.31% by value had approved the resolution proposal, the restructuring

plan deemed to come into effect from that day itself, ie., 06.02.2018, being a

date prior to the passing of the Order admitting application filed under Section 7

of the Code. However, on 27.02.2018, the Adjudicating Authority admitted the

Company petition filed by Bank of Baroda/ Respondent No. 2 and appointed

Respondent No. 1, the Interim Resolution Professional.

14. The Appellant stated that the Adjudicating Authority in para 8 inter alia

observed and directed "there cannot be any prejudice likely to cause to the

respondent by initiating the instant CIRP and whatever, grievances /

contentions of the respondent can very well be placed before the interim

resolution professional and all the financial creditors will be formed committee

of creditors to decide the CIRP. The other lenders of respondent can also place

their stated acceptance of One- time settlement etc before the committee of

creditors."

15. The Appellant mentioned that that by E-mail and letter dated 31.10.2018

submitted to the CoC, Appellant placed settlement proposal for an amount of

Rs. 430 Crores which was payable to all the financial creditors with proposal to

make direct payment to operational creditors and further requested all the

financial creditors to approve the same and take appropriate steps to withdraw

the petition. The Appellant stated that the said proposal of Rs. 430 Crores was -11- Comp. App. (AT) (Ins.) No. 438 of 2020

more than the Floor price fixed by CoC in their 14th meeting of CoC held on

28.09.2018, but the CoC instead of accepting the proposal of the Appellant,

which was in interest of the Corporate Debtor, deliberately accepted the

Resolution Plan of SRA, contrary to the provisions of the Code.

16. The Appellant submitted that he unsuccessfully challenged order of

admission of petition filed under section 7 of the Code by order dated

07.02.2017 by filing appeal before this Appellate Tribunal in Company Appeal

(AT) (Ins) No. 84 of 2018, which was dismissed by this Appellate Tribunal

order dated 06.09.2018.

17. The Appellant stated that the failure to provide the copy of resolution plan

to the suspended director denying the opportunity to raise objections is violative

of principles of natural justice. The Appellant admitted fact that the copy of the

resolution plan was provided to the appellant only in pursuance to

order/directions issued by Adjudicating authority dated 08/02/2019, whereas,

the plan was stated to have been approved in the meeting held on 18/12/2018,

therefore, as held by Hon'ble Supreme Court in the matter of Vijay Kumar Jain

Vs Standard Chartered Bank and Ors. [(2019) SCC Online SC 103], the plan is

liable to be rejected. It is the case of the Appellant that the Resolution Plan

should be sent back to the CoC for reconsideration with directions to consider

all the objections of the Appellant.

-12-

Comp. App. (AT) (Ins.) No. 438 of 2020

18. The Appellant alleged that CoC took arbitrary non-consideration of

settlement of Appellant as promoters which was better than Resolution Plan

approved by CoC within majority of 68.26% in favour of SRA and the CoC

failed to consider offer of settlement of Appellant despite being better than the

Resolution Plan of SRA .

19. The Appellant submitted that the Resolution Plan is contrary to provisions

of Section 30(2) of Code read with Regulation 38(1) (A) of CIRP Regulations

since as per para 8 of Resolution Plan Operational Creditors have been divided

into two categories i.e., Special Operational Creditor w.r.t., (YATCL and

Society) and Operational Creditor. The Appellant stated that no amount has

been given to Operational Creditors, whereas the special creditors have been

offered to pay 42 Crores i.e., 100% of claims. The Appellant pleaded that this

discrimination is contrary to section 30(2) read with CIRP regulation 38(1) and

1A stipulating amount due to the operational creditors shall be given priority in

payment over financial creditors. The Appellant assailed the Impugned Order

which upheld the discriminatory payment among Operational Creditors by

holding that Special Operational Creditors, as the lessors of land are on different

footing as compared to other operational creditors. The Adjudicating Authority

justified discrimination of payment among Operational Creditor by classifying

two Operational Creditor as special operational creditor and general operational

creditor on the ground that non-payment to the lessor of land would result in -13- Comp. App. (AT) (Ins.) No. 438 of 2020

halting operation of the hotel of the Corporate Debtor which would be

detrimental to the interest of the stakeholders of the Corporate Debtor.

20. The Appellant stated that the Adjudicating authority failed to appreciate

that the corporate debtor prior to the CIRP was being prejudicial by the arbitrary

notices issued by Special Operational Creditor, filed statement of claim before

Arbitral Tribunal comprising of Sh. Justice (Retd) V.V.S. Rao, challenging the

arbitrary and illegal notices issued raising illegal demands of which proceedings

were concluded prior to the CIRP and finally the award was pronounced on

25/02/2020, holding that the notices issued by Special Operational Creditor,

being the lessor is illegal, contrary to the lease agreement and development

management agreement and further awarded the cost of Rs. 28.20 Crores in

favour of the corporate debtor and against the Special Operational Creditor

along with interest which comes to arounds Rs. 40 Crores. It is the case of the

Appellant that passing of such award itself justify the reconsideration of the

resolution plan.

21. The Appellant submitted that the Adjudicating authority in para 58 upheld

non-payment to the operational creditor by placing reliance only on

"commercial wisdom" of the COC, without appreciating the facts that non-

payment to the operational creditor of their claim of more than Rs.100 Crores

may result in insolvency of operational creditors and the Adjudicating authority

also failed to appreciate that plan submitted by SRA on 19.10.2018, which was -14- Comp. App. (AT) (Ins.) No. 438 of 2020

considered in the meeting of CoC held on 04.12.2018, had a provision of

payment of Rs. 5 Crores for operational creditor other than the lessor. The

Appellant reiterated that providing zero amount to operational creditors is

contrary to objective of the code.

22. The Appellant stated that the plan is not feasible and viable contrary to

Regulation 38(3)(b) which mandate the Resolution Plan has to demonstrate that

it is feasible and viable. The Appellant stated that the CoC failed in considering

feasibility and viability of the plan and considered the plan as mode of recovery

of its debt which is contrary to the object of the Code.

23. It is the case of the Appellant that the SRA has no experience in the

Hospitality Sector and principally is an investor interested in investing only for

gain and in all probabilities will sell off to third party by pocketing the gain at

the cost and expense of public at large and promoters who are losing their hard-

earned money. The Appellant elaborated that the Resolution Plan is not viable in

absence of any provision for its implementation which is evident from the

condition precedent in the Resolution Plan. The Appellant mentioned that the

SRA in Resolution Plan proposed to covert tower II of the hotel project to the

office complex which was never envisaged. The Adjudicating Authority

disposed of objections raised by the Appellant in various IA's summarily and

granted approval to the Resolution Plan in the impugned order. -15-

Comp. App. (AT) (Ins.) No. 438 of 2020

24. The Appellant alleged that no detail of distribution of funds has been

provided in the Resolution Plan which is silent about distribution of funds

among Financial Creditors and special operational creditors and contingent

payments are proposed without any clarity and unambiguous distribution of

funds which is one of the mandatory conditions for approving Resolution Plan

under the Regulations.

25. The Appellant stated that there has been collusive act of EIH Ltd. and its

attempt to continue as operator contrary to section 29A of Code as EIH Ltd. was

16% promoter of the Corporate Debtor and hence is person not eligible under

section 29A of Code, to be part of resolution applicant in any manner. The

Appellant emphasised that the Parliament under amended provisions of section

29A of the Code enlarged the scope of ineligibility by introducing the phrase

"Acting in Concert". The Appellant submitted that the Hon'ble Supreme Court

of India in case of Arcelormittal India Pvt. Ltd. Vs Satish Kumar Gupta in

Civil Appeal Nos. 9402-9405 of 2015 in para 29 to 63 in detail dealt with the

see-through provision including the definition of promoter, control and

management. The Appellant submitted that by applying the parameters laid

down by Hon'ble Supreme Court, the EIH Ltd. being promoter of the Corporate

Debtor cannot be permitted, to continue as operator of the Hotel on the

precedence of independent person because of alleged execution of separate

management agreement.

-16-

Comp. App. (AT) (Ins.) No. 438 of 2020

26. It is the case of the Appellant that the approved Resolution Plan stipulates

that if condition precedents are not satisfied within one year from the date of

approval of Resolution Plan by Adjudicating Authority, it will expire

automatically expire and the resolution plan will be null and void. The

Appellant submitted that this make the Resolution Plan as conditional and hence

not valid Resolution Plan.

27. The Appellant stated that the Resolution Professional published

advertisement for Expression of Interest in May 2018, pursuant to which

Blackstone along with three other entities submitted their bids for resolution

plan. The Appellant mentioned here that Sattva and Blackstone are partners in

India and have invested together in projects and have even cited each other's

technical qualifying credentials, thus as related parties have acted in concert to

takeover GJHPL at throwaway value. The Appellant submitted that the

Resolution Plans submitted by Blackstone and Sattva clearly reveals that one of

the Resolution Plans is copied from the other. The Appellant assailed the

Respondent No. 1 who did not bring the fact before the CoC that the bids have

been rigged and thus has committed material irregularity.

28. Concluding his arguments, the Appellant pleaded that the Impugned

Order passed by the Adjudicating Authority deserves to be set aside. -17-

Comp. App. (AT) (Ins.) No. 438 of 2020

Pleadings of Respondent No. 1

29. Per contra, the Respondent No. 1 of the Corporate Debtor denied the

allegations of the Appellants labelling these as baseless.

30. The Respondent No. 1 submitted that the placed the OTS proposal of the

Appellant before the meeting of CoC and it was for the CoC to consider the OTS

proposal of the Appellant as deemed fit, subject to compliance of provision of the

Code and regulations. The Respondent No. 1 stated that he was not the authorised

person to decide OTS proposal of the Appellant. It is the case of the Respondent

No. 1 in any case, the Appellant cannot seek or demand the CoC to accept OTS

as a matter of statutory right. The Respondent No. 1 stated that it is the

commercial wisdom of CoC whether to accept or reject the OTS offered by the

Appellant. The Respondent No. 1 submitted that the CoC did not consider OTS

of the Appellant fit to be approved and this was pure commercial wisdom of the

CoC which cannot be questioned by the Appellant.

31. The Respondent No. 1 submitted that the Appellant's OTS proposal is not

eligible to be considered as the Appellant was in charge of the affairs of the

management in the and is hit by the provisions of Section 29A of the Code as per

ratio of judgement of Hon'ble Supreme Court of India in the matter Arcelor

Mittal Nippon Steel India Ltd. Vs. Essar Bulk Terminal Ltd. (Civil Appeal No.

5700 Of 2021) and Committee of Creditors of Essar Steel India Limited vs -18- Comp. App. (AT) (Ins.) No. 438 of 2020

Satish Kumar Gupta and Ors.(Civil Appeal No.8766-67 of 2019) where in the

erstwhile promoter's offer for OTS had been rejected.

32. The Respondent No. 1 elaborated that the COC is having ultimate power

under the code and the regulations to decide on the commercial aspects of the

resolution plan placed before and engaging in deliberations and discussions with

the resolution applicants on the various aspects of the bids in the course its

evaluation, keeping the spirit and objective of the code, the members of the COC

have deliberated extensively and taken a collective decision by exercising their

commercial wisdom in approving the resolution plan which has been submitted

by the SRA. The Hon'ble Supreme court in the case of K Shashidhar Vs. Indian

Overseas Bank & Ors in CIVIL APPEAL No.10673/2018 categorically has held

that commercial wisdom of the CoC cannot be subjected to judicial scrutiny and

the same is not justiciable before the adjudicating authority or the appellate

authority.

33. The Respondent No. 1 denied the allegation of the Appellant that the

whole process of e-voting was rigged and manipulated. The Respondent No. 1

submitted that the Appellant is not empowered under the Code to verify the

record of the E- voting process of the decision of the CoC. The Respondent stated

that minutes was circulated to all the COC members and participants and none of

the voting members has put any objection on the voting result. -19-

Comp. App. (AT) (Ins.) No. 438 of 2020

34. The Respondent No. 1 denying contentions of the Appellant that while

approving the Resolution Plan, the CoC has ignored the Evaluation Matrix which

was provided in the RFRP documents. The Respondent No. 1 submitted that he

has taken all the steps under the Code and the regulations in verifying meeting

and placing the valid resolution bids received before the meeting of the CoC

which decides the same in the interest of the Corporate Debtor.

35. Denying the allegation of the Appellant that the CoC failed to discuss on

the feasibility and viability of the Resolution Plan, the Respondent No. 1

submitted that in the 20th CoC meeting held on 18.12.2018, he informed the CoC

that under Section 30(4), the CoC has to decide on the feasibility and viability of

the Resolution Plan. The Respondent No. 1 stated that the collective decision of

the CoC on the feasibility and viability of the Resolution Plan was positively

expressed by the CoC members by way of approval of the Resolution Plan

submitted by M/s Blackstone through e-voting held on 20.12.2018 & 21.12.2018.

36. The Respondent No. 1 stated that the impugned order dated 07.02.2020 is

in accordance with the law which correctly dismissed the Interlocutory

Application filed by the Appellant and also approved the Resolution Plan of the

SRA duly recommended by the CoC.

37. Concluding the arguments, the Respondent No. 1 requested this Appellate

Tribunal to dismiss the Appeal with an exemplary cost.

-20-

Comp. App. (AT) (Ins.) No. 438 of 2020

Pleadings of Respondent Nos., 2,3,5,6,8 & 9

38. The Respondents denied all the contentions of the Appellant as mentioned

in the Company Appeal (AT) (Ins) No. 438 of 2020 filed by ex-management

contending that copy of resolution plan was not furnished inspite of demand;

that the OTS offered by appellant was for higher amount; that the approved

Resolution Plan is for lesser than liquidation value; and that the Operational

creditors are discriminated against as "NIL" payment to them.

39. The Respondents submitted that they approved the Resolution Plan with

68.26% of voting wherein claims of Financial Creditors was Rs. 949 Crores and

claims of Operational Creditor was Rs. 106.57 Crores. The Liquidation value of

the Corporate Debtor was assessed to be Rs.458 Cr. (Replacement Cost Method)

and Rs. 448 Cr. (DCF Value Method). The CoC elaborated that The Resolution

plan provides for a payment of 37% of admitted claim for the secured Financial

Creditors (including dissenting Financial Creditors) and also to bring in capital

funds of Rs.180 Cr.

40. The Respondents denied the allegations of the Appellant regarding

discriminating treatment to Special Operational Creditors. The Respondents

submitted that the Special Operational Creditors being land owners were paid in

full to ensure viability and feasibility of the Resolution Plan for revival of the

Corporate Debtor. The Respondents gave details fo payments to be made as per

Resolution Plan. The Respondents submitted that though Rs.60.14 Crores has -21- Comp. App. (AT) (Ins.) No. 438 of 2020

been admitted as against a claim of Rs. 200.08 Crores with regard to

Operational Creditor, the plan provides for 'Nil' amount to operational Creditors

being NIL liquidation value as per Sec. 53 of the Code.

41. The Respondents submitted that if the Actual Special Operational

Creditor Amount is higher than the Society Claim, then the difference between

the Actual Special Operational Creditor Amount and the Society Claim will be

added to Rs.384 cr. and shall be deemed to be the restated Upfront Financial

Commitment. The amounts payable to Government Agencies (classified as

Special Operational Creditor) i.e. the lessor of the Land on which the hotel

business of the Corporate Debtor runs, are admitted to the tune of 41.99 Crores

and the plan provides for payment in full.

42. The Respondents submitted that the Appellant was attending the CoC

meetings and was aware of the terms of resolution plan, hence no prejudice was

caused to him. The Respondents stated that there was no plea by appellant

before the Adjudicating Authority that any prejudice was caused to him due to

non- furnishing of proposed resolution plan. The Respondents submitted that the

Appellant participated in all meetings and discussed the said plan offered by

Respondent No. 10 and then only sought the copy of resolution plan.

43. The Respondents stated as on date 04.12.2018 when Resolution

Professional declined to furnish a copy of the resolution plan to appellant, the

position of law was that the ex-management was not entitled to a copy of the -22- Comp. App. (AT) (Ins.) No. 438 of 2020

proposed resolution plan. The ex- management accepted this position of law and

did not assail the decision Resolution Professional of the dated 04.12.2018.

44. The Respondents submitted that the challenge to acceptance of Resolution

Plan and merits/demerits thereof is non-justiciable by the Adjudicating

Authority or even this Appellate Tribunal as commercial wisdom of CoC is

supreme. Requisite vote was polled in favour of approval of Resolution Plan.

45. The Respondents stated that the issue of OTS and JLF stood closed with

order dated 06.09.2018 in Co. Appeal (AT) (Ins) No. 84/2018 which holds that

JLF stands disbanded on 12.02.2018 and that no OTS was ever approved by

JLF.

46. The Respondent denied the allegations of the Appellant that the value of

the OTS offered by the Appellant was more than the amount offered in the

Resolution Plan. The Respondents submitted that the correct position is that the

resolution plan value is Rs. 584.02 crore while the OTS offer was for Rs. 480

Crores only.

47. The Respondents stated that the payment of full amount to Special

Operational Creditors is not prejudicial to the CIRP or the Operational Creditors

as Special Operational Creditors provided land for the Hotel of corporate debtor

on lease, hence Special Operational Creditors had different rights in contrast to

other Operational Creditors. The Respondents further stated that under the

waterfall mechanism of Section 53 of code, the payment to operational creditors -23- Comp. App. (AT) (Ins.) No. 438 of 2020

would remain NIL irrespective of payment or non payment to Special

Operational Creditors and further the CoC can provide for payment (either full

or partial) to any Operational Creditor for keeping the Corporate Debtor as

going concern and in this case without lease of land, there would be nothing left

with Corporate Debtor

48. The Respondents submitted that that allegations of bias levelled against

Bank of Baroda are baseless and reason for default was not the opening of new

bank account in United Bank of India in 2015, but stress was there in account of

Corporate Debtor since 2014 and JLF was constituted to address it.

49. The Respondents stated that the allegations of connivance amongst the

resolution applicants Blackstone (BREP) & Sattva are baseless as there is no

joint venture amongst them. These are two business entities which may decide

to collaborate for some specific projects and may also compete against one

another in other cases.

50. Concluding their arguments, the Respondents requested this Appellate

Tribunal to dismiss this appeal with exemplary costs.

Findings

51. We note that the grievance of the Appellant is against the approval of

resolution plan by the Adjudicating Authority vide impugned Order dated

07.02.2020. The Appellant was the promoter of the Corporate Debtor holding

84% of the share capital along with another promoter namely EIH Ltd. - -24-

Comp. App. (AT) (Ins.) No. 438 of 2020

Respondent No.11 herein, which held 16% of share capital of the Corporate

Debtor.

52. The Appellant has shown his grievances against EIH and Bank of Baroda

for cheating and siphoning of money. Similarly, the Appellant has grudge

against the lenders/CoC for not considering his OTS. The Appellant is also

aggrieved by the fact that copy of resolution plan submitted by Resolution

Applicant including SRA was not given to him. The Appellant has also stated

that the approved Resolution Plan is conditional since it has condition precedent

and thus was wrongly approved.

53. The Appellant also accused that the COC has violated Section 30(2) of

the Code by not providing the payments to the Operational Creditor and rather

has provided payment only to special creditors.

54. The Operational Creditor has also challenged the approval of resolution

plan on the ground of feasibility and viability and including the lack of expertise

of the SRA.

55. Another ground for challenge is no details of distribution of fund has been

provided in the plan.

56. The Appellant alleged again EIH - R11 herein to collude with the other

Resolution Applicant and want to avoid attracting of Section 29(A) of the Code.

57. We shall deal with the issues raised by the Appellant in the following

discussion.

-25-

Comp. App. (AT) (Ins.) No. 438 of 2020

58. As regards the contention of the Appellant that the impugned Order

should be set aside as copy of the resolution plan was not given to him before

decision of COC, we have noted that the plan was approved on 18.12.2018 and

at that stage, there was no provision in the Code regarding submission of

resolution plan to the ex-promoters or suspended directors of the Corporate

Debtor. We have noted that the Hon'ble Supreme Court of India laid down

stipulation regarding furnishing of Resolution Plan to the suspended directors

while pronouncing the Judgement in case of "Vijay Kumar Jain vs. Standard

Chartered Bank Ltd. and ors." vide its Order dated 31st January, 2019 where

Hon'ble Supreme Court of India gave ruling that copies of resolution plan are

required to be circulated amongst the suspended directors of the corporate

debtors also. We have further noted from the pleadings that the Appellant was

attending the COC meeting and was aware of the contents of resolution plan

including that of SRA. We also note that subsequent to Judgement in Vijay

Kumar Jain (Supra), the Respondent No.1 vide e-mail dated 20.02.2019

circulated a final resolution plan as approved by CoC in its meeting held on

18.12.2018. We have also noted that CoC during pleading have categorically

mentioned that even if resolution plan would have been available with the

Appellant, the decision of the CoC would have remained the same. In view of

all this especially keeping in view that while approving the resolution plan on

18.12.2018, there was no legal requirement neither in the Code nor in regulation -26- Comp. App. (AT) (Ins.) No. 438 of 2020

to submit such resolution plan to suspended directors, hence non-providing copy

of the Resolution Plan to the Appellant cannot be faulted upon at this stage due

to subsequent pronouncement of Judgement of Hon'ble Supreme Court of India.

In any case, we find that no prejudice could have been caused to the Appellant

since he was attending all the CoC meetings and was in know of all the

developments. Therefore, the contention of the Appellant in this regard are not

found to be contravening.

59. We will take up another issue raised by the Appellant that his OTS

proposal was not considered by the lenders/CoC. In this regard, we note that the

Respondent No.1 categorically stated that he has put up the OTS proposal of the

Appellant to the CoC who did not find it prudent to consider and accept the

same as it was not found favour with the members of COC. We have also noted

that the prima facie reasons for this decision were due to earlier committed

defaults by the Appellant which led to filing of Section 7 application by Bank of

Baroda. We also note the CoC found OTS as a conditional offer which was

against the provision of the Code and regulations. We have noted from the

impugned Order that the Adjudicating Authority has categorically recorded that

once CIRP is initiated, the settlement between the parties could have been done

only in terms of Section 12A of the Code provided there is a consensus between

the parties in this regard and further the proposal under Section 12A of the Code

is submitted with the approval of 90% voting shares of CoC. We note that the -27- Comp. App. (AT) (Ins.) No. 438 of 2020

OTS was indeed considered by CoC but was not found favour and could not

muster minimum threshold of 90% of voting shares of CoC members for 12A

the Code initiate. As such we do not find any legal infirmity in the decision of

the Appellate Authority in rejecting such plea of the Appellant.

60. Another issue raised by the Appellant is regarding non-compliance of the

Code by SRA in submitting the conditional resolution plan which contained the

condition precedent. The Appellants pleaded that agreeing to conditional

Resolution Plan, the payments under Resolution Plan were to be made by the

SRA subject to completion of condition precedent, which is not in accordance

with the Code and the Regulations.

61. At this stage, it will be important to understand what is a nature of

condition precedent made in the Resolution Plan.

62. The condition precedent has been defined in Schedule -I of the Resolution

Plan i.e., "condition precedent shall have the meaning escribed to such term in

Clause 6.1"

-28-

Comp. App. (AT) (Ins.) No. 438 of 2020

63. From above, it is noted that the condition precedent referred to receipt of

written consent of YATCL and society (GoT) for change of control and

restructuring of Corporate Debtor. Clause 6.1 also mentioned that on the

receipt, the approval of Resolution Plan by the Adjudicating Authority the SRA

shall take steps as set out in Schedule II of the Resolution Plan and shall

undertake all effort to procure the satisfaction of condition precedent within a

period of one year of approval of Resolution Plan by the Adjudicating

Authority. It is the case of the Respondent that development and management

agreement is co-terminus with lease agreement which tantamount that without -29- Comp. App. (AT) (Ins.) No. 438 of 2020

prior consent of GoT, the shareholding of the Corporate Debtor cannot be

changed and therefore it would be absolutely essential to have such condition

precedent.

64. We note that this Appellate Tribunal in the case of Jet Aircraft

Maintainance Engineers Welfare Association Vs. Ashish Chhawchharia

Resolution Professional of Jet Airways (India) Ltd. & Ors. in Company Appeal

(AT) (Ins.) No. 752 of 2021, held that where it has been stipulated that the

condition precedent in the Resolution Plan, is necessary for implementation of

Resolution Plan, then such condition precedent would be valid. This judgment

was challenged before the Hon'ble Supreme Court of India which upheld the

same vide order dated 30.01.2023 passed in Civil Appeal No. 407 of 2023. The

relevant portion of this Appellate Tribunal is contained in para 109 which reads

as under :-

"109. When we look into the relevant clauses of the plan which has also been captured by the Resolution Applicant in Form H. Para 7.6.1 refers to condition precedents i.e. obligation of the Resolution Applicant to recommence operations as an aviation company subject to fulfillment of conditions after the approval date mentioned therein. Para 7.6.2 deals with fulfilment of condition precedents and Para 7.6.4 deals with automatic withdrawal. In view of the judgment of Hon'ble Supreme Court in "Ebix Singapore"

(Supra), as noted above, after approval by the CoC, the clause for automatic withdrawal becomes redundant and -30- Comp. App. (AT) (Ins.) No. 438 of 2020

Resolution Applicant has no jurisdiction to withdraw from the Resolution Plan. The condition precedents as mentioned in Para 7.6.1 are basically condition precedents required for aviation business which are must for any company carrying on aviation business. Enumeration of condition precedent is only for purposes of noticing obligations of the Resolution Applicant to recommence the operations as an aviation company after obtaining necessary approvals. Such condition precedent cannot be said to be any hindrance in the approval of the plan by the Adjudicating Authority. We, thus, do not find any substance in the submission of the Appellant that the resolution plan ought to have rejected in view of the condition precedent contained in the resolution plan. The Resolution Applicant has also completed all necessary condition precedents to the satisfaction of the Monitoring Committee. We, thus, are of the view that the judgment of Hon'ble Supreme Court in "Ebix Singapore" does not help the Appellant to support his contention that the Resolution Plan is liable to be rejected due to condition precedents."

65. We have already observed that the transfer of ownership in favour of the

new management was dependent on the consent of the YATCL and Society and

therefore, the same was treated as condition precedent. This seems to be quite

logical and cannot be faulted upon. Thus, the arguments of the Appellant in this

regard is not convincing and stand rejected.

-31-

Comp. App. (AT) (Ins.) No. 438 of 2020

66. Now we will examine the issue of the Appellant that the Resolution Plan

is invalid due to discriminatory treatment to Operational Creditors. We note

that by the amended Section 30(2)(b) (notified w.e.f. 6.8.2019), it has been

made amply clear that as long as payment to its creditors under plan is in

compliance to the amended Section 30(2)(b)(i) and (ii), the same has to be

considered as fair and equitable. We have dealt with this issue in great detail in

connected CA (AT) (Ins) No.426 of 2020 which is also being pronounced along

with this Order. On this account, we have noted that the Hon'ble Supreme Court

of India has held time and again that commercial wisdom of COC is supreme.

We have also noted that in the cases of Committee of Creditors of Essar Steel

India Limited Vs. Satish Kumar Gupta & Ors. (Civil Appeal No. 8766-67 of

2019), Excel Engineering & Ors. v. Vivek Muralidhar Dabhade [2022 SCC

OnLine NCLAT 4461] and Sabari Realty Private Limited v. Sivana Realty

Private Limited & Ors., Company Appeal (AT) (Insolvency) No. 1162 of 2023,

the different treatments to creditors proposed to be made by SRA which was

duly considered and recommended by CoC and finally approved by the

Adjudicating Authority were found to be in compliance with Section 30(2) of

the Code. Hence, we do not find any illegality on this count. Furthermore, the

Appellant being ex-promoters and suspended directors of the Corporate Debtor

who himself was in charge of the Corporate Debtor and also held 84% of the

share capital of the Corporate Debtor and during his own period, the outstanding -32- Comp. App. (AT) (Ins.) No. 438 of 2020

payment due to be made to the operational creditors were not paid. In a manner,

the Appellant himself was reason for failure to make payment to the operational

creditors and we find it rather strange that the Appellant is taking the plea of

non-payment or discriminatory payments among such operational creditors. In

any case, the Appellant is not directly or indirectly prejudiced by such payment

or discriminatory payments among operational creditors by SRA which has

been duly approved by the Adjudicating Authority. Hence, the argument of the

Appellant on this count stands rejected.

67. As regards the challenge to the resolution plan by the Appellant on the

ground of non-viability and non-feasibility of the resolution plan, we do not find

any detailed reasoning furnished by the Appellant for the same. The Appellant

has stated that the SRA does not have the expertise and experience in the

hospitality industry and rather it is only an investor. The arguments are not

found convincing. The SRA has furnished his resolution plan in accordance

with terms and conditions while inviting bids and all parameters including

technical and financial were considered according to evaluation metrics by the

CoC exercising their commercial wisdom. In the present case, we have seen that

CoC has examined the same in detail and after its approval, the Respondent

No.1 through suitable IA certified compliance of Resolution Plan to be in

conformity with the Code including viability and feasibility of the plan and

submitted the same to the Adjudicating Authority for its approval, the -33- Comp. App. (AT) (Ins.) No. 438 of 2020

Adjudicating Authority approved the same. In view of this, arguments of the

Appellant on this ground stands rejected.

68. Yet another ground taken by the Appellant is regarding no detail of

distribution funds has been provided in the plan. During pleadings before us, the

Appellant submitted that no specific amount has been indicated in the

distribution to the financial creditors. In this regard, we would like to reproduce

relevant portion of the approved resolution plan which covers the issues:- -34-

Comp. App. (AT) (Ins.) No. 438 of 2020 -35- Comp. App. (AT) (Ins.) No. 438 of 2020 -36- Comp. App. (AT) (Ins.) No. 438 of 2020

69. From above, it is noted that suitable details of payments to financial

creditors and other creditors have been given. It is not required to indicate party-

wise the payment in the approved resolution plan as this is subject to decision to

be taken by CoC. Hence, we do not find any merit in the argument of the

Appellant.

70. The Appellant also alleged that Respondent No.11 - EIH has siphoned

Rs.80 Crores in collusion with Bank of Baroda - Respondent No.2 herein for

which he has filed a Writ Petition before Hon'ble High Court which is pending.

In view of this, we would not like to comment on this aspect.

71. As regard the contention of the Appellant that the Respondent No.11 -

EIH held 16% of the shares of the Corporate Debtor and was hit by Section 29A

of the Code. We note that even the Adjudicating Authority has indicated the

R11/EIH ineligible in terms of Section 29A of the Code.

72. Thus, in view of our detailed discussion in preceding paragraphs, we do

not find any merit in the Appeal. The Appeal fails and stands rejected. No case.

IA, if any, stand closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical) Sim