M P Agarwal vs Shri Lakshmi Cotsyn Ltd & Anr

M. P. Agarwal ...Appellant

Versus

Shri Lakshmi Cotsyn Ltd. & Anr. ...Respondents

Present: For Appellant: Mr. Darpan Wadhwa, Sr. Advocate with Ms Tanya and Mr. Shankari Mishra, Advocates. For Respondents: Mr. Sarfaraz Karim and Mr. Shashwat Anand, Advocates for R-1 Mr. Pervinder and Ms. Ranjana Roy Gawai, Advocates for R-2.

27.07.2020: Vide impugned order dated 1st July, 2020, the

Adjudicating Authority (National Company Law Tribunal), Allahabad Bench

allowed application filed by the Resolution professional under Section

33(1)(a) r/w Section 33(2) of the Insolvency and Bankruptcy Code, 2016 (in

short 'I&B Code') in CP(IB) NO. 142(ALD)/2018 seeking order of liquidation

and appointment of Liquidator qua the Corporate Debtor - 'Shri Lakshmi

Cotsyn Ltd.'. It sent the Corporate Debtor into liquidation. Same has been

challenged in appeal preferred by one M. P. Aggarwal, Promoter and Member

of the suspended Board of Directors primarily on the ground that the

Committee of Creditors had failed to take into account the Settlement Offer/

Proposal of the Appellant and the recommendation for Liquidation was

based on stale valuations. It is contended on behalf of the Appellant that

the I&B Code at its core is to be used for reorganization and resolution of -2-

the Corporate Debtor and unless such reorganization is effected in a time

bound manner, the value of the assets of such persons will deplete.

2. After hearing learned counsel for the Appellant for a while we find that

initially three Expressions of Interest were filed in response to the invitation

by the Resolution Professional, by three prospective Resolution Applicants.

However, none of them submitted Resolution Plans by the last date. It

further appears that two more bids were made to secure Resolution Plans

but the same proved abortive. Since even the extended period of Corporate

Insolvency Resolution Process was expiring, on 18th February, 2019 the

Committee of Creditors in its 9th Meeting resolved to go for Liquidation of the

Corporate Debtor.

3. The Appellant's contention is that its Settlement Proposal of Rs.650

Crores far exceeds the liquidation value of the assets of the Corporate

Debtor fixed at Rs.500 Crores and there was no justification on the part of

the Committee of Creditors in rejecting the Settlement Proposal. It emerges

from Record that even after filing of the application for Liquidation, the

Resolution Professional has convened five meetings of the Committee of

Creditors to consider the Proposal of Settlement under Section 12A of the

I&B Code. Admittedly, the highest offer was made by the Promoter -

Appellant for Rs.650 Crores but the same was rejected as the Committee of

Creditors had fixed a benchmark of Rs.1000 Crore and Committee of

Creditors in its wisdom rejected the aforesaid Settlement Proposal for not

Company Appeal (AT) (Insolvency) No. 620 of 2020 -3-

complying with the conditions set out for consideration of such OTS/

Settlement Proposal. The Committee of Creditors appears to have taken a

commercial call on the OTS Proposal of the Ex-management/Promoter/

Appellant but it found that the investors supposedly giving the funds to the

ex-management had been frequently changing and in two proposals even

the names of the investors were not revealed. Subsequently, when the name

of a foreign investor was disclosed, even the upfront amount was not

deposited. Thus, the Committee of Creditors decided to go for liquidation of

the Corporate Debtor as it was convinced that the Suspended Management

was only delaying the process and could not mobilize resources and arrange

the requisite funds for supporting its OTS Proposal/ Settlement Offer.

4. It is the settled law of the land that the Committee of Creditors enjoys

primacy in matter of approval or rejection of Resolution Plan/ Settlement

Proposal and the Adjudicating Authority as also this Appellate Tribunal

would be exceeding its jurisdiction in questioning the commercial wisdom of

the Committee of Creditors in approving or rejecting such plan/proposal

which is essentially based on business decision. In this regard it would be

apposite to extract relevant portion of para 48 of the judgment rendered by

the Hon'ble Apex Court in 'K. Sashidhar' Vs. 'Indian Overseas Bank and

Ors.', reported in MANU/SC/0189/2019:-

"48. ........ Indubitably, the legislature has consciously

not provided for a ground to challenge the justness of the

Company Appeal (AT) (Insolvency) No. 620 of 2020 -4-

"commercial decision" expressed by the financial creditors

- be it to approve or reject the resolution plan. The opinion

so expressed by voting is non-justiciable."

5. The proposition of law enunciated by Hon'ble Apex Court is loud and

clear. In absence of a Resolution Plan emanating from an eligible Resolution

Applicant within prescribed timelines and not being satisfied with the

capacity of the Promoter/Ex-management/Appellant to garner and mobilze

an adequate and satisfactory finance provider/investor in support of its OTS

Proposal, the Committee of Creditors in its wisdom decided to push the

Corporate Debtor into Liquidation. This being the business decision based

on commercial wisdom of the Committee of Creditors and no material

irregularity in Corporate Insolvency Resolution Process culminating in

passing of Liquidation Order having been brought to notice of this Appellate

Tribunal, we find no justifiable ground for judicial intervention. The appeal

is accordingly dismissed. No costs.

[Justice Bansi Lal Bhat] Acting Chairperson

[V. P. Singh] Member (Technical)

[Shreesha Merla] Member (Technical) am/gc

Company Appeal (AT) (Insolvency) No. 620 of 2020