Manoj Kunwar vs Punjab National Bank Erstwhile ...

Mr. Manoj Kunwar Promoter and Ex-Director M/s SSMP Industries Ltd. K336, Sarita Vihar, New Delhi ...Appellant Vs.

1. Punjab National Bank (Erstwhile Oriental Bank of Commerce) M-1,2,3,M Block, Connaught Circus, New Delhi - 110001 ...Respondent No. 1 /Financial Creditor 2. Mr. Yogesh Sethi Liquidator for M/s SSMP Industries Ltd. K 336, Sarita Vihar, New Delhi - 110076

Also at

213, LSC DDA Market, 1st Floor, A-6, Paschim Vihar, New Delhi, National Capital Territory of Delhi, 110063 ...Respondent No. 2 /Resolution Professional Present: For Appellant: Mr. Narendra Kumar, Advocate. For Respondent: Mr. Aamir Shaikh, Advocate for R1. Mr. Yogesh Jagia, Advocate for R2.

JUDGMENT

Jarat Kumar Jain. J.

The Appellant Ex-Director of the M/s SSMP Industries (Corporate

Debtor) filed this Appeal against the order dated 04.02.2021 passed by the

Adjudicating Authority (National Company Law Tribunal, Delhi, Bench -III) in

Company Appeal (AT) (Ins) No. 260 of 2021 2

I.A. No. 346 of 2021 in CP (IB) 495/(ND)/2017. Whereby dismissed the

Appellant's Application as it become infructuous.

2. Brief facts of this case are that on 27.08.2018 the Adjudicating

Authority passed an order for initiating Corporate Insolvency Resolution

Process (CIRP) against the M/s SSMP Industries Ltd. (Corporate Debtor) on

the petition of an Operational Creditor. Pursuant thereto and in response to

the advertisement of the Interim Resolution Professional (IRP) inviting

Expression of Interest (EOI), the Appellant is the Promoter and Ex-Director of

the Corporate Debtor submitted his EOI on 07.12.2018. Thereafter, on

27.01.2019 the Appellant submitted his Resolution Plan for revival of the

Corporate Debtor. However, the same was rejected on various grounds by the

Committee of Creditors (CoC). Thereafter, the RP filed an Application before

the Adjudicating Authority for liquidation. The Adjudicating Authority vide

order dated 31.07.2019 allowed the Application and directing the liquidation

of the Corporate Debtor and appointed Mr. Yogesh Shethi (Respondent No. 2)

as Liquidator. Against the order of liquidation, the Appellant has filed CA (AT)

(Ins) No. 947 of 2019 before this Appellate Tribunal. This Appellate Tribunal

vide order dated 06.02.2020 directed the liquidator to take steps in terms of

the Section 230 of the Companies Act, 2013 (in short Act), before taking steps

to sell the assets of the Corporate Debtor. On 09.11.2020 the Appellant

submitted One Time Settlement (OTS) cum Compromise proposal under

Section 230 of the Act, offering to pay amount of Rs. 5.5 Crores which was

rejected by the Respondent No. 1 Panjab National Bank (PNB) as well as by

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Kotak Prime Ltd. (KPL) being both the Financial Creditors by 100% voting.

Thereafter, the Appellant filed an Application I.A. No. 346 of 2021 under

Section 60(5) of the Insolvency and Bankruptcy Code (IBC) r/w Section 230

of the Act with the following prayer:

(a) Direct the liquidator (R-2) to consider the proposal of the Applicant (Appellant) under Section 230 of the Act in view of the order dated 06.02.2020 passed by the Hon'ble NCLAT.

(b) Pass such other and further order/orders as this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the present case.

3. On 22.01.2021 the Appellant submitted OTS cum Compromise

proposal under Section 230 of the Act offering the total payment of Rs. 1.50

Crores. This proposal was also rejected by both lenders being on the lower

side against admitted claim of Rs. 15.93 Crores. Ld. Adjudicating Authority

dismissed the Application by the impugned order which reads as under: -

"Counsel for the Applicant is present. It is submitted that two OTS proposal were given to the Financial Creditor i.e. PNB which have been rejected, therefore, there is no chance for settlement. The Application has become infructuous. The same stands dismissed".

4. Against the aforesaid order, the Appellant has filed this Appeal and

prayed for the following reliefs:

"(a) Pass an order staying the order dated 04.02.2021 passed by the NCLT, Delhi Bench in I.A. No.346 of 2021 in CP ((IB) 495 (ND)/2017 or in the alternative.

(b) Pass an order staying the action taken by the Respondent No. 1 & 2.

(c) Pass an order for replacement of the liquidator.

(d) Pass an order to look for settlement on the basis of order in I.A No. 4170 of 2019 in CA (AT) (Ins) No. 947 of 2019, in which, order was passed by the NCLAT approving liquidation value of the Corporate Debtor Rs. 150 Lacs.

Company Appeal (AT) (Ins) No. 260 of 2021 4

(e) Pass any other order (s) or direction as this Appellate Tribunal may deem fit and proper in facts and circumstances of the present case."

5. Ld. Counsel for the Appellant submitted that the OTS proposals on

behalf of the Corporate Debtor dated 09.11.2020 and 22.01.2021 covering

100% liquidation value which were rejected by Respondent No. 1 (PNB)

without assigning any valid reason and without any suitable opportunity to

the Appellant to discuss with Respondent No. 1 on OTS proposals. There was

no official intimation by the Respondent No. 1 mentioning that OTS proposals

were rejected and on the basis of misleading submissions by the Counsel for

the Respondent No. 2 (Liquidator) before the Adjudicating Authority on

04.02.2021 impugned order was passed which is illegal. It is submitted that

as per direction of this Appellate Tribunal vide order dated 06.02.2020 the

Respondent No. 2 (liquidator) did not exhaust remedies under Section 230 of

the Act. The Respondent No. 2 did not organize meetings of CoC Members

with the Appellant on two OTS proposals covering agenda. Therefore, the

Appellant was unable to discuss on OTS Proposals with Respondent No. 1.

Hence, the impugned order is liable to be set aside.

6. Per Contra, Ld. Counsel for the Respondent No. 1 (PNB) submitted that

the acceptance or rejection of OTS depends solely upon the CoC. The CoC

found that the OTS Proposals were on lower side vis a vis option of security

enforcement available with the Respondent No. 1. The claim of Respondent

No. 1 is Rs. 16 Crores whereas the OTS proposals do not even cover half of

the debt and mere claim that such amount is more or equal then liquidation

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amount holds no water. He submitted that it is not mandatory to settle or

resolve the debt at the liquidation value only. There is no provision in the IBC

or Regulations requiring a bid of any Resolution Applicant to match the

liquidation value. In the absence of violation of any provisions it is the CoC

which prevails rather than any quantitative analysis, the CoC after due

consideration, rejected the OTS Proposals on the ground of non-viability of

such low offer. Thus, the rejection by CoC is based on valid grounds. The

statue has not an invested jurisdiction and authority either with the NCLT or

NCLAT to review the commercial decision of the CoC, for this proposition, he

placed reliance on the Judgment of Hon'ble Supreme Court in the case of CoC

Essar Steel India Ltd. Vs. Satish Kumar Gupta 2019 SCC Online SC 1478.

The CoC finds that the Corporate Debtor has not viable business for

Resolution, therefore, recommended for Liquidation. There is no flaw in the

impugned order, therefore, the Appeal is liable to be dismissed.

7. Ld. Counsel for the Respondent No. 2 (Liquidator) submitted that the

Appellant submitted four OTS Proposals 1st on 01.11.2019 and 02nd modified

OTS Proposal to pay an amount of Rs. 8.5 Crores to secure creditors against

admitted debt of Rs. 15.93 Crores and subsequently, after the order passed

by this Hon'ble Appellate Tribunal dated 06.2.2020 submitted OTS cum

Compromise Proposals under Section 230 of the Act, offering to pay an

amount of Rs. 5.05 Crores which was rejected by the both the Financial

Creditors by 100% voting. However, subsequently on 22.01.2021 the

Appellant submitted another OTS cum Compromise proposals under Section

Company Appeal (AT) (Ins) No. 260 of 2021 6

230 of the Act, offering total payment of Rs. 1.5 Crores, this proposal was also

rejected by both the Financial Creditors. There are only two Financial

Creditors i.e. Respondent No.1 and Kotak Prime Ltd. They are the members

of the CoC. The Respondent No. 2 being a liquidator placed the OTS Proposals

before the CoC and the CoC after due consideration, rejected the OTS

Proposals, such decision is a commercial decision of the CoC. The acceptance

of OTS Proposals are prerogative of Financial Creditors as per their

commercial wisdom, wherein Respondent No. 2 being a liquidator has no

locus. There is no allegation against the Respondent No. 2 in I.A. No. 346 of

2021 wherein impugned order was passed. Surprisingly, in the instant

Appeal, Appellant prayed for replacement of Liquidator. Such prayer may not

be allowed. The Respondent No. 2 being a liquidator is duty bound to liquidate

the Corporate Debtor Company in time bound manner as mandated by the

law. There is no infirmity in the impugned order. Thus, the Appeal is liable to

be dismissed.

8. After hearing ld. Counsel for the parties we have gone through the

record.

9. Issue for our consideration is that whether the Adjudicating Authority

committed any error while dismissing the Application I.A. No. 346 of 2021.

10. In the Application I.A. No. 346 of 2021, the Appellant sought the relief

to direct the Liquidator to consider the proposals of the Applicant under

Section 230 of the Companies Act. The Appellant submitted two OTS cum

Compromise proposals under Section 230 of the Act dated 09.11.2020 and

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22.01.2020, the Respondent No. 2 being a liquidator placed both the

proposals before the CoC and CoC after due consideration, rejected both the

proposals by 100% voting on the ground of non-viability of such lower offer.

No other reliefs sought in the aforesaid Application.

11. Ld. Counsel for the Appellant has not pointed out any irregularity in

exercise of the powers committed by Ld. Adjudicating Authority. The CoC has

taken commercial decision of rejecting the OTS proposals. It is settled law that

the statute has not invested jurisdiction and authority either with NCLT or

NCLAT to review the commercial decision exercised by the CoC of approving

the resolution plan or rejecting the same.

12. It is also to be noted that in this Appeal the Appellant has raised the

ground that the CoC has rejected the OTS cum Compromise proposals

without assigning any valid reason and without any suitable opportunity to

the Appellant to discuss with the Respondent No. 1 on OTS Proposals. Such

objection was never raised before the Adjudicating Authority. For this

purpose, it is useful to refer the Judgment of Hon'ble Supreme Court in the

case of CoC of Essar Steel India Ltd. Vs. Satish Kumar Gupta 2019 SCC

Online SC 1478 observed:

"Thus, it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of Committee of Creditors, has to be within the four corners of section 30 (2) of the Code, in so far as the Adjudicating Authority is concerned, and Section 32 read with section 61(3) of the Code, in so far as the Appellate Tribunal is concerned, the parameters of such review having been clearly laid down in K. Sashidhar."

Company Appeal (AT) (Ins) No. 260 of 2021 8

13. There is no allegation against the liquidator in I.A. No. 346 of 2021 and

no prayer for replacement of liquidator was made. The Appellant in the Appeal

first time prayed for replacement of the liquidator. Such prayer cannot be

considered at this stage, particularly when there is no allegation in the

Application.

14. With the aforesaid, we find no ground to interfere in the impugned

order. Thus, the Appeal is dismissed. However, no order as to costs

[Justice Jarat Kumar Jain] Member (Judicial)

[Dr. Ashok Kumar Mishra] Member (Technical)

New Delhi 05th July, 2021.

SC

Company Appeal (AT) (Ins) No. 260 of 2021