Mr Kuldeep Verma Resolution ... vs State Bank Of India And Ors

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No. 98 of 2021 In the matter of: Kuldeep Verma, Resolution Professional K.S Oils Ltd. 46bb Ganguly Street, 5th Floor Unit No.501, Kolkata - 700 012 ....Appellant

Vs.

1.State Bank of India Kind Attn: Shri N N Mathur, AGM 11th Floor, Stressed Assets Management Branch, Jawahar Vyapaar Bhawan, 1, Tolstoy Marg, New Delhi- 110001 ....Respondent No.1

2. Phoenix ARC Private Limited (Acting in its capacity as Trustee of Phoenix Trust FY 14-3& Phoenix Trust FY 15-15) 5th Floor, Dani Corporate Park, 158 CST Road, Kalina, Santacruz €, Mumbai - 400 098 ...Respondent No.2

3.SREI Infrastructure Finance Limited Vishwakarma 86C, Topsia Road (South), Kolkata - 700 046 ...Respondent No.3

4.IDBI Bank Limited IDBI Tower, 1st Floor, Plot No.C-7, G-Block, Opposite NSE, Bandra, Kurla Complex, Bandra (East), Mumbai - 400 051 ...Respondent No.4

5.Central Bank of India Jail Road, Areara Hills, Bhopal, Madhya Pradesh - 462 011 ...Respondent No.5

6.Union Bank of India, (Erstwhile Andhra Bank) Specialised Asset Recovery Management Branch) 1st Floor, M-35, Connaught Circus, New Delhi - 110 001 ...Respondent No.6

1 Company Appeal (AT) (Insolvency) No. 98 of 2021 7.Punjab National Bank PNB Asset Recovery Management Branch, 20 Sneh Nagar, Sapna Sangita Road, Indore - 452 001, Madhya Pradesh ...Respondent No.7

8.The Jammu & Kashmir Bank Ltd Impaired Assets Recovery Branch, 4th Floor, 5/1 Prestige Terraces, Union Street, Off Infantry Road Bengaluru - 560001 ...Respondent No.8

9.Life Insurance Corporation of India LIC of India, Central Office, 6th floor, East Wing, Jeevan Bima Marg, Mumbai - 400 021 ...Respondent No.9

10. PEC Ltd Hansalaya, 15 Barakhamba road, New Delhi - 110001 ...Respondent No.10

11.The Federal Bank Ltd 134, 13th Floor, Jolly Maker- II Vinay K Shah Marg Nariman Point, Mumbai 400 021 ...Respondent No.11

12.Bank of India Gwalior Branch, Sanjay Complex, Jayendraganj, Gwalior, MP ...Respondent No.12

13.Cooperative Rabo Bank U.A 20/F, Tower, A Peninsula Business Park, Senapati Bapat Marg, Lower Parel, Mumbai- 400013 ...Respondent No.13

14.Mr. Ramesh Chandra Garg Chairman & Managing Director (Suspended) C/o. K S Oils Limited, Jiwaji Ganj, Morena, Madhya Pradesh - 476 001 ...Respondent No.14

15.Mr. Davesh Agarwal CFO and Executive Director (suspended) C/o. K S Oils Limited Jiwaji Ganj, Morena, MP - 476 001 ...Respondent No.15

Present: Appellant: Mr. Vivek Sibal, Mr. Rahul Sharma, Advocates Mr. Kuldeep Verma (RP in person). Respondents: Ms. Pooja M Saigal, Mr. Shantanu Chaturvedi, Mr. Anshul Bajaj, Advocates for R14 & 15.

2 Company Appeal (AT) (Insolvency) No. 98 of 2021 Mr. Sumant Batra, Mr. Sanjay Bhatt, Ms. Niharika Sharma, Advocates for R1-13 Mr. Ramji Srinivasan, Senior Advocate with Mr. Ashutosh Ghade, Mr. Shashvata Shukla, Ms. Rajshree Chaudhary, Mr. Shivkrit Rai, Advocates for Intervenor ('Om Shri Shubh Labh Agritech Pvt. Ltd.)

JUDGEMENT

DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER.

1. The present Appeal is filed by the Appellant - Mr. Kuldeep Verma,

Resolution Professional ('RP') of M/s. K.S Oils Ltd, under Section 61 of

the Insolvency and Bankruptcy Code, 2016 (in short 'Code') against the

Impugned order dated 01.01.2021 passed by the Adjudicating

Authority (National Company Law Tribunal, Indore Bench at

Ahmedabad Court No.1) in IA No. 165/2018 in CP(IB) No. 32 of 2017

(TP No. 60/2019).

2. The grievance of the Appellant - RP is that as on 01.01.2021 i.e. the

date of hearing by the Adjudicating Authority as above, despite lapse

of 981 days from the date of filing (23.04.2018/26.04.2018) of the

Application i.e. IA No. 165/2018 seeking broadly to consider passing

orders for liquidation of the Corporate Debtor i.e. M/s. K.S Oils Ltd., as

no Resolution Plan has been approved by the Committee of Creditors

(CoC) before the maximum period permitted for the Corporate

Insolvency Resolution Process ('CIRP') under Section 12 of the Code:

instead the Adjudicating Authority has dismissed the Interlocutory

Application ('IA') as not maintainable and being infructuous.

3 Company Appeal (AT) (Insolvency) No. 98 of 2021

3. The Appellant has accordingly sought the following reliefs:

a. Allow the instant appeal and set aside/quash the impugned order

dated 01.01.2021 passed by the Ld. Adjudicating Authority, NCLT,

Indore Bench at Ahmedabad in IA No. 165/2018 in CP(IB) No. 32 of

2017 (TP No.60/2019).

b. Pass an order initiating liquidation of the Corporate Debtor M/s.

K.S.Oils Ltd., under section 33(1) of IBC,2016; and

c. Pass such further or other orders as this Hon'ble Tribunal may deem

fit and proper.

4. Learned Counsel for the Appellant has made a detailed submission

which includes followings:

a. Section 12 of the Code requires completion of CIRP within a period

of 180 days from the date of submission of the Application whereas

in this case even on completion of 270 days from the date of CIRP

commencement the Appellant filed the said IA No.165/2018 for

appropriate order to be passed by Adjudicating Authority under

Chapter -III of the Code, the Adjudicating Authority has erred in not

passing Liquidation order but has dismissed the IA as not

maintainable & infructuous.

b. The said IA was listed and heard on 31 hearings commencing from

11.05.2018, 21.06.2018, 19.07.2018, 04.09.2018, 03.10.2018,

30.10.2018, 11.12.2018, 04.02.2019, 18.03.2019, 03.04.2019,

12.04.2019, 26.04.2019, 28.06.2019, 19.07.2019, 08.08.2019,

4 Company Appeal (AT) (Insolvency) No. 98 of 2021 06.09.2019, 25.09.2019, 25.10.2019, 22.11.2019, 13.12..2019,

19.12.2019, 03.01.2020, 23.01.2020 (Order Reserved), 03.07.2020

(List the matter for further consideration), 10.09.2020 (Order

Reserved), 16.09.2020 (Further consideration on 28.09.2020),

28.09.2020, 08.10.2020, 27.11.2020, 10.12.2020 and 01.01.2021

(dismissed being infructuous).

c. History of the case is that an Application under Section 7 of the Code

was filed by SREI Infrastructure Finance Limited (SREI) and on

21.07.2017 the Adjudicating Authority has admitted the Petition

filed in respect of M/s. K.S.Oils Ltd- Corporate Debtor and ordered

for CIRP. SREI is also a Financial Creditor who submitted a

Resolution Plan dated 09.04.2018 as Resolution Applicant and the

same was put to vote in the 7th CoC Meeting held on 13.04.2018 and

the Resolution Plan was rejected by a vote of 71.34%. Since the

maximum statutory period of 270 days concluded on 16.04.2018

without a Resolution Plan approved by CoC, the RP filed an

application IA No. 165 of 2018 to consider passing of orders for

liquidation of the Corporate Debtor under Chapter -III of the Code.

However, the Adjudicating Authority asked the RP to consider

addendum -III dated 04.05.2018 submitted by SREI to the

Resolution Plan as stated above for placing before the CoC. The RP

placed the said addendum before the CoC on 13.06.2018; the same

was rejected by e-voting of 76.50%. The RP filed affidavit on

27.06.2018 apprising the Adjudicating Authority. The Adjudicating

Authority again asked the RP to consider the Addendum -IV dated

5 Company Appeal (AT) (Insolvency) No. 98 of 2021 09.07.2018 to the said Resolution Plan and place before the CoC.

The CoC members filed individual affidavit confirming that

Addendum -IV has been rejected by 69.14% voting. SREI again

submitted Addendum -V dated 11.04.2019 and RP was asked by

Adjudicating Authority to place before the CoC. The RP convened the

meeting of the CoC on 12.07.2019 and Addendum -V was rejected

by 64.16% of the voting. The Adjudicating Authority vide its order

08.08.2019 again directed CoC to consider positive workable

solution for the Corporate Debtor by considering any of the 5(Five)

Addendum. The RP called 10th meeting of the CoC on 29.08.2019

and CoC rejected all Addendum upto V with 77.96% of the voting

shares. The RP filed additional affidavit dated 03.09.2019 that CoC

has rejected all the Addendums and also resolved for liquidation of

the Corporate Debtor. The Appellant also filed his consent to act his

Liquidator of the Corporate Debtor.

d. State Bank of India, one of the CoC Member, on behalf of Joint

lenders forum who collectively holds 76.53% of the voting rights of

the CoC filed an appeal before the Appellate Tribunal bearing No.

Company Appeal (AT) (Ins) No. 1015 of 2019 on the ground that

Adjudicating Authority has not adhered to the timelines of CIRP and

has not passed liquidation order even after completion of maximum

period allowed under CIRP requiring Adjudicating Authority under

Part-III of the Code for initiation of Liquidation. The order passed by

this Tribunal is extracted below:

6

Company Appeal (AT) (Insolvency) No. 98 of 2021 18.11.2019- The Appellant - 'State Bank of India' is one of the

member of the 'Committee of Creditors'. It has challenged the order

dated 6th September, 2019 passed by the Adjudicating Authority

(National Company Law Tribunal), Ahmedabad Bench, Ahmedabad,

which reads as follows: "The parties are represented through learned

counsels. On the request of the proposed Resolution Applicant, the

matter is adjourned. List the matter on 25.09.2019." The main plea

taken by the Appellant is that the 'resolution plan' was revised 5 times

and the Adjudicating Authority adjourned the matter from time to time

even after the impugned order. Till date, no final order has been

passed. Learned counsel for the 'Resolution Applicant' submits that

the matter relates to 'Madhya Pradesh' for which 'Indore Bench' had

been notified initially but there was no Bench constituted and now the

Hon'ble Members of the 'Ahmedabad Bench' have been allowed to

take up 'Indore Bench matters' at Ahmedabad. Learned counsel for

the Appellant submits that the 'revised plan' has already been filed,

which may be considered by the 'Committee of Creditors'. In the facts

and circumstances, we allow the 'Committee of Creditors' to consider

the 'revised plan', if any, filed or is to be filed within a week. The

'Committee of Creditors' is allowed to consider the same within

2 weeks from the date of this order or receipt of the 'revised

plan' and in case the 'proposed resolution plan' is not filed

within a week, the Adjudicating Authority will take up the

application under Section 33 of the 'I&B Code' and pass

7 Company Appeal (AT) (Insolvency) No. 98 of 2021 appropriate order in accordance with law. The appeal stands

disposed of.

e. Even after this Appellate Tribunal order, the Petition before the

Adjudicating Authority was heard on 22.11.2019, 13.12.2019,

19.12.2019, 03.01.2020, 23.01.2020, 03.07.2020, 10.09.2020,

16.09.2020, 28.09.2020, 08.10.2020, 27.11.2020, 10.12.2020 and

finally 01.01.2021 dismissed being not maintainable & Infructuous.

f. In the meantime, IA No. 357 of 2021 has been filed on 25.02.2021

vide Diary No. 25695 by Om Shri Shubh Labh Agritech Private

Limited, Gwalior seeking intervention in the matter under the

provisions of Rule 11 of NCLAT Rules, 2016. Learned Senior Counsel

has argued that the Applicant proposes to infuse Rs. 310 Crore (Page

3 para 4 of the IA No. 357 of 2021) in the Corporate Debtor (which at

the time of hearing was shown to increase to Rs. 625 Crore Page 79

of the IA No. 357 of 2021) within a period of 270 days from the date

of approval of the Resolution Plan by Adjudicating Authority with a

view to revive its operations. However, it is to be mentioned here that

the RP published Expression of Interest ('EOI') on 14.11.2017

against which SREI submitted its EOI Addendum-IV of Rs.451 Crore

to its Resolution Plan dated 09.04.2018 which was rejected by CoC.

g. Learned Senior Counsel representing Respondent No.1 to 13

basically banks and financial institution, he was very categorical

that the time was come when the Appellate Authority has to pass

the liquidation order under Chapter-III of the Code. Time is the

essence of the Code & its core objects is provide Resolution in a time

8 Company Appeal (AT) (Insolvency) No. 98 of 2021 bound manner for maximization of value of assets of the Corporate

Debtor and the Adjudicating Authority has erroneously failed to

consider this aspect inspite of 31 hearings and finally

dismissing the petition as infructuous and not maintainable.

5. We have carefully gone through the pleadings and the submissions

made by the learned Sr. Counsels / Counsels and are observing the

followings:-

a) The Code has come into force with the basic objective of

Resolution in a time bound manner. Available literature on

the subject suggests that in pre-IBC period Resolution used

to take more than 4(Four) years in India while it was around

1(one) year in other European Countries and USA. If the

Adjudicating Authority takes such a considerable time it will

defeat a very purpose of the Code.

b) No doubt, reorganisation and Insolvency Resolution is the

prime purpose of the Act but with a rider in a time bound

manner as well as maximization of the value of assets of such

Corporate Debtor. Section 12 of the Code has already laid

down a period of 330 days on the outer side, although it is

directory in nature. This also suggests that the need for giving

multiple opportunities to the sole Resolution Applicant is not

warranted to defeat the very purpose of the Act.

c) If this Appellate Tribunal consider the intervention

Application i.e. IA No. 357 of 2021, it will again move in a

wrong direction and will violate the principles of natural

9 Company Appeal (AT) (Insolvency) No. 98 of 2021 justice as the Code and the Regulator IBBI has prescribed a

process for selection of Resolution Applicant which initially

starts with Invitation for Expression of Interest (EOI) followed

by Information Memorandum, Evaluation Matrix and a

request for Resolution Plan in accordance with Chapter -X of

IBBI (Insolvency Resolution Process for Corporate Persons)

Regulations, 2016. Hence, such midway interruptions of

allowing a party to enter the fray after 3 years of issue of EOI

is neither warranted by the Regulations nor by the Code.

Learned Senior Counsel representing Respondent No.1 to 13

has already vehemently objected the intervention application.

Considering the above said aspect, we are no way inclined to

allow the Intervention Application and accordingly, the

Intervention Application is rejected at the very threshold.

However, the Intervener is free to move for a compromise or

arrangement under IBBI Liquidation Process Regulations,

2016 if advised and permitted under its Regulation 2-B.

d) It is unfortunate to observe that even after the lapse of 981

days and repeated compliance by the RP of the direction of

the Adjudicating Authority; the Adjudicating Authority has

not yet considered initiation of Liquidation as per Section 33

/ Chapter -III of the 'Code'. Neither the Adjudicating Authority

nor the Appellate Authority is supposed to look into the

commercial wisdom of CoC or to reverse the Commercial

wisdom of CoC as repeatedly observed by Hon'ble Supreme

10 Company Appeal (AT) (Insolvency) No. 98 of 2021 Court in Committee of Creditors of Essar Steel India Limited

Through Authorised Signatory Vs. Satish Kumar Gupta &

ors.in Civil Appeal No.8766-67 of 2019 dated 15.11.2019 and

K Sashidhar Vs. Indian Overseas Bank & Ors Judgment dated

05.02.2019 in Civil Appeal No. 10673 of 2018.

e) While we appreciate that the year 2020 has faced

unprecedented global pandemic Covid-19 and it might have

acted as a bottleneck to the Adjudicating Authority but

Adjudicating Authority may not have allowed repeated

reference of Resolution Applicant for the consideration of CoC

when CoC was repeatedly rejecting their variants of

proposals.

6. Chapter -III of the Code deals with Liquidation Process and Section 33

of the Code deals with initiation of liquidation. Section 33 is reproduced

below for convenience:

"Section 33. Initiation of Liquidation- (1) Where the Adjudicating Authority, --

(a) before the expiry of the insolvency resolution process period or the maximum period permitted for completion of the corporate insolvency resolution process under section 12 or the fast track corporate insolvency resolution process under section 56, as the case may be, does not receive a resolution plan under sub-section (6) of section 30; or

(b) rejects the resolution plan under section 31 for the non-

compliance of the requirements specified therein, it shall--

(i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter;

(ii) issue a public announcement stating that the corporate debtor is in liquidation; and

11 Company Appeal (AT) (Insolvency) No. 98 of 2021

(iii) require such order to be sent to the authority with which the corporate debtor is registered.

(2) Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors 1[approved by not less than sixty-six per cent. of the voting share] to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub- section (1).

[Explanation. - For the purpose of this sub-section, it is hereby declared that the committee of creditors may take the decision to liquidate the corporate debtor, any time after its constitution under sub-section (1) of section 21 and before the confirmation of the resolution plan, including at any time before the preparation of the information memorandum.] (3) Where the resolution plan approved by the Adjudicating Authority is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1).

(4) On receipt of an application under sub-section (3), if the Adjudicating Authority determines that the corporate debtor has contravened the provisions of the resolution plan, it shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1).

(5) Subject to section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor:

Provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the corporate debtor, with the prior approval of the Adjudicating Authority. (6) The provisions of sub-section (5) shall not apply to legal proceedings in relation to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.

(7) The order for liquidation under this section shall be deemed to be a notice of discharge to the officers, employees

12 Company Appeal (AT) (Insolvency) No. 98 of 2021 and workmen of the corporate debtor, except when the business of the corporate debtor is continued during the liquidation process by the liquidator.

7. It is abundantly clear that the Object of the Code, 2016, IBBI

Regulations, this Appellate Tribunal Judgments, Hon'ble Apex Court

Judgments all this suggests that time is the essence of the Code. The

Adjudicating Authority naturally, is to keep this factor in mind,

liquidation sale can be in the format of anyone of the followings as per

Regulations 32 of IBBI (Liquidation Process) Regulations, 2016:

a. An asset on a standalone basis;

b. the assets in a slump sale;

c. set of assets collectively;

d .the assets in parcels;

e. the Corporate Debtor as a going concern; or

f. the business (s) of the Corporate Debtor as a going concern.

Even Provisions of Section 230 & 232 of the Companies Act, 2013 can

also be invoked.

8. All this suggests that the Appellate Tribunal has to perforce consider

the relief sought by the Appellant-Resolution Professional approved by

the CoC for setting aside the impugned order and initiation of

Liquidation Process. The Adjudicating Authority has failed to

implement the order of the Appellate Tribunal dated 18.11.2019. It is

settled law that whatever power vests in the Adjudicating

Authority is always available to Appellate Authority.

9. In view of the above elaborate observations, it is in the fitness of

situation to allow the appeal and set aside the impugned order dated

13 Company Appeal (AT) (Insolvency) No. 98 of 2021 01.01.2021 passed by the Adjudicating Authority (NCLT, Indore bench

at Ahmedabad Court No.1) in IA No. 165/2018 in CP(IB) No. 32 of 2017

(TP No. 60/2019) and initiate Liquidation of the Corporate Debtor M/s.

K.S.Oils Ltd under Section 33(1) of the Code. Hence, the Appeal is

allowed and the impugned order dated 01.01.2021 passed by the

Adjudicating Authority is set aside and at the same time the order for

initiation for liquidation of the Corporate Debtor M/s. K.S.Oils Ltd is

also allowed.

The Corporate Debtor- M/s.K.S.Oils Ltd shall liquidate in the manner

as laid down in Chapter-III of the Code;

a. Mr Kuldeep Verma IP Registration No. IBBI/IPA-001/IP-

P00014/2016-2017/10038 an Insolvency Professional is appointed as

the Liquidator. He shall be entitled to such fees as may be specified by

the Board in terms of Section 34 (8) of the Code.

b. He shall issue public announcement stating that Corporate Debtor

is in liquidation.

c. The Moratorium declared under Section 14 of the IBC 2016 shall

cease to operate here from.

d. Subject to section 52 of the IBC 2016 no suit or other legal

proceedings shall be instituted by or against the Corporate Debtor. This

shall however not apply to legal proceedings in relation to such

transactions as may be notified by the Central Government in

consultation with any financial sector regulator.

14 Company Appeal (AT) (Insolvency) No. 98 of 2021 e. All powers of the Board of Directors, Key Managerial Personnel and

partners of the Corporate Debtor shall cease to have effect and shall be

vested in the Liquidator.

f. The liquidator shall exercise the powers and perform duties as

envisaged under Sections 35 to 50 and 52 to 54 of the Code, read with

Insolvency and Bankruptcy Board of India (Liquidation Process)

Regulations 2016.

g. Personnel connected with the Corporate Debtor shall extend all

assistance and cooperation to the Liquidator as will be required for

managing its affairs.

h. Copy of the Order shall be furnished to the IBBI, to the Regional

Director (North Western Region), Ministry of Corporate Affairs; Registrar

of Companies, the Liquidator and the Adjudicating Authority (NCLT

Indore Bench at Ahmedabad Court No.1).

No order as to costs. Pending Application(s), if any, stands disposed of.

[Justice Bansi Lal Bhat] Acting Chairperson

[Dr. Ashok Kumar Mishra] Member (Technical)

16th March, 2021

New Delhi

Raushan.K

15 Company Appeal (AT) (Insolvency) No. 98 of 2021