Mr. Satya Narayan Jhunjhunwala vs Mr. Supriyo Kumar Chaudhari & Ors

IN THE MATTER OF: Satya Narayan Jhunjhunwala K67/85-2, Jhunjhunwala Bhawan Plot No.2, Nati Imli, Varanasi Appellant Vs. 1. Supriyo Kumar Chaudhuri Resolution Professional Of M/s. JVL AgroIndustries Limited At BDO Restructuring Advisory LLP C/o BDO India LLP, Floor 4, Duckback House, 41, Shakespeare Sarni, Kolkata-700017 Respondent No.1

2. Committee of Creditors Represented by its lead member State Bank of India 18, 19, Devdas Kamlleg Block, Synergy Building, Bandra Kurla Complex- Bandra East, Mumbai - 400 051 Respondent No.2 Present:

For Appellant : Mr. Mohit Chaudhary and Ms. Garima Sharma Advocates.

For Respondents : Mr. Ramji Srinivasan, Sr. Advocate with Mr. Indranil Ghosh, Mr. Orijit Chatterjee, Ms. Swati Dalmia, Mr. Palzer Mokhtan, Ms.Sabarni Mukherjee, Ms. Rajshree Choudhary, Mr. Akash Yadav, Ms. Ojasa Arya, Ms. Aishwarya Gupta, Mr. Yash Tandon, Mr. Aparajito Sen, Advocates for R- 1 Mr. Ritin Rai, Sr. Advocate with Mr. Bishwajit Dubey, Mr. Madhav Kanoria, Advocates for R-2.

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 1 of 50 With Company Appeal (AT) (Insolvency) No. 846 of 2020

In the matter of:

1. Ramesh Chander Garg S/o B.L.Garg, R/o Flat No.103 (SA 6/171/A-P103) Radhika Apartment Near Ashoka Institute, Varanasi - 221007 Appellant No.1

2. Yogesh Singh, S/o Nand Kumar Singh Koilari, Koilaro, Jaunpur, UP - 222 148 Appellant No.2

3. Prem Nath S/o Rajbali Kharwar, 143 near primary School, Bihar Kurd (Bangla), Bihar Buzung, Kushinagar Bihar Buzurg - 274 401 Appellant No.3 Vs.

1. Supriyo Kumar Chaudhuri Liquidator Of M/s. JVL AgroIndustries Limited At BDO Restructuring Advisory LLP C/o BDO India LLP, Floor 4, Duckback House, 41, Shakespeare Sarni, Kolkata-700017 Respondent No.1

2. Committee of Creditors M/s. JVL Agro Industries Limited Respondent No.2

Present

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 2 of 50 For Appellants: Mr. Abhijeet Sinha and Mr. Gautam Singh, Mr. Saikat Sarkat Advocate.

For Respondents: Mr. Ramji Srinivasan, Sr. Advocate with Mr. Indranil Ghosh, Mr. Orijit Chatterjee, Ms. Swati Dalmia, Mr. Palzer Mokhtan, Ms. Sabarni Mukherjee, Ms. Rajshree Choudhary Mr. Akash Yadav, Ms. Ojasa Arya, Ms. Aishwarya Gupta, Mr. Yash Tandon, Mr. Aparajito Sen, Advocates for R-1

Mr. Ritin Rai, Sr. Advocate with Mr. Madhav Kanoria, Mr. Bishwajit Dubey, Advocate for R-2.

J U D G M E NT

DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER

1. The present appeals have been filed by the 'Appellants' under Section 61 of the

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

order dated 19.08.2020 passed by the 'Adjudicating Authority' (National

Company Law Tribunal), Allahabad Bench in CA No.215/2019, CA No.73/2020

and I.A No. 160/2020 and CP(IB) No. 223/ALD/2018.

2. The Appeals as stated (supra) have been filed against the impugned order of

Adjudicating Authority dated 19.08.2020. The relief sought in both the appeals

primarily is asking for setting aside the said order dated 19.08.2020 apart from

quashing the appointment of the Liquidator or restraining the Liquidator from

discharging the employees etc. Since both these appeals are against the same

impugned order and relief sought are common and requires same question of

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 3 of 50 law against the same Corporate Debtor (CD), we have clubbed the appeals

together during the course of the hearing and now being decided by the

'Common Judgment'.

3. While passing the impugned order on 19.08.2020 in CA No.215/2019, CA

No.73/2020 and I.A No. 160/2020 and CP(IB) No. 223/ALD/2018 at

paragraphs 15 to 25 had observed the following:

15.In view of the submission made by the Parties and the

documents placed thereof this Adjudicating Authority is

of the view that the intervention applications i.e CA No.

73 of 2020 and IA No160 of 2020 both filed by the

Resolution Applicant after the completion of CIRP period

i.e. more than 700 days directly to the Adjudicating

Authority was need to be filed before the Appropriate

Authority i.e. Resolution Professional to be put before the

CoC and this Adjudicating Authority is not empowered to

allow the applicant to file the plan before this Tribunal

after the expiry of the such a long period of ending of

CIRP. Further in CA No. 73 of 2020, it is also found that

it is being filed by one of the Members of the Suspended

Directors i.e., Mr. R.C. Garg, who was the CFO of the

Company at the time when the application for insolvency

was admitted which can also be reflected in the data of

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 4 of 50 Ministry of Corporate Affairs of the corporate Debtor, thus

being disqualified under Sec 29(A) of the Code. Thus, this

Adjudicating Authority does not find any merit in the

arguments raised by the Applicants for allowing the

applications and accordingly CA No. 73/2020 as well as

IA No. 160 of 2020 is rejected and accordingly disposed

of.

16. Further, with regard to the Liquidation application i.e.

CA 215/2019, this Tribunal finds that the ex-

management has raised the objection that the object of

the Code is maximization of value of assets. Therefore,

the plan presented before this Adjudicating Authority

shall be placed before the CoC instead of liquidating the

Corporate Debtor. To this, I do not find any infirmity in

the contention raised by the Corporate Debtor. In regard

to the CoC, it shows that after the Resolution Plan of SREI

was rejected by CoC with required majority and further

was also rejected by this Adjudicating Authority vide

order dated 5th February, 2020, there was no viable plan

put before CoC for consideration and CIRP period has

expired long back. Thus, in absence of any approved or

viable plan the adjudicating authority has no option but

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 5 of 50 to pass order of liquidation on completion of insolvency

period.

17. The Resolution Professional has filed the present

application for resolution as statutory period has elapsed

from the date of · initiation of CIRP and no Resolution Plan

has been approved by the CoC.

18.At this juncture, it is pertinent to refer Section 33(1 )(a)

of the IBC, which mandates that "where the Adjudicating

Authority before the expiry of 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, it shall pass an order

requiring the Corporate Debtor to be liquidated in the

manner as laid down in the manner."

19. Therefore, the Tribunal observes that upon failure of

the resolution process and no approved resolution plan

and further on completion of statutory CIRP process,

there is no alternative left but to order in conformity with

the decision of the CoC liquidation has to follow under

Section 33 of the Code. Adherence of the statutory

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 6 of 50 requirement has to be done, as the language of the Code

is clear that the adjudicating authority must give effect to

it whatever may be consequences.

20. Thus, the application is allowed by ordering

liquidation of Corporate Debtor i.e. ,JVL Agro Industries

Ltd. in the manner laid down in Chapter Ill Part Il of lBC,

2016 and further appoint Supriyo Kumar Chaudhari with

Registration No. IBBI/IPA-001/IP-P00644/2017-2018/

11098 as a liquidator in terms of Section 34(1) of the

Code, and he is directed lo issue public announcement

stating that the Corporate Debtor is in liquidation, in

terms of · Regulation 12 of IBBI (Liquidation Process)

Regulations, 2016.

21. The registry is directed to communicate the order to

ROC Kanpur and to Insolvency and Bankruptcy Board of

India.

22. The order of moratorium passed under Section 14 of

IBC, 2016 cease to have its effect and a fresh moratorium

under Section 33 (5) of IBC shall commence.

23. The Liquidator is directed to proceed with the process

of liquidation in the manner laid down and in accordance

with the Code and Regulations.

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 7 of 50

24. The liquidator shall file progress report of every three

months.

25. With the aforesaid observation, the CA No. 215/2019

is allowed and accordingly stands disposed of."

4. Company Appeal (AT) (Ins) No. 832 of 2020

Submissions of the Appellant:-

a. It is submitted by the learned counsel for the Appellant that the

Appellant is a 'Promoter' and 'Shareholder' of the Corporate

Debtor (CD) with a shareholding of 2.66%. The Appellant is also a

member of the suspended 'Board of Directors' of the CD as well as

part of the 'Committee of Creditors' (CoC) on account of being a

'Managing Director' of the previous management. Prior to the

commencement of 'Corporate Insolvency Resolution Process'

(CIRP), the Appellant alongwith his association were in control of

the CD. The Adjudicating Authority has admitted the petition and

initiated the CIRP against the CD vide its order dated 25.07.2018.

b. It is also stated that the Respondent No.1/Resolution Professional

(RP) is a former employee of 'State of bank of India' (SBI), which

owns the largest share/voting percentage in the CoC i.e. 26%.

This goes on to show that the actions of R1 were at the behest of

SBI, in order to secure their interest, even at the cost of the

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 8 of 50 insolvency process. Importantly, SBI possesses first charge over

the assets and properties of the CD and would therefore

exclusively benefit on liquidation of the CD, as compared to a

resolution. As a Financial Creditor (FC), SBI would receive a high

amount if the CD underwent liquidation, as opposed to the

receivables generated from a Successful Resolution through CIRP.

In other words, the interest of SBI rank higher on liquidation as

compared to a 'Successful Resolution Process'. Therefore, R1 in

cohorts with SBI attempted to drive the CD into liquidation. It is

also stated that that the CD is profit making entity which

underwent distress temporarily. In fact, the CD was under the

process of bouncing back from the same, when the CIRP was

admitted by the Adjudicating Authority. But the CD soon

overcame its financial difficulties and operated as a going concern

throughout the CIRP on its own accruals. Importantly, the CoC

did not have to pay for the costs of the CIRP and the entire costs

were borne from the internal accruals of the CD. As would appear

from the 'Annual Report' of the CD for the 'Financial Year 2018-

19', the CD owns Rs. 578.27 Crore as liquid assets and properties

apart from owning assets and properties in terms of property,

plant and equipment worth Rs. 550.40 Crore. In fact, the value of

the land is taken at a book value and the market value of such

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 9 of 50 land shall be much higher. Particulars of these assets, properties

and funds are given below:

Sl No. Particulars of the Amount (in Rs. Crore) Asset

1. Property, plant & 550.40 Equipment

2. Current Asset 578.27 Total 1128.67

c. It is also stated that the willful inaction on the part of RP is

manifest against the fact that it failed to seek exclusion of the

following periods of time:-

Sl Particulars From To Total no. No. of days 1. Period of 07.08.2019 03.02.2020 181 litigation initiated by SREI 2. Period of 06.02.2020 19.082020 196 litigation when the employees resolution plan was pending with the Respondent No.-RP (including the Covid-19 period)

(Note : Lockdown period ought to be excluded)

d. It is also stated that the Application filed u/s 7 of the Code against

the CD, was admitted by the Adjudicating Authority on

25.07.2018. Thereafter, the RP received several EOI's from

potential RAs but no Resolution Plan was furnished within the

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 10 of 50 allotted time. Because of this, the last date for submission of the

Resolution Plan kept getting pushed until 'SREI' submitted a plan

on 02.05.2019. The Resolution Plan was later rejected by the CoC

on 07.05.2019 but the negotiations continued between them in

pursuit of a more acceptable Resolution Plan. Meanwhile the

'Adjudicating Authority' determined that the CIRP should

continue vide order dated 21.05.2019 in light of negotiations with

SREI. Thereafter, SREI revised the offer on the basis of CoC's

comments and resubmitted the Resolution Plan, which was

rejected by the CoC on 19.07.2019. Hot on its heels, the RP filed

an Application for liquidation u/s 33(1) of the Code even before

the CIRP lapsed (appearing at page No. 1 of the Written

submissions of the Appellant Diary No.23266).

e. After the rejection, SREI changed the commercials of the Plan with

a view to convince the CoC and deposited a final revised plan on

25.07.2019. Notwithstanding the fact that (i) payment under

revised plan of SREI was increased from Rs. 395 Crs to Rs.401

Crs; (ii) certain members of the CoC were in fact willing to consider

the revised proposal; (iii) the RP never sought a resolution from

the CoC to the effect that the CIRP be terminated; and that (iv) the

RP did not place the final revised offer before CoC for

consideration; the RP took a unilateral and self-serving decision,

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 11 of 50 filed an Application for Liquidation on 29.07.2019. While the CIRP

was ongoing, Section 12 of the Code was amended to extend the

total period of CIRP to an upper limit of 330 days, allowing the CD

the benefit of reconsidering RAs or issuing a fresh EOI. This would

have made the liquidation application premature as even for

CIRPs which were not completed by then, an additional 90 days'

period was granted. But the RP disregarded to it the hilt and then

blindsided the 'Adjudicating Authority' to obtain an order of

liquidation on 19.08.2020. In this regard, the RP also disregarded

two orders of the 'Adjudicating Authority' dated 30.04.2019 and

07.05.2019 which categorically provided that the CIRP should

continue.

f. In this regard, attention must be drawn at the intention and

motive of the RP in the whole process. It has been brought to the

notice of the Appellant that the RP was a former employee of the

SBI, who is the lead banker of the consortium with a voting share

of about 26%. In fact, he was appointed as the RP at the insistence

of SBI and still manages to draw pension from it. In the

circumstances, the motive of the RP is gravely impugned with

malafides and, therefore, the RP should not be allowed to control

the reigns of the CD as a Liquidator.

g. It is also stated that the impugned order suffers from the vice of

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 12 of 50 the coram non judice and is therefore, illegal. The impugned order

is without jurisdiction since it has been passed by a bench of the

Adjudicating Authority comprising of a single member and

therefore in the teeth of Section 419(3) of the Companies Act,

2013. The Hon'ble Supreme Court in Sonu Cargo Movers Vs. UOI

(WP(C) No.722/2019) categorically directed that the NCLT

constitute a two-member bench including a 'Judicial' and a

'Technical' member for hearing. On the basis, even this Appellate

Tribunal has asked the Adjudicating Authority in Indison Agro Vs.

Registrar & Anr. CA(AT) (Ins) No. 726-727 of 2020 to constitute a

two-member bench in compliance with the directions of the

Hon'ble Apex Court.

h. It is also stated that the Application for liquidation filed by the RP

is unauthorized and ex facie illegal. In this regard, it is submitted

that the RP failed to seek a resolution from the CoC to the effect

that the CIRP is terminated or that the Company should enter into

liquidation. In the absence of the above, the 'Adjudicating

Authority' should have waited until the CIRP lapsed before

passing an order for liquidation. In addition to this, the RP took

the unilateral decision to file the liquidation application in spite of

the fact that in the 13th meeting of the CoC dated 02.05.2019, the

CoC had requested the RP to take a vote on the issue of liquidation

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 13 of 50 of the CD. Even then, no such voting on liquidation was conducted

by the RP.

i. In the present case, the RP failed to place SREI's final plan before

the CoC for consideration pursuant to self-serving interests

arising out of its relationship with SBI. SBI has 26% stake in the

CoC and is keen on a liquidation as opposed to Resolution. In

addition to this, the RP drove the CD into liquidation by filing a

premature application for liquidation despite the order of the

Adjudicating Authority dated 21.07.2019 proclaiming that the

CIRP continue. Lastly, the RP failed to even furnish resolutions

from the CoC to the effect that CIRP has come to an end and thus

liquidation must ensure. The further malafide and illegal conduct

of the RP is further evident from the fact that despite there being

an alternate plan available to revive the Company for an amount

of Rs. 512 Crore, which is way more that the liquidation value of

the company (Rs. 385 Crore), the RP has not even bothered to

place the same before the CoC. Despite there being an order dated

14.02.2020 from the Adjudicating Authority granting liberty to the

employees to place their plan before the CoC, the RP in his haste

to liquidate the CD, did not even allow for the said process to take

place. The Hon'ble Supreme Court in Innoventive Industries Vs.

ICICI bank (2018) 1 SCC 407 identified the duty of the RP to be

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 14 of 50 synonymous with acting as a conduit between the Creditors and

the Debtor in the following words:

"The law must appoint a resolution professional

as the manager of the resolution period, so that

the creditors can negotiate the assessment of

viability with the confidence that the debtors will

not take any action to erode the value of the

enterprise. The professional will have the power

and responsibility to monitor and manage the

operations and assets of the enterprise. The

professional will manage the resolution process

of negotiation to ensure balance of power

between the creditors and debtor, and protect the

rights of all creditors. The professional will

ensure the reduction of asymmetry of information

between creditors and debtor in the resolution

process."

j. This Appellate Tribunal in 'Tata Consultancy Services Ltd. Vs.

Vishal Ghisulal Jain', CA(AT) No. 237 of 2020, has reiterated that

it is both the primal objective of the Code as well as the solemn

duty of the RP to keep the CD as a going concern.

k. The Hon'ble Supreme Court in Arcellor Mittal India Pvt. Ltd. Vs.

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 15 of 50 Satish Kumar Gupta (2019) 2 SCC 1 has succinctly identified the

intention of the Code while drawing analogies with the

consequence of the chopper falling in a corporate death and

observed as follows:

"It is also true that the time taken by a Tribunal

should not set at naught the time limits within which

the corporate insolvency resolution process must take

place. However, we cannot forget that the

consequence of the chopper falling is corporate death.

The only reasonable construction of the Code is the

balance to be maintained between timely completion

of the corporate insolvency resolution process, and the

corporate debtor otherwise being put into liquidation.

We must not forget that the corporate debtor consists

of several employees and workmen whose daily

bread is dependent on the outcome of the corporate

insolvency resolution process. If there is a resolution

applicant who can continue to run the corporate

debtor as a going concern, every effort must be made

to try and see that this is made possible.

l. The Hon'ble Supreme Court recently granted interim relief against

a liquidation order in 'Kridhan Infrastructure Pvt. Ltd Vs.

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 16 of 50 Venkatesan Sankaranarayan' in Civil Appeal No. 3299 of 2020

while remarking as follows:

"9. Liquidation of the CD should be a matter of last

resort. The IBC recognizes a wider public interest in

resolving corporate insolvencies and its object is not

the mere recovery of monies due and outstanding."

Thus, in light of the above submissions, the impugned order dated

19.08.2020 ought to be set aside with a direction to the CoC to consider

other plans readily available with it and even otherwise, quashing the

appointment of the RP as the 'Liquidator'.

5. Submission of the Respondent No.1- Supriyo Kumar Chaudhuri

a. It is stated by the Respondent No.1 that CIRP of JVL Agro

Industries Limited (Corporate Debtor) had commenced CIRP on

25.07.2018 pursuant to an order passed by the Adjudicating

Authority. Subsequently by an order dated 10.09.2020 passed by

the Adjudicating Authority, the Respondent No.1 herein had been

appointed as the RP. On 05.10.2018 had issued the request for

submitting the 'Expression of Interest' (EOI) were received from

the potential/prospective 'Resolution Applicants' within the due

date provided in the request for EOI. Thereafter, in the 5th CoC

meeting held on 27.11.2018, it was decided to re-issue the request

for EOI and a revised Request for EOI was published in the

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 17 of 50 newspapers. Accordingly, in response to the said publication, 12

EOIs were received by the RP within the due date provided in the

revised Request for EOI. Based on the examination of the EOI, the

RP shortlisted all 12 potential Resolution Applicants and provided

them access to the virtual data room and issued Information

Memorandum as well as 'Request for Submission of the

Resolution Plan' (RFRP) to the potential Resolution Applicants.

The last date for submission of Resolution Plan as per the RFRP

was 2nd February, 2019. However, no Resolution Plan was

received by RP till the last date and therefore, the RP requested

the CoC to extend the Resolution Plan submission date. The same

was agreed upon the 7th CoC meeting held on 31.01.2019 and

accordingly, the last date for submission of Resolution Plan was

extended till 02.03.2019.

b. It is stated that on 19.02.2019, the RP received an email from

'SREI Multiple Asset Investment Trust Vision India Fund' (SREI)

attaching therewith an EOI for submitting Resolution Plan for CD.

In the meeting of the CoC held on 08.03.2019, the resolution

process advisor informed the CoC members that an EOI was

received from SREI on 19.02.2019 which was rejected by the RP

on account of submission beyond the stipulated deadline which

had expired on 19.12.2018. It was proposed in the said meeting

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 18 of 50 that since there were no other Resolution Plan received as on

02.03.2019, the CoC may consider accepting EOI of SREI and

condoning the delay in submission off the said EOI. Under the

circumstances, the members of the CoC agreed that the last date

of submission of the Resolution Plan be extended till 25.03.2019.

c. It is submitted that the CoC in this meeting held on 06.09.2018

had requested the then IRP to file an Application before the

Adjudicating Authority for exclusion of time. Since immediately

thereafter the Respondent No.1 herein i.e. the RP had replaced the

IRP, the RP filed an Application being CA 95 of 2019 in CP(IB) No.

223/ALD/2018 for exclusion of 18 days from CIRP period being

the time between the 1st meeting of the CoC and the appointment

of the present RP (September, 10, 2018). The Application for

exclusion of time was allowed by the Adjudicating Authority on

14.08.2019 thereby extending the CIRP period by a further period

of 18 days i.e. till 09.05.2019. It is pertinent to mention that the

order dated 14.08.2019 passed by the Adjudicating Authority has

intentionally been suppressed by the Appellant herein.

d. In the CoC meeting held on 26.03.2019, it was agreed to further

extend the Resolution Plan submission date to 06.04.2019.

Despite further extension, no Resolution Pan was received till

06.04.2019 i.e. till the last date for submission of Resolution Pan.

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 19 of 50 However, the RP had received a request from one of the

prospective Resolution Applicants, namely SREI for further

extension of timeline for submission of Resolution Plan by 10 days

i.e. 16.04.2019. The CoC agreed to further extend the Resolution

Plan submission date till 16.04.2019. On 16.04.2019 SREI

submitted its Resolution Plan in respect of the CD. However, since

SREI had submitted the Earnest Money Deposit (EMD) in the form

of Bank Guarantee (BG) of INR 1,00,00,000 as against as amount

of INR 10,00,00,000 required as per the RFRP, the CoC granted a

time of 48 hours to SREI to revert on whether they would be in a

position to submit the BG amount as per the RFRP and

accordingly submit the BG as per the RFRP before 23.04.2019.

However, the SREI submitted an additional BG of Rs.4 Crore only

towards the EMD. It was based on deliberations in the CoC

meeting on 24.04.2019 Resolution Pan submitted by SREI was

considered. However, the SREI financial commitment was below

the liquidation value and EMD was below the required amount,

on conclusion of voting process on 07.05.2019, the Resolution

Plan so submitted by SREI was rejected by 98.18% of voting share.

Again SREI convened to the Resolution Applicant to improve

financial offer and revised the same from Rs.395 Crore to Rs.401

Crore. In any case, the RP forwarded the same to the members of

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 20 of 50 the CoC. No CoC member shown interest in pursuing the new offer

and CIRP period of 270 days was already over. Constraint to file

the Application under Section 33(1) of the Code for Liquidation of

the CD, the RP did the same on 29.07.2019. SREI even gone to

the Adjudicating Authority through CA No.214 of 2019 in CP(IB)

No. 223 /ALD/2018 for calling the meeting of CoC and

considering their revised offer and the Adjudicating Authority

dismissed the said application through an elaborate order that the

standalone commercial offer cannot be considered as the

Resolution Plan requires to have certain mandatory content as per

CIRP Regulations. Thereafter, there was nothing to be persuaded

except a Resolution Plan on behalf of the employees of the CD

moved by the CFO of the CD on 06.02.2020. The Resolution Plan

was proposed by a trust and were directly approached to the

Adjudicating Authority and even that plan under the directions of

the Adjudicating Authority were provided to the CoC for the

purpose of their information. However, no positive response was

received to the CoC in this regard. As also the employed trust was

not inexistence on the date of filing of the Resolution Plan, the

source of funding from such purported trust could not be verified

by the RP and the Appellant- Mr. R.C Garg, CFO was disqualified

under Section 29(A) of the Code. The Adjudicating Authority has

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 21 of 50 rightly dismissed the application in view of the provisions of the

Code.

6. Submission of the Respondent No.2- Committee of Creditors (CoC)

a. It is submitted by the Ld. Sr. Counsel for the Respondent No.2-

CoC that the Appellant is a 'Shareholder cum Director' of the CD

and has no locus standi to prefer this instant appeal. The

Appellant is not personally aggrieved in any manner and is rather

making a concocted argument on behalf of others. The Appellant

being a 'Promoter and Ex-Director' of the CD has come up in

appeal with mala fide and ulterior motive to scuttle the liquidation

proceedings of the CD. SREI the apparent aggrieved party, who

had filed a revised offer in relation to the Resolution plan

submitted by it, has not come up in appeal before this Appellate

Tribunal and has already accepted the order of the Adjudicating

Authority dated 03.02.2020. However, the Appellant in its fraught

wisdom has chosen to file the present appeal without any

grievance of its own. Further, the other Resolution Applicant (RA)

i.e., Ramesh Chandra Garg has preferred a separate appeal being

CA(AT) (Ins) No. 846 of 2020 before this Appellate Tribunal

challenging the impugned order and praying for identical reliefs

and raising the same issues as raised by the Appellant herein.

Thus, the present appeal filed by the Appellant is not

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 22 of 50 maintainable as is liable to be dismissed in limine.

b. It is also submitted by the Ld. Sr. Counsel for the CoC that the

Code provides for time bound resolution of a company. There is

no provision under the Code allowing a RA to wait for an indefinite

period or till other RA(s) plans are rejected by the CoC or the

Adjudicating Authority and then file a Resolution Plan. In this

regard, emphasis is supplied on the following provisions of the

IBBI (Insolvency Resolution Process for Corporate Persons)

Regulations 2016:

"36A. Invitation for expression of interest

..(3) The Form G in the Schedule shall -

...(b) provide the last date for submission of expression of interest

which shall not be less than fifteen days from the date of issue of

detailed invitation.

(5) A prospective resolution applicant, who meet the requirements

of the invitation for expression of interest, may submit expression

of interest within the time specified in the invitation under clause

(b) of sub-regulation (3).

(6) The expression of interest received after the time specified in the

invitation under clause (b) of sub-regulation (3) shall be rejected.

(10) the resolution professional shall issue a provisional list of

eligible prospective resolution applicants within ten days of the last

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 23 of 50 date of submission of expression of interest to the committee and to

all prospective resolution applicants who submitted the EOI.

(12) On considering the objections received under sub-regulation

(11), the RP shall issue the final list of prospective resolution

applicants within ten days of the last date of receipt of objections

to the committee.

36B - Request for resolution plans-

(1) The RP shall issue the information memorandum, evaluation

matrix and a request for resolution plans, within five days of the

date of issue of the provisional list under sub-regulation (10) of

regulation 36A..

(7) The RP may, within the approval of the committee re-issue

request for resolution plans, if the resolution plans received in

response to an earlier request are not satisfactory, subject to the

condition that the request is made to all prospective resolution

applicants in the finalist.

30. Approval of the resolution plan

(1) A prospective resolution applicant in the final list may

submit resolution plan or plans prepared in accordance with

the Code and these regulations to the RP electronically within

the time given in the request for resolution plans under

regulation 36B alongwith (a) an affidavit stating that it is

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 24 of 50 eligible under Section 29A to submit resolution plans:

(1) A resolution plan which does not comply with the provisions of

sub- regulation (1) shall be rejected".

c. In conjunction with the above provisions of the CIRP Regulations,

emphasis is also placed on the following provisions of the Code:

Section 5(25) "resolution applicant" means a person, who

individually or jointly with any other person, submits a resolution

plan to the RP pursuant to the invitation made under clause (h) of

sub-section 2 of the Section 25;

Earlier clause read as follows: "resolution applicant" means any

person who submits a resolution plan to the RP;

12.Time limit for completion of the Insolvency resolution process:-

(3) On receipt of an application under sub-section (2), if the

Adjudicating Authority is satisfied that the subject matter of the

case is such that CIRP cannot be completed within one hundred

and eighty days, it may be order extend the duration of such

process beyond one hundred and eighty days by such further

period as it thinks fit, but not exceeding ninety days:

...Provided further that the CIRP shall mandatorily be completed

within a period of three hundred and thirty days from the

insolvency commencement date, including any extension of the

period of CIRP granted under this section and the time taken in legal

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 25 of 50 proceedings in relation to such resolution process of the CD."

30. Submission of resolution plan -

The resolution professional shall examine each

resolution plan received by him to confirm that each

resolution plan--

(f) conforms to such other requirements as may be

specified by the Board.

(4)The committee of creditors may approve a

resolution plan by a vote of not less than seventy-

five sixty-six per cent, of voting share of the financial

creditors, after considering its feasibility and

viability the manner of distribution proposed, which

may take into account the order of priority amongst

creditors as laid down in sub-section (1) of section

53, including the priority and value of the security

interest of a secured creditor, and such other

requirements as may be specified by the Board:

...Provided also that nothing in the second proviso

shall be construed as extension of period for the

purposes of the proviso to sub-section (3) of section

12, and the corporate insolvency resolution process

shall be completed within the period specified in that

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 26 of 50 sub-section.

d. It is evident from the above provisions that before a resolution

plan can be submitted, a prospective resolution applicant will

have to qualify the criteria laid down in the invitation for EOI and

the RP can only call for submission or resolution plans from the

prospective resolution applicants who have qualified such criteria.

All RA(s) are required to submit their Resolution Plans pursuant

to publication of the invitation of EOI within the last date specified

therein as per the provisions of the Code.

e. The CIRP cannot be permitted to continue indefinitely.

Admittedly, the CIRP period of the Corporate Debtor expired on

09.05.2019. Since there was no Resolution Plan approved by the

CoC in relation to the CD, the RP had no other option but to

proceed for liquidation. On 06.02.2020 the Mr. R.C.Garg and

other employees of CD filed a purported Resolution Plan directly

with the Adjudicating Authority after expiry of 700 days from the

commencement of the CIRP. Pertinently, no order/direction had

been given by the Adjudicating Authority for considering the

Resolution Plan. Reliance is also placed on the judgment of the

Hon'ble Supreme Court in the case of Arcelor Mittal (India) (P) Ltd.

Vs. Satish Kumar Gupta (2019) 2 SCC 1, where the Court

explicitly held a resolution applicant has no vested right that his

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 27 of 50 resolution plan be considered by the CoC. The relevant portion of

the judgment is reproduced as follows:

"76. Given the timeline referred to above, and given

the fact that a resolution applicant has no vested

right that his resolution plan be considered, it is

clear that no challenge can be preferred to the

Adjudicating Authority at this stage.

81. Section 60(5), when it speaks of the NCLT

having jurisdiction to entertain or dispose of any

application or proceeding by or against the

corporate debtor or corporate person, does not

invest the NCLT with the jurisdiction to interfere at

an applicant's behest at a stage before the quasi-

judicial determination made by the Adjudicating

Authority. The non-obstante clause in Section

60(5) is designed for a different purpose: to ensure

that the NCLT alone has jurisdiction when it comes

to applications and proceedings by or against a

corporate debtor covered by the Code, making it

clear that no other forum has jurisdiction to

entertain or dispose of such applications or

proceedings."

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 28 of 50 f. Further, an Applicant who has not submitted an EOI or the

Resolution Plan within the deadline, and whose eligibility under

Section29A has not been confirmed by the RP, cannot file a

Resolution Plan belatedly and directly before the Adjudicating

Authority. No Resolution Applicant can be allowed herein to

bypass and frustrate the prescribed mandatory and statutory

procedure prescribed under the Code by attempting to slip in a

Resolution Plan and make a backdoor entry. It is also stated by

the CoC that under the proviso to Section 12 of the Code, for

pending CIRP an additional period of ninety days has been given

from the commencement of the Code (Amendment) Act, 2019, i.e.

06.08.2019. Thus, the CIRP period of the CD expires on

04.11.2019. However, it is only subsequent to the filing of the

aforesaid application, the Code (Amendment) Act 2019 came into

force with effect from 06.08.2019. Therefore, the amendment

brought to Section 12 of the Code, in not applicable in the instant

case.

g. The Liquidation Application has been filed and directions have

been passed by the Adjudicating Authority under Section 33(1) of

the Code which does not contemplate any prior approval of CoC.

The Liquidation Application was filed by the RP in term of Section

33(1) of the Code. Admittedly, there has been no objection by any

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 29 of 50 of the CoC members to the Liquidation application. The

Liquidation Application was thereafter duly adjudicated and

approved by the Adjudicating Authority after due consideration in

terms of Section 33 (1) of the Code, 2016 Section 33(1) provides

that:

"33. 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;"

From the aforesaid, it is evident that the Adjudicating Authority is

empowered to pass an order of liquidation in case no Resolution

Plan duly approved by the CoC is presented before it expiry of

CIRP period. Thus, when liquidation order is passed by the

Adjudicating Authority in terms of Section 33(1), no prior approval

of CoC is required (which is contemplated only in case of

liquidation under Section 33(2).

h. It is also stated by the CoC that the Appellant has relied on Section

419(3) of the Companies Act, 2013 and falsely attempts to

establish that the order has not been passed by an appropriate

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 30 of 50 quorum of the Adjudicating Authority. However, the Appellant has

failed to appreciate that the first proviso to Section 419(3) provides

that:

"It shall be competent for the members of the Tribunal authorized in

this behalf to function as a bench consisting of a single Judicial

Member and exercise the powers of the Tribunal in respect of such

class of cases or such matters pertaining to such class of cases, as

the President may, by general order, specify."

i. It is also stated that by an order Bearing No. 10/36/2016- NCLT

dated 07.12.2019, the Adjudicating Authority was reconstituted

with Member (Judicial) as the only member. The constitution of

the Bench was mentioned to be in accordance with Section 419(3)

of the Companies Act, 2013. Furthermore, Section 5(1) of the Code

defines 'Adjudicating Authority' as follows:

"Adjudicating Authority for the purpose of this part (i..e Part II of the

Code - Insolvency Resolution and Liquidation of Corporate

persons), means National Company Law Tribunal constituted

under Section 408 of the Companies Act, 2013 (18 of 2013)".

Thus, the impugned order has been passed by the Adjudicating

Authority having jurisdiction and constituted in accordance with

the provisions of the Companies Act, 2013.

j. It is also submitted by the Ld. Sr. Counsel for the CoC that the

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 31 of 50 Appellant has made false allegations that the RP being an ex-

employee of the SBI and is acting hand in glove with SBI to push

the CD into liquidation as SBI would get a better value from its

secured assets at the time of liquidation. However, the Appellant's

band allegations in this regard are strongly denied. The RP is an

independent professional and has no nexus with SBI. The Hon'ble

Supreme Court of India in the case of SBI Vs. M/s. Metenere Ltd

(Civil Appeal No. 2570 of 2020) has held that merely because the

RP was in service of SBI and getting a pension from it, he was not

disentitled to be the RP. As a matter of fact, SBI had voted in favor

of SREI's Resolution Plan. However, SBI only has a 26% voting

share in the CoC and the Resolution Plan was rejected by 71%

majority of the CoC. Therefore, contrary to the Appellant's stand,

SBI had in fact supported resolution to the CD, however the same

could not sail through because of dissent of remaining CoC

members. Thus the Appellant's contentions in respect of the same

are strongly denied and the Appellant is called to strict proof

thereof.

k. It is stated that this Appellate Tribunal during the course of

hearing on 06.11.2020 had asked the parties to examine its

judgment in CA(AT) (Ins) No. 515 of 2020 ("Panna pragati"), and

analyse if the same was applicable in the present matter. In this

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 32 of 50 regard, it is submitted that the judgment of this Tribunal in Panna

Pragati is wholly inapplicable to the present matter. In Panna

Pragati, the Appellants were excluded from consideration of their

Resolution Plan primarily on the ground of impending expiry of

180 days of CIRP. On account of the exclusion, the revised

Resolution Plan of the appellants (filed within the CIRP period)

was not considered or placed before the CoC. After the Appellants

were excluded, the RP filed an application for extension of CIRP

for a further period of 90 days. In the ensuing extended time, the

Resolution plan of an eligible highest bidder was voted upon and

accepted by the majority of the CoC. Thus, this Appellate Tribunal

held that the exclusion of the Appellants was unwarranted and

the appellants could not be excluded from consideration of their

revised Resolution Plan on the strength of earlier exclusion which

had nothing to do with disqualification ineligibility. It is apparent

that the issue in present case is substantially different from that

in Panna Pragati. In the present case, no eligible Resolution Plan

was received by the RP/CoC during the continuation of the CIRP

period. In any case, the RP cannot without application of his mind

submit any plan for consideration before the CoC. The RP under

Section 30(3) of the Code, can only submit such plans to the CoC

which confirm to the requirements under Section 30(2) of the

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 33 of 50 Code which also includes being complaint with requirements

under Section 29A.

7. Company Appeal (AT) (Ins) No. 846 of 2020

Submission of the Appellants

a. The Appellants are employees of the CD and representing all the

employees of the CD and they are stakeholders of the CD who are

interested in the CIRP of the CD. The Appellants filed the

Resolution Application for consideration and approval of the same

under the provisions of the Code, a resolution plan for resolution

of the CD thereby preventing a catastrophe of the CD going into

liquidation. The CD was incorporated on 17.11.1989 as M/s.

Jhunjhunwala Vansapati Ltd. The CD commenced its operations

as a small scale industry for manufacturing of hydrogenated

vegetable oil in 1989. Thereafter, the name of the CD was changed

to M/s. JVL Agro Industries Limited on 21.10.2008.

b. It is also stated that the CD is engaged in manufacturing of

vegetables oil and fats (other than hydrogenated). Its products

including Vasnaspati, refined oil, mustard oil, rice and bakery

shortening. Its refined oil variants including olein, soyabean,

cotton seed, palm and sunflower. Its mustard oil variants

including kachchighani and pakkighani. Its Vanaspati variants

include Vanaspati ghee variant. Its rice variants include steamed,

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 34 of 50 par-boiled and white rice. The Registered office of the CD is located

in Varanasi. The CD gradually set up and its manufacturing

facilities at 5 different locations in India. The CIRP process was

admitted against the CD vide an order dated 25.07.2018 passed

by the Adjudicating Authority.

c. It is stated that the RP was an employee of the SBI, which has the

largest share/voting percentage in the CoC i.e. 26%. The R! is

acting at the behest of SBI and to secure the best interest of such

financial creditor at the cost of the process. It is submitted that as

a consequent of the R1 long association with a Financial Creditor,

the said Respondent has failed to act fairly and has consequently

resulted in vitiating the entire CIRP of the CD and the consequent

impugned order is a nullity. On 03.02.2020, when the application

of SREI was dismissed by the Adjudicating Authority, the workers

and the employees came to know that no resolution plan is

approved and the CD might go for liquidation. The Appellants as

earlier discussed this with other employees of the CD reached a

consensus and decided to file a resolution plan. Thereafter, the

Appellants filed a prospective resolution plan on behalf of the

employees of the CD as liquidation is not in interest of

stakeholders and their source of livelyhood would be lost and then

thereafter filed an application before the Adjudicating Authority in

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 35 of 50 CA No.73 of 2020. The said Resolution Application alongwith the

Resolution Plan was handed over to the RP on 06.02.2019. An

order passed by the Adjudicating Authority for considering the

resolution plan to the RP and the same was already handed over

to the RP. Even after receiving the prospective the Resolution Plan,

the RP did not place the same before the CoC. The RP did not also

inform the CoC of the said fact. The RP also did not inform the

Appellants that whether the Resolution Plan attracts any infirmity

under the Code. Without any such intimation from the RP, the

Appellants were confident that the resolution plan will be placed

before the CoC.

d. It is also stated that the question that arises in the present appeal

is (1) whether a going concern CD which has been functional

should be sent for liquidation even when a Resolution Plan which

is pending for consideration of CC and which proposes to payRs

512 Crore when the liquidation value of the CD is Rs. 385 Crore?

(2) Can an ongoing concern should be liquidated after closing

down the company and deliberately put to the end its life in

liquidation? (3) Can there be automatic Liquidation of CD even

when there is plan which can keep it as a going concern? (4) Can

a liquidation order be passed by a bench which is coram non

judice and hence lacks jurisdiction?

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 36 of 50 e. The Appellants have submitted that in the light of the order dated

03.02.2020 passed by the Adjudicating Authority, CIRP was going

on and not concluded in interest of all stakeholders. The order

dated 03.02.2020 is extracted below:

"After the rejection of the resolution plan submitted by SREI, it

would be equitable that the resolution process is open for all

resolution applicants in order to maximize the recovery for the

creditors of the CD" as there were interest resolution applicants

(appearing at page No. 69 of the Appeal paper book in CA(AT) (Ins)

No. 846 of 2020).

f. It is also stated that the Resolution Plan never put before the CoC

for it to apply its commercial wisdom. Application C.A No.70 of

2020 having plan of the appellant filed before the Adjudicating

Authority on 06.02.2020 i.e. within 3 days of direction passed in

the order dated 03.02.2020. However, the plan never placed

before the CoC, no document or record of the same on record. The

Adjudicating Authority vide order dated 14.02.2020 observed the

plan will be submitted to RP within 24 hours and put for

consideration on 20.02.2020. The Application of the Appellant

was listed before the Adjudicating Authority on 06.07.2020 and

was considered. It was proposed the plan be submitted before CoC

which confirmed higher value of plan than proposed liquidation

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 37 of 50 value, matter again listed on 13.07.2020 and again listed on

17.07.2020, suddenly the liquidation order is passed in haste and

hurry without confirming the fact that there was no resolution by

CoC for liquidation and its only IRP application without CoC

approval. The RP always interested in liquidation as he has more

gain and profit in liquidation and commission on sale of assets as

per Regulation 4.

g. It is also stated that the Adjudicating Authority erred in holding

that one of the Appellant, who was the CFO was disqualified u/s

29A to submit a resolution plan. A CFO is a key managerial person

(as defined under the Companies Act, 2013) and is required to be

appointed pursuant to the requirements under the Companies

Act, 2013. A key managerial person may also be the authorized

signatory of a company and hence such name would be reflected

in the Master Data of the Company available with ROC. Mr.

Ramesh Chander Garg was the CFO and the authorized signatory

and hence his name was reflecting in the Master Data of the CD

with the ROC. Disqualification provisions contained u/s 29A of

the Code is not attracted to a CFO or a KMP. The RP failed to seek

a resolution from the CoC to the effect that the CIRP should be

terminated and liquidation of the CD should ensue. In the absence

of the above, the Adjudicating Authority should have waited until

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 38 of 50 the CIRP lapsed before passing the impugned order for

liquidation. In addition to this, the RP took the unilateral decision

to file the liquidation application in spite of the fact that in the

13th meeting of the CoC dated 02.05.2019, the CoC has requested

the RP to take a vote on the issue of liquidation of the CD. Even

then, no such voting on liquidation was conducted by the RP. No

such vote taken.

h. It is also stated that the Adjudicating Authority completely

misinterpreted the provisions of the Code insofar as they relate to

the jurisdiction in respect of applications for liquidation under

Section 43 of the Code. The Code itself provides that an

application for liquidation must be considered by the Adjudicating

Authority. Put differently, the Code provides for the justifiability

of such application. Commercial wisdom has no role or connection

justifiability. In the case of K.Shashidhar Vs. Indian Overseas

Bank & Ors. (Civil Appeal No. 10673 of 2019) as and Essar

Judgment, the Hon'ble Supreme Court did not lay down any law

to the effect that matters which are otherwise justiciable under

the Code can be made non-justiciable only because of a view taken

by the CoC. The Application for liquidation was allowed by the

Adjudicating Authority without considering and / or considering

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 39 of 50 the objective of the Code as explained by the Hon'ble Supreme

Court in several judgments including the following:

 Swiss Ribbons Pvt.Ltd Vs. Union of India (2019) 4 SCC 17

 Committee of Creditors, Essar Steel India Ltd, through

authorized Signatory Vs. Satish Gupta & Ors. (Civil Appeal

No. 8766-8677 of 2019)

 Duncans Industries Ltd Vs. J Agrochem (2019) 9 SCC 725

 Civil Appeal No. 9402-9405 of 2018 ArcelorMittal India Pvt,

Ltd. Vs. Satish Kumar Gupta & Ors.

i. The Judgment of this Tribunal in CA(AT) (Ins) No. 606 of 2019

Hammond Power Solutions Pvt. Ltd. Vs. Mr. Sanjit Kumar Nayak

& Ors., wherein the Hon'ble Tribunal has set aside the impugned

order and remit the matter back to the Adjudicating Authority

with a direction to send back the Resolution Plan to the CoC to

resubmit the plan after satisfying the parameters as laid down by

the Hon'ble Supreme Court in the judgment in the matter of

"Essar Steel", as the decision of the CoC also does not reflect that

it has taken into account the fact that the CD needs to be kept as

a going concern and that there is need to maximise the value of

the assets and that the interest of all the stakeholders including

Operational Creditor has to be taken care of. Thus, in the light of

the above submissions, the Appellant submits that the impugned

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 40 of 50 order dated 19.08.2020 ought to be set aside with a direction to

the CoC to consider other plans readily available with it.

8. Submission of the Respondent No.1

a. The CIRP of the CD had commenced on 25.07.2018 pursuant to

an order passed by the Adjudicating Authority. Subsequently, by

an order dated 10.09.2020, Mr. Supriyo Kumar Chaudhuri (the

Respondent No.1 herein) had been appointed as the RP. The RP

has issued the request for submitting the EOI in the newspapers

on 05.10.2018. Only 2(two) were received from the potential/

Prospective Resolution Applicants within the due date provided in

the request for EOI. Thereafter, in the 5th CoC meeting held on

27.11.2018, it was decided to re-issue the request for EOI and a

revised request for EOI was published in the newspaper.

Accordingly, in response to the said publication, 12(twelve) EOIs

were received by the RP within the due date provided in the revised

request for EOI. Based on the examination of the EOI, the RP

shortlisted all 12 potential Resolution Applicants and provided

them access to the virtual data room and issued Information

Memorandum as well as RFRP to the potential Resolution

Applicants. The last date for submission of Resolution Plan as per

the RFRP was 02.02.2019. However, no Resolution Plan was

received by the RP by the last date and therefore, the RP requested

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 41 of 50 the CoC to extend the Resolution Plan submission date. The same

was agreed upon in the 7th CoC meeting held on 31.01.2019 and

accordingly, the last date for submission of Resolution Plan was

extended till 02.03.2019.

b. It is stated that the CoC in its meeting held on 06.09.2018 had

requested the then IRP to file an application before the

Adjudicating Authority for exclusion to time. Since immediately

thereafter the R1 herein i.e. the RP had replaced the IRP (by an

order dated 10.09.2018 of the Adjudicating Authority), the RP filed

an application being CA 95 of 2019 in CP No. (IB) 223/ALD/2018

for exclusion of 18 days from CIRP period being the time between

the 1st meeting of the CoC and the appointment of the present RP.

The Application for exclusion of time was allowed by the

Adjudicating Authority on 14.08.2019 thereby extending the CIRP

period by a further period of 18 days i.e. till 09th May, 2019. It is

pertinent to mention that the order dated 14.08.2019 passed by the

Adjudicating Authority has intentionally been suppressed by the

Appellant herein.

c. It is also stated that in the CoC meeting held on 26.03.2019, it

was agreed to further extend the Resolution Plan submission date

to 06th April, 2019. Despite further extension, no Resolution Plan

was received till 06.04.2019 i.e till the last date for submission of

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 42 of 50 Resolution Plan. However, the RP had received a request from one

of the prospective Resolution Applicants, namely, SREI, for

further extension of timeline for submission of Resolution Plan by

10 days i.e. till 16.04.2019. The CoC agreed to further extend the

Resolution Plan submission date till 16.04.2019. On 16.04.2019

SREI submitted its Resolution Plan in respect of the CD. However,

since SREI had submitted the Earnest Money Deposit (EMD) in

the form of Bank Guarantee (BG) of INR 1,00,00,000 as against

an amount of INR 10,00,00,000 required as per the RFRP, the CoC

granted a time of 48 hours to SREI to revert on whether they

would be in a position to submit the BG amount as per the RFRP

and accordingly submit the BG as per the RFRP before

23.04.2019. Thereafter, SREI submitted an additional BG of INR

4,00,00,000 towards the EMD. On the basis of the deliberations

in the meeting dated 24.04.2019 of the CoC, the RP opened the

Resolution Plan submitted by SREI and commenced the

examination of the said Resolution Plan. The RP presented the

Resolution Plan submitted by the SREI to the CoC members in the

said meeting whereof it was recorded that the financial

commitment made by SREI was way below the liquidation value

of the CD and that SREI did not wish to comply with the

requirements under the RFRP regarding EMD deposit and

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 43 of 50 submission of performance bank guarantee. Accordingly, on

conclusion of voting process on 07.05.2019, the Resolution Plan

submitted by SREI was rejected by 98.18% voting share of the

Financial Creditors.

d. After the rejection by the CoC of the Resolution Plan submitted by

SREI by such a massive margin of over 98%, SREI again sent

standalone offer increasing the financial value of the proposal

from Rs.395 Crore to Rs.401 Crore. As RP, he forwarded the same

to all CoC members and only one CoC member categorically

mentioned that CIRP is a time bound process and there cannot be

and less negotiation. No other members responded. Hence, it is

assumed that CoC is not interested in such proposal of SREI.

e. The RP then filed Liquidation application on 29.07.2019 before

the Adjudicating Authority as no other Resolution Plan was in

hand and two rounds of EOI did not yield any acceptable proposal

to CoC and more than one year was getting lapsed. He has moved

the Liquidation application. Thereafter, employee trust filed an

application before the Adjudicating Authority on 06.02.2020

which included the CFO of the Company. CFO is disqualified

under Section 29A of the Code. Based on the order of the

Adjudicating Authority on 14.02.2020, the RP was asked to send

the Resolution Plan to CoC. The RP, thereafter, send the

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 44 of 50 Resolution Plan to the CoC for the purpose of information.

However, he is categorically submitting that no positive response

was received from CoC in this regard. As RP, he found several

infirmity in the Resolution Plan submitted by the employees which

includes non-existence of trust on the date of filing of the

Resolution Plan and the employee who is filing the Resolution

Plan, he himself disqualified and he also could not find out how a

new trust can generate funding from different sources.

9. Submission of the Respondent No.2:- Committee of Creditors

a. As far as the issue of order delivered by a single Judicial Member

Bench of the Adjudicating Authority. It is clarified that Section

419 of the Companies Act, 2013 is amply clear on this subject

that a single member can constitute the Bench. For brevity and

clarity, the same is depicted below:

Section 419 of the Companies Act, 2013

"Section 419: Benches of Tribunal.

(1) There shall be constituted such number of Benches of the Tribunal, as may, by notification, be specified by the Central Government.

(2) The Principal Bench of the Tribunal shall be at New Delhi which shall be presided over by the President of the Tribunal.

(3) The powers of the Tribunal shall be exercisable by Benches consisting of two Members out of whom one shall be a Judicial Member and the other shall be a

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 45 of 50 Technical Member: Provided that it shall be competent for the Members of the Tribunal authorised in this behalf to function as a Bench consisting of a single Judicial Member and exercise the powers of the Tribunal in respect of such class of cases or such matters pertaining to such class of cases, as the President may, by general or special order, specify: Provided further that if at any stage of the hearing of any such case or matter, it appears to the Member that the case or matter is of such a nature that it ought to be heard by a Bench consisting of two Members, the case or matter may be transferred by the President, or, as the case may be, referred to him for transfer, to such Bench as the President may deem fit.

[(4) The Central Government shall, by notification, establish such number of benches of the Tribunal, as it may consider necessary, to exercise the jurisdiction, powers and authority of the Adjudicating Authority conferred on such Tribunal by or under Part II of the Insolvency and Bankruptcy Code, 2016.] (5) If the Members of a Bench differ in opinion on any point or points, it shall be decided according to the majority, if there is a majority, but if the Members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President for hearing on such point or points by one or more of the other Members of the Tribunal and such point or points shall be decided according to the opinion of the majority of Members who have heard the case, including those who first heard it."

Cited several judgments to support it stands. 2017 SCC OnLIne

GUJ 1183 (Nipun Praveen Singhivi Vs. Union of India). 2021 SCC

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 46 of 50 OnLine SC 1044, Newtech Promoters and Developers Pct. Ltd Vs.

State of UP and ors.

b. It is also stated that the Appellant didn't raise any objections

against the constitution of the Single Member Bench before the

Adjudicating Authority and is thus estopped from raising the

same at this belated stage. Cited Hon'ble Apex Court Judgment in

Mahabal Ram (DR) Vs. Indian Council of Agricultural Research

(1994) 2SCC 401 which requires either party before a single

member to suggest to the member hearing the matter that it

should go to a Bench of two members. Hence, raising such

questions at this stage is impressible under the framework of law

laid down.

10. After going through the submissions made by the learned Sr.

Counsels for the parties and the available records submitted by the

parties, we observed the followings:

a. It is not in dispute that the CIRP commenced from 25.07.2018.

b. It is also not in dispute that the RP published the request for EOI

on 05.10.2018 and thereafter, again on 05.12.2018.

c. It is also not in dispute that 12 Applications for EOI were

responded to the RP. Only one M/s. SREI wish to participate in

the Resolution Process and submitted an EOI on the extension of

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 47 of 50 the deadline for submission of the Resolution Plan in February,

2019.

d. The CoC agreed to accept the EOI of SREI and further extended

the date of submission of the Resolution Plan from 02.03.2019 to

25.03.2019. However, SREI submitted the Resolution Plan on

16.04.2019 which was rejected by the CoC on 07.05.2019 by

approx.98% vote. SREI went on improving the proposal just by a

minuscule amounts and finally CoC decided to put the resolution

plan to vote on 24.07.2019. However, the Resolution Plan was

rejected by the CoC by approx.71% of the vote and rejection was

communicated to the SREI. On 25.07.2019, SREI further sent a

standalone financial offer raising its proposal from Rs.395 Crore

to Rs. 401 Crore. The RP sent the same proposal to members of

the CoC and no Member other than one raised the issue. The issue

was why we are going on endlessly with the same firm as IBC is a

time bound programme. No other members informed RP of any of

its comments. Similarly, the RP received proposal from employee

trust which are unregistered on the date of application and he

could not verify the sources of funding authenticity etc.

e. It is observed that the RP has forwarded the proposal of employee

trust to the members of the CoC as directed by the Adjudicating

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 48 of 50 Authority. No response was received from any members of the

CoC.

f. While hearing was initiated in March, 2020 to July, 2020 the

Coram for the bench was comprising of two members but on the

final concluding day of the final hearing only Judicial member was

available and hence the Judicial Member has delivered the

judgment as a single member Coram bench duly constituted by

the 'Competent Authority'.

g. IBBI (Liquidation Process) Regulations 2016 vide Chapter -VI

Regulation 32 provides the sale of the CD as a going concern.

Regulation 33 of the same Regulation also provides the

methodology to sale. All this provides going concern sale.

h. It is very much clear there is no viable plan for the consideration

of the CoC and CIRP period has expired long back.

i. All this suggests for that the Adjudicating Authority has no

options but to pass order of Liquidation on completion of

Insolvency Period and accordingly, the Adjudicating Authority has

passed the liquidation order.

j. We also observe that the assets of the CD is valued at Rs.1128

Crore and it is one of the largest vanaspati manufacturer in India

with five manufacturing units scattered in the states of Uttar

Pradesh, Rajasthan, Bihar & employing 550 employees as per the

Company Appeal (AT)(INS) No. 832 of 2020 & Company Appeal (AT)(INS) No. 846 of 2020

Page 49 of 50 list furnished by the Appellant in CA(AT) (Ins) No. 846 of 2020 at

page no.106-118 of the appeal paper book.

k. Hence, we do not find any infirmity in the impugned order to set

it aside. However, the RP is directed to make all attempts to sale

the CD as a going concern or the business of the CD as a going

concern in consultation with stakeholders consultations

committee as constituted under Regulation 31A of the IBBI

(Liquidation Process) Regulations 2016, in order to protect the

livelihood of 550 families.

l. Accordingly, we dispose off the appeals with above observations

and directions.

Pending application, if any, stands disposed off.

Interim Orders, if any, stands vacated.

No order as to costs.

[Justice Jarat Kumar Jain] Member (Judicial)

(Dr. Ashok Kumar Mishra) Member(Technical)

18th January, 2022

New Delhi

Raushan.K

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