Nakul Bharana Erstwhile Director Of ... vs Anil Kohli Appointed Irp For The ...

Regional Office at: ICICI Bank Tower, NBCC Place, Bisham Pitamah Marg, Pragati Vihar, New Delhi - 110 003 ...Respondent No.2

3. Committee of Creditors Of the Corporate Debtor Dehradun Highway Projects Limited Through ICICI Bank ICICI Tower NBCC Place Bisham Pitamah Marg, Pragati Vihar, New Delhi - 110003 ...Respondent No.3

1 Company Appeal (AT)(Ins) No.899 of 2020 Present: For Appellant: Mr. Gopal Jain, Sr. Advocate with Mr. Apoorv Agarwal and Ms. Riya Thomas, Advocates.

For Respondents: Mr. Abhishek Anand and Mr. Pathik Choudhury, Advocate for Respondent No. 1. Mr. Abhirup Dasgupta, Ms. Bhawana Sharma, Ms. Ishaan Duggal, Advocates for Respondent No. 2 -Caveator. Ms. Prachi Johri, Advocate for Respondent No. 3- CoC. Ms. Mahima Khandel, Proxy counsel for Intervenor.

JUDGMENT

DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER

1. The present appeal has been filed by the 'Appellant'-'Nakul Bharana' -

'Erstwhile Director of Corporate Debtor'-'Dehradun Highway Projects Limited'

(DHPL) under Section 61 of the 'Insolvency and Bankruptcy Code, 2016' (in

short 'Code') against the impugned order dated 18.09.2020 passed by the

'Adjudicating Authority' (National Company Law Tribunal), New Delhi Bench-

V in CP(IB) 725(ND)/2020.

2. The Appellant has sought the relief of setting aside of the above order and for

directing to form a consolidated 'Committee of Creditor' (CoC) of the Corporate

Debtor alongwith 'parent company' and the Corporate Debtor etc.

3. The Adjudicating Authority has elaborately discussed on the issue of

'financial debt' and its 'default' in respect of corporate debtor and initiated the

2 Company Appeal (AT)(Ins) No.899 of 2020 'Corporate Insolvency Resolution Process' (CIRP). The Adjudicating Authority

has also elaborately explained 'Section 7 of the Code' vide para 22 of the

impugned order and 'issue of limitation in para 23, 24, 25 & 26 of the

impugned order'.

The Adjudicating Authority has also explained the issue emerging on the

claim filed by the financial creditor in other CIRP and withdrawing the same

claim from in other CIRP proceedings which was against the parent company

of the Appellant - 'Era Infra Engineering Limited' (EIEL) and initiating the

CIRP based on the same claim 'debt' and 'default' vide para 31 to 42 of the

impugned order.

4. The Appellant has made the following submissions as stated below:

a. The Appellant has submitted that it is an 'Engineering Procurement

Construction Contract Company' with a business model of 'Executing

BOT (Build-Operation-Transfer) Projects' through its six special

purpose vehicle company which includes corporate debtor /DHPL.

b. The Appellant has stated that the DHPL was incorporated as a 100%

subsidiary of the Parent Company which was the investment vehicle

created for infusing promoter contribution into the SPVs. The SPVs

were created by the Parent Company to fulfil contractual obligation laid

down for BOT projects merely to execute these projects. These projects

were awarded to the Parent Company and was envisaged to be executed

using the expertise and experience of the Parent Company and the

promoter contribution infused by the Parent Company. Post the

3 Company Appeal (AT)(Ins) No.899 of 2020 incorporation of the SPVs including the Corporate Debtor, the Parent

company continued to be in control and management of them, took on

itself all the obligations as an EPC contractor (Fixed Price) and as a

financial sponsor. The Adjudicating Authority ordered for

commencement of CIRP against the Parent Company dated 08.05.2018

on an application moved by the Union Bank of India. The Appellant has

also submitted that the Respondent No.2 filed its claim in the CIRP of

Parent Company, however, the claim of the Respondent No. 2 was

rejected by the Resolution Professional dated 28.05.2018. The

Respondent no.2 was aggrieved by the above-mentioned rejection, and

subsequently approached the Tribunal by way of C.A No.997(PB)/2018

in CP. NO. (IB) -190(PB) of 2017 titled Union Bank of India Vs. Era Infra

Engineering Pvt, Ltd. vide order dated 06.12.2018. The Tribunal has

allowed the CA No. 997(PB)/2018 and consequently, directed the RP to

admit the claim of the Respondent in the CIRP of Parent Company.

c. At the end of the bidding process for the Parent Company, two

Resolution Plans were received. The two resolution plans did not

provide for the resolution of the Parent company on a standalone basis.

Both the resolution plans for the parent company were proposed

including the value of the assets of the SPVs.

d. It is also stated that the CoC members agreed that on account of the

typical business model of the Parent Company, a resolution plan for

the Parent Company on standalone basis would hardly ascribe any

4 Company Appeal (AT)(Ins) No.899 of 2020 value for the stakeholders. The CoC of the Parent Company also

acknowledged that there has been no precedent in this regard wherein

the CoCs of a parent company undergoing an insolvency process had

voted upon a resolution plan which provides for the resolution of the

Parent company including the assets of the SPV's of the Parent

Company. Therefore, the CoC of the parent company was apprehensive

to deliberate and vote on the two resolution plans. In view of the

apprehension of the CoC of the parent company to consider and vote

upon the Resolution Plans and the Section 12A proposal, the Appellant

filed the mentioned consolidation Application on 04.11.2019 number

CA No. 2448/2019 in the present matter "Union Bank of India Vs. Era

Infra Engineering limited" requesting for consolidation of all the SPVs

with the CIRP of the Parent company, which remains pending for

adjudicating since then.

e. It is submitted that the Resolution Professional of the parent company

at the suggestion of the Bench after hearing the abovementioned

application filed by the Promoter of the parent company, filed an

application number IA No. 2497 of 2019 on 12.11.2019 with similar

prayer alongwith an affidavit, which is pending for adjudication. The

CoC of the parent company has specifically passed a resolution and

allowed the Resolution Professional to proceed with the application IA

No. 2497 of 2019 in the course of the 18th CoC meeting. Financial

Creditors constituting 66.6% of the CoC of the parent company has

5 Company Appeal (AT)(Ins) No.899 of 2020 approved this Resolution. IA No. 2497 of 2019 still remains pending for

adjudication.

f. It is also submitted that the Respondent no.2 is bound by the decision

of the CoC of the parent company and even if it is dissenting, it cannot

opt of circumvent the decision. The financial creditor forms a part of

the CoC of EIEL and has been participating in the CoC meetings. The

CoC of EIEL had specifically approved the consolidation during the

course of the 19th CoC meeting with 66.6% voting and the Respondent

No.2 is thus barred as per Edelweiss Asset Reconstruction Company

Ltd Vs. Sai Regency power Corporation Pvt. Ltd & Ors CA (AT) (Ins) No.

887 of 2020. Thus, it is established that all the assenting as well as the

dissenting members of the CoC of the parent company are bound by

the majority decision. The Respondent No.2 is fully aware that to

facilitate Consolidation of the Parent company and the SPVs, the SPV

at the suggestion of the Adjudicating Authority had filed an application

under Section 10 of the Code. In the said application, Resolution

Professional of the parent company has been proposed as the IRP. The

decision to appoint the RP of the parent company as the IRP for all the

SPVs was approved by the CoC of the parent company in its ninth

meeting held on 29.01.2019 with more than 88% majority. Further

during the same meeting, the CoC of EIEL voted on a Resolution,

approved takeover of the management control of the DHPL by the RP of

the parent company. The Resolution was passed with 77.45% vote (the

6 Company Appeal (AT)(Ins) No.899 of 2020 Respondent No.2 was a member to the 9th meeting and voted in favour

of this resolution and hence is bound by the decision). Moreover, all

other SPVs are on the path of consolidation as Application under

Section 10 of the Code has been filed and are pending for adjudication

before the Principal bench NCLT. That in fact, the ingredients,

parameters and requirement for the consolidation of the group

companies as highlighted in the judgments/ order in the case of "State

Bank of India Vs. Videocon Industries Limited" in MA No. 1306 of 2018

in CP No. 02/2018 vide decision dated 08.08.2019 the bench while

allowing the consolidation application moved by SBI has laid down

certain parameters while ordering for consolidation of 13 Videocon

group companies that : (i) common control (ii) common directors (iii)

common assets (iv) common liabilities (v) inter-dependence (vi)

interlacing of finance (vii) pooling of resources (viii) co-existence of

survival (ix) intricate link of subsidiaries (x) inter winded accounts (xi)

inter-looping of debts (xii) singleness of economics of units (xiii)

common financial creditors (xiv) cross holding. And further vide the

said consolidation order directed to complete the resolution process

within 180 days from the date of the order. That in furtherance to the

above set of parameters, the NCLT Mumbai Bench on 08.06.2021

approved the Resolution Plan submitted by Twin star technologies

limited in "SBI Vs. Videocon Industries Limited", consolidating the 13

Videocon group companies vide the application bearing IA No.196 of

7 Company Appeal (AT)(Ins) No.899 of 2020 2021 in CP No. 02/2018 fled by the RP (Mr.Abhijit Ghathakurta). In the

case of "Arcelomittal India (P) Ltd. Vs. Satish Kumar Gupta" reported

in (2019) 2 SCC1, it is held

"37. It is thus clear that, where a statute itself lifts the

corporate veil, or where protection of public interest is

of paramount importance, or where a company has

been formed to evade obligations imposed by the law,

the court will disregard the corporate veil. Further, this

principle is applied even to group companies, so that

one is able to look at the economic entity of the group

as a whole".

That in "Radico Khaitan Ltd. Vs. BT & FC Pvt. Ltd. 2021 (4) TMI

144,NCLAT, Delhi, the Appellant, an operational creditor filed an

appeal against the impugned order 02.09.2020 passed by the

Adjudicating Authority, Bangalore Bench, where the Adjudicating

Authority had rejected the application filed by the appellant for

consolidation of two CIRP, stating that the Appellants being operational

creditor have no locus standi to file the consolidation application / to

interfere in the CIRP of the Respondent No.2.

g. It is also stated that in the light of above contentions, the malafide

conduct of the Respondent No.2 and in order to achieve value

maximization as well as to ensure that the commercial judgment of the

CoC of EIEL is to push ahead for consolidation of EIEL and its SPVs.

8 Company Appeal (AT)(Ins) No.899 of 2020 Therefore, it is prayed to this Appellate Authority for setting aside the

said order dated 18.09.2020 passed in CP (IB) No. 725 of 2020 and

subsequently the consolidation of the whole ERA Group for the interest

of all the creditors/stakeholders as it amounts to maximization of the

value of ERA Group Companies.

5. The Respondent no.1- Resolution Professional has submitted that he has

collated all claims submitted by Creditors pursuant to public announcement

in terms of Section 18(1)(a) of the Code and has determined the Financial

status of Corporate Debtor and based on weight factor has constituted the

CoC comprising only financial creditors wherein the Respondent No.2- ICICI

Bank Ltd. i.e. the initiator of application for CIRP under Section 7 of the Code

is having a voting share of 51.48%. He has also informed that he has

appointed two registered valuers in accordance with the provisions of

Regulation 35 of the CIRP Regulations, 2016. He has also submitted that the

Appellant has filed an application under section 10 of the Code for initiation

of CIRP for the Group. Hence he is not entitled to assail the CIRP admission

order as the Appellant himself has admitted the 'Debt' and 'Default' and has

sought initiation of CIRP.

6. The Respondent No.2 has made the submissions as given below:

a. The Respondent No.2 - ICICI Bank Ltd., has submitted that it is the

largest financial creditor of the corporate debtor. It has granted facility

of term loan aggregating to Rs.2,700 million with external commercial

borrowing facilities of USD 60 million as a sub-limit facility of the main

9 Company Appeal (AT)(Ins) No.899 of 2020 facility to part finance the cost of projects. The project was four lanes

on BOT on annuity basis for Haridwar -Dehradun route covering NH-

58 and NH-72. The above said facility was further extended with the

consortium of lenders including Bank of India and other banks. It has

also stated that it has assisted the Corporate Debtor to meet costs

overrun as and when required as per the agreement executed between

them. It has also been brought to our notice that on 23.05.2016, owing

to the Corporate Debtor's failure to adhere to timelines and milestones,

NHAI issued an intention to terminate the Concession Agreement.

Pursuant thereto, the Senior Lenders in principal agreed that the

Corporate Debtor would avail bridge-financing from NHAI to complete

the balance work of the Project. NHAI granted approval for one-time

fund infusion to the extent of INR 2798.8 Million subject to the terms

of tripartite agreement among the Corporate Debtor, NHAI and Bank of

India (as the lead bank of the senior lenders) and that on 27.03.2017,

due to default in payment of interest under the DHPL facilities for the

period from September 2016 to February 2017, the Respondent No.2

issued a demand notice to the Corporate Debtor demanding payment

of total outstanding Rs. 187.7 million under the DHPL facilities.

However, the Corporate Debtor failed to make payment of the

outstanding monies under the DHPL facilities demanded under the

aforesaid demand notice to the Respondent No.2. The account of the

10 Company Appeal (AT)(Ins) No.899 of 2020 Corporate Debtor was declared as NPA on 30.09.2016 w.e.f.

31.12.2015.

b. On 26.04.2018, the 'Tripartite Agreement' as referred to above, was

executed, inter alia by the Corporate Debtor and the Bank of India,

being the Lead Bank representative of the Senior Lenders (including

ICICI Bank). By virtue of signing the said Tripartite Agreement, the

Corporate Debtor admitted and acknowledged the facilities granted by

the Senior Lenders, including the DHPL facilities granted by the

Respondent No.2. In the interregnum, vide order dated 08.05.2018, the

Adjudicating Authority ordered for commencement of CIRP against 'Era

Infra Engineering limited', parent company of the Corporate Debtor, on

an application filed by Union Bank of India. In its capacity as the Parent

Company, EIEL provided various securities and contractual comforts

to the Respondent No.2 to secured the DHPL facilities availed by the

Corporate Debtor.

c. The Respondent No.2 filed its claim with respect to the Sponsor

Undertaking provided by EIEL to the Answering Respondent in the

prescribed Form-C in the CIRP of EIEL which was later withdrawn by

the Answering Respondent on 05.03.2020 which was duly

acknowledged and accepted by the Resolution Professional of EIEL. On

07.12.2018, the Respondent No. 2 issued a Notice of Acceleration and

Reservation of Rights to the Corporate Debtor enumerating several and

subsisting events of defaults occurred under the DHPL Facilities availed

11 Company Appeal (AT)(Ins) No.899 of 2020 by the Corporate Debtor and in light of the aforesaid defaults, the

Answering Respondent cancelled the DHPL Facilities and inter alia

called upon the Corporate Debtor to immediately pay the outstanding

amount of INR 493.43 Crore as on 30.11.2018, to the Answering

Respondent. The Corporate Debtor failed to pay the outstanding

amount mentioned above. the Respondent No.2 approached the

Adjudicating Authority way of CP (IB) No. 725/ND/2020 under Section

7 of the Code seeking initiation of CIRP against the CD. The amount in

default was Rs. 5,654,726,003.96/- including interest as on

27.02.2020.

d. It is relevant to note that the Corporate Debtor had filed CP(IB) No.

665/ND/2020 before the Adjudicating Authority under Section 10 of

the Code for voluntary initiation of insolvency proceedings against

itself. One could reasonably infer from such an application being filed

that the financial condition of the corporate debtor had deteriorated

beyond repair and warranted immediate resolution under the aegis of

the Code. The Appellant's claim of filing the application under Section

10 of the Code in pursuance of an alleged scheme of consolidation is

factually and legally untenable as in terms of the Section 10 (1) of the

Code, a Company Petition can be under Section 10 only if a "Default"

has been committed by the Corporate Debtor. It is an inescapable fact

that the Corporate Debtor had committed a series of default(s) in

repayment of its debts to its creditors including the Respondent no.2.

12 Company Appeal (AT)(Ins) No.899 of 2020 e. It is relevant to note that on 29.08.2020, the Appellant herein i.e. Mr.

Nakul Bharana filed an Additional Affidavit in the Company Petition

before the Ld. Adjudicating Authority stating that the Committee of

Creditors of 'Era Infra Engineering Limited', which is a separate legal

entity vis-a-vis the Corporate Debtor, has allegedly voted for the

consolidation of the Corporate Debtor with Era Infra Engineering

Limited. In view thereof, Mr. Nakul Bharana averred that the decision

of the majority of Committee of Creditors of 'Era Infra Engineering

Limited' for the consolidation of the Corporate Debtor would be binding

upon the Answering Respondent herein. Such an argument is not only

fallacious but also untenable in law in view of the fact that ICICI had

withdrawn its claim from the CIRP of Era Infra Engineering Limited.

f. It is also stated that the Appellant has also mentioned that the present

company appeal has been filed under Section 61(5) of the Code.

However, there is no such statutory provision under the Code. In view

of the above, it is clear that the present appeal is not maintainable since

Section 60(1) of the Code does not give any right to the Appellant to

approach this Tribunal by way of present appeal, and Section 61(5) of

the Code does not exist. It is imperative to bring to the kind notice of

this Tribunal that by way of the Appeal which is allegedly, against the

order of admission passed by the Adjudicating authority, the Appellant

prayed for the consolidation of the CoC of Corporate Debtor alongwith

the parent company. It is pertinent to mention that admittedly, the

13 Company Appeal (AT)(Ins) No.899 of 2020 Corporate Debtor has also initiated proceedings before the Adjudicating

Authority seeking consolidation of Era Infra Engineering Limited with

its alleged SPVs. Going by the submissions made by the Appellant in

the Company Appeal, the said proceedings are pending as on date. This

proves that the Company Appeal is malafide and nothing but an

attempt to forum shopping. The Respondent No.2 has also submitted

that the facts pertaining to the business arrangement of the Corporate

Debtor and its alleged parent company are immaterial for the purpose

of deciding a company petition under section 7 of the Code or an appeal

arising out of the same.

g. It is also pertinent to note that in the Company Appeal, the Appellant

has not specifically denied the existence of debt owed to the Respondent

No.2 or the occurrence of the default thereon. In fact, the Appellant has

not only admitted the sanction of loan to the Corporate Debtor but also

its availment as well as default made by the Corporate Debtor in

repayment of the loan. In view thereof, it is most humbly submitted this

is a fit case for commencement of CIRP and consequently, the

Impugned Order warrants no interference by this Appellate Tribunal.

7. The Respondent No.3, has made the submissions as given below:

a. It is stated that the Appellant conceals email dated 19.03.2020 issued

by RP of parent company acknowledging withdrawal of claim by the R2

from that CIRP. The Appellant alleges that claim of Respondent No.2 in

the CIRP of the parent company is to be withdrawn under Section 12A

14 Company Appeal (AT)(Ins) No.899 of 2020 and no other withdrawal of claim is permitted. However, Section12A

deals with withdrawal of claim to end CIRP and deals with claim of

creditor at whose behest insolvency is initiated. In case of the parent

company insolvency was initiated at the behest of Union Bank of India

and R2 (ICICI Bank Ltd.) is fully entitled to withdraw its claim in that

CIRP. Right of lenders to withdraw claim was unequivocally recognised

by the RP when proposal for consolidation as discussed at the 18th

COC of the parent company.

b. Once admitted, CIRP initiated is a proceeding in rem. Whether

application under Section 10 is admitted or that of financial creditor

under Section 7 is admitted, the result is the same and the consequent

CIRP is proceeding in remain for all creditors and stakeholders.

Therefore, the same is not a ground for challenge to the admission

order. The CD admits that it has valid debt and has committed default

by filing of an application under Section 10 of Code. Various other

acknowledgments of debt are also mentioned herein below. The

allegation that application under Section 10, IBC was filed in

pursuance of an alleged scheme of consolidation is false, legally

untenable and an afterthought because Section 10 does not provide for

filing of an application for such a reason.

c. It is also stated that the COC of the parent company has opted for

consolidation of CIRP is irrelevant to CIRP of Corporate Debtor. The

COC of the Corporate Debtor ought to consent to such consolidation.

15 Company Appeal (AT)(Ins) No.899 of 2020 No consent has ever been given by COC of the Corporate Debtor. The

commercial wisdom of the COC has been given utmost importance by

various pronouncements of the Hon'ble Supreme Court. In the matter

of Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar

Gupta, 2019 SCC OnLine SC 1478, the Hon'ble Supreme Court has

categorically noted that the judicial approach to the commercial

wisdom of the COC in respect of the CIRP has to be that which is a

hands off approach. Resolution passed in CIRP of any other company

cannot be binding on CoC of the CD. The conduct of RP of the parent

company itself shows that he recognize the exclusive right of lenders of

Corporate Debtor in deciding the issue of consolidation with parent

company. The 9th meeting of COC of the parent company only

authorised the RP to file application for appointment of common RP

and this was due to the representatives of one COC member pointing

out that the Adjudicating Authority had already made oral observations

about potential conflict of interest. The 18th COC of the parent

company held on 20.11.2019, where the RP, when pulled up for filing

application for consolidation without authority from COC, categorically

mentioned that the voting in the COC of the parent company was only

qua the parent company and not its SPVs. The representative of PNB

had stated that he has no mandate to vote for SPVs. The lenders of

parent company conveyed apprehensions that the view of lenders of the

SPVs will be diluted and the RP reassured that the prayer was only for

16 Company Appeal (AT)(Ins) No.899 of 2020 permission of Adjudicating Authority to consider resolution plans.

Without initiation of insolvency against Corporate Debtor, there is

no question of consolidation of proceedings. Appellant on ground of

consolidation cannot object to admission of Corporate Debtor into

insolvency. The Adjudicating Authority in the case of IFCI Vs. HI-Point

Investment Finance Pvt Ltd, C.A. No. 1792 (PB)/2019 in C.P. (IB)-478

(ND)/2017 vide order dated 22.10.2019 has already held that

application filed by the ex-management seeking consolidation of CIRP

of group companies are not maintainable as ex-promoter/directors

have no locus. In all cases of consolidation quoted by Appellant such

as IL&FS, Adel Landmark, Videocon, the facts were such that the

lending was done considering group of companies as one unit. In the

present case, each subsidiary company had its own project to carry out.

Lending for works to be carried out was done considering the project in

the hands of each subsidiary company. Evaluation for lending is based

on each subsidiary's separate business model and risk profile. The

parent Company has guaranteed the loans of SPVs such as the

Corporate Debtor, however SPVs such as the Corporate Debtor have

not guaranteed loans of the parent company. Most importantly, the

lenders have different charge in the parent company & SPVs such as

the Corporate Debtor and are not co-obligors.

d. It is also stated that the Appellant wrongly contends that the present

case is one of alleged double claim by R2. Participation of R2 as creditor

17 Company Appeal (AT)(Ins) No.899 of 2020 in the parent company is at the sole discretion of the R2 and R2

admittedly withdrew its claim from the parent company. The

withdrawal of claim is permitted and has been acknowledged by the RP

of the parent company in the COC minutes as well as vide letter dated

19.03.2019. The issue raised is false and frivolous. Balance Sheet of

the Corporate Debtor acknowledges debt to R2 and all lenders. The

Hon'ble Supreme Court vide order in the case of Asset Reconstruction

Company (India) Limited v. Bishal Jaiswal, CA No. 323 of 2021, has

categorically held that balance sheets amount to acknowledgment of

debt and Section 18 of Limitation Act is applicable to the proceedings

under IBC. CIRP period of the parent company was admittedly initiated

on 08.05.2018. The CIRP period for the parent company has already

expired on 01.12.2019. Therefore, by merging the CIRP of the

subsidiary the appellant, who is the shareholder and director at whose

behest the Corporate Debtor has been pushed into insolvency, is trying

to derail the CIRP of both. Consolidation at such belated stage would

be used by the Appellant to delay the liquidation of the parent company

has also to derail and delay the CIRP of the Corporate Debtor.

8. We have carefully gone through the submissions made by the parties and the

various records produced before us and have observed as follows:

a. It is an admitted fact that 'debt' and 'default' exists. The Corporate

Debtor is in a bad financial health and has failed to execute the major

project awarded to it by NHAI and there are huge costs overrun.

18 Company Appeal (AT)(Ins) No.899 of 2020 b. The issue of limitations cannot be acceded too as the Balance Sheet of

the corporate debtor as early as in the year 2018 acknowledges debt

and Section 18 of Limitation Act, 1963 is applicable to the proceedings

under the Code. Hence, the Appellant cannot be given advantage of the

limitation also.

c. On 08.05.2018 CIRP proceedings of the parent company was initiated

and the same has expired on 01.12.2019. Hence, merging the CIRP of

the subsidiary with the holding of the parent company is running into

rough weather. The Petition on the same is pending at the Adjudicating

Authority level only and this is an independent fact to be examined

independently and to be accordingly decided also. Hence, this is not the

stage for the Appellate Authority to consider consolidation based on the

simple inputs of list of Directors as on date of incorporation and as on

31.12.2019 of various SPVs Projects which is in the form of the

subsidiary companies. Even the summary of financial linkage between

the parent company and the SPVs cannot be examined on standalone

mode. Even value of awards won by SPVs and 'Financial Debt' and

other input cannot be examined as these are not the subject matter of

the Appeal even remotely. The Code is silent on the issue of 'Group

Insolvency' and only when input is available in respect of all subsidiary

companies and holding company then only it can be examined and that

too only with respect to the material available in the Appeal Paper book

19 Company Appeal (AT)(Ins) No.899 of 2020 and relief sought. This Tribunal is the creature of the statute only and

hence, it has to work within the framework of the Code.

d. As far as filing of claim by the Respondent and withdrawing the claim,

thereafter, is the prerogative of the Bankers at its own risks and based

on its own evaluation. The claim has been withdrawn and permitted by

the 'Adjudicating Authority'. Hence, this issue is not of much

consideration in the present appeal. Each member of CoCs have an

independent mechanism for evaluation considering its own benefits

and risks.

e. The financial creditor, who filed the initiation of CIRP in the present

case i.e. ICICI bank has dissented voting in the agenda of consolidation

of the CIRP of the parent company with its SPVs including the

Corporate Debtor for which two applications CA No.2448/2019 and

2497/2019 filed in CP No (IB) 190/2017 which is pending for

adjudication before the Adjudicating Authority and cannot be the sole

ground for setting aside the order dated 18.09.2020 passed in CP

No.(IB)725/2020 ordering initiation of CIRP of the Corporate Debtor.

This is an independent issue and the Adjudicating Authority is yet to

decide on the said issue for which the Petitions are pending before

them.

f. The submission of the Appellant that the Financial Creditor/

Respondent No.2 has played fraud with the COC members of the parent

company and the Adjudicating Authority by filing section 7 Application

20 Company Appeal (AT)(Ins) No.899 of 2020 of the Code against the Corporate Debtor is also not tenable under the

Code as there are specific provisions for fraudulent or malicious

initiation of proceedings under section 65 (1) of the Code. For brevity

and clarity, the same is reproduced below:

" 65 (1) If, any person initiates the insolvency resolution

process or liquidation proceedings fraudulently or with

malicious intent for any purpose other than for the

resolution of insolvency, or liquidation, as the case may

be, the Adjudicating Authority may impose upon such

person a penalty which shall not be less than one lakh

rupees, but may extend to one crore rupees."

From the above it is amply clear that the Appellant has to prove the

fraudulent or malicious intent and has to file specific application

under Section 65 of the Code. The Appellant has not done so. Hence,

this Tribunal cannot accede to the request of the Appellant to annule

the proceedings.

g. This is the case where a Financial Creditor has initiated the CIRP by

filing the appropriate applications in the relevant format and has

proved beyond doubt that the 'Debt' is beyond the threshold limit of the

Code and 'Default' has occurred.

h. The Adjudicating Authority vide Section 7(5)(a) is fully satisfied from

their observations in the impugned order that a 'Debt' beyond the

threshold limited of the Code exists and 'Default' has occurred and the 21 Company Appeal (AT)(Ins) No.899 of 2020 Application complied with the relevant applicable regulations and

hence, thereafter, admitted the application.

i. Hence, we do not find any infirmity in the impugned order dated

18.09.2020 passed by the Adjudicating Authority and appeal deserves

to be dismissed and is dismissed. No order as to costs.

Interim order, if any, passed by this Tribunal stands vacated.

Pending application, if any, stands disposed of.

[Justice Jarat Kumar Jain] Member (Judicial)

(Dr. Ashok Kumar Mishra) Member(Technical)

23rd November, 2021 New Delhi

Raushan.K

22 Company Appeal (AT)(Ins) No.899 of 2020