Pepsico India Holding Pvt Ltd vs V. Nagarajan. Rp Of Oceanic Tropical ...

M/s. B.R. Traders ...Appellant

Versus

Venkataramanarao Nagarajan & Ors. ...Respondents

Present:

For Appellant : Mr. Vikram Singh Arya, Advocate.

For Respondents: Mr. J. Manivannan, Advocate for R-1. Mr. E. Omprakash, Senior Advocate with Ms. Madhusmita Bora, Advocate for SEBI. Mr. D. Sreenivasan, Advocate for ICICI Bank.

Company Appeal (AT) (Insolvency) No. 190 of 2019

IN THE MATTER OF:

M/s. K.K. Foods ...Appellant

Versus

Venkataramanarao Nagarajan & Ors. ...Respondents

Present:

For Appellant : Mr. A. Mohan Roy and Ms. Chemlata Chaudhary, Advocates.

For Respondents: Mr. J. Manivannan, Advocate for R-1. Mr. E. Omprakash, Senior Advocate with Ms. Madhusmita Bora, Advocate for SEBI. Mr. D. Sreenivasan, Advocate for ICICI Bank. 2

Company Appeal (AT) (Insolvency) No. 784 of 2018

IN THE MATTER OF:

Arokiasamy Joseb Raj ...Appellant

Versus

Venkataramanarao Nagarajan & Ors. ...Respondents

Present:

For Appellant : Mr. S.C. Das, Advocate.

For Respondents: Mr. J. Manivannan, Advocate for R-1. Mr. E. Omprakash, Senior Advocate with Ms. Madhusmita Bora, Advocate for SEBI. Mr. D. Sreenivasan, Advocate for ICICI Bank.

Company Appeal (AT) (Insolvency) No. 686 of 2019

IN THE MATTER OF:

Pepsico India Holdings Pvt. Ltd. ...Appellant

Versus

V. Nagarajan, Resolution Professional of Oceanic Tropical Fruits Pvt. Ltd. ...Respondent

Present:

For Appellant : Mr. Sanjeev Puri, Senior Advocate with Mr. Dheeraj Nair, Mr. Manish K. Jha and Ms. Vishrutyi Sahni, Advocates.

For Respondents: Mr. J. Manivannan, Advocate for R-1. Mr. E. Omprakash, Senior Advocate with Ms. Madhusmita Bora, Advocate for SEBI. Mr. D. Sreenivasan, Advocate for ICICI Bank.

Company Appeal (AT) (Insolvency) Nos. 189, 190, 686 of 2019 and 784 of 2018 3

SUDHANSU JYOTI MUKHOPADHAYA, J.

In the 'Corporate Insolvency Resolution Process' of 'M/s. Oceanic

Tropical Fruits Pvt. Ltd.'- ('Corporate Debtor'), 'M/s. B.R. Traders (one of

the Appellants herein) filed Miscellaneous Application under Section

60(5) of the Insolvency and Bankruptcy Code, 2016 ("I&B Code" for short)

for direction to the 'Resolution Professional' and the members of the

'Committee of Creditors' to reconsider the 'Resolution Plan' submitted by

the Resolution Applicant- 'M/s. B.R. Traders'. It was rejected by the

Adjudicating Authority (National Company Law Tribunal), Single Bench,

Chennai by impugned order dated 31st October, 2018, which is under

challenge in Company Appeal (AT) (Insolvency) No. 189 of 2019.

2. 'M/s. K.K. Foods' (another Appellant) filed similar application

under Section 60(5) of the 'I&B Code' in the said 'Corporate Insolvency

Resolution Process' of 'M/s. Oceanic Tropical Fruits Pvt. Ltd.'- ('Corporate

Debtor') with similar prayer to direct the 'Resolution Professional' and the

'Committee of Creditors' to reconsider its 'Resolution Plan'. The

Adjudicating Authority by another order dated 31st October, 2018

rejected the prayer, which is also under challenge in Company Appeal

(AT) (Insolvency) No. 190 of 2019.

Company Appeal (AT) (Insolvency) Nos. 189, 190, 686 of 2019 and 784 of 2018 4

3. In absence of any viability and feasibility in the 'Resolution Plan',

the 'Resolution Professional', on instruction of the 'Committee of

Creditors', filed application under Section 33(1)(a)/ 34(1) of the 'I&B Code'

for liquidation of the 'Corporate Debtor' ('M/s. Oceanic Tropical Fruits

Pvt. Ltd.'). By third order dated 31st October, 2018, the Adjudicating

Authority allowed the application and ordered for liquidation of the

'Corporate Debtor'. The aforesaid order has been challenged by Mr.

Arokiasamy Joseb Raj, Shareholder of the 'Corporate Debtor' in Company

Appeal (AT) (Insolvency) No. 784 of 2018.

4. 'Pepsico India Holdings Private Limited', one of the Appellants

herein, filed a Miscellaneous Application under Section 60(5) read with

Sections 36(3) & (4) of the 'I&B Code' seeking directions to the 'Resolution

Professional' to handover to the Appellant certain Plant & Machinery

owned by it which are lying at the premises of the 'Corporate Debtor'. The

Adjudicating Authority by order dated 28th May, 2019 rejected the

application which has been challenged by the Shareholder in Company

Appeal (AT) (Insolvency) No. 686 of 2019.

Case of 'M/s. B.R. Traders'

5. Learned counsel appearing on behalf of the Appellant submitted

that the 'Resolution Plan' submitted by the 'Resolution Applicant'- 'M/s.

B.R. Traders' was within time. The Appellant is belonging to the similar

Company Appeal (AT) (Insolvency) Nos. 189, 190, 686 of 2019 and 784 of 2018 5

line of business as that of the 'Corporate Debtor' and would have the

potentiality to be in a position to revive the 'Corporate Debtor' and to run

the same as a 'going concern, which is in the interest of all stakeholders.

6. It was submitted that pursuant to e-mail issued by the 'Resolution

Professional', the 'Revised Plan' was submitted by way of a proposed

consideration of Rs.66,29,50,501/-. The said 'Resolution Plan' envisages

payment mechanism for each of the stakeholders including statutory

dues, payment to the 'Operational Creditors' etc.

7. The members of the 'Committee of Creditors' appeared before the

Adjudicating Authority and taken specific plea that 'Information

Memorandum' have several discrepancies as it did not capture the

security structure properly in terms of ranking of charge as well as mixing

the assets of the Company and personal guarantors.

8. The stand of the 'Committee of Creditors' is that market value of

the assets of the 'Corporate Debtor' as well as the Promoters is Rs. 121.60

Crores excluding the non-core assets which 'Resolution Professional'

failed to take into consideration and the liquidation value of the assets of

the 'Corporate Debtor' as well as the Promoters is Rs. 89.10 Crores. In

spite of the same, the 'Resolution Applicant'- 'M/s. B.R. Traders' quoted

Rs.66,29,50,501/- which being below the Liquidation Value is

unacceptable.

Company Appeal (AT) (Insolvency) Nos. 189, 190, 686 of 2019 and 784 of 2018 6

Case of 'M/s. K.K. Foods'

9. Similar plea has been taken by the 'Committee of Creditors' and it

was brought to the notice of the Adjudicating Authority that though the

market value of the assets of the 'Corporate Debtor' is Rs. 121.60 Crores

approximately excluding the non-core assets which the 'Resolution

Professional' has failed to take into consideration and liquidation value

of the assets of the 'Corporate Debtor' as well as the Promoters is Rs.

89.10 Crores which was also accepted by the Promoters. However, the

'Resolution Applicant'- 'M/s. K.K. Foods' quoted lessor amount of

Rs.71.17 Crores which is below the Liquidation Value and, therefore, it

is not accepted.

10. From the record, we find that both the 'Resolution Applicants'

namely-- 'M/s. B.R. Traders' and 'M/s. K.K. Foods' (Appellants herein)

proposed amount less than the Liquidation Value of the assets of the

'Corporate Debtor'. Any plan which is less than the liquidation value

cannot be accepted as it will be against the provisions of sub-section (2)

(b) of Section 30 in terms of which the liquidation value is to be paid to

the 'Operational Creditors' and dissenting 'Financial Creditors'.

11. The object of the 'I&B Code' is to reorganise the insolvency

resolution of corporate persons, partnership firms and individuals in time

bound manner for maximisation of the value of the assets of the

Company Appeal (AT) (Insolvency) Nos. 189, 190, 686 of 2019 and 784 of 2018 7

'Corporate Debtor'/ Partnership Firms/ individuals and to promote

entrepreneurship, availability of credit and balance the interests of all

stakeholders including the 'Financial Creditors' and the 'Operational

Creditors' and their assets are also to be maximised in a time bound

manner. Any plan which is less than the Liquidation Value and the

assets of the 'Corporate Debtor' and does not stipulate infusion of money

for maximisation of the assets of the 'Corporate Debtor', is against the

provisions of the 'I&B Code' and violative of Section 30(2) of the 'I&B

Code'.

12. For the aforesaid reasons, the 'Committee of Creditors' and the

Adjudicating Authority if they refused to approve the 'Resolution Plans'

filed by 'M/s. B.R. Traders' and 'M/s. K.K. Foods' and rejected the

applications for reconsideration of the same, no interference is called for.

Case of Mr. Arokiasamy Joseb Raj (Shareholder)

13. According to the counsel for the Shareholder of the 'Corporate

Debtor', the Liquidation Value was obtained in an open process which is

fundamentally not correct.

14. It was submitted that the 'Committee of Creditors' informed about

the assets value of the 'Corporate Debtor' (Liquidation Value) at Rs. 89.10

Crores which is not based on assets of the 'Corporate Debtor' but includes

the assets of guarantor and 3rd Party.

Company Appeal (AT) (Insolvency) Nos. 189, 190, 686 of 2019 and 784 of 2018 8

15. It was submitted that the Adjudicating Authority erred by

overlooking the reason for non-consideration of the 'Resolution Plan' by

the 'Committee of Creditors' and instead of directing compliance under

the 'I&B Code', has erroneously passed an order for liquidating the

'Corporate Debtor'.

16. We have noticed the object of the 'I&B Code' as per which the

'Corporate Insolvency Resolution Process' is required to be completed in

a time bound manner for maximisation of the value of the assets of the

'Corporate Debtor' and to promote entrepreneurship, availability of credit

and balance the interests of all stakeholders including the 'Financial

Creditors' and the 'Operational Creditors'. Time is of essence in such

matters as maximum value of assets can be achieved/ saved if process is

time bound. Delay brings down the value. Thus, the law has prescribed

period which are reasonable. If process has not been completed in a time

bound manner i.e., in the maximum time prescribed under the 'I&B

Code', we find no reason to direct the 'Resolution Professional' or the

'Committee of Creditors' to re-initiate the process.

17. In absence of any viability and feasibility of the 'Resolution Plan',

the Adjudicating Authority has rightly entertained the application under

Section 33 and ordered for liquidation. No interference is called for

against the impugned order of liquidation dated 31st October, 2018.

Company Appeal (AT) (Insolvency) Nos. 189, 190, 686 of 2019 and 784 of 2018 9

Case of 'Pepsico India Holding Pvt. Ltd.'

18. The Appellant- 'M/s. Pepsico India Holdings Pvt. Ltd.' claim that

the Plant & Machinery belongs to it. The Plant and Machinery, in

question, owned by the Appellant are lying at the premises of the

'Corporate Debtor'. As per Clause 15.3(b) of the Agreement, either party

was entitled to terminate the Agreement if the other party entered into

bankruptcy, liquidation or in the event that its business or assets were

confiscated or seized as a result of foreign interference or a winding up

petition was admitted or if it made any assignment for benefit of its

creditors.

19. According to the Appellant, it addressed a termination notice dated

28th November, 2017 to the 'Corporate Debtor'. The copy to the 'Interim

Resolution Professional' stating inter alia in view of the admission of the

insolvency against the 'Corporate Debtor', the agreement was liable to be

terminated under Clause 15.3(b) of the Agreement.

20. The 'Resolution Professional'/ Liquidator submitted that the

'Corporate Insolvency Resolution Process' was triggered against the

'Corporate Debtor' on 13th September, 2017. After initiation of the

'Corporate Insolvency Resolution Process', it was not open to the

Appellant to terminate the Agreement as in terms of the provisions of

Section 20(1) of the 'I&B Code', the 'Interim Resolution Professional' is

liable to make every endeavour to protect and preserve the value of the

Company Appeal (AT) (Insolvency) Nos. 189, 190, 686 of 2019 and 784 of 2018 10

property of the 'Corporate Debtor' and manage the operations of the

'Corporate Debtor' as a going concern.

21. In regard to the alleged dues, the Appellant- 'Pepsico India Holdings

Pvt. Ltd.' addressed a letter dated 22nd February, 2018 denied and

disputed the alleged liability to pay a sum of Rs.95,99,955/-. It was

intimated that as per its undertaking, a sum of Rs.24,34,314/- was

payable by the Appellant- 'Pepsico India Holdings Pvt. Ltd.' to the

'Corporate Debtor'. On the other hand, the 'Corporate Debtor' was liable

to pay a sum of Rs.61,09,876/- to the Appellant in terms of the

Agreement for the period between September, 2017 to November, 2017.

22. From the aforesaid fact, it is clear that the claim and counter claim

by the 'Corporate Debtor' and the Appellant-'Pepsico India Holdings Pvt.

Ltd.' till it is decided, the question of handing over any asset i.e. Plant &

Machinery to the Appellant does not arise.

23. It appears that the 'Corporate Debtor' was a plant and the

Appellant has supplied Plant & Machinery. Even during the liquidation

process, the Liquidator is to ensure that the 'Corporate Debtor' remains

a going concern.

24. As per the decision of the Hon'ble Supreme Court and this

Appellate Tribunal, one should ensure that the 'Corporate Insolvency

Resolution Process' ends in success for revival and restructuring of the

company. Liquidation is not answer but the sale of assets can be made

only at final stage.

Company Appeal (AT) (Insolvency) Nos. 189, 190, 686 of 2019 and 784 of 2018 11

25. As per the decision of this Appellate Tribunal in "Y. Shivram

Prasad Vs. S. Dhanapal & Ors.─ Company Appeal (AT)

(Insolvency) No. 224 of 2018", during the liquidation process, the

Liquidator is to ensure that the 'Corporate Debtor' remains a going

concern and steps required to be taken for Arrangement or Scheme under

Section 230-232 of the Companies Act, 2013 for revival and re-

structuring of the company. If it does not succeed then in such case, the

'Corporate Debtor' is to be sold as a going concern to a third party. Only

on such failure, liquidation should take place following the procedure

under Section 53 read with Section 52 of the 'I&B Code'.

26. In view of the aforesaid position of law, the Appellant cannot derive

advantage of Clause 15.3(b) of the Agreement as the provisions of the 'I&B

Code' can prevail over such agreement. Finally, if no arrangement or

Scheme framed under Section 230-232 of the Companies Act, 2013

becomes possible or the 'Corporate Debtor' is not sold in its totality along

with the employees as ordered by this Appellate Tribunal in "Y. Shivram

Prasad Vs. S. Dhanapal & Ors" (Supra) and there is no option but to

sell the assets of the 'Corporate Debtor' and to distribute the same

amongst the Creditors in terms of Section 53 read with Section 52 of the

'I&B Code', at that stage, the Appellant may ask the Liquidator to return

the assets i.e. Plant & Machinery, if it belongs to it as the third party.

Company Appeal (AT) (Insolvency) Nos. 189, 190, 686 of 2019 and 784 of 2018 12

For the reasons aforesaid, we find no merit in any of the appeals.

All the appeals are dismissed. No costs.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice A.I.S. Cheema ] Member (Judicial)

[ Kanthi Narahari ] Member (Technical)

NEW DELHI 13th November, 2019

/AR/

Company Appeal (AT) (Insolvency) Nos. 189, 190, 686 of 2019 and 784 of 2018