Raghav Jain vs Jalesh Kumar Grover & Ors

1

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Ins.) No. 153 of 2023 IN THE MATTER OF: SH. RAGHAV JAIN ...Appellant Versus JALESH KUMAR GROVER Resolution Professional, GPI Textiles Limited Address: First Floor (Above Yes Bank) SCO 818, NAC Manimajra, Chandigarh - 160101 Email: jk.grover27@gmail.com Ip.gpitextiles@ductrus.com ...Respondent No. 1

COMMITTEE OF CREDITORS (Through the Lead Financial Creditors) Phoenix ARC Private Limited 5th Floor, Dani Corporate Park, 158, CST Road, Kalina, Santa Cruz (E), Mumbai - 400098 ... Respondent No. 2 STATE BANK OF INDIA SAM Branch, Local Office, Sector 17A, Chandigarh - 160017 sbi.04262@sbi.co.in, team5samb.cha@sbi.co.in ... Respondent No. 3 Present:

For Appellant: Mr. Sangram Patnaik, Mr. Shefali Goyal, Advocates. For Respondent: Mr. Nidesh Gupta, Sr. Advocate, Mr. Abhishek Anand, Mr. Mohak Sharma, Mr. Karan Kohli, Mr. Viren Sharma, Mr. Vaibhav and Mr. Sahil Bhatia, Advocates for RP Mr.Manish Jain, Mr. Siddhart Jain, Ms. Divya Sharma, Advocate for R2/CoC.

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J U D G M E N T Per: Justice Rakesh Kumar Jain:

This appeal arises from the order dated 04.11.2022 passed by the

'Adjudicating Authority' (National Company Law Tribunal, Chandigarh Bench),

by which an application bearing I.A. No. 1355 of 2022 filed by the Appellant

under Section 60(5) of the 'Insolvency and Bankruptcy Code, 2016' (in short

'Code'), has been dismissed.

2. Brief facts of the case are that 'M/s. Phoenix ARC Private

Limited'(Financial Creditor) filed an application under Section 7 of the Code for

the initiation of the 'Corporate Insolvency Resolution Process' (for short 'CIRP')

against M/s. GPI Textiles Limited (Corporate Debtor) for the resolution of an

amount of Rs.129,02,00,000/-. The said application was admitted on

06.07.2018 and Jalesh Kumar Grover was appointed as an 'Interim Resolution

Professional' (IRP) vide a separate order dated 12.07.2018.

3. The IRP constituted the 'Committee of Creditors' (CoC) of two Financial

Creditors, namely, M/s. Phoenix ARC Private Limited and State Bank of India,

constituting 92.55% and 7.45 %voting shares respectively. On 15.09.2018, the

CoC approved the invitation of Expression of Interest (EoI) on Form-G to invite

prospective resolution applicants to submit their resolution plans and fixed the

last date for submission of EOI as 05.10.2018 and the last date for submission

of Resolution as 30.11.2018. Pursuant thereto, ten prospective resolution

applicants submitted their EOI. Since only one plan was received, therefore,

the CoC convened its 6th meeting on 17.12.2018 and decided to re-publish

Company Appeal (AT) (Ins.) No. 153 of 2023 3

Form-G to invite more Resolution plans. The IRP re-published Form-G on

22.12.2018 inviting fresh EOIs, fixed the last date of submission of EOI's as

02.01.2019 and the last date for submission of resolution plan was extended to

28.01.2019. Pursuant thereto, 17 EOIs were received and in the 7th Meeting of

the CoC dated 10.01.2017 the CoC was apprised of the said fact. It is

pertinent to mention that out of 17 prospective Resolution Applicants only six

submitted their plans including the Appellant till the last date of submission of

Resolution Plan i.e. 28.01.2019 and this fact was made known by the

Resolution Professional to the CoC in the 8th meeting of the CoC held on

30.01.2019. According to the Appellant, in the 8th meeting of the CoC, the

following had transpired:

"In the meeting, the Chairman opened all the sealed envelops

containing Resolution Plan one by one and placed them before the

members of the CoC and all the prospective Resolution Applicants

and announced the major terms of all the Resolution Plans to all the

Prospective Resolution Applicants and the CoC members. The

Chairman also informed to CoC members and that one Resolution

Applicant has submitted a plan which is prima facie conditional in

nature. The terms of the plan were not announced at the meeting

and the Resolution Professional has been kept, subject to

verification and evaluation and if found complaint.

Chairman further informed that after the verification, compliance

and analysis of the Resolution Plans, Resolution Professional shall

Company Appeal (AT) (Ins.) No. 153 of 2023 4

present the compliant Resolution Plans before the CoC members in

the next meeting of CoC which is to be held on Thursday, 5 th

February, 2019 and all the Resolution Applicants having complaint

Resolution Plans shall be called for negotiations with CoC

Members."

4. Thereafter, the Resolution Applicants, including the Appellant, was called

for negotiations in the 9th Meeting of the CoC held on 05.02.2019. The

Appellant submitted its Resolution Plan for an amount of Rs. 28.15 Crore. The

Appellant allegedly submitted two Resolution plans, one with condition and

another without condition. As per the RP, the non-conditional plan was put up

before the CoC on 05.02.2019. In the 9th Meeting of the CoC held on

13.02.2019, item No. 9:04 was discussed regarding four prospective Resolution

Plans. According to the Appellant, his plan was not considered and the plan of

H1 to H4 namely, Aggarsain Spinners Limited, Shivani Trendz Pvt. Limited,

Navraj Mittal and Ors. & Pankaj Bhatia and Shreeji Cotfab were considered. In

the said meeting, the following minutes were recorded:

iii. If any Resolution Applicant who has stopped in between the negotiation process and has not negotiated for some time and in the meantime whilst the negotiations with other applicants were going on, could the earlier Resolution Applicant who stopped could participate for further negotiation?

Chairman informed that as per the legal opinion, a Resolution Applicant who skipped for a while in the negotiation but has not left the meeting hall can continue for the further negotiation and the

Company Appeal (AT) (Ins.) No. 153 of 2023 5

Resolution Applicants who quitted from the negotiation process and left the meeting hall cannot participate in the further negotiation.

iv. If any resolution applicant has opted to quit during the negotiation, saying that he need more ten days' time for further negotiation and negotiation with others are not concluded. Can that party subsequently take part in the negotiation along with other parties?

Chairman informed that if such Resolution Applicant has withdrawn from the process or have informed to quit, then it would be difficult for the said Resolution Applicant to come back in the process. However, if the said Resolution Applicant has simplicitor earlier sought time to negotiate, then if the CoC decides to negotiate prior to reaching the further step in negotiation, then such Resolution Applicant can be called for negotiations."

5. In the 9th Meeting of the CoC the process of negotiations and valuation of

matrix score was discussed and the Resolution Applicants were called to

explain to them the process of negotiations. The procedure of negotiations was

explained as follows:

i. Resolution Applicants shall be called up individually to improve their proposed amount of Resolution Plan;

ii. After submission of improved terms of plan by all the resolution applicants, revised scores shall be declared in front of all the Resolution Applicants for further negotiations with all in front of all the resolution applicants who have improved their plans as per Para 1;

iii. Based on the result of open negotiation, revised score shall be disclosed to all the resolution applicants participating in the process.

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6. It is further recorded in the said meeting that "After Lunch, Resolution

Professional disclosed the updated ranking of the resolution applicants with

Committee of Creditors and after discussion, all the resolution applicants were

called for open negotiation with the CoC members to maximize the recovery to all

the stakeholders. Thereafter, Resolution Professional initiated the open

negotiation & disclosed the ranks as per the Evaluation Matrix to all the

resolution applicants. Resolution Professional called up the lowest rank holder

namely Raghav Jain & others to improve their proposal to stay in negotiation

process. Resolution Applicant asked for one week time to submit revised

proposal but CoC members declined their request as further negotiations with

resolution applicants is the utmost agenda to move forward and revised

timelines based on each resolution applicant's request will not lead to the

desired objectives, since the negotiation process with other applicants was

already in process. Therefore, the applicant opted to quit the negotiation and left

the meeting venue."

7. It is the case of the Appellant that he had never quit the meeting held on

05.02.2019. It is rather submitted that the Appellant sent an email dated

10.02.2019 at 7:52PM to the RP. The said email read thus:

"Dear Sir, Kindly give us summary of our improved Plans i.e. Plan 1 and Plan 2 at 9th CoC meeting - GPI Textiles Ltd. held on 05.02.2019 at Hotel Lalit, Chandigarh and attended by us i.e. Raghav Jain and Others, Regards Raghav Jain"

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8. The said email was replied by the RP on the same day i.e. 10.02.2019 at

9:26 PM "Dear Sir, the plans were given by you. Please provide me with the final

figures". Thereafter, on 12.02.2019 at 7:02PM, the Appellant sent a further

email to the RP "final figures Plan 2 total to Secured Crs. 50 Crores, Plan Value

53.58 Crore GPI Textiles Ltd, _5th February (Tuesday) at 11:30AM at Hotel lalit,

IT Park Chandigarh".

9. It is submitted that plans were also attached with the email but counsel

for the RP has submitted that the attachment is not a resolution plan but an

'Excel Sheet' showing particulars of the amount. The 10th meeting of the CoC

was held on 21.02.2019 in which the RP apprised the CoC about the amount

proposed by the Prospective Resolution Applicant and the CoC was to negotiate

with the prospective resolution applicants i.e. H1 to H4 namely, Aggarsain

Spinners Limited, Shivani Trendz Pvt. Limited, Navraj Mittal and Ors. & Pankaj

Bhatia and Shreeji Cotfab.

10. Thereafter in 12th Meeting of the CoC held on 27.03.2019, the CoC

declared that the resolution plan submitted by H1 (Aggarsain Spinners Limited)

was approved with 92.55% voting share. After the CoC approved the Resolution

Plan of H1, the RP filed an application bearing IA No. 287 of 2019 before the

Adjudicating Authority for approval of the said plan of the H1 but the

Adjudicating Authority rejected the application vide its order dated 24.05.2022.

The Adjudicating Authority observed that "Consequently, to avoid the

liquidation of the Corporate Debtor period of CIRP is extended by 90 days for

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exploring the possibility of resolution of the Corporate Debtor. Accordingly, matter

is referred back to the Committee of Creditors, which is ordered to be reinstated

and revived to make another attempt for consideration of other resolution plans

in accordance with law."

11. The H1 (Aggrasain) filed a Company Appeal (AT) (Ins) No. 637 & 638 of

2022 to assail the order dated 24.05.2022, whereas the CoC in its 26th meeting

held on 01.06.2022 resolved to issue fresh Form-G inviting fresh EOIs and

resolution plan. On 02.06.2022, the RP issued Form-G providing the last date

for submission of EOIs as 17.06.2022 and the last date for submission of

resolution plan as 19.07.2022. According to the RP, the Appellant had never

participated in this round whereas Counsel for the Appellant submits that it is

not within his knowledge.

12. It so happened that in June 2022, IA No. 656 of 2022 was filed by

another prospective resolution applicant i.e. Shreeji Cotfab, challenging the

second round of inviting Form-G, in view of the decision taken in the 26th

Meeting of the CoC held on 01.06.2022. The RP apprised the CoC on

01.07.2022, in its 29th meeting that till 17.06.2022 he had received 18 EOIs

and further informed the CoC on 20.07.2022, in its 30th Meeting, that he had

received 11 resolution plans and further informed the CoC, in its 31st meeting,

held on 27.07.2022, that out of 11 Resolution Plan only 9 resolution plans

were complaint. According to the RP, the Appellant sent an email dated

22.08.2022 to enhance the amount of resolution plan to the tune of Rs. 84

Company Appeal (AT) (Ins.) No. 153 of 2023 9

Crores. According to the RP, the offer made by the Appellant was not

considered as according to him it was not in form- G. Be that as it may, the

Appellant then filed IA No. 1355 of 2022 before the Adjudicating Authority in

September, 2022 making the following prayers:

"i. Direct the Resolution Professional to consider the resolution plan of the applicant being most eligible resolution applicant in the present case.

ii. Direct the resolution professional to withdraw the new expression of interest being illegal.

iii. Stay the proceedings arising out of the new Expression of Interest/ Form G, published on 02.06.2022."

13. At the same time, the CoC also filed an application bearing IA No. 1381

of 2022 in which prayer made by the CoC was to invite all the Resolution

Applicants who were there in the 1st round for their participation in the 2nd

round as well. Both the applications were dealt with together by the same

impugned order which was passed on 04.11.2022.

14. The application IA No. 1381 of 2022 filed by the CoC was dismissed as

well as the application filed by the Appellant and the Adjudicating Authority

made observations in the both the applications which read as under:

"Thus, when other Resolution Applicants were not included in the final list of H1 to H4 by the Committee of Creditors then it can be safely deduced that they were not in the fray of competing Resolution Applicants finally. If other Resolution Applicants of the earlier round including the applicant in IA No.1355/2022 were/are interested to compete then none stopped them to apply when fresh EOI/Form G inviting fresh resolution plans was approved by the Committee of Creditors and issued by the Resolution Professional.

Company Appeal (AT) (Ins.) No. 153 of 2023 10

In these circumstances when order dated 10.10.2022 has become final as no appeal has been stated to be preferred against it, then no other earlier Resolution Applicants including the applicant in IA No.1355/2022 except H2, H3 & H4 can be allowed to participate in negotiations of Resolution Plan. Moreover, the claim of the applicant in IA No.1355/2022 is stinking stale, particularly when he kept sleeping upon his right, if any, for last more than 3½ year as Committee of Creditors in its 12th Meeting held on 27.03.2019 had drawn the final list of Prospective Resolution Applicants, excluding the applicant in IA No.1355/2022. This unexplained inordinate delay is not only culpable but also suicidal. Although, IA No.1355/2022 deserves dismissal with heavy costs but we refrain ourselves from imposing such costs because Committee of Creditors itself has prompted to file IA No.1381/2022, wherein it sought clarification of unambiguous order dated 10.10.2022.

11. Consequently, both these applications i.e. IA No.1381/2022 and IA No.1355/2022 deserve dismissal and ordered accordingly. The Committee of Creditors is directed to complete the CIRP within the time frame strictly, granted by this Adjudicating Authority."

15. In the meantime, while the application in question was pending before

the Adjudicating Authority, the Company Appeal (AT) (Ins) No. 637 & 638 of

2022 filed by the Aggrasain was dismissed by this Tribunal on 14.09.2022. The

said decision was challenged by it by way of a Civil Appeal (Diary) No. 30238 of

2022. While the said Civil Appeal (diary) was pending before the Hon'ble

Supreme Court, 34th Meeting of the CoC was held on 20.09.2022, convened at

the instance of the RP, wherein CoC negotiated with all the PRA's being 9 in

number. IA No. No. 656 of 2022 filed by Shreeji Cotfab before the Adjudicating

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Authority, in which it was prayed that second round of Form-G is illegal and

only the prospective resolution applicants from first round should be invited

was allowed by order dated 10.10.2022 only to the extent that besides the 9

fresh applicants who have come in the second round, the earlier Resolution

Applicants namely, Navraj Mittal & Ors., Shivani Trendz Pvt. Limited, Pankaj

Bhatia and Shreeji Cotfab be also added. Thus, the number of Resolution

Applicants was increased to 12. The Application filed by the Appellant and the

CoC, was dismissed on 04.11.2022 and thereafter on 15.11.2022, the Hon'ble

Supreme Court passed an interim order which read as under:

"1 These proceedings have been mentioned with notice to the respondents. Both the counsel for the contesting parties are present.

2 In the order dated 14 November 2022, the interim direction has remained to be incorporated through inadvertence. 3 There shall accordingly be an interim order to the effect that till 9 December 2022, which is the next date for listing, the resolution plan shall not be finalized by the CoC."

16. Thereafter, on 09.12.2022, the Hon'ble Supreme Court decided the Civil

Appeal Nos. 9080-9081 of 2022 with the following observations:

"11 Mr Guru Krishna Kumar, senior counsel appearing on behalf of the CoC has informed the Court that in the two appeals, the fresh EoIs have resulted in a substantially higher offer (Rs 96 crores as opposed to Rs 83 crores and Rs 165 crores instead of Rs 85 crores). Having regard to this backdrop, the process before the adjudicating authority had not culminated in the final approval of the resolution plan.

12 In this view of the matter, and since the Court is apprised of the fact that substantially higher offers are now made available to the

Company Appeal (AT) (Ins.) No. 153 of 2023 12

CoC, it would be appropriate and proper that the CoC is permitted to proceed further on the basis of the fresh EoIs which have been received. Since the subsequent communication dated 16 February 2021 issued by BSE operates to lift the restraint status that was imposed on the appellants, it would be appropriate to permit the appellants to submit a resolution plan and an EoI to the CoC within a period of thirty days.

13 The bank guarantees and the earnest money which were submitted by the appellants with their resolution plan shall be returned back to the appellants so as to facilitate the submission of a fresh resolution plan together with a fresh bank guarantee.

14 The period for the completion of the process shall stand extended by sixty days from the date of this order. After completing the process, the RP shall file a fresh application before the adjudicating authority for approval of the resolution plan in terms of the provisions of Section 31 of the IBC.

15 In view of the above directions, the impugned judgment and order of the NCLAT is set aside and substituted by the directions issued above."

17. In the light of the order of the Hon'ble Supreme Court, 38th Meeting of

the CoC was convened by the RP on 09.12.2022 and Aggarsain Spinners ltd

was granted 30 days time to submit their resolution Plan but they did not

submit their plan. Thereafter, 39th meeting of the CoC was held on 12.01.2023

and the plans of the following 9 prospective resolution applicants were placed

before the CoC for consideration:

SL No. Name of the Prospective Resolution Applicants (PRA's)

1. Mr. Anil Sharma & Mr. Satvinder Singh (Consortium)

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2. M/s. Vardhman Textile Limited

3. M/s. Proma Industrial Limited and Mr. Anant Aggarwal (Consortium)

4. M/s. Longowalia Yarna Limited

5. Mr. Navraj Mittal and Mr. Vishnu Parkash Goyal (Consortium)

6. M/s. RSWM Limited

7. M/s. Shree Siddi Vinayak Forgings Private Limited

8. M/s. United Biotech Private Limited

9. M/s.Vikas Lifecare Limited

18. Thereafter on 12.01.2023, all the 9 resolution plans were put before the

members of the CoC and the resolution plan of Anil Sharma & Satvinder Singh

(Consortium) for an amount of Rs. 165 Crore was approved by the CoC.

Thereafter, the RP filed an application bearing IA No. 452 of 2023 seeking

approval of Resolution Plan filed by the Respondent No.1 before the

Adjudicating Authority in which the order has been reserved on 16.03.2023.

19. Counsel for the Appellant has submitted that the RP has failed in his

duty in not presenting the resolution plan submitted by the Appellant in terms

of Section 25(2)(i) of the Code as well as Regulation 39 of the IBBI (Insolvency

Resolution Process for Corporate Persons) Regulations 2016 whereas according

to the Respondent the plan submitted by the Appellant was put up and

discussed in the meeting held on 05.02.2019 in which the following transaction

was recorded "thereafter, Resolution Professional initiated the open negotiation

& disclosed the ranks as per the evaluation matrix to all the resolution

applicants. Resolution Professional called up the lowest rank holder namely

Raghav Jain & Others to improve their proposal to stay in negotiation process.

Company Appeal (AT) (Ins.) No. 153 of 2023 14

Resolution Applicant asked for one week time to submit revised proposal but

CoC members declined their request as further negotiations with resolution

applicants is the utmost agenda to move forward and revised timelines based

on each resolution applicant's request will not lead to the desired objectives,

since the negotiation process with other applicants was already in process.

Therefore, the Applicant opted to quit the negotiation and left the meeting

venue. Resolution Professional called the next lowest rank holder, namely,

Pankaj Bhatia & Shreeji Cotfab."

20. Thus, from the minutes of the meeting dated 05.02.2019, it is evident

that the plan of the Appellant was considered but the Appellant opted to quit

the negotiation and left the meeting venue. Whereas according to the Appellant

he did not quit the meeting but was rather thrown out.

21. The Appellant has thereafter relied upon the emails exchanged between

him and the RP on 10.02.2019 whereby the Appellant was asked to give final

figures of the plan. It is contended that if the Appellant was not in the race and

had opted to quit as has been recorded in the minutes dated 05.02.2019 then

the offer made by the Appellant could not have been negotiated with by the RP.

In this regard, he has referred to the minutes of the meeting dated 13.02.2019

which took place after the emails dated 10.02.2019 and 12.02.2019 mentioned

herein before.

22. According to the RP, the request received from the Appellant was also put

up before the CoC but CoC took a decision not to allow the Appellant for

Company Appeal (AT) (Ins.) No. 153 of 2023 15

further negotiation with the CoC members. In this regard discussion before the

CoC has been referred to which read as under:-

"Chairman further informed the CoC members regarding the request received from the Resolution Applicant Raghav Jain & Others who have opted to quit from the negotiation process as the 1st day of ninth meeting of CoC held on 05.02.2019, to allow them to participate in the further negotiation process.

CoC discussed the matter and informed that the Resolution Applicant Raghav Jain & Others has opted to quit and decided not to further participate in the negotiation process. Therefore, they shall not be allowed to participate in the further negotiation with the CoC Members."

23. It is thus submitted that the allegation of the Appellant is totally ill

founded as on that date the plea of the Appellant was not put up rather it

is the case of the RP that the CoC took a decision in its commercial

wisdom, after taking a legal opinion, that the resolution applicant who

skipped from the negotiation process and left the meeting cannot

participate in the further negotiations.

24. The allegation of the Appellant is that they had not quit the meeting

rather were thrown out cannot be decided in these summary proceedings

in the absence of any evidence and the Tribunal shall rely upon the

minutes of the meeting recorded in its normal course of business as an

evidence about whatever has transpired in the meeting.

Company Appeal (AT) (Ins.) No. 153 of 2023 16

25. Otherwise also, there were two applications one by the CoC i.e. I.A.

No. 1381 of 2022 in which it had made a prayer to the Adjudicating

Authority that it may allow all the applicants in the first round to

participate but the said application was dismissed by the impugned order

while dismissing the application bearing I.A. No. 1355 of 2022 by which

the prayer made by the Appellant has been rejected and the order passed

in I.A. No. 1381 of 2022 has attained finality as regards the right of the

Appellant as well.

26. Thus, in view of the aforesaid discussion, we are of the considered

opinion that there is no merit in the present appeal and as such the same

is hereby dismissed. No costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

New Delhi

10th April, 2023 Raushan/sheetal

Company Appeal (AT) (Ins.) No. 153 of 2023