Shri Ram Residency Private Limited vs Kuldeep Verma, Designated As ...

(Arising out of Order dated 7th May, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata in CA (IB) No. 397/KB/2017 in C.P(IB) No. 397/KB/2017)

IN THE MATTER OF:

Shri Ram Residency Private Limited ...Appellant

Vs.

Kuldeep Verma, designated as Resolution Professional, Jalan Intercontinental Private Limited & Ors. ...Respondents

Present: For Appellant: - Mr. Sudipto Sarkar, Senior Advocate and Mr. A.K. Ganguly, Senior Advocate assisted by Mr. D.N. Sharma, Mr. Abhijit Sinha, Mr. Arindam Gupta, Mr. Anup Kumar, Mr. Indranil Ghosh, Mr. Kunal Singh and Mr. Palzer Moktan, Advocates.

For Respondents:- Mr. Sumant Batra, Mr. Saurabh Kalia, Mr. Sanjay Bhatt, Ms. Srishti Kapoor, Mr. Rahul Ahuja and Mr. Nilay Sen Gupta, Advocates for R-1.

Mr. Ramji Srinivasan, Senior Advocate with Mr. Vikram Trivedi, Ms. Suchitra Valjee, Ms. Aishwarya Nabh, Mr. Bharat Sangal, Mr. R.R. Kumar, Mr. Naveen Hegde and Ms. Babita Kushwala, Advocates for Respondent No.2.

JUDGMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

The Appellant, the successful 'Resolution Applicant' has challenged

the order dated 7th May, 2018 passed by the Adjudicating Authority

(National Company Law Tribunal), Kolkata Bench, Kolkata in CA (IB) No.

Company Appeal (AT) (Insolvency) No. 202 of 2018 2

397/KB/2017 in C.P(IB) No. 397/KB/2017, whereby and whereunder

the Adjudicating Authority directed the 'Resolution Professional' to

receive modified offer "to be submitted by the 8th Respondent-

'Ritudhan Suppliers Private Limited'" on or before 9th May, 2018 in a

sealed cover before 5 P.M. The Adjudicating Authority while accepted

that the Appellant is the successful Resolution Applicant (H-1) has also

allowed the Appellant to file revised offer to the 'Resolution Professional',

within the same period with directions as quoted below:

"(1) The RP is directed to receive modified offer to

be submitted by the applicant in this application on

or before 09/05/2018 in a sealed cover (i.e., before

5 P.M. on 09/05/2018).

(2) H-1 Resolution Applicant can also submit

revised offer, if they wish, and submit the modified

or revised offer to the RP on or before 09/05/2018

in a sealed cover (i.e., before 5 P.M. on 09/05/2018)

(3) The RP is directed to consider both modified

offer, if any, submitted by the H-I as well as H-2

applicants and place those offers before the COC for

its consideration.

(4) The COC is directed to consider both Resolution

Applicants revised offers and have the choice of

approving the best among them, if it meets all the

Company Appeal (AT) (Insolvency) No. 202 of 2018 3

requirements under the provisions of the Code and

Regulations.

(5) The RP is directed to file final report/Resolution

Plan, if any, on or before 25/05/2018 and list the

case for further consideration on 04/06/2018 "

2. The Adjudicating Authority has noticed the fact that the Appellant

has been declared to be the most successful Resolution Applicant (rank

of H-1), which has also been approved by the 'Committee of Creditors' by

majority voting share, but because of prayer made by the 8th Respondent,

without any reason, issued the aforesaid directions.

3. The facts and purported reason given by the Adjudicating Authority

is as follows:

"CA(IB) No. 405/KB/2018 filed by Resolution

Applicant, who is ranked as H-2, praying for stay

of rank of H-1 applicant in the meeting held on

26/04/2018 and to give an opportunity to the

applicant herein to revise its bid. The Ld.

Resolution Professional (RP) submits that on

23/04/2018 a Modified Information

Memorandum had been published and

Resolution Applicants were given opportunity to

revise their offer and the applicant herein

Company Appeal (AT) (Insolvency) No. 202 of 2018 4

submitted a revised offer on 26/04/2018 and

that offer is also less than the offer of H-1

Resolution Applicant and therefore there is no

merits in the contention of the applicant.

We heard the Ld. Counsel appearing for

the applicant, Ld. Sr. Counsel for the RP as well

as Ld. Sr. Counsel for H-1 applicant. It seems

that one of the prayer on the side of the applicant

is for revision of the offer and reconsideration of

the revised offer by the RP before approval of the

Resolution Plan by the Committee of Creditors

(COC). In consideration of the said prayer on the

side of the Resolution Applicant in the C.A., we

are inclined to issue directions to have a

reconsideration of modified offer, if any,

submitted by the Resolution Applicant in the

application. At this juncture Ld. Counsel

appearing for the H-1 applicant strongly objected

issuing such a directions to the RP. According to

him such a direction, if issued, it would prejudice

to the H-1 Resolution Applicant and that the

entire process is to be disrupted. The above

objection seems to have no legal force at all

because RP not at all concluded the Corporate

Company Appeal (AT) (Insolvency) No. 202 of 2018 5

Insolvency Resolution Process (CIRP) and the

COC did not finalised, which is the best

resolution plan to be taken into consideration for

its approval. Only ranking of Resolution

Applicant based on the highest offer and other

requirement to be meted out as per the

information memorandum is finalised. So in the

interest of all stake holders and in order to

arriving for maximisation of value of assets of the

corporate debtor allowing the H-2 Resolution

Applicant to modify its offer and give an

opportunity in participating in the bidding

process to be finalised by the COC is just and

proper in the nature of this case. In the said

circumstances it appears to us that directions to

the Resolution Professional is to be issued in

order to avoid further interruption in the CIRP."

4. It is not in dispute that after initiation of 'Corporate Insolvency

Resolution Process' in respect to 'Jalan Intercontinental Hotels (P) Ltd.',

the 'Information Memorandum' was initially prepared by the 'Resolution

Professional' on 17th December, 2017. A second 'revised Information

Memorandum' was published on 2nd February, 2018. Both the Appellant

and the 8th Respondent submitted a 'Resolution Plan' on 14th February,

Company Appeal (AT) (Insolvency) No. 202 of 2018 6

2018. However, they were directed by the 'Resolution Professional' to

submit a revised 'Resolution Plan' which were submitted by both the

Appellant and the 8th Respondent on 9th March, 2018. Thereafter, the

'Committee of Creditors' in its meeting held on 5th April, 2018 after

negotiation with both the 'Resolution Applicants' asked the Appellant and

the 8th Respondent to submit another revised (final) 'Resolution Plan' by

14th April, 2018.

5. In view of the decision of the 'Committee of Creditors', the

'Resolution Plans' were second time revised and third time both the

Appellant and the 8th Respondent submitted 'Resolution Plan' (second

time revised plan) on 14th April, 2018.

6. Subsequently, a 'third modified Information Memorandum' was

issued by the 'Resolution Professional' without any instructions from the

'Committee of Creditors', even after final decision of the 'Committee of

Creditors' on 5th April, 2018. In the said Information Memorandum, the

claim of one 'IHCL' and another 'Emfar' were taken into consideration

based on data record.

7. On 25th April, 2018, third time revised plan (Rs. 105.30 Cr.) was

sought to be submitted by the 8th Respondent but not accepted by the

'Committee of Creditors'. In any case, even the said revised plan was lower

than the 'Resolution Plan' of the Appellant who had offered Rs. 111.11

Crores.

Company Appeal (AT) (Insolvency) No. 202 of 2018 7

8. In the meeting held on 25th April, 2018, the 'Committee of

Creditors' declared the Appellant's plan as the best, viable and feasible

on the basis of upfront payment and scoring matrix. Therefore, on 26th

April, 2018, the 'Committee of Creditors' declared the Appellant's ('Shri

Ram Residency Pvt. Ltd.') plan as successful offered plan (of Rs. 111.11

Crores) in comparison to the plan submitted by the 8th Respondent

('Ritudhan Suppliers Pvt. Ltd.') who offered plan of Rs. 103.50 Crores.

The scoring matrix was prepared after taking into consideration

qualitative and quantitative parameters for 'Sh. Ram Residency Pvt. Ltd.'

(Appellant) which is 75.50 and 'Ritudhan Suppliers Pvt. Ltd.' (8th

Respondent) which is 68.90. The 'Committee of Creditors' also rejected

the so-called proposal with the revised plan submitted by the 8th

Respondent on 25th April, 2018 as it was also below the offer given by

'Sh. Ram Residency Pvt. Ltd'. (Appellant) as the fourth revised plan

offered by the 8th Respondent was for Rs. 105.30 Crores.

9. E-voting of the 'Committee of Creditors' took place on 28th and 29th

April, 2018 declaring 'Sh. Ram Residency Pvt. Ltd.' (Appellant) as

successful viable 'Resolution Applicant' (H-1 Bidder) by 98.05% voting

shares, whereas 8th respondent whose 'Resolution Plan' was next to

Appellant got 0% vote. In fact, 77.58% of the 'Committee of Creditors'

directly voted against the 'Resolution Plan' of the 8th Respondent.

10. On 30th April, 2018, the 'Resolution Professional' declared and

intimated the 8th Respondent that 'Sh. Ram Residency Pvt. Ltd.'

Company Appeal (AT) (Insolvency) No. 202 of 2018 8

(Appellant) has been declared as successful 'Resolution Applicant'. The

Appellant was also intimated on the same date. The 'Resolution

Professional' also informed the 8th Respondent that the Appellant's plan

has been declared as H-1 and the 8th Respondent's as H-2. Only

thereafter, the 8th Respondent moved before the Adjudicating Authority

for allowing it another opportunity to revise the plan on the ground that

the Information Memorandum has been changed on 23rd April, 2018.

However, 8th Respondent concealed and not disclosed that revised bid

had been submitted by 8th Respondent on 25th April, 2018, i.e. after the

final 'revised Information Memorandum' dated 23rd April 2018, which is

also lower than the 'Resolution Plan' of the Appellant. It was also not

disclosed that subsequent revised plan submitted by the 8th Respondent

was also rejected by the 'Committee of Creditors'

11. However, without recording any reason, the Adjudicating

Authority, by impugned order dated 7th May, 2018 again allowed the

parties to file revised plan, which will amount to 5th 'Resolution Plans'.

12. Learned counsel appearing on behalf of the Appellant has brought

to our notice the proceeding of the 8th Meeting of the 'Committee of

Creditors' of 'Jalan Intercontinental Hotels (P) Ltd.' held on 26th April,

2018 (Annexure A). In the said proceedings, the stand taken by both the

Appellant and the 8th Respondent has been recorded. The key points

discussed and deliberated by the 'Committee of Creditors' with the

Appellant- 'Sh. Ram Residency Pvt. Ltd.' ('SRPL') has been recorded

Company Appeal (AT) (Insolvency) No. 202 of 2018 9

wherein the Appellant agreed to continue with 'IHCL' till full payment to

'IHCL' is made as also agreed with regard to 'Emfar'. Thereby the third

modified Information Memorandum dated 23rd April, 2018 with regard to

'IHCL' and 'Emfar' were discussed and taken care by the Appellant.

13. In the said proceedings, the key points discussed with 8th

Respondent- 'Ritudhan Suppliers Pvt. Ltd.' ('RSPL') has also been

recorded. The 'RSPL' also agreed to continue with 'IHCL' till full payment

to 'IHCL' is made. The claim admission for 'IHCL' and 'Emfar' and also

estimated increase of CIRP costs by Rs. 30 lakhs were also accepted by

both the Appellant and the 8th Respondent. Thereby, we find that the

third modified Information Memorandum prepared by the 'Resolution

Professional' on 23rd April, 2018 were taken care in the 'Resolution Plans'

submitted by both the Appellant and the 8th Respondent accepting the

claims of 'IHCL' and 'Emfar'.

14. As per Section 30(2), the 'Resolution Professional' is required to

examine each 'Resolution Plan' to find out whether the same confirm with

the provisions as laid down under sub-section (2). It is only thereafter the

'Resolution Professional' is required to present to the 'Committee of

Creditors' for its approval under Section 30(3) of such 'Resolution Plans'

which confirms the conditions referred to in sub-section (2).

15. The 'Committee of Creditors' thereafter may approve a 'Resolution

Plan' by voting shares in terms of Section 30(4). Therefore, once the

'Resolution Plans' are clear and placed before the 'Committee of

Company Appeal (AT) (Insolvency) No. 202 of 2018 10

Creditors', the 'Resolution Professional' has no power to issue another

revised Information Memorandum till the reason for such 'revised

Information Memorandum' is brought to the notice of the 'Committee of

Creditors' and the 'Committee of Creditors' allows the 'Resolution

Professional' to prepare a revised Information Memorandum. In the light

of the aforesaid provisions, it was not open to the 'Resolution Professional'

to prepare the third Information Memorandum though it was open to him

to bring the fact to the notice of the 'Committee of Creditors'. However,

for such reason, we are not going to declare the third Information

Memorandum as bad, as the facts were brought to the notice of the

'Resolution Applicants', including the Appellant and the 8th Respondent

regarding dues of 'IHCL' and 'Emfar' which was the reason for preparation

of third modified Information Memorandum.

16. It is true that the Adjudicating Authority has jurisdiction to call for

further 'Resolution Plan' but such order can be passed for the reasons to

be recorded and not arbitrary without any reason.

17. In the present case all procedures having followed and in absence

of any infirmity, we hold that the Adjudicating Authority had no

jurisdiction to give another opportunity to the 8th respondent or even to

the Appellant.

18. In view of the discussion as made above, the impugned order dated

7th May, 2018 cannot be upheld and we accordingly set aside the

Company Appeal (AT) (Insolvency) No. 202 of 2018 11

impugned order. The 'Resolution Plan' of the Appellant having been

approved by the 'Committee of Creditors' with 98.05% voting shares and

it having been found viable and feasible and as it meets the requirements

as referred to in sub-section (2) of Section 30, we direct the Adjudicating

Authority to approve the 'Resolution Plan' submitted by the Appellant, as

approved by the 'Committee of Creditors' and pass appropriate order. For

such order no further hearing is required to be given except the

information to the parties as the matter has been finally decided by this

Appellate Tribunal.

19. The appeal is allowed with aforesaid observations and directions.

However, in the facts and circumstances of the case, there shall be no

order as to cost.

(Justice Bansi Lal Bhat) (Justice S.J. Mukhopadhaya) Member (Judicial) Chairperson

NEW DELHI 24th July, 2018 AR

Company Appeal (AT) (Insolvency) No. 202 of 2018