Shrinathji Trading Company vs Sanwaria Consumer Limited Through ...

Page 1 of 17 d. Bank of India, 4, Shopping Complex, TT Nagar, Bhopal - 462003.

e. Bank of Baroda Habibganj Branch, Plot No. 9, Zone - II, M.P. Nagar, Bhopal-462011.

f. IDBI Bank Limited IDBI Complex, 1st floor, Off CG Road, near Gulbai Tekra, Ahmedabad-380006. Gujarat.

g. Andhra Bank (Now Union Bank of India) Specialized Asset Recovery Management Branch, A/5, Model town CHS Ltd., Gulmohar Road, JVPD Scheme, 2nd Floor, Andhra Bank (Now Union Bank of India) JVPD Branch, Mumbai - 400049.

h. Canara Bank Arera Colony Branch, E-5, Plot No. 9, Commercial Area, Ravi Shankar Nagar, Bhopal - 462016.

.... Respondent No. 2

Present

For Appellant: Mr. Akshat Agrawal, Advocate.

For Respondents: Mr. Gautam Mittal & Mr. Manish Jain, for R-

1/RP, Mr. Prakash Shinde, Mr. Nishit Dhruva, Ms. Meghna Arvind, Ms. Aalisha Sharma & Ms. Astha Ojha, for R-2/CoC

Judgment

(Dated: 27.07.2022)

(Virtual Mode)

Company Appeal (AT) (Ins.) No. 480 of 2022

Page 2 of 17 (Per.: Dr. Alok Srivastava, Member (Technical)]

This appeal arises from the order dated 9.12.2021 passed by

National Company Law Tribunal, Indore Bench (Adjudicating

Authority) whereby IA No. 192/2021 filed by the Appellant seeking

consideration of his resolution plan submitted on 10.9.2021 was

rejected.

2. In brief the Appellant's case is that Corporate Insolvency

Resolution Process (CIRP) was initiated against the corporate debtor

M/s. Sanwaria Consumer Limited (formerly known as M/s.

Sanwaria Agro Oils Ltd.) on 29.5.2020. Thereafter, on invitation of

Expressions of Interest (EOI) for submitting resolution plan for

insolvency resolution of the corporate debtor, the Appellant

submitted a resolution plan on 22.1.2021, which was revised on

27.3.2021. This revised resolution plan was considered in the

meeting of the Committee of Creditors (in short 'CoC') held on

30.3.2021 and based on the comments received in the meeting the

Appellant again submitted a revised resolution plan dated 8.4.2021,

which was considered by the CoC and the Appellant was informed

vide e-mail dated 23.4.2021 that the resolution plan submitted by

him was not approved after being rejected in voting by requisite vote

Company Appeal (AT) (Ins.) No. 480 of 2022

Page 3 of 17 share in the CoC. Thereafter, the Appellant filed an application

bearing No. IA No. 133(MP)2021 before the Adjudicating Authority

seeking indulgence for consideration of his revised resolution plan,

and vide order dated 6.8.2021, the Appellant was permitted to

submit the latest revised plan within 3 days to the Resolution

Professional, which was to be thereafter considered by the CoC.

Consequently, the Appellant submitted another revised resolution

plan to the Resolution Professional on 9.8.2021 which was

considered by the CoC and was put to vote from 18.8.2021 till

16.9.2021. The Appellant submitted another plan on 3.9.2021 in

which he improved the financial bid upwards and also reduced the

time schedule for payment. The RP forwarded this latest revised

resolution plan to the CoC on 4.9.2021.

3. After the e-voting, the RP informed the Appellant on 17.9.2021

that his resolution plan was not approved by the CoC. The Appellant

has claimed that according to the information available to him, the

latest resolution plan submitted by the Appellant on 10.9.2021 was

not considered by the CoC and therefore, he preferred IA No.

192/2021 before the Adjudicating Authority praying for direction to

the CoC for consideration of his latest revised resolution plan. This

application IA no. 192/2021 was rejected by the Adjudicating

Company Appeal (AT) (Ins.) No. 480 of 2022

Page 4 of 17 Authority vide order dated 9.12.2021 on the ground that the CoC

had already considered a resolution plan of the Appellant and CIRP

period of 330 days is over and application for liquidation is already

filed before the Adjudicating Authority. Therefore, the Adjudicating

Authority declined to direct the CoC to further consider any

resolution plan.

4. We heard the arguments put forth by the Learned Counsels

of all the parties and perused the record.

5. The Learned Senior Counsel for Appellant has argued that the

Appellant is the only resolution appellant left whose resolution plan

was under consideration. He has claimed that after the direction of

the Adjudicating Authority in IA No. 133(MP)/2021 delivered vide

order dated 6.8.2021, the Appellant submitted a resolution plan,

which was considered by the CoC in its meetings held on 2.8.2021

and 16.8.2021 wherein the Appellant was asked to revise his

resolution plan. He has claimed that Appellant re-submitted a

revised resolution plan on 17.8.2021 in accordance with directions

given by the Adjudicating Authority vide order dated 6.8.2021. The

joint lenders meeting considered his resolution plan and on the

basis of comments given by the lenders in the meeting, he submitted

Company Appeal (AT) (Ins.) No. 480 of 2022

Page 5 of 17 a revised plan, further revised from the resolution plan which was

submitted on 17.8.2021 and on 10.9.2021. He has claimed that

since the revised resolution plan submitted on 10.9.2021 was in

accordance with the comments given by the lending banks, it would

have passed muster, but the CoC did not take up this revised plan

for consideration and therefore the Appellant approached the

Adjudicating Authority through IA No. 192 of 2021 seeking direction

to the CoC/Resolution Professional to consider his revised

resolution plan submitted on 10.9.2021, whereupon the

Adjudicating Authority, vide its order dated 9.12.2021, rejected his

application.

6. The Learned Senior Counsel for Appellant has further argued

that the corporate debtor is a going concern and as held by the

Hon'ble Supreme court in its judgment in Ghanashyam Mishra and

Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. 2021

SCC Online SC 313, liquidation should be the last resort as it would

mean certain death of the corporate debtor. Therefore, since the

Appellant had already submitted a much improved resolution plan,

it would have been in the interest of the corporate debtor as well as

the creditors that such a plan was considered by the CoC. He has,

therefore, challenged the Impugned Order in the appeal.

Company Appeal (AT) (Ins.) No. 480 of 2022 Page 6 of 17

7. The Learned Counsel for the CoC (Respondent No. 2) has

provided a chronology of events in the CIRP of the corporate debtor

to argue that sufficient opportunity and time was given to the

Appellant to submit satisfactory resolution plan and revise it to meet

with the expectations of the CoC members, but his plan, which was

revised many times did not meet with the expectations of the CoC.

He has argued that the Corporate Insolvency Resolution Process

(CIRP) of the corporate debtor was initiated on 29.5.2020 and after

invitation of Expression of Interest for Resolution Plan, the first

version of the resolution plan was submitted by the Appellant on

1.1.2021, which was rejected after due consideration by the CoC.

He has argued that thereafter a revised plan was submitted by the

Appellant, which was again rejected by the CoC in its 8th meeting on

24.4.2021 through e-voting. He has further argued that in

accordance with the directions given by the Adjudicating Authority

in IA No. 130 of 2021 vide order dated 6.8.2021, the revised

resolution plan submitted on 9.8.2021 was discussed in detail by

the CoC on 16.8.2021 and the Appellant was requested to submit a

revised plan incorporating the suggestions given by the CoC

members. This revised plan was re-submitted on 17.8.2021, which

was considered by the CoC and in the e-voting, which took place

Company Appeal (AT) (Ins.) No. 480 of 2022

Page 7 of 17 between 17.8.2021 and 16.9.2021, this revised plan was rejected by

100% vote share. He has claimed that since the revised resolution

plan was not approved by the CoC, the application for liquidation

was considered by the CoC in the same meeting and was approved,

and consequently RP filed application for liquidation before the

Adjudicating Authority.

8. He has further argued that the joint lenders in the NPA

account of M/s. Sanwaria Consumer Limited discussed the issue of

obtaining the improved resolution plan in its meetings on

27.10.2021 and 26.11.2021 when the majority of lenders strongly

presented the view that despite repeated opportunities the

prospective resolution applicant has neither shown seriousness nor

modified the plan in accordance with the directions of the lender

banks by submitting desired documents for comfort, and hence no

further opportunity should be given the prospective resolution

applicant (the Appellant Shrinathji Trading Company) for

submitting any revised plan. He has stated that in accordance with

the decision of the joint lenders in meeting held on 26.11.2021, the

views of the CoC were placed before the Adjudicating Authority

during consideration of IA No. 192(MP)/2021, whereupon the

Adjudicating Authority rejected IA No. 192/2021 vide the Impugned

Company Appeal (AT) (Ins.) No. 480 of 2022

Page 8 of 17 Order taking the view that the CoC had rejected the resolution plan

presented to it and the CIRP period of 330 days was already over,

and further since the application for liquidation was filed on the

directions of CoC.

9. The Learned Counsel for RP agreed with the arguments put

forth on behalf of the CoC and submitted that Hon'ble Supreme

Court has held in the matter of Ebix Singapore Private Limited v.

Committee of Creditors of Educom Solutions Limited & Anr.

2021 SCC OnLine SC 707 that if statutory timelines are over and

no resolution could be obtained, the matter should be allowed to

take due course in accordance with the provisions of IBC without

unnecessary delay.

10. It is noted that the CIRP was initiated against the corporate

debtor on 29.5.2020, whereafter resolution plans were invited from

the prospective resolution applicants. Admittedly the Appellant

submitted his resolution pan on 1.1.2021, which after due

examination was considered in the 8th meeting of the Committee of

Creditors held on 23.3.2021 and again held on 30.3.2021 after

adjournment. These revised plans, submitted by three prospective

resolution applicants including the appellant, were considered by

Company Appeal (AT) (Ins.) No. 480 of 2022

Page 9 of 17 the CoC on 30.3.2021 when the representative of the Appellant

along with representatives of other prospective resolution applicants

were invited to make presentation of their respective plans. In this

meeting, the representative of appellant informed the CoC members

that there is no scope of increasing the proposal financial bid and

the bid being offered is the best amount proposed. Thereafter, on

the statement of the Appellant's representative that there can be no

increase in the bid amount, the three resolution plans were put to

vote. The resolution relating to e-voting is attached at pg. 53 of the

affidavit-in-reply of the CoC, whereby it is mentioned that the

resolution is not approved by the CoC members. More specifically,

the resolution for approval of the plan submitted by Appellant

Shrinathji Trading Company is disapproved by the CoC members

i.e. 100% (Resolution 1B). Subsequently, in the same meeting of

CoC, the issue regarding initiation of liquidation of corporate debtor

was also put to vote (after the CoC had disapproved all the resolution

plans under consideration), whereby the resolution for authorizing

the RP, to submit liquidation application before the Adjudicating

Authority, was approved by vote share of 100% (refer page 55 of the

affidavit-in-reply of the CoC).

Company Appeal (AT) (Ins.) No. 480 of 2022

Page 10 of 17

11. Thereafter, upon receipt of the order of the Adjudicating

Authority in IA/133/MP/2021 dated 6.8.2021 (attached at pp.65-

66 of the appeal paperbook), the Adjudicating Authority directed as

follows:-

"Let the plan be submitted to the RP within three days. The Learned Counsel for the RP states that the CoC is going to held the meeting tomorrow. The CoC to defer its meeting to three days. Let meeting be held on 13th August, 2021 or any suitable date nearby and let the both plans placed before the CoC for its consideration."

12. In response to these directions and the opportunity given to

the Appellant to submit a revised/modified resolution plan, the

appellant submitted revised plan on 9.8.2021, which was discussed

in accordance with the directions of the Adjudicating Authority in

the meeting of the CoC held on 16.8.2021 and after due

consideration, the appellant was advised to increase the bid amount

and further submit the revised plan by 17.8.2021, which the

Appellant agreed to. This revised plan was considered and

deliberated upon in the meeting of CoC and put up for e-voting

during the period 17.8.2021 till 3.9.2021, which was extended till

16.9.2021 upon the request of some members of the CoC and the

revised resolution plan was rejected by a vote share of 100% in the

Company Appeal (AT) (Ins.) No. 480 of 2022

Page 11 of 17 9th meeting of the CoC. The table depicting e-voting result is

attached at pg. 90 of the affidavit-in-reply of the CoC. In the same

meeting, the CoC members took note of the progress of liquidation

application bearing IA No. 90/2021 pending before the Adjudicating

Authority.

13. We consider the claim of the Learned Senior Counsel for

Appellant that the meeting of joint lenders took the view that the

resolution plan submitted by the appellant on 10.9.2021 was an

important one, which satisfied the lenders banks, we note from the

minutes of the meeting of joint lenders dated 26.11.2021 (attached

at pp.99-100 of the affidavit in reply of CoC) as follows:-

"State Bank of India then submitted that -

• PRA has revised the plan for the third time, only amount has been changed in the plan; and • No change in plan regarding source of funds, no seeding of party on security, requirement of bank guarantee for confirmation of dissolution, etc. as was discussed.

As such no despite commitment by the PRA during the last month's meeting, the PRA could not submit desired confirmations/documents, despite lapse of a month's time, State Bank of India reaffirmed that PRA is not serious an just buying time and they are of the view that the revised plan for Rs.105.00 crores should not be considered for discussion."

Company Appeal (AT) (Ins.) No. 480 of 2022

Page 12 of 17

14. After such views were expressed by the representative of State

Bank of India, the representatives of Bank of Baroda, Bank of India,

Central Bank of India, Canara Bank and Punjab National Bank

endorsed the views expressed by the State Bank of India's

representative, which is recorded in the minutes of joint lenders

meeting held on 26.11.2021. The representative of IDBI also

questioned why the present meeting is called and wanted the

Hon'ble NCLT to decide the matter. Thereafter, the CoC authorized

the leader of lenders to submit the common view before the NCLT

that the CoC is of the final view that no further opportunity should

be given to prospective resolution applicant (PRA), as he has failed

to provide desired comforts to the lenders for the acceptable terms

in resolution plan, which could be successfully implemented.

15. We note that the Impugned Order dated 9.12.2021 rejected IA

No. 192/2021 on the basis that the plan submitted by the

Appellant/Applicant had been considered by the CoC and that the

CIRP period of 330 days is already over and application for

liquidation is filed before the Adjudicating Authority.

Company Appeal (AT) (Ins.) No. 480 of 2022

Page 13 of 17

16. Looking at the total circumstances of the case, including the

views of joint lenders and also at the fact that the CoC did not wish

to consider any further revised resolution plan as he had failed to

provide required comfort to the lender banks by submitting/revising

the resolution plan despite being provided with enough

opportunities to do so, we are of the clear opinion that such decision

is within the ambit of commercial wisdom of the CoC.

17. The Learned Senior Counsel for Appellant has referred to the

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

Mishra and Sons (P) Ltd. through the authorized signatory vs.

Edelweiss Asset Reconstruction Co. Ltd. through the Director

and Ors. [2021 SCC Online SC 313], wherein it is held as follows:-

"53. After discussing the relevant provisions of I&B Code, this Court observed thus:

33. ........

The scheme of the Code, therefore, is to make an attempt, by divesting the erstwhile management of its powers and vesting it in a professional agency, to continue the business of the corporate body as a going concern until a resolution plan is drawn up, in which event the management is handed over under the plan so that the corporate

Company Appeal (AT) (Ins.) No. 480 of 2022

Page 14 of 17 body is able to pay back its debts and get back on its feet. All this is to be done within a period of 6 months with a maximum extension of another 90 days or else the chopper comes down and the liquidation process begins."

[emphasis supplied]

18. On the other hand. the Learned Counsel for Respondent has

referred to Hon'ble Supreme Court's judgment in the matter of Ebix

Singapore Private Limited v. Committee of Creditors of Educom

Solutions Limited & Anr. 2021 SCC OnLine SC 707, wherein it is

held as follows:-

"202......A failed negotiation for modification after submission, or a withdrawal after approval by the CoC and submission to the Adjudicating Authority, irrespective of the content of the terms envisaged by the Resolution Plan, when unregulated by statutory timelines could occur after a lapse of time, as is the case in the present three appeals before us. Permitting such a course of action would either result in a down-graded resolution amount of the Corporate Debtor and/or a delayed liquidation with depreciated assets which frustrates the core aim of the IBC."

Company Appeal (AT) (Ins.) No. 480 of 2022

Page 15 of 17

19. While noting both the above judgments of Hon'ble Supreme

Court, we find that the statutory scheme given in the IBC regarding

the time period of CIRP in section 12 of IBC stipulates that a total of

330 days could be spent in obtaining prospective resolution plan.

In the present case, approximately 559 days are over since the

initiation of CIRP till the date of Impugned Order and enough

opportunities have already been given to the prospective resolution

applicant to provide resolution plan without success. We, therefore,

follow the view of Hon'ble Supreme Court in the matter of Ebix

Singapore Private Limited v. Committee of Creditors of Educom

Solutions Limited & Anr. (supra) wherein timely completion of

resolution process has been considered necessary without delaying

the stage of liquidation, if circumstances so require.

20. In view of the aforementioned discussion, we are of the clear

view that the Adjudicating Authority has not erred in passing the

Impugned Order, and while passing the order it has considered the

views of the CoC as well as the lapse of stipulated time period of

more than 330 days in the CIRP. Furthermore, the CoC has already

resolved for liquidation of the assets of the corporate debtor and the

application for approval of liquidation of the corporate debtor is

Company Appeal (AT) (Ins.) No. 480 of 2022

Page 16 of 17 under consideration of the Adjudicating Authority. We, therefore,

find no merit in the appeal and accordingly dismiss it.

21. In view of the circumstances of the appeal, there is no orders

as to costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Kanthi Narahari] Member (Technical)

[Dr. Alok Srivastava] Member (Technical)

New Delhi 27th July, 2022

/aks/

Company Appeal (AT) (Ins.) No. 480 of 2022

Page 17 of 17