Som Distilleries Private Limited vs Pratibha Khandelwal Resolution ...

[Arising out of Order dated 13.10.2021 passed by the Adjudicating Authority (National Company Law Tribunal), Jaipur Bench in I.A. 186/JPR/2019 in C.P. (IB) No. 86(ND)/ 2017- TA No. 83(ND)/2018]

IN THE MATTER OF:

Som Distilleries Pvt. Ltd. Through: Ashok Bhandari Authorised Representative At: 601, 6th Floor, Shivkaran Apartments Yari Road, Versova, Andheri West, Mumbai- 400053 ...Appellant

Versus

1. Pratibha Khandelwal Resolution Professional for Mount Shivalik Industries Ltd. 140th Milestone, Delhi-Jaipur Highway No. 8 Village Gunti, Tehsil Behror Alwar - 301701.

2. Kals Distilleries Private Limited (Successful Resolution Applicant) 23/5, Thanikachalam Road, T. Nagar, Chennai Tamil Nadu - 600017

3. Committee of Creditors of Mount Shivalik Industries Ltd. Through Oriental Bank of Commerce Plot No. 5, Institutional Area Section - 32, Gurgaon - 122001. ...Respondents

Present: For Appellant: Mr. Sumesh Dhawan, Ms. Vatsala Kak, Ms. Geetika Sharma and Mr. Raghav Dembla, Advocates. For Respondents: Mr. Abhishek Sharma, Advocate with Ms. Pratibha Khandelwal, RP for R-1. 2

Mr. Arun Kathpalia, Sr. Advocate with Mr. Ankit Popli, Advocate for R-2. With

Company Appeal (AT) (Insolvency) No. 910 of 2021

[Arising out of Order dated 16.07.2021 passed by the Adjudicating Authority (National Company Law Tribunal), Jaipur Bench in I.A. 201/JPR/2019 in C.P. (IB) No. 86 (ND)/2017- TA No. 83(ND)/2018]

IN THE MATTER OF:

Som Distilleries Pvt. Ltd. Through: Ashok Bhandari Authorised Representative At: 601, 6th Floor, Shivkaran Apartments Yari Road, Versova, Andheri West, Mumbai- 400053 ...Appellant

Versus

1. Pratibha Khandelwal Resolution Professional for Mount Shivalik Industries Ltd. 140th Milestone, Delhi-Jaipur Highway No. 8 Village Gunti, Tehsil Behror Alwar - 301701.

2. Kals Distilleries Private Limited (Successful Resolution Applicant) 23/5, Thanikachalam Road, T. Nagar, Chennai Tamil Nadu - 600017

3. Committee of Creditors of Mount Shivalik Industries Ltd. Through Oriental Bank of Commerce Plot No. 5, Institutional Area Section - 32, Gurgaon - 122001. ...Respondents

Present: For Appellant: Mr. Sumesh Dhawan, Ms. Vatsala Kak, Ms. Geetika Sharma and Mr. Raghav Dembla, Advocates. For Respondents: Mr. Abhishek Sharma, Advocate with Ms. Pratibha Khandelwal, RP for R-1.

Comp. App. (AT) (Ins) No. 909 of 2021 & 910 of 2021 3

Mr. Arun Kathpalia, Sr. Advocate with Mr. Ankit Popli, Advocate for R-2.

JUDGMENT

(24th November, 2021)

Ashok Bhushan, J.

1. These two Appeals have been filed by same Appellant challenging

different orders passed by the Adjudicating Authority (National Company Law

Tribunal), Jaipur Bench, Jaipur. Both the Appeals have been heard together.

2. Company Appeal (AT) (Ins.) No. 910 of 2021 has been filed challenging

the order dated 16.07.2021 passed by the Adjudicating Authority rejecting the

I.A. No. 201/JPR/2019 filed in CP (IB) No. 86(ND)/2017 (T.A. No. 83(ND)/

2018). The Appellant's Resolution Plan was rejected by the Committee of

Creditors (hereinafter referred to as "CoC") in its meeting dated 04.06.2019.

By I.A. the said decision was challenged by the Appellant before the

Adjudicating Authority, which Application came to be rejected by order dated

16.07.2021.

3. Company Appeal (AT) (Ins.) No. 909 of 2021 has been filed by the

Appellant questioning the order dated 13.10.2021 passed by the Adjudicating

Authority in I.A No. 186/JPR/2019 in CP (IB) No. 86(ND)/ 2017 (T.A. No.

83(ND)/2018) whereby the Adjudicating Authority has approved the

Resolution Plan submitted by 'Kals Distilleries Private Limited'- 'Successful

Resolution Applicant'.

Comp. App. (AT) (Ins) No. 909 of 2021 & 910 of 2021 4

4. We have heard Shri Sumesh Dhawan, Learned Counsel for the

Appellant, Shri Abhishek Sharma, Learned Counsel for the Resolution

Professional and Shri Arun Kathpalia, Learned Senior Counsel for 'Successful

Resolution Applicant'.

5. Learned Counsel for the Appellant challenging the order dated

16.07.2021 by which his Application questioning the CoC's Resolution dated

04.06.2019 was rejected submits that the Appellant being H-1, his Resolution

Plan has been rejected illegally. It is submitted that 'M/s. Mahalaxmi Traders'

who is one of the members of the CoC holding a voting share of 22.4% colluded

with the 'Successful Resolution Applicant' due to which the Appellant's

Resolution Plan got rejected and Resolution Plan of 'Kals Distilleries Private

Limited'- 'Successful Resolution Applicant' was approved. It is submitted that

the allegations have been made by the Appellant in his Application of malafide

and fraud committed by 'M/s. Mahalaxmi Traders' which has not been

correctly adverted to and decided by the Adjudicating Authority. It is

submitted that the only observation made by the Adjudicating Authority with

regard to allegations of collusion and fraud in Paragraph 16 of the order is that

even after deducting the 22.4% voting share of the 5th Respondent- 'Mahalaxmi

Traders', the Resolution Plan of the Appellant could have been rejected by

77.76%, therefore, the said contention of the Appellant need not to be

considered at all. It is further submitted that the Resolution Plan of 'Kals

Distilleries Private Limited' which has been approved by the CoC in the same

meeting was also approved by the Adjudicating Authority by allowing the

Application filed by the 'Successful Resolution Applicant'. The Resolution Plan

Comp. App. (AT) (Ins) No. 909 of 2021 & 910 of 2021 5

of the 'Successful Resolution Applicant' was not in compliance with the

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

and the Regulations framed thereunder and the Adjudicating Authority

without considering the said compliance approved the Resolution Plan.

6. Learned Counsel for the Resolution Professional submits that there was

no procedural breach in consideration of the Resolution Plan of the Appellant.

It is submitted that the CoC in its meeting dated 04.06.2019 with 100% votes

rejected the Resolution Plan of the Appellant and with 100% vote approved the

Resolution Plan of the 'Successful Resolution Applicant'. It is submitted that

the mere fact that the Appellant was declared H-1 earlier does not give any

indefatigable right in the Appellant. It is further submitted that the Resolution

Plan of 'Kals Distilleries Private Limited' was taken into consideration in view

of the order dated 04.04.2019 passed by the Adjudicating Authority in I.A filed

by 'Kals Distilleries Private Limited'. The order dated 04.04.2019 never came

to be challenged. It is submitted that the CoC is the best judge to watch

commercial interest and decision of the CoC which was taken with 100% vote

is not to be interfered by in exercise of judicial review. It is submitted that

there was no collusion of fraud as alleged by the Appellant.

7. Learned Counsel for the 'Successful Resolution Applicant' supported the

decision of the Adjudicating Authority approving the rejection of the

Resolution Plan of the Appellant as well as the order approving the Resolution

Plan of the 'Successful Resolution Applicant. It is submitted that the

Comp. App. (AT) (Ins) No. 909 of 2021 & 910 of 2021 6

commercial wisdom of Financial Creditors in rejection of a Resolution Plan is

not challengeable.

8. We have considered the submissions of the Learned Counsel for the

parties and perused the record.

9. The Resolution Plan of the Appellant got rejected by 100% vote in the

19th meeting of the CoC dated 04.06.2019 on which date the Resolution Plan

of the 'Successful Resolution Applicant' was approved with 100% votes. The

commercial wisdom of the Financial Creditors which has support of 100%

votes has to give due weight by Adjudicating Authority as well as this Court.

The CoC is well aware about the contents of the Resolution Plan of both the

Appellant as well as the 'Successful Resolution Applicant' and it was with the

deliberation of the CoC that decision was taken to reject the Resolution Plan

of the Appellant. The complaint of Appellant is that 'Kals Distilleries Private

Limited' was surreptitiously permitted to submit his Resolution Plan without

knowledge of the Appellant has no legs to stand. It has been noted in the order

of the Adjudicating Authority that by order passed on 04.04.2019, the

Adjudicating Authority permitted 'Kals Distilleries Private Limited' to submit a

Resolution Plan, hence the same was duly accepted by the Resolution

Professional. On 11.04.2019, the Appellant sent a protest to the Resolution

Professional regarding Resolution Plan of 'Kals Distilleries Private Limited'

which protest was immediately replied by Resolution Professional on

12.04.2019 informing that the plan has been accepted by the order dated

04.04.2019 of the Adjudicating Authority.

Comp. App. (AT) (Ins) No. 909 of 2021 & 910 of 2021 7

10. The Hon'ble Supreme Court in "K. Sashidhar v. Indian Overseas

Bank, (2019) 12 SCC 150" had occasion to consider the relevant provisions

of the 'I&B Code', including the provisions of Section 30. With regard to

commercial wisdom of the Financial Creditor, the Hon'ble Supreme Court laid

down that there is an intrinsic assumption that financial creditors are fully

informed about the viability of the corporate debtor and feasibility of the

proposed Resolution Plan. In paragraph 52 of the Judgment, following was

laid down:-

"52. As aforesaid, upon receipt of a "rejected"

resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I&B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of the Sick Industrial Companies Act, 1985 or under other such enactments

Comp. App. (AT) (Ins) No. 909 of 2021 & 910 of 2021 8

which has now been forsaken. Besides, the commercial wisdom of CoC has been given paramount status without any judicial intervention, for ensuring completion of the stated processes within the timelines prescribed by the I&B Code. There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject-matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justiciable."

11. The decision as noted above, the CoC has rejected the Resolution Plan

with 100% votes which is an important factor to reckoned with. The

submission of the Learned Counsel for the Appellant is that there is collusion

and fraud between 'M/s. Mahalaxmi Traders' and the 'Successful Resolution

Applicant'. Admittedly, 'M/s. Mahalaxmi Traders' was one of the CoC's

member holding a voting share of 22.4%. There can be no doubt that any fraud

in process may vitiate the entire process but it is easy to allege fraud and

collusion but difficult to prove the same. Apart from the bald allegation of the

Appellant that 'M/s. Mahalaxmi Traders' colluded with the 'Successful

Comp. App. (AT) (Ins) No. 909 of 2021 & 910 of 2021 9

Resolution Applicant', there is no other material to come to a finding that

actually any fraud was played. The commercial wisdom of the Financial

Creditors cannot be disregarded on bald allegation of fraud and collusion as

raised by the Appellant. The Adjudicating Authority has in detail considered

the submissions of the Appellant and has rightly come to the conclusion that

the decision of the CoC rejecting the Resolution Plan of the Appellant does not

require any interference. We do not find any error in the order dated

16.07.2021 rejecting the I.A filed by the Appellant.

12. Now coming to the Company Appeal (AT) (Ins.) No. 909 of 2021 by which

the order dated 13.10.2021 has been challenged, after rejection of Appellant's

Resolution Plan, the Resolution Plan of 'Kals Distilleries Private Limited' was

approved by the CoC with 100% voting as noted above. I.A. was filed before

the Adjudicating Authority. In paragraph 11 of the judgment, it has been

noticed by the Adjudicating Authority that members of the CoC after detailed

discussion rejected the Resolution Plan of Appellant mainly on the grounds of

credit worthiness of 'Som Distilleries Pvt. Ltd.'. The Adjudicating Authority has

in detail considered the compliance of Resolution Plan of the 'Successful

Resolution Applicant' with provisions of Sections 30 & 31 and the Regulations

38, 39 of the CIRP Regulations. In paragraphs 14 to 24, a finding was recorded

by the Adjudicating Authority that Resolution Plan submitted by 'Kals

Distilleries Private Limited' as approved by the CoC satisfies all the

requirements of the Code and Regulations made thereunder. None of the

grounds to challenge the Resolution Plan had been made out. Hence the

Adjudicating Authority rightly approved the Resolution Plan. No ground has

Comp. App. (AT) (Ins) No. 909 of 2021 & 910 of 2021 10

been made out to interfere with the order dated 13.10.2021 of the Adjudicating

Authority.

13. In view of the forgoing discussion, we do not find any merit in these

Appeals. Both the Appeals are dismissed.

[Justice Ashok Bhushan] Chairperson

[Justice Jarat Kumar Jain] Member (Judicial)

[Dr. Ashok Kumar Mishra] Member (Technical)

New Delhi Anjali

Comp. App. (AT) (Ins) No. 909 of 2021 & 910 of 2021