Steel Strips Wheels Ltd vs Shri Avil Menezes Resolution ...

[Arising out of Order dated 18.01.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Ahmedabad, Court-2 in IA 43(AHM)2022 in CP(IB) No. 185 OF 2018]

In the matter of:

Steel Strips Wheels Ltd. ...Appellant Vs.

Shri Avil Menezes, Resolution Professional of AMW Autocomponent Ltd. & Ors. ...Respondents For Appellant: Mr. Krishnendu Datta, Sr. Advocate with Samir Malik, Siddharth Nigotia, Mr. Aditya Sharma, Advocates For Respondents: Mr. Jayant Mehta, Sr. Advocate with Mr. Bishwajit Dubey, Srideepa Bhattacharya, Aishwarya Gupta, Advocates for R-1 Ms. Prachi Johri, Mr. Dhrupad Vaghani, Naveli Reshamwalla, Ajiz M.K., Mr. Lakshya Sachdeva, Advocates for R-2. Mr. Darius Khambata, Sr. Advocate with Mr. Amit Sibal, Sr. Advocate Mr. Devang Nanavati, Sr. Advocate Mr. Deepak Sharma, Advocates for R-3

JUDGMENT

(18th April, 2022)

Ashok Bhushan, J.

1. This Appeal has been filed under Section 61 of the Insolvency and

Bankruptcy Code, 2016 ("Code" for short) challenging the order dated

18.01.2022 passed in I.A No. 43(AHM)2022 in CP (IB) No. 185 of 2018. The

Adjudicating Authority (National Company Law Tribunal), Ahmedabad,

Court-2, by impugned order has allowed the I.A No. 43(AHM)2022 filed by the 2

Respondent No.3. The Appellant- Successful Resolution Applicant has filed

this Appeal challenging the impugned order. The brief facts of the case and

sequence of the events necessary to be noted for deciding this Appeal are:-

By order dated 01.09.2020, 'Corporate Insolvency Resolution Process'

("CIRP" for short) was initiated against the Corporate Debtor- 'AMW Auto

Component Ltd.'. Form-G was issued on 30.11.2020. The last date for

submission of the Expression of Interest was 15.12.2020. The Adjudicating

Authority granted extension of 90 days' time. The Committee of Creditors

(CoC) has fixed 19.04.2021 as final date of submission of the Resolution Plan.

The Appellant submitted its Resolution Plan on 24.04.2021. The Appellant

was communicated by Respondent No.1 that CoC has decided to consider the

Resolution Plan of the Appellant and CoC has granted one-time opportunity

to all the Prospective Resolution Applicants in the final list to submit

Resolution Plan or a revised Resolution Plan till 09.05.2021. Further

extension of 60 days' time was allowed beyond 270 days. On 26.07.2021, the

Adjudicating Authority allowed eight weeks' time to complete the CIRP. The

Appellant submitted its revised Resolution Plan on 24.04.2021 with

addendum of 27.08.2021. In the CoC meeting dated 21.09.2021, the

Resolution Plan of the Appellant was considered and voting was conducted

from 28.08.2021 till 21.09.2021. The Appellant's plan was approved by the

CoC with 98.55% voting share. The Letter of Intent was issued by Respondent

No.1 to the Appellant on 21.09.2021. In pursuance of which, the Appellant

submitted the Bank Guarantee of Rs. 20 Crores on 23.09.2021. On

24.09.2021, the Respondent No.1 filed I.A No. 692 of 2021 before the NCLT

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seeking approval of the Resolution Plan of the Appellant. On 13.12.2021, the

Respondent No.1 received the request from Respondent No.3 for submitting a

joint Resolution Plan. The Respondent No.1 placed the request of Respondent

No.3 before the CoC by e-mail dated 14.12.2021. The 21st meeting of the CoC

held on 18.12.2021 opined that the plan of the Appellant has already been

approved by the CoC and Application for approval of Plan has already been

filed by the Resolution Professional before the Adjudicating Authority,

therefore, a new Expression of Interest cannot be considered. The Respondent

No.1 by its e-mail dated 22.12.2021 conveyed to Respondent No.3, CoC's

decision taken on 18.12.2021. The Application I.A. No. 692 of 2021 for

approval of the Resolution Plan came before the Adjudicating Authority on

12.01.2022. The Adjudicating Authority was informed that certain objections

by Ex-Management has been filed yesterday and Learned Counsel Shri

Devang Nanavati also stated that he has filed an Intervention Application in

I.A. No. 692 of 2021 which is getting numbered. The Adjudicating Authority

passed an order on 12.01.2022 for listing the matter on 04.03.2022. The

Respondent No.3 filed an I.A No. 43 of 2022 before the Adjudicating Authority

impleading the CoC as Respondent No.1 and the Resolution Professional as

Respondent No.2. In the Application, it prayed for permitting the Applicant to

intervene in the I.A. No. 692 of 2021 and further to submit the Resolution

Plan and that the Resolution Professional and the Committee of Creditors be

directed not to consider the Resolution Plan of the Appellant which is

Respondent No.3 in the I.A. The above Application I.A. No. 43 of 2022 was

taken by the Adjudicating Authority on 18.01.2022 and allowed.

Company Appeal (AT) (Ins.) No.89 of 2022 4

2. The Appellant aggrieved by the said order has filed the present Appeal.

3. We have heard Shri Krishnendu Datta, Learned Senior Counsel for the

Appellant, Shri Jayant Mehta, Learned Senior Counsel for Respondent No.1,

Ms. Prachi Johri, Learned Counsel for Respondent No.2 and Shri Darius

Khambata, Shri Amit Sibal, Shri Devang Nanavati, Learned Senior Counsels

for Respondent No.3.

4. Shri Krishnendu Datta, Learned Senior Counsel for the Appellant

submits that the Resolution Plan of the Appellant having been approved by

the CoC with 98.55% voting shares pursuant to the meeting of the CoC dated

26.08.2021 and the Application for approval of the Resolution Plan having

been filed and pending before the Adjudicating Authority, there was no

occasion for the Adjudicating Authority to pass an order for consideration of

the Resolution Plan submitted by the Respondent No.3. The period for

submitting Expression of Interest and the Resolution Plan had long expired

and the name of Respondent No.3 was not included in the final prospective

list of the Resolution Applicants and he had no authority to submit any

Expression of Interest/ Resolution Plan. The Adjudicating Authority has no

jurisdiction to permit the CoC to consider the Resolution Plan of the

Respondent No.3 when the Resolution Plan of the Appellant has already been

approved by the CoC, which fully comply with the provisions of the Code. The

order dated 18.01.2022 was passed by the Adjudicating Authority without the

Appellant being given opportunity and without Appellant being made party in

the Application I.A. No. 43 of 2022 filed by the Respondent No.3. The order

dated 18.01.2022 indicate that neither the Resolution Professional nor CoC

Company Appeal (AT) (Ins.) No.89 of 2022 5

was heard since notices were issued to both Resolution Professional and the

CoC. The Adjudicating Authority was not made aware that Resolution Plan

has already been approved by the CoC on 26.08.2021 and further with regard

to request of Respondent No.3, CoC on 18.12.2021 has already declined the

request of Respondent No.3. The Adjudicating Authority being not posted with

the correct facts has erroneously passed the impugned order directing the

CoC to consider the Resolution Plan. The timeline under the IBC cannot be

breached and Respondent No.3 who was not part of the CIRP could not have

been permitted to join at such late stage.

5. Learned Counsel for Respondent No.1 has filed a Reply. It is submitted

by Learned Counsel for Respondent No.1 that the Resolution Plan of the

Appellant stood approved by 98.55% voting shares of the CoC in the meeting

dated 26.08.2021 and the Resolution Professional has already filed an

Application being I.A No. 692 of 2022 for approval of the plan which was fixed

for 04.03.2022. It is submitted that after receiving e-mail dated 13.12.2021

from the Respondent No.3 an e-mail dated 22.12.2021 was sent to

Respondent No.3. It was communicated to Respondent No.3 that CoC has

instructed the Resolution Professional to convey that the Resolution Process

of the Corporate Debtor is at very advance stage and Resolution Plan has

already been approved by the CoC which is pending consideration before the

NCLT, hence, CoC could not be able to consider the proposal at that stage.

6. Learned Counsel for the Resolution Professional referring to reply filed

by the CoC submits that now CoC has shown its willingness to consider the

plan of the Respondent No.3.

Company Appeal (AT) (Ins.) No.89 of 2022 6

7. Learned Counsel for the CoC submits that the Respondent No.2

support the reply of the Resolution Professional dated 04.03.2022. It is further

submitted that looking to the objects and reasons of the Code, the CoC in its

meeting dated 05.03.2022 deliberated and decided that the Respondent No.3

may be given an opportunity to present their Resolution Plan.

8. Learned Senior Counsel appearing for the Respondent No.3 submits

that the Resolution Plan submitted by the Respondent No.3 is joint Resolution

Plan with regard to Corporate Debtor as well as another sister concern. It is

submitted that the Appellant itself had failed to submit the Resolution Plan

before the final date of submission fixed by the CoC i.e. 19.04.2021. Keeping

in mind the object and purpose of the Code, in the interest of the Corporate

Debtor the Respondent No.3 be permitted to submit Resolution Plan.

Respondent No.3 is a leading Company in Auto Component Sector and the

Resolution Plan of Respondent No.3 will not only maximise the value of the

assets of the Corporate Debtor but also provide value maximisation and a

timely exit to all stakeholders of the CIRP including all the employees/ ex-

employees of the Corporate Debtor. It is submitted that the CoC has now

expressed its opinion to consider the Resolution Plan of Respondent No.3. The

commercial wisdom of the CoC is to be given due credence. The Resolution

Plan of the Appellant is neither binding nor irrevocable. The Adjudicating

Authority has all powers and jurisdiction to permit the CoC to consider the

Resolution Plan of Respondent No.3.

Company Appeal (AT) (Ins.) No.89 of 2022 7

9. Learned Counsel for the parties has referred to and relied on judgments

of this Tribunal and the Hon'ble Supreme Court which shall be referred to

while considering the submissions in detail.

10. It is not disputed between the parties that Resolution Plan of Appellant

stood approved by the CoC by majority of 98.55% voting shares. The approval

of the Resolution Plan was well within CIRP period as extended by the

Adjudicating Authority. It is on the record that CIRP period of the Corporate

Debtor was to expire on 28.07.2021. Thereafter, eight weeks' extension was

granted by the Adjudicating Authority vide order dated 26.07.2021. During

the CIRP, two Resolution Plans were placed for approval before the CoC and

the Resolution Plan of the Appellant received 98.55% voting shares. An

Application for approval of the Resolution Plan was filed by the Resolution

Professional on 24.09.2021. The Letter of Intent was issued to the Appellant

on 21.09.2021. It is not the case of any of the parties that Respondent No.3

in the CIRP had given any Expression of Interest. The CIRP period as per

pleadings of the Resolution Professional came to end on 26.09.2021.

Application for approval of the Resolution Plan was already filed and pending

consideration before the Adjudicating Authority in which Application,

following order was passed on 12.01.2022:-

"IA/692(AHM)2021 Application for Approval of Resolution Plan. IA/686(AHM)2021 Application for objection to the Approval of Resolution Plan.

Company Appeal (AT) (Ins.) No.89 of 2022 8

Learned Sr. Counsel Mr. Sanjanwala for the ex- management states that they have filed objection yesterday.

Learned Counsel Mr. Devang Nanavati states that they have filed Intervention Application in IA 692 of 2021 which is getting numbered, further states that there was one IA 659 of 2021 pending consideration which is listed on 4th March, 2022 which will have same bearing on the Resolution Plan Application. RP may respond and file affidavit in response to the objections filed by the parties.

List the matter on 04.03.2022"

11. The Adjudicating Authority by impugned order dated 18.01.2022 in I.A

No. 43 of 2022 passed following order:-

"IA 43(AHM)2022 Application filed by a proposed Resolution Applicant seeking permission to submit the resolution plan to RP to enable CoC to consider the same. Learned Counsel for the Applicant states that they have already sent the copy of plan to RP and CoC and the application was informed that CoC is of the view that it could be taken into consideration subject to the outcome of this application or directions issued by the Bench. The CoC is the final Authority as on date to decide about the discretion and decision with respect to resolution plans. If CoC finds that considering this plan may bring maximisation of value, it may take a call and decide accordingly. RP to file an affidavit to the effect of the decision taken by the CoC with respect to the present applicant.

Issue notice to RP and CoC.

Company Appeal (AT) (Ins.) No.89 of 2022 9

List the matter on 04.03.2022."

12. With reference to the request received by Respondent No.3, Resolution

Professional has stated in its reply that after receiving the e-mail dated

13.12.2021, by e-mail dated 14.12.2021 CoC was informed and the CoC in

its meeting held on 18.12.2021 expressed opinion that the new Expression of

Interest cannot be considered. In this context, it is useful to refer para 14 of

the Reply filed by the Resolution Professional which is to the following effect:-

"14. During the twenty-first CoC meeting held on December 18, 2021, the joint expression of interest submitted by Triton was discussed and deliberated upon by the CoC. The CoC unanimously opined that since the SSWL Plan has already been approved by the CoC and the Plan Approval Application has already been filed by the RP before the Ld. Adjudicating Authority, a new expression of interest cannot be considered at this juncture. Further, the CoC directed the RP to convey the same to Triton. The Respondent No.1 undertakes to produce a copy of the minutes of the twenty-first CoC meeting held on December 18, 2021 before this Hon'ble Appellate Tribunal, if it so desires."

13. Further for the first time, the Expression of Interest was shown by

Respondent No.3 by its e-mail dated 13.12.2021 by which time entire CIRP

process was complete including approval of the Resolution Plan of the

Appellant which is pending consideration before the Adjudicating Authority.

The e-mail dated 13.12.2021 received from Respondent No.3 was replied by

the Resolution Professional by its e-mail dated 22.12.2021. It is useful to

Company Appeal (AT) (Ins.) No.89 of 2022 10

extract the e-mail dated 22.12.2021 sent by the Resolution Professional to the

Respondent No.3 which is to the following effect:-

"Subject: RE: Submission of Joint Resolution Plan under the provisions of The Insolvency and Bankruptcy Code, 2016 for AMW Motors Limited and AMW Auto component Limited and Comprehensive resolution of AMW campus at Kannaiyabe, Bhuj, Gujarat.

Dear Sir, This is with reference to the ongoing corporate insolvency resolution process ("CIRP") of AMW Auto component Limited ('Corporate Debtor'). At the outset, we thank you for your interest to participate in the resolution process of the Corporate Debtor vide your e-mail below.

At the outset, we would like to bring to your attention that the 330 days' time period in respect of the Corporate Debtor expired on July 28, 2021. Thereafter, the 8 weeks' extension granted by the Hon'ble National Company Law Tribunal, Ahmedabad Bench ("Hon'ble NCLT") vide order dated July 26, 2021 expired on September 22, 2021. During the CIRP, 2 prospective resolution applicants had submitted resolution plans for the Corporate Debtor. The 2 resolution plans were placed for approval of the Committee of Creditors ("CoC") of the Corporate Debtor by the undersigned in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016, as amended ("IBC') and the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process of Corporate Persons) Regulations, 2016, as amended ("CIRP Regulations"). The CoC has

Company Appeal (AT) (Ins.) No.89 of 2022 11

approved one of the resolution plans by the requisite majority and an application under Section 30(6) of the IBC has been filed by the undersigned for seeking approval of the Hon'ble NCLT. The application for approval of the resolution plan is pending before the Hon'ble NCLT.

In light of the aforesaid background, your e-mail and proposal was placed before the CoC for their consideration at the meeting of the CoC held on December 18, 2021.

After due discussions and deliberations on your proposal, the CoC members have instructed the undersigned to convey to you that the resolution process of the Corporate Debtor has is at a very advanced stage given that the resolution plan has already been approved by the CoC of the Corporate Debtor and the CoC approved resolution plan is pending before the Hon'ble NCLT for its consideration. In view of the aforesaid, the CoC of the Corporate Debtor would not be able to consider your proposal at this stage.

Please note that the CoC and the undersigned shall always act in accordance with applicable laws and regulations and any directions from the Hon'ble NCLT or any other appropriate court or tribunal."

14. The CoC in its meeting dated 18.12.2021 has clearly refused to consider

the plan of Respondent No.3 after over of CIRP which fact was communicated

by the Resolution Professional to the Respondent No.3. A perusal of the order

of the Adjudicating Authority impugned in the present Appeal indicate that

the Respondent No.3 has represented before the Adjudicating Authority that

Company Appeal (AT) (Ins.) No.89 of 2022 12

"CoC is of the view that it could be taken into consideration subject to the

outcome of this Application and directions issued by this Bench". The CoC

could not as per existing law, consider the Resolution Plan of Respondent

No.3 after approval of the plan of the Appellant and after over of the CIRP. The

Respondent No.3 did not correctly represent the correct situation before the

Adjudicating Authority which resulted in Adjudicating Authority issuing

direction to take a call and decide accordingly. The order dated 18.01.2022

does not indicate any valid reason on which CoC was directed to consider the

plan of the Respondent No.3 which was submitted after approval of the plan

of the Appellant and after close of the CIRP. A bare perusal of the order dated

18.01.2022 indicate that it was passed without even hearing the Resolution

Professional and CoC since the order itself mention "Issue notice to RP and

CoC". The Adjudicating Authority ought not to have passed an order without

hearing the affected parties. The order dated 18.01.2022 deserves to be set

aside on this ground alone.

15. Learned Counsel for the Appellant has submitted that the finality has

been attached to the Resolution Plan of the Appellant which was approved by

the CoC, which finality could not have been taken away by the impugned

order passed by the Adjudicating Authority. Learned Counsel for the

Appellant has placed reliance on the judgment of the Hon'ble Supreme Court

in "Ebix Singapore Private Limited vs. Committee of Creditors of

Educomp Solutions Limited and Another- 2021 SCC OnLine SC 707". In

the said judgment, the Hon'ble Supreme Court held that Resolution Plan even

prior to the approval of the Adjudicating Authority is binding inter se the CoC

Company Appeal (AT) (Ins.) No.89 of 2022 13

and the successful resolution applicant. Para 132 of the judgment is as

follows:-

"132. While the above observations were made in the context of a scheme that has been sanctioned by the Court, the Resolution Plan even prior to the approval of the Adjudicating Authority is binding inter se the CoC and the successful Resolution Applicant. The Resolution Plan cannot be construed purely as a 'contract' governed by the Contract Act, in the period intervening its acceptance by the CoC and the approval of the Adjudicating Authority. Even at that stage, its binding effects are produced by the IBC framework. The BLRC Report mentions that "[w]hen 75% of the creditors agree on a revival plan, this plan would be binding on all the remaining creditors". The BLRC Report also mentions that, "the RP submits a binding agreement to the Adjudicator before the default maximum date". We have further discussed the statutory scheme of the IBC in Sections I and J of this judgement to establish that a Resolution Plan is binding inter se the CoC and the successful Resolution Applicant. Thus, the ability of the Resolution Plan to bind those who have not consented to it, by way a statutory procedure, indicates that it is not a typical contract."

16. The CoC having approved the plan of the Appellant had rightly taken a

decision on 18.12.2021 to communicate the Respondent No.3 that plan of

Respondent No.3 cannot be considered. In "Ebix Singapore Private

Limited" (supra), the Hon'ble Supreme Court has emphasised on the

timeline. It was held that the CIRP is a time bound process with a specific aim

Company Appeal (AT) (Ins.) No.89 of 2022 14

of maximizing the value of assets. In para 146, following observations have

been made:-

"146. The CIRP is a time bound process with a specific aim of maximizing the value of assets. IBC and the regulations made under it lay down strict timelines which need to be adhered to by all the parties, at all stages of the CIRP. The CIRP is expected to be completed within 180 days under Section 12(1) of the IBC. In terms of sub-Section (2) and (3) of Section 12, an extension can be sought from the Adjudicating Authority for extending this period up to 90 days. The first proviso to Section 12(3) clarifies that such an extension can only be granted once. In Arcelor Mittal (India) (P) Ltd. v. Satish Kumar Gupta93, this Court had held that the time taken in legal proceedings in relation to the CIRP must be excluded from the timeline mentioned in Section 12. Since this could (2019) 2 SCC 1, para 86 PART I extend the CIRP indefinitely, the Insolvency and Bankruptcy Code (Amendment) Act 2019, inserted a second proviso to Section 12(3) with effect from 16 August 2019 to state that the CIRP in its entirety must be mandatorily completed within 330 days from the insolvency commencement date, including the time taken in legal proceedings. A legislative amendment that takes away the basis of a judicial finding is indicative of the strong emphasis of the IBC on its timelines and its attempt to thwart the prospect of stakeholders engaging in multiple litigations, solely with the intent of causing undue delay. Delays are also a cause of concern because the liquidation value

Company Appeal (AT) (Ins.) No.89 of 2022 15

depletes rapidly, irrespective of the imposition of a moratorium, and a delayed liquidation is harmful to the value of the Corporate Debtor, the recovery rate of the CoC and consequentially, the economy at large."

17. Further in para 249, the Hon'ble Supreme Court noticed the cause for

deviation of the original objective and timeline for CIRP. It was also noticed

that "late and unsolicited bids by Resolution Applicants after the original

bidder becomes public upon passage of the deadline for submission of the

plan' is a reason for deviation of the original objective and timeline. In para

249, following has been stated:-

"249. In its observations, the Report noted that a delay in the resolution process with more than seventy-one per cent cases pending for more than 180 days is in deviation of the original objective and timeline for CIRP that was envisaged by the IBC129. The delays were attributable to: (i) the NCLT taking considerable time in admitting CIRPs;

(ii) late and unsolicited bids by Resolution Applicants after the original bidder becomes public upon passage of the deadline for submission of the Plan; and (iii) multiplicity of litigation and the appellate process to the NCLAT and the Supreme Court130. Such inordinate delays cause commercial uncertainty, degradation in the value of the Corporate Debtor and makes the insolvency process inefficient and expensive. We urge the NCLT and NCLAT to be sensitive to the effect of such delays on the insolvency resolution process

Company Appeal (AT) (Ins.) No.89 of 2022 16

and be cognizant that adjournments hamper the efficacy of the judicial process. The NCLT and the NCLAT should endeavor, on a best effort basis, to strictly adhere to the timelines stipulated under the IBC and clear pending resolution plans forthwith.

Judicial delay was one of the major reasons for the failure of the insolvency regime that was in effect prior to the IBC. We cannot let the present insolvency regime meet the same fate."

18. In view of the law laid down by the Hon'ble Supreme Court in the above

case, we are of the considered opinion that there is no valid reason given by

the Adjudicating Authority for permitting the consideration of plan of

Respondent No.3. The consideration of the Resolution Plan of Respondent

No.3 shall be breaching both timeline as well as the finality of the Resolution

Plan of the Appellant which was approved by the CoC on 26.08.2021.

19. Learned Counsel for the Appellant has also relied on the judgment of

this Tribunal in "Chhatisgarh Distilleries Ltd. vs. Dushyant Dave

(Resolution Professional of Anand Distilleries Pvt. Ltd.)- 2020 SCC

OnLine NCLAT 1078". In the above case also, after approval of the Resolution

Plan, the Application filed by Chhatisgarh Distilleries Ltd. for direction to

submit its Resolution Plan which was rejected by the Adjudicating Authority.

In paras 6 and 7 of the judgment, following has been noticed:-

"6. Appellant Chhatisgarh Distilleries Ltd (i.e. A-1) filed an application (MA No. 602/2019) under section 60(5) of I&B Code before Adjudicating Authority on 5.11.2018 seeking direction to submit its resolution plan for consideration of the resolution

Company Appeal (AT) (Ins.) No.89 of 2022 17

professional and COC under Section 30(3) of I&B Code. It is stated that once the plan is submitted before the Adjudicating Authority then the CIRP period stopped running and thus the A-1's application be considered as filed within the subsistence of the CIRP period. It is also stated that the A-1 shall invest approximately Rs.52.50 crores which consists of Rs.35.60 crores towards liability of the corporate debtor and Rs.12.90 crores towards capital investment for upgradation of the plant of the corporate debtor and Rs. 4 crores towards working capital for the corporate debtor.

7. After elaborate discussions, Adjudicating Authority rejected the application on two grounds, firstly the A-1 has come after the submissions of approved resolution plan to the Adjudicating Authority and secondly the COC or RP has not sought any relief to recall the approved resolution plan and for allowing them to reconsider the approved resolution plan along with the new resolution plan offering better value. Adjudicating Authority suo moto cannot direct the COC to consider the new resolution plan and re-consider the already approved resolution plan. As the decision of the COC accepting or rejecting the resolution plan is limited to the grounds mentioned in Section 30(2) and purely commercial decision of COC cannot be adjudicated by the Adjudicating Authority. Thus Adjudicating Authority rejected the application of the A-1, and approved the plan by the impugned order".

Company Appeal (AT) (Ins.) No.89 of 2022 18

20. This Tribunal after noticing the judgment of the Hon'ble Supreme Court

in "Committee of Creditor of Essar Steel India Ltd. vs. Satish Gupta-

2019 SCC OnLine SC 1478" made following observations in para 17:-

"17. In the light of the above pronouncement of Hon'ble Supreme Court, we have examined the issues raised in these Appeals. Admittedly, the A-1 filed its resolution plan before the Adjudicating Authority on 13.02.2019 whereas, the last date for submission of Resolution Plan before RP was 15.10.2018. Resolution plan of successful Resolution Applicant i.e. Dera Finvest Pvt. Ltd. (R2) was approved by 98.72 % of the Committee of Creditor in e-voting conducted on 01.11.2018 and 02.11.2018. When the Resolution Plan is filed before the Adjudicating Authority then the Authority has to satisfy that the Resolution Plan approved by the Committee of Creditor fulfills the requirements as specified in Sub-Section 2 of Section 30. However, the Adjudicating Authority cannot direct the CoC to consider the second Resolution plan submitted before the Authority although the second Resolution Applicant is ready to invest more amount in comparison to first Resolution Applicant. Learned Adjudicating Authority has rightly held that Adjudicating Authority cannot suomotu direct the CoC to consider new resolution plan and reconsider already approved Resolution plan. The Hon'ble Supreme Court in the above referred judgment held that under Section 30(2) of I&B Code, decision of Committee of Creditor is purely Commercial and cannot be adjudicated by the

Company Appeal (AT) (Ins.) No.89 of 2022 19

Adjudicating Authority. Thus, we are of the view that Adjudicating Authority is well within its jurisdiction while rejecting the application of A-1".

21. The law laid down by this Tribunal in the above case fully supports the

submissions of the Counsel for the Appellant.

22. Shri Darius Khambata, Learned Senior Counsel sought to distinguish

the above judgment in the facts of the present case. It is submitted that the

case in "Chhatisgarh Distilleries Ltd." (supra) is a case where the

Adjudicating Authority has rejected the plan whereas present is a case where

the Adjudicating Authority has allowed Application and the CoC as has now

been submitted before this Tribunal is willing to consider the Resolution Plan

of the Respondent No.3.

23. As noted above, the CoC in its meeting dated 18.12.2021 has declined

to consider the Resolution Plan which was also communicated to Respondent

No.3 by Resolution Professional. During the hearing before this Tribunal, after

passing of the impugned order dated 18.01.2022, the fact that the CoC is now

willing to consider the plan of the Respondent No.3 does not in any manner

shall take away the finality of plan of Appellant approved by the CoC.

24. Learned Counsel for the Respondent No.3 has also emphasised that the

commercial wisdom of the CoC cannot be questioned by the Appellant. The

present is not a case where issue of commercial wisdom of the CoC regarding

approval or disapproval of the plan is under consideration. In exercise of

Company Appeal (AT) (Ins.) No.89 of 2022 20

commercial wisdom, CoC has already approved the plan of the Appellant in

its meeting dated 26.08.2021 on the basis of voting share of 98.55%.

25. Learned Counsel for the Respondent No.3 has emphasized that the plan

which is being submitted by Respondent No.3 is of much higher value and is

favourable to the Corporate Debtor. After approval of the Resolution Plan by

the CoC by requisite vote and after expiry of CIRP, it is not open for the CoC

to contend that it is ready to consider the plan of Respondent No.3 which

according to it may be better plan.

26. Another judgment of this Tribunal has been relied by the Learned

Counsel for the Appellant is "Kalinga Allied Industries India Pvt. Ltd. vs.

Hindustan Coils Ltd.- 2021 SCC OnLine NCLAT 51" where one of the

question framed was "Whether the Adjudicating Authority can direct the CoC

to consider the Resolution Plan of a person who was not part of CIRP?". The

said question no. (ii) is answered in paras 15, 16 & 17 in following words:-

"Issue No. 2.

15. In pursuant to the expression of interest issued by RP on 24.08.2018 the Appellant submitted a Resolution Plan. After several rounds of deliberation by the COC revised Resolution Plan was submitted by the Appellant on 19.12.2018. The same was approved on 28.12.2018 by the COC in the 13th meeting by requisite majority. Thereafter, the RP filed an Application under Section 30 (6) of the I&B Code for approval of Resolution Plan in the month of January, 2019 and sometime in the month of February, 2020 the Respondent No. 1 filed an

Company Appeal (AT) (Ins.) No.89 of 2022 21

Application seeking direction for consideration of its Resolution Plan. Admittedly the Respondent No. 1 has not submitted any Resolution Plan pursuant to the expression of interest issued by the RP. Thus, the Respondent No. 1 is not part of CIRP. The Respondent No. 1 has filed Application directly before the Adjudicating Authority. The Adjudicating Authority in the guise of maximization of the value of assets of the Corporate Debtor directed that the Respondent No. 1's Application and Resolution Plan be put up before the COC for consideration. There is no provision in the code or regulation which provides that while exercising the power under Section 31 of the I&B Code the Adjudicating Authority can direct the COC to consider the Resolution Plan of such person who has not been part of CIRP. Otherwise also if such procedure is adopted then the CIRP will be frustrated. Once the Resolution Plan has been opened and fundamentals and financials of the Plan and offer made therein were disclosed to all the participants including RP. Then anyone can enhance its offer before the Adjudicating Authority in the guise of maximization of realisation. Therefore, no further fresh bid or offer could have been accepted or considered as held by this Appellate Tribunal in the case of Kotak Investment Advisors Ltd. (Supra) (See Para 23)

16. This Appellate Tribunal in the case of Chhatisgarh Distilleries Ltd. Vs. Dushyant Dave & Ors. Company Appeal (AT) (Ins) No. 461 of 2019 in the light of the pronouncement of Hon'ble Supreme Court in the case of Committee of Creditors Essar

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Steel India Ltd. Vs. Satish Gupta & Ors. 2019 SCC Online SC1478 held that:

"In the light of the above pronouncement of Hon'ble Supreme Court, we have examined the issues raised in these Appeals. Admittedly, the A-1 filed its resolution plan before the Adjudicating Authority on 13.02.2019 whereas, the last date for submission of Resolution Plan before RP was 15.10.2018.

Resolution plan of successful Resolution Applicant i.e. Dera Finvest Pvt. Ltd. (R2) was approved by 98.72 % of the Committee of Creditor in e-voting conducted on 01.11.2018 and 02.11.2018. When the Resolution Plan is filed before the Adjudicating Authority then the Authority has to satisfy that the Resolution Plan approved by the Committee of Creditor fulfils the requirements as specified in Sub-

Section 2 of Section 30. However, the Adjudicating Authority cannot direct the CoC to consider the second Resolution plan submitted before the Authority although the second Resolution Applicant is ready to invest more amount in comparison to first Resolution Applicant. Learned Adjudicating Authority has rightly held that Adjudicating Authority cannot suomotu direct the CoC to consider new resolution plan and reconsider already approved Resolution plan. The Hon'ble Supreme Court in the above referred judgment held that under Section 30(2) of I&B Code, decision of Committee of Creditor is purely Commercial and cannot be adjudicated by the

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Adjudicating Authority. Thus, we are of the view that Adjudicating Authority is well within its jurisdiction while rejecting the application of A-1."

17. With the aforesaid, we are of the considered view that Ld. Adjudicating Authority has erroneously entertained the Application and Resolution Plan of the Respondent No. 1 and directed the RP to put up the same before the COC for consideration."

27. The above judgment fully supports the submission of the Learned

Counsel for the Appellant. It is also submitted by Respondent No.3 that the

Resolution Plan which is submitted by the Appellant was beyond 19.04.2021

which was last date for submission fixed by CoC. The Resolution Professional

in its reply has categorically stated that the plan was received on 24.04.2021.

It has been stated that the CoC has extended the last date for submission of

Resolution Plan from time to time. The Resolution Professional sent an e-mail

on 03.05.2021 to the Appellant that CoC has decided to consider the

Resolution Plan of the Appellant and further CoC has granted one-time

opportunity to all Resolution Applicants in the final list to submit a Resolution

Plan or a revised plan till 09.05.2021.

28. In view of the above decision of the CoC, there is no substance in the

submission of the Counsel for the Respondent No.3 that plan of Appellant was

also not submitted within the time fixed. We, thus, are of the view that there

was no valid reason indicated in the order of the Adjudicating Authority dated

18.01.2022 for permitting the CoC to consider the Resolution Plan of the

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Respondent. The impugned order dated 18.01.2022 is unsustainable and

deserves to be set aside. We allow the Appeal and set aside the order dated

18.01.2022 and reject the Application I.A. No. 43 of 2022. The parties shall

bear their own costs.

[Justice Ashok Bhushan] Chairperson

[Dr. Alok Srivastava] Member (Technical)

[Shreesha Merla] Member (Technical)

New Delhi Anjali

Company Appeal (AT) (Ins.) No.89 of 2022