Vijay Kumar Singh vs Anil Kumar & Ors

Shri Vijay Kumar Singh, Shareholder/Director M/s. Newgen Speciality Plastics Limited S/o Sh Jodhan Singh Flat No. 263, Gail Apartment, Sector - 62, Noida Gautam Buddhnagar Uttar Pradesh - 20130 .....Appellant.

Versus

1. Shri Anil Kumar, Liquidator M/s. Newgen Speciality Plastics Limited 303, CGHS Limited, Golf Course Road, Plot No. 64, Sector 55, Gurgaon, Haryana - 122011 .....Respondent No. -1

2. Punjab National Bank, (Substituted Oriental Bank of Commerce) (Member of CoC) B-31, Sector 62, Noida Staff Training Centre, Uttar Pradesh - 201301 .....Respondent No. -2

3. Export-Import Bank of India (Exim Bank) (Member of CoC) Block Tower 1.7 Floor, Adjacent Ring Road, Opposite AIIMS, Kidawi Nagar East New Delhi - 110023 .....Respondent No. -3 2

4. Hero Fincorp, (Member of CoC) 09, Basant Lok, Vasant Bihar, New Delhi - 110057 ....Respondent No.-4

5. Intec Capital Limited (Member of CoC) 708, Manjusha Building 57 Nehru Place, New Delhi - 110019 ....Respondent No. -5

6. HDFC Bank Limited, (Member of CoC) Plot-31, Najafgarh Industrial Area Tower - A, First Floor, Shivaji Marg New Delhi - 110015 ....Respondent No. 6

7. M/s. Dynamic Star Security & Allied Services, Village Sutiyana, PO- Kulsera, Dist. Guatam Budh Nagar, Uttar Pradesh ...Respondent No. - 7/ Operational Creditor Advocates:

For Appellant: Mr. Gautam Singhal and Mr. Rajat Choudhary, Advocates.

For Respondent: Mr. Rajendra Kumar Beniwal and Mr. Anil Kumar, Advocates for R-1 (Liquidator). Mr. Chirag Gupta and Mr. Kumar Sumit, Advocates for R-1. Mr. Durgesh Agarwal, Mr. Piyush Beriwal, Mr. Ankit Raj, Advocates for R-2. Mr. Chander Harsh, Mr. Ashish Rana and Mr. Ramesh, Advocates for R-3. Mr. Kisalay Kartikey and Ms. Kajal Bhatia, Company Appeal (AT) (Insolvency) No. 391 of 2020 3

Mr. Sanjeev Singh, Mr. Sam Panna Pani, Mr. Prashant Tripathi, Advocates for R-4. Ms. Amrita Rana, Advocate for R-5. Mr. Gurmeet Bindra, Advocate for R-6. Ms. Amita, Mr. Sampurna Gupta, Advocate.

JUDGMENT

A.I.S. Cheema, J.

1. This Appeal has been filed by the Appellant, Director of the Corporate

Debtor (M/s. Newgen Speciality Plastics Ltd.). The Appeal has been filed

against Impugned Order dated 06th January, 2020 passed by Adjudicating

Authority (NCLT, New Delhi, Bench - III) at New Delhi in C.P.(IB) No.

1251/ND/2018, in the matter of "M/s. Dynamic Star Securities & Allied

Services Vs. M/s Newgen Speciality Plastics Ltd."

2. By the Impugned Order, the Adjudicating Authority rejected the C.A.

No. 962/C-III/ND/2019 filed by Oriental Bank of Commerce (Now, Punjab

National Bank) and Others against Respondent No. 1, Amit Kumar

(Resolution Professional), (Now, Liquidator).

3. By the same order, the Adjudicating Authority accepted C.A. No.

452/C-III/ND/2019 filed by the Resolution Professional (Now, Liquidator)

seeking order of liquidation of the Corporate Debtor.

4. The Present Appeal has been filed by the Appellant Director of the

Suspended Board of the Corporate Debtor seeking direction to set aside the

Company Appeal (AT) (Insolvency) No. 391 of 2020 4

impugned order and prays that the Resolution Plan, copy of which has been

filed with Appeal should be considered and accepted by the CoC.

Case of Appellant in short

5. In short the Appeal claims that the Corporate Debtor was engaged in

exporting of products which deal with the manufacture of plastic products;

the Company got best MSME awards. On 19.11.2018, Application under

Section 9 of Insolvency and Bankruptcy Code, 2016 (in short IBC) filed by

M/s. Dynamics Star Security & Allied Services against the Corporate Debtor

was admitted. Earlier, one IRP Mr. Rajesh Parekh was appointed and

subsequently the CoC appointed the Respondent No.-1 as RP. The Appellant

claims that during the period of CIRP, Promoters secured orders and

executed orders worth Rs. 3.4 Crores. It is claimed that the Respondent No.

1/Resolution Professional himself presented that the loss during CIRP

period from middle of November to March was Rs. 14 Lacs at an average of

Rs. 10 Lacs per month whereas loss for the month of March had come down

to Rs. 5.8 Lacs; that it will be made profitable if the operations were

continued but, according to the Appellant, Respondent No. 1 however with

ulterior motive and mala fide intention presented the case that it would not

be viable to run the unit.

6. Respondent No. 1 presented CIRP expenses for two months of July

and August, at approximately Rs. 50 lacs and Rs. 25 lacs. The Appellant

claims that if the losses were gradually coming down why Respondent No. 1,

instead of raising interim finance to run the unit, decided to close the unit.

Company Appeal (AT) (Insolvency) No. 391 of 2020 5

7. The Appellant claims that Respondent No. 1 distorted and

misrepresented the facts to CoC that liquidation is only the alternative. It is

claimed that the Adjudicating Authority has not appreciated the documents

presented by the Respondent No.1, properly.

8. It is argued by the Appellant that the Respondent No. 1 filed

Application under Section 30 (2) of IBC with mala fide intention to force C.D.

into liquidation. The Corporate Debtor had 56 employees and orders worth

Rs. 12 crores and ready infrastructure. It is argued that Oriental Bank of

Commerce (Now, PNB) conducted extensive forensic audit before CIRP

started which audit showed that the project is viable subject to infusion of

fresh equity. At the time of arguments, Learned Counsel for the Appellant

stated that the Corporate Debtor with the help of Ex-Director could have

become profitable and was moving towards profitability but Respondent No.

1 suddenly stopped operations from April, 2019. Respondent No. 1 did not

pay the suppliers, workers and employees on time intentionally and kept

withdrawing his fees and expenses. The Information Memorandum prepared

was also with wrong data. The CoC belatedly realized intention of

Respondent No. 1 and conducted Joint Lenders' meeting on 25th November,

2019 and sought replacement of Respondent No. 1 as Resolution

Professional. The Appellant has referred to Reply of Respondent No. 4 /Hero

Fincorp, member of CoC to submit that Respondent No. 4 has supported the

CoC for removal of Respondent No.1.

9. The Appellant has argued that the Appellant can still give Resolution

Plan for revival of Corporate Debtor and has given a settlement proposal

Company Appeal (AT) (Insolvency) No. 391 of 2020 6

under Section 230 of the Companies Act, 2013 to the members of CoC as

presently the Company is under Liquidation. The Appellant wants

liquidation order to be set aside. The Appellant has referred section 27 of

IBC and argued that CoC decided that the RP should be replaced. RP is

required to be replaced.

Case of Respondent No. 1 (then R.P.-now Liquidator) in short

10. Against this, the Respondent No.1 then RP (now Liquidator) has

referred to Reply filed and the case put up before the Adjudicating Authority

to submit that the Respondent No. 1 had faced non-cooperation from the

Appellant who made efforts to sabotage the entire Resolution Process. The

Counsel for Respondent No. 1 referred to Reply to show that the Corporate

Debtor was in bad financial position and Respondent No. 1 took all

necessary steps under provisions of law to try to keep the Corporate Debtor

as a going concern. It is argued that the working capital of the Company

depleted to the tune of Rs. 19.99 crores which was shown in the inventory

towards procurement and development of moulds. According to Respondent

No. 1 the Appellant took orders when Appellant was knowing that the

working capital of the Company was depleting and company was in loss.

11. It is argued that the allegations of Appellant that the Respondent No.

1 did not take appropriate steps to keep the Corporate Debtor as a going

concern, was concocted story. It is stated that 4th CoC meeting clearly

showed that the Corporate Debtor was incurring loss in a recurring manner

Company Appeal (AT) (Insolvency) No. 391 of 2020 7

and that the Appellant along with other promoters deliberately took orders

from the market while being completely aware of the fact that the working

capital of the Company was not even sufficient to achieve the break even

sales. Referring to the Reply, it is argued that it has been categorically

recorded in second, third and fourth CoC meetings that Corporate Debtor

was incurring huge loss on daily basis and working capital of the corporate

Debtor was steadily decreasing. The Respondent No. 1 has argued that CoC

was mainly responsible for taking commercial decisions and the members of

CoC were sent Notice of meeting fixed on 19th June 2019, in advance having

Item No. 9 with regard to taking decision regarding liquidation. It is argued

that the CoC wrongly claimed before the Adjudicating Authority that

Respondent No. 1 made misrepresentation of facts and that it did not

understand the decision they were taking. Reference is made to Minutes at

page 340 @ 362 of the Appeal Paper Book, which is part of Minutes of 5th

CoC meeting dated 19th June 2019 where CoC recorded that although they

could physically cast their votes on the items of the agenda but as important

decisions were to be taken, they might require prior approval of the

concerned authorities of their organisation and insisted on e-voting.

Respondent No. 1 has argued that accordingly e-Voting took place and

reference is made to Summary of the decision taken by way of e-Voting Page

367. It is argued that CoC had no ground to claim before Adjudicating

Authority that it had no idea of procedure or that Resolution dated

19.06.2019 was based on misrepresentation.

Company Appeal (AT) (Insolvency) No. 391 of 2020 8

12. According to the Respondent No. 1 Minutes of 5thMeeting show that

Resolution regarding liquidation was duly approved by the RP was approved

by CoC.

Case of other Respondents (Members of CoC)

13. The Respondent No. 2 OBC Bank (Now PNB) having 66.79 % voting

share in the Committee of Creditor has filed written submissions and argued

that the Corporate Debtor was a loss making entity and accumulated ever

increasing losses since 2015-2016. It is argued that no Resolution Plan was

received by CoC within stipulated time of 180 days which ended on 17th

May, 2019. However, the consortium of two directors of the Corporate

Debtor which included the Appellant along with a third party, assured CoC

to grant sometime to submit Resolution Plan. As such CoC decided to grant

further time to Consortium including Appellant and sought extension of

time for CIRP before the Adjudicating Authority. The Adjudicating Authority

by order dated 23rd May 2019 granted extension of 90 days which was

ending on 16th August, 2019. Respondent No. 2/PNB has argued that

several opportunities were granted for submission of Resolution Plan but no

Resolution Plan was submitted and therefore CoC in the 5th meeting held on

19th June 2019 resolved:

(a) by way of last opportunity, the consortium of two directors of the

Corporate Debtor along with a third party was granted a final opportunity to

submit a Resolution Plan by 21st June 2019;

Company Appeal (AT) (Insolvency) No. 391 of 2020 9

(b) If any Resolution Plan is not submitted by 21st June 2019,

appropriate proceedings to be initiated for liquidation of corporate Debtor.

14. According to the Respondent No. 2, no Resolution Plan was submitted

by 21st June 2019 and therefore CoC requested RP to proceed as per agenda

to liquidate the corporate Debtor through e-Voting which was resolved with

100 % voting share to initiate appropriate proceedings for liquidation of the

Corporate Debtor.

15. It is argued that accordingly on 1st July, 2019, Respondent No. 1 filed

CA No. 452 of 2019 under Section 33 (2) of IBC with Respondent No. 1 to be

appointed as Liquidator if the Application is allowed.

16. Respondent No. 2 has then argued that subsequently members of CoC

called Joint Lenders' Meeting on 20th November, 2019 and decided that an

application should be filed before the Adjudicating Authority under Section

27 of IBC for removal of Respondent No. 1 as Resolution Professional which

was recorded in the Joint Lenders' Meeting. However, the Adjudicating

Authority did not agree and appointed the Respondent No. 1 as Liquidator.

The grievance of Respondent No. 2 is that in view of the decision taken in

Joint Lenders' Meeting, Respondent No. 1 should not have been appointed

as Liquidator.

17. Respondent No. 3 (Export Import Bank of India) who was another

member of CoC has also filed written submissions and argued that when

Expression of Interest was called, only two EoI were received. One, from a

reconstruction company M/s. Prudent ARC Limited, and, another was from

Company Appeal (AT) (Insolvency) No. 391 of 2020 10

Consortium comprising of the Appellant V.K. Singh, with Mr. SK Singh,

directors of the Corporate Debtor and M/s. Air Touch Technology Pvt. Ltd.

Subsequently, the first Resolution Applicant M/s. Prudent ARC Ltd. sent

letter that they do not have any viable Resolution Plan. The Consortium

consisting of the Appellant informed that they are yet to submit relevant

information on the consortium and the queries raised. Respondent No. 3

has argued that CoC decided to give them chance by submitting relevant

documents and Resolution Plan by 25th May 2019 and extension of time was

sought from Adjudicating Authority under Section 12 of IBC. On 19th June

2019, the 5th CoC meeting was conducted wherein request for time for

prospective Resolution Plan till 30th June 2019 was discussed. CoC was not

inclined to grant extension but on persistent demand, CoC agreed to grant

extension of time till 21st June 2019 to submit a Resolution Plan. Till the

stipulated time, no Resolution Plan was received. As there was no resolution

plan, CoC opined to initiate liquidation process of the Corporate Debtor and

CoC passed Resolution dated 19th June, 2020 to take Corporate Debtor into

Liquidation. The RP was directed to submit an appropriate Application for

seeking liquidation of the Corporate Debtor. The Respondent No. 3

submitted that at the request of members e-Voting was conducted on 22nd

June, 2019 and 24th June, 2019. However, Respondent No. 3 further argued

that subsequently Joint Lenders' Meeting took place on 25th November,

2019 and Financial Creditors noted the losses caused to the Financial

Creditors as a result of CIRP costs and sought replacement of the Resolution

Professional. The Application filed in this regard on 16th December, 2019

came to be rejected by Impugned Order. This Respondent No. 3 also agrees Company Appeal (AT) (Insolvency) No. 391 of 2020 11

that as in requisite time, no Resolution was received, the liquidation Order

was required to be passed. However, this Respondent also (like P.N.B.),

wants the present Liquidator Respondent No. 1 to be changed.

18. Respondent No. 4 has also filed written Submissions and argued that

Respondent No. 1 misrepresented the fact by quoting wrong figures and

suppressed the material to make contradictory statements with the object of

pushing the company into liquidation. Respondent No. 4 has claimed that

Respondent No. 1 suppressed material facts and induced CoC to vote for

Liquidation. This Respondent wants the Respondent No. 1 to be substituted

by another insolvency professional.

19. The Learned Counsel for Respondent No. 6 has also supported the

other Respondents for change of the Respondent No. 1 as by another

professional.

Reasonings and Findings

20. We have heard the Learned Counsel for both the sides and perused

the record.

21. Regarding Liquidation Order passed, the impugned order shows that

Counsel for CoC submitted that CoC had no idea about the procedure to be

followed for conducting the CoC and the Resolution that came to be passed

by CoC on 19th June 2019 was passed on misrepresentation. Before the

Adjudicating Authority, the Respondent No. 1 supported the decision taken,

by pointing out the record and Adjudicating Authority held that the Counsel

for CoC failed to prove that CoC had lack of knowledge. Consequently, the

Company Appeal (AT) (Insolvency) No. 391 of 2020 12

Application filed by CoC (which was actually for replacement of Respondent

No. 1) came to be dismissed. As regards, the Application filed by then RP for

Liquidation, the Adjudicating Authority in Paragraphs 4 to 9 of Impugned

Order observed as under:

"4. In the 2nd COC meeting held on 20.02.2019, after deciding the eligibility criteria for prospective resolution applications in terms of Section 25(2) of the IBC, it was agreed that Form-G in the instant matter should be published in all India edition of a widely circulated newspaper, keeping in mind the pan-India nature of clientele of CD. It was further noted that in view of non- availability of working capital to run the CD, the RP put the proposal to raise Interim Finance before the CoC, but it did not get approved. The RP received two Expression of Interest (EOI) i.e. one from Mr.VK Singh and Mr. SK Singh (directors of CD) & M/s. Air Touch Technologies Pvt. Ltd and after this no further EoI(s) were received by the applicant.

5. In 3rd meeting of the CoC, held on 16.04.2019, the sole resolution applicant i.e. consortium of directors of CD and M/s. Air Touch Technologies Pvt. Ltd. sought extension for submitting their resolution plans.

6. In 4th meeting of the COC held on 13.05.2019, again the sole consortium sought extension of time for submitting their resolution plan. The minutes of COC clearly indicate the non-cooperation on the part of the suspended board of directors.

7. On 25.05.2019, Mr. SK Singh (Director) the proposed Resolution applicant of the CD sent email to RP requesting

Company Appeal (AT) (Insolvency) No. 391 of 2020 13

to further extend the time period for submitting a resolution plan.

8. In 5th meeting of the COC held on 19.06.2019, the chairman shared the complete background giving trails of events as to haw the directors of the company have been accommodated by the COC to submit a resolution plan. Directors who were eligible and allowed to submit a Resolution Plan by 25.05.2019, were given an extension till 06.06.2019, were given an extension till 06.06.2019 for submission of resolution plan as requested. But no resolution plan has been submitted by the directors even after the extended period of time. Thus, Oriental Bank of Commerce, the key lender having 67% of the voting share declined to approve further extension of time to the prospective resolution applicants. Lastly, the COC members resolved to allow the directors to submit a resolution plan in respect of CD to the RP latest by 21.06.2019. As no resolution plan was received by the last stipulated date, the COC members requested the RP to proceed as per agenda to liquidate the company and put the resolution for e-voting.

9. Since no resolution plan was submitted till the extended period of time, the resolution for liquidation was passed unanimously through e-voting with 100% voting rights by the CoC, which is extracted below-

"Resolved that the appropriate application under Section 33 (1) (a) of the IBC , 2016 for initiation of Liquidation of Newgen Speciality Plastics Limited, CD undergoing corporate insolvency resolution process be filed before the Hon'ble National Company Law Tribunal and its Resolution Professional, CA Anil Kumar having IBBI

Company Appeal (AT) (Insolvency) No. 391 of 2020 14

registration number IBBI Registration Number IBBI/IPA- 001/IP-P00144/2017-2018/10308 be appointed as the liquidator for the company the Liquidator's fee as prescribed in the fee table under Regulation 4 (3) of the IBBI (liquidation process) Regulations, 2016 be and is hereby ratified."

9. Since no Resolution Plan is received by this Authority under Sub-section (6) of Section 30 of the IBC, 2016, before the expiry of the maximum period of the Corporate Insolvency Resolution Process, the CD has to be ordered for Liquidation."

For such reasons, the Liquidation Order came to be passed.

22. Regarding liquidation order which has been passed, although, the

Appellant has made various allegations against the Respondent No. 1 to

claim that the Losses being incurred by the Corporate Debtor were coming

down and thus it was possible to make corporate debtor profitable, the

Resolution Professional (Respondent No. 1) has pointed out that keeping the

Corporate Debtor as a going concern was incurring more losses. The

Appellant wants to claim that Appellant procured fresh orders for supply.

However, the Respondent No. 1 is pointing out that although the Corporate

Debtor was incurring losses and the Appellant was aware that the working

capital of the company were not sufficient to achieve the break even sales,

still the Appellant took Orders. Reply filed shows that there are allegations

of Respondent No. 1 against the Appellant and other promoters of the

company regarding non-cooperation. The Appellant does not appear to have

taken up these issues before the Adjudicating Authority when question of

Company Appeal (AT) (Insolvency) No. 391 of 2020 15

passing of liquidation order came up. In fifth CoC meeting dated 19.06.2019

(Page 340) these Minutes were approved. Once CIRP is initiated the

management vests with the IRP/RP and under Section 20 the IRP/RP is to

keep the company as a going concern. Thus, Appellant could not have acted

in a manner not agreed to by the Resolution Professional and get Orders

when Resolution Professional did not agree. Record shows non-cooperation

by Directors & Respondent No. 1 placed facts before CoC. If there was

grievance, it should have been taken up with CoC by the Appellant. The

arguments of the Respondent No 2 show that the Corporate Debtor was a

loss making entity and had accumulated ever increasing losses since 2015 -

2016. For such reasons, we are not impressed by the arguments made by

the Learned Counsel for the Appellant that Respondent No. 1 should have

kept the Corporate Debtor as going concern even if it was incurring loss.

23. Minutes of 4th CoC dated 13.05.2019 (Appeal Page 300 @ page 303)

has item No. A 5 relevant parts of which read as under:

"Books and other information of the Corporate Debtor

The members were informed that even now, the books of accounts and data base of the Corporate Debtor claimed to be scattered among various consultants employed by the Company in the past have still not been made available to the RP despite repeated request. The Directors had undertaken in the previous CoC meeting that they would provide the necessary documents to the Transaction Authority by 26.04.2019. However, the record finally provided by them on 30.04. 2019 when compiled and cross-verified by the RP, was

Company Appeal (AT) (Insolvency) No. 391 of 2020 16

found to be incomplete or unsatisfactory. Accordingly, upon request due to administrative difficulty, the RP has allowed them last opportunity to provide the requisite information to his satisfaction by 20.05.2019 positively.

Book Debts

As was brought to the notice of the members of the CoC in the previous CoC meeting, high values of book debts have been written off the CD in the previous financial year.

In the Financial Year 2017-18, after writing book debts of nearly Rs. 16.18 Crores the total book debts outstanding in the balance sheet is Rs. 8.67 Crores. It was claimed in the books of the CD that only Rs. 1.25 Crore out of the total Book Debts of Rs. 7.43 Crores as on 30.04.2019 was recoverable. The Directors have till date not been able to provide the complete required information to ascertain their recoverability."

..................................................................

"Operations of the CD

As explained in Item A10 and A11 below, the members were informed that contrary to the sales level of Rs. 80 lakhs for the month of March, 2019 expected to be achieved by the Directors which would have been sufficient to recover fixed cost of the CD, the company has continued to incur cash losses in the month.

Similarly, in the month of April, 2019, only sales of Rs. 12,28,239/- have been achieved mainly due to non- availability of working capital. In light of these circumstances, and the details mentioned in Item A 10

Company Appeal (AT) (Insolvency) No. 391 of 2020 17

and Item A 11 below, the RP after taking required inputs from the Directors has taken a conscious business decision to temporarily suspending the operations of the Corporate Debtor Members so as to avoid.

Restricting the involvement of the Directors in running the operations and entering the premises of the CD

As explained above, the Directors have not been able to provide the satisfactory explanation, records and document with regard to past transactions and current operations of the company.

It was felt that restricting the rights of the directors might bring effective control expedite submission of information and documents. Accordingly, the RP has restricted the role of the Directors in running the day to day operations of the CD by asserting that all decisions of purchase and sales would be taken by RP based on the recommendations of directors along with facts and figures."

..........................................................

"After due discussion on the steps taken by the RP and the challenges being faced by him in running the operations of the CD and conducting the instant CIRP, the members acknowledged the various points presented by him and took note of the same."

Thus, Respondent No. 1 had updated CoC about the state of Accounts

and non-co-operation and business decision to temporarily suspend

operations and CoC took note of the same. Thus, losses were gradually

Company Appeal (AT) (Insolvency) No. 391 of 2020 18

coming down is poor reason to keep going. The Allegations not having been

taken up by the Appellant before the CoC it would not be appropriate for us

to consider them in Appeal.

24. The fact remains that during the CIRP period, there was no resolution

plan received which was available for CoC to consider. As such Liquidation

Order would be unavoidable.

25. Under Section 12 of IBC in 180 days from date of admission of

application and after extension, in extended period of 90 days CIRP was

required to be concluded. According to the Respondent No. 2, the extended

period of CIRP was ending on 16th August 2019. The Respondent Nos. 2 and

3 state that because the Consortium which included the Appellant had

stated that they want to submit resolution plan, the initial extension under

Section 12 of IBC seeking another 90 days was sought and taken from

Adjudicating Authority. The record shows that in spite of giving

opportunities to the Consortium (which included Appellant) no resolution

plan was submitted and consequently in the fifth CoC meeting, CoC decided

to move for liquidation. The changed tone of Respondent No. 4, in Appeal

that Respondent No. 1 misrepresented facts or suppressed facts, in the face

of the Minutes of various meetings must be ignored as vague and after

thought.

26. The Respondent No.1 filed CA No. 452 of 2019 under Section 33 (2) on

01st July 2019 (Annexure A-11). The Liquidation order came to be passed on

06th January, 2020 by when time stated even in Second Proviso of Section

12 (3) of IBC was already over.

Company Appeal (AT) (Insolvency) No. 391 of 2020 19

27. The Appellant has added Annexure A-5 as proposed Resolution Plan

with the Appeal. We will not go into it as Resolution Plans were required to

be submitted before CoC during the CIRP period and in spite of

opportunities, the Appellant and Consortium consisting of Appellant had

failed to put up any resolution plan.

28. We do not find any error in the conclusion of Adjudicating Authority

that the liquidation order was required to be passed as no resolution plan

was submitted even in the extended period of time.

Whether Resolution Professional/Prospective Liquidator should have

been charged?

29. With regard to the Application filed by CoC having CA No. 962 of 2019

(Annexure A-12), we have seen the Application. The Application referred to

Joint Lenders' Meeting dated 25th November, 2019 and the prayer was to

replace Resolution Professional/Liquidator. The Adjudicating Authority just

referred to the argument of the Counsel for CoC that CoC did not have idea

about the procedure to be followed for conducting the CoC and the

Resolution that came to be passed by CoC on 19 June, 2019 is based on the

misrepresentation. Adjudicating Authority did not refer to the contents of

Application or Minute. It would be appropriate to refer to Minutes of the

Joint Lenders' Meeting in which the Respondent No. 1 also appears to have

been present for some time. We are not referring to the Application as

Minutes and contents of Application are not carrying the same effect as seen

in Minutes. It would be appropriate to photocopy the Minutes which are as

under:

Company Appeal (AT) (Insolvency) No. 391 of 2020 20

Company Appeal (AT) (Insolvency) No. 391 of 2020 21

Company Appeal (AT) (Insolvency) No. 391 of 2020 22

Company Appeal (AT) (Insolvency) No. 391 of 2020 23

30. The Adjudicating Authority does not appear to have referred to

contents of this meeting and rejected the CA No. 962 of 2019 because the

Advocate could not convince that CoC was ignorant about procedure and

law. The Joint Lenders' Meeting did not seek to recall decision to go for

liquidation. For reasons discussed they observed that "entire CIRP process

has not been conducted in desired way" and Resolution Professional may be

replaced.

31. The Respondent No.1 claims that such Joint Lenders' Meeting was

illegal. However, we are not going into that technicality. Under Section 27 of

IBC during pendency of CIRP Proceeding, CoC can take a decision to replace

the RP. In the present matter stage was that already RP had, on decision of

the CoC, moved Adjudicating Authority with Application CA No. 452 of 2019

for liquidation. At such stage, the decision which remained to be taken by

the Adjudicating Authority was if liquidation should be ordered and under

Section 34 (4) of IBC to appoint Liquidator and fee to be paid. Sub-Section 4

of Section 34 reads as under:

"(4) The Adjudicating Authority shall by order replace the resolution professional, if -

(a) - The Resolution Plan submitted by the Resolution Professional under Section 30 was rejected for failure to meet the requirements mentioned in sub-

section (2) of Section 30; or

Company Appeal (AT) (Insolvency) No. 391 of 2020 24

(b) - the Board recommends the replacement of a resolution professional to the Adjudicating Authority for reasons to be recorded in writing; or

(c) The resolution professional fails to submit written consent under sub-section (1)."

32. In the present matter, the Resolution Professional had already given

the written consent and sub-clause a and b of Sub-Section 4 of Section 34

did not arise.

33. The Application filed by CoC Annexure A-12 was under Section 60 (5)

of IBC read with rule 11 of National Company Law Tribunal Rules, 2016.

The Resolution Professional/Liquidator act in trust of CoC and Creditors.

Under Section 10 (3) (b) of IBC name of Resolution Professional is proposed

by Corporate Applicant at the time of initiation of CIRP. Under Section 34

the Resolution Professional subject to submission of consent is appointed

Liquidator unless replaced by Adjudicating Authority under sub-section (4).

34. In the facts and circumstances of the present matter, it would have

been more appropriate that the Adjudicating Authority should have

considered appointing any other Professional as liquidator instead of

appointing the Respondent No. 1 in the face of the Joint Lenders' Meeting

Minutes reproduced above which claimed that the lenders were of the view

that entire CIRP had not been conducted in desired way by the RP.

Liquidation Order was yet to be passed and claim of CoC could not have

been ignored under Section 27 of IBC. The interest of Financial Creditors

Company Appeal (AT) (Insolvency) No. 391 of 2020 25

and other Creditors is there even during Liquidation proceeding and it would

not be appropriate if there are doubts regarding the manner in which the

Liquidator is conducting the process. We are not sitting in judgment on the

question whether the averments made in the Joint Lenders' Meeting by the

Financial Creditors against the Respondent No. 1 are correct or not. We hold

that though delayed, when CoC had conveyed that it wanted Resolution

Professional changed and as Liquidation Order was yet not passed,

Adjudicating Authority should have first replaced Resolution Professional

and then passed Liquidation Order.

For the above reasons, we pass the following orders:

1. The liquidation order passed by the Adjudicating Authority is

maintained.

2. The Order passed by Adjudicating Authority dismissing C.A.

(AT) No. 962/C-III/ND/2019 is set aside.

3. The matter is remitted back to appoint another Insolvency

Professional as Liquidator replacing Respondent No. 1.

4. Adjudicating Authority may appoint Mr. Sandeep Kr. Bhat as

proposed by CoC as Liquidator, or may call for name of any

other Insolvency Professional from IBBI, if felt necessary by

Adjudicating Authority. The Adjudicating Authority is

requested to pass Orders for proper handing over of charge

from Respondent No. 1 to the Insolvency Professional to be

Company Appeal (AT) (Insolvency) No. 391 of 2020 26

appointed as Liquidator for replacing the Respondent No. 1.

Other orders necessary may also be passed in this regard.

5. The Appeal is disposed of accordingly.

[Justice A.I.S. Cheema] Member (Judicial)

[Kanthi Narahari] Member (Technical)

New Delhi 09th November, 2020 Basant B.

Company Appeal (AT) (Insolvency) No. 391 of 2020