Mr. G. Balasubramaniam Promoter / Suspended Director of GBJ Hotels Private Limited vs CA Mahalingam Suresh Kumar Resolution Professional
Comp App (AT)(CH) (Ins) Nos. 309 & 321/2023
Facts:
1.Appeal is filed against the order passed in IA(IBC)/493/CHE/2023 and IA(IBC)/349(CHE)/2023 dated 25.08.2023 passed by the Adjudicating Authority.
Issue: Whether the order passed is correct?
Arguments:
Appellant:
1.Counsel submitted that AA had failed to look at the ‘CIRP’, and Resolution Plan, to see if the laudable objectives of the I&B Code, towards ‘Asset Maximisation and Balancing of Interest of Stakeholders’, were achieved, more so, when there is, no ‘financial insolvency’, at all, except mere delays, in ‘Repayment of Instalments’ and are those aspects, a matter of ‘commercial wisdom’.
2.Counsel submitted that Resolution Professional’, the ‘Committee of Creditors’ and the Adjudicating Authority are bound to see if the ‘Resolution Applicant’ is lawfully constituted, in accordance with applicable law to ensure that it was legally and validly constituted. It was further submitted that ‘Committee of Creditors’, is not entitled to approve a Resolution Plan, that is far less than the ‘Fair Value’ as well as Liquidation Value, just because it offers 100% recovery, to Financial Creditor, with more than 98% vote share in the Committee.
3.Counsel submitted that when the Plan value is projected as Rs. 184/- crores, and all admitted claims, including disputed claims and admitted claims of related parties aggregate only Rs. 170 crores. Then it is mandatory on the part of the Adjudicating authority / Tribunal to ensure that Operational Creditors, whether related parties or otherwise, must be paid in full to the extent of the entitlement as per ‘Liquidation Value’ and that too in priority’.
4.It further submitted that Successful Resolution Applicant’ though a ‘Limited Liability Partnership’, is not legally constituted, and hence, is ‘not a person’ within the meaning of Section 3(23) of the I&B Code, 2016 and therefore, the ‘Resolution Plan’, is not submitted by a person’ within the meaning of the I&B Code. Adjudicating Authority / Tribunal, has jurisdiction because of the fact that the concept of Successful Resolution Applicant, is developed by the I&B Code, 2016 and the sole aim/object of the Code, is to provide a ‘scheme’ to rehabilitate a ‘Corporate Debtor’ under CIRP, and therefore, it cannot be said, that it is not a matter, relating to the ‘Insolvency Proceedings’.
5.Counsel submitted that the Resolution Professional has over stepped his jurisdiction and converted a disputed liability into an admitted claim, contrary to the provisions of the Code and thereby pre-judged OP No. 44/2021 filed by the Corporate Debtor, before the Hon’ble Madras High Court u/s 34 of the Arbitration and Conciliation Act, 1996.
Respondents:
1.Counsel submitted that NCLAT and NCLT have ‘no civil court jurisdiction’ and it is clarified that the ‘Appellate Tribunal’, is not a Civil Court, to ‘adjudicate’ ‘all the ‘disputes’, questioning the formation / members, when the LLP is a registered entity, with the Ministry of Corporate Affairs, New Delhi.
2.It was submitted that Appellant, had not extended his co-operation during the CIRP deliberately, and a petition was filed u/s 19 of the Code, 2016 and the same was allowed. In fact, the 1st Respondent, had ‘retrieved’ the Accounts and other details like material litigations etc. As a matter of fact, the claim of ‘M/s. B.E. Billimoria & Co.’ was never questioned by the ‘Promoter’ at any of the ‘Committee of Creditors meetings’ and indeed, no averment was made, if at all raised at any ‘given point of time’.
3.Counsel submitted that Successful Resolution Applicant’ is providing 100% pay out to all the Creditors, even provided contingencies, to provide pay out, upto the ‘Approval’ of Resolution Plan, by the Adjudicating Authority / ‘Tribunal’, and for the Related Parties, it had provided viz. instrument as ‘Redeemable Preference Shares’ and hence, the plea that they are getting ‘zero’ is false.
Decision: NCLAT dismissed the appeal
Rationale:
1.It held that it is well settled by now that the ‘National Company Law Tribunal’ / ‘National Company Law Appellate Tribunal’ is not empowered, to have the jurisdiction of a Civil Court, to determine all controversies, touching upon the formation/members, when the ‘Limited Liability’ is a registered entity, with the ‘Ministry of Corporate Affairs’. Section 3(23) (d) of the I&B Code, under the caption ‘person’ includes ‘Trust’ and the General Clauses Act defines ‘Person’ includes ‘Trust. As such the contra, plea taken on behalf of the Appellants is not accepted, by this ‘Tribunal.
2.It held that Tribunal is not to determine the matters, pertaining to a ‘disputed question of fact’. It must be borne in mind, that Section 60(5) of the Code, 2016 is not an all pervasive section, showering jurisdiction, to the Appellate Authority/Tribunal to ‘determine’ any question pertaining to the ‘Corporate Debtor.’
3.It held that In so far as the aspect of cut-back facility of 20% pay to the Financial Creditor, is to be treated as preferential transaction, this Tribunal significantly points out that, in the instant case, the cut-back 20% was offered to the single Financial Creditor / 2nd Respondent through Indian Overseas Bank / only secured Creditor, in respect of the ‘Corporate Debtor’, and the said Bank is waiting in the queue as first person, as per Section 53 of the I&B Code.
4.In regard to ‘CIRP’ costs, the Appellants’ have no ‘Locus Standi’, because of the fact that the said issue is only between a ‘Resolution Professional’, and the ‘Committee of Creditors.
Order copy:
