Jindal Power Limited vs Dhiren Shantilal Shah & Ors
Company Appeal (AT) (Insolvency) No. 1166-1167 of 2023
Facts:
1.In the year 2019, proceeding under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“Code”) was initiated against the Corporate Debtor by Bank of India, being one of its financial creditors, before the Adjudicating Authority which was allowed vide order dated 20.02.2020.
2.On 08.09.2020, the RP/Respondent No.1 issued an “Invitation for Resolution Plan” (“Form G”) under Regulation 36-A of the CIRP Regulations. On 06.10.2020 timelines for submission of Expression of Interest (“EoI”) and issuance of final list of PRAs was extended to 12.10.2020 and 31.10.2020 respectively.
3.Pursuant to the issuance of Form G, the RP received seven (7) EoIs from Prospective Resolution Applicants (“PRAs”) for submission of a resolution plan for the Corporate Debtor. Out of seven (7) EOIs, only six (6) were eligible PRAs. The Final list was issued under Regulation 36-A(12) with six (6) PRAs in the final list. In the year 2021, RP received resolution plans only from two (2) PRAs out of the final list of PRAs. These were presented before the CoC, but were not accepted by the CoC. Thereafter, RP filed an IA No. 836 of 2022 on 20.08.2021 seeking liquidation of the Corporate Debtor.
4.During the pendency of the Liquidation Application, another I.A. No. 3593 of 2022 was filed by M/s SEAHAWK (SHAL Group), which was not in the final list of PRAs seeking submission of a resolution plan for the Corporate Debtor. SEAHAWK was given an opportunity to submit a resolution plan for the Corporate Debtor. Even though, M/s SEAHAWK was given an opportunity to submit a resolution plan, it did not submit any resolution plan for the Corporate Debtor. In the clarificatory hearing on 04.01.2024, RP further reiterated that till date the RP has not received any resolution plan by M/s SEAHAWK and no such resolution plan was placed before the CoC for consideration or approval. Further RP submits that M/s M/s SEAPOL is just an intervenor and his claim that CoC rejected the resolution plan submitted by M/s SEAHAWK due to the fact that it was in contravention and in violation of Regulation 39(1-B) and Regulation 36-B(7) of the CIRP Regulations is factually incorrect and without any basis.
5.Another Interlocutory Application bearing I.A. No.3535 of 2022 was filed by the M/s SEAPOL, which was one of the PRAs in the final list of PRAs, seeking submission of a resolution plan for the Corporate Debtor. Liquidation Application was dismissed as withdrawn and M/s SEAPOL was given an opportunity to submit the resolution plan for the Corporate Debtor. Pursuant to the 09.01.2023 order M/s SEAPOL submitted their resolution plan for the Corporate Debtor on 18.02.2023.
6.On 12.07.2023, the Appellant in this Appeal before us, sent an EoI for the Corporate Debtor to the RP showing its interest to participate in the CIRP process of the Corporate Debtor. At that time RP was considering the proposals of M/s SEAPOL and a proposal of M/s VOCPA (which was submitted under the guidelines for dealing with stressed Public Private Partnership Projects’. Therefore, on 14.07.2023 the RP placed the EoI before 45th Meeting of CoC. However, considering the restrictions in Regulation 39(1-B) of the CIRP Regulations, the RP suggested the Appellant to take appropriate directions from the Adjudicating Authority.
7.Even though the Adjudicating Authority had allowed to submit a resolution plan for the Corporate Debtor, but it was subject to compliance with Regulation 39(1-B) read with Regulation 36-B(7), which stipulates that Appellant should be in the final list of the PRAs. Appellant is challenging this order.
Issue: Whether the appeal can be allowed and appellant be allowed to submit the plan?
Arguments:
Appellant:
1.Counsel argued that by accepting the resolution plan it will maximise the value of the assets of the Corporate Debtor, which is in line with the primary objective of the Insolvency and Bankruptcy Code, 2023 (“Code”). The order dated 22.08.2023 of the Adjudicating Authority is contrary to the preamble and to the objective of the Code, which is to maximise the value of the assets of the corporate debtor.
2.It also raises the issue that due to change in economic conditions since 31.10.2022, there may be now more participants, who could be interested in participating in the CIRP, including the Appellant which would help in maximising the value of the Corporate Debtor. It also raises the issue that the Adjudicating Authority, vide its order dated 29.11.2022, had allowed M/s SEAHAWK to submit its resolution plan even though it was not in the final list of the PRAs
3.Appellant further argues that Regulations cannot be read as a fetter on the power of the CoC, to discuss and deliberate and take further steps of negotiation with the resolution applicants.
4.COC supported the argument of appellant and argued that at present the only resolution plan, that is pending consideration before the Committee of Creditors is the plan submitted by SEAPOL. It is pertinent to state that consideration of an additional plan would be in the interest of value maximisation and would afford the Committee of Creditors to choose between the plan that betters subserves the primary consideration of value maximisation of the assets of the corporate debtor
Respondent:
1.M/s SEAPOL who is the final PRA, in its Interlocutory Application No.4774 of 2023, has submitted that M/s SEAHAWK was not in the final list and was allowed to submit resolution plan vide its order dated 29.11.2022 of Adjudicating Authority. CoC considered the resolution plan, as submitted by M/s SEAHAWK and rejected due to the fact that it was in contravention and in violation of the Regulation 39(1-B) read with Regulation 36B(7) with the CIRP Regulations
2.It further submitted that Insolvency Resolution has to be conducted in a time bound manner and the time has already expired on 13.09.2023 and at this stage, only the plan of the resolution applicant which is feasible and viable, is under the consideration before the CoC and CoC is duty bound to approve or reject the plan of the Applicant instead of extending the CIRP period of the Corporate Debtor. The CoC, instead of concluding the CIRP in a time bound manner, is stretching the revival of Corporate Debtor or pushing the Corporate Debtor into liquidation, which is not the intent of the Code.
Decision: NCLAT dismissed the appeal
Rationale:
1.NCLAT noted that A bare reading of the Regulation 39(1-B) read with Regulation 36-B(7) IBBI (CIRP) Regulations, 2016 indicate that the Regulations do not permit the proposals to be entertained which are not there in the final list of the PRAs and the Adjudicating Authority has acted as per this provisions.
2.It held that The justification of the Appellant, and supported by RP/CoC, that by accepting its resolution plan, it maximises the value of the assets of the Corporate Debtor and it is in alignment of the primary objective of the Insolvency and Bankruptcy Code, 2023 (“Code”), cannot be accepted by giving a go by to the Code and particularly Regulations.
3.It held that If unsolicited plans are obtained at any stage it will cause unnecessary avoidable delay in the CIRP process. If resolution plans are allowed to be submitted at any stage, it will make the whole CIRP process unending. To curtail the delay in the CIRP process, it is appropriate to restrain the tendency to consider resolution plans after the time as specified by the CoC and from someone not in the final list of PRAs.
4.Maximisation of the value of the Corporate Debtor can be ensured by other means also, particularly by conducting CIRP in a time-bound manner, simultaneously complying with existing regulations and not bypassing them. The Resolution plans, which enter midway and which were not in the final list of PRAs derail and delay the CIRP proceedings and this has also been noted in the background Discussion paper, before the introduction of new Regulations in 2021
Order:
