Shivashakti Elmech Pvt. Ltd vs Shiv Nandan Sharma
Company Appeal No. (Ins) 34 of 2021
Facts:
1.Appellant filed application under Section 9 of the Code to initiate the ‘CIRP’) in the matter of M/s Drake and Scull Water & Energy India Pvt. Ltd. (Corporate Debtor), which was admitted on 30.10.2018 and the CIRP was initiated.
2.RP appointed two valuers, namely, Apex Valuers and Pratik Sharma and Associates to determine fair value and liquidation value of the Corporate Debtor in accordance with Regulation 35 of the Regulations and the liquidation value was assessed. In the 6th COC meeting, pursuant to the publication of Form G, since six persons have shown interest, but none has submitted EOI till the last date of submission i.e. 10.02.2019, it was resolved to publish revised Form G to enable the said parties or any other party having potential to submit the EOI. The revised Form-G was published on 25.02.2019 in which the last date of submission of EOI was extended to 03.03.2019.
3.Revised Form G was approved in the 7th COC meeting and published on 05.04.2019 which was extended to 26.04.2019 from the earlier date of 20.04.2019 without any change in the timeline. Two RAs, namely Passavant Energy & Environment GmbH and Maa Pahari Mercantiles Pvt. Ltd. have submitted their proposal on 02.07.2019 of which plan
submitted by Passavant Energy & Environment GmbH which was approved with 100% voting of the CoC in its 14th meeting held on 13.11.2019 after due deliberations on various meetings.
4.RP filed application bearing CA No. 1192 of 2019 which had been allowed by the Adjudicating Authority under Section 30(4) of the Code subject to comments in Para No. 35 to 39 regarding performance security, reliefs and concessions as provided in the plan. Appellant has filed appeal challenging the order of approval of plan.
Issue: whether the AA erred in approving the Resolution Plan?
Arguments:
For Appellant:
1.Counsel for appellant submitted that as per Section 29-A of the Code, a person shall not be eligible to submit a resolution plan, if such person, or any other person acting jointly or in concert with such person suffers from any of the condition mentioned in clause 29-A (a) & (i). It was argued that if a connected person of the resolution applicant suffers from any of the condition enumerated under Section 29-A (i) then he would not be eligible to submit a resolution plan
2.It was submitted that Drake & Scull International PJSC, UAE (DSI) is the 100% holding company of the Passavant Energy & Environment GMbH, Germany (Successful Resolution Applicant) and is covered by the definition of a ‘connected person’. It is thus clear from the flow chart included earlier in this judgment that the Corporate Debtor is a subsidiary of Drake & Scull Engineering LLC, UAE which in turn is a wholly-owned subsidiary of Drake And Scull International PJSC, UAE. Thus in accordance with Section 5(24)(i) Drake And Scull International PJSC, UAE is a related party of the Corporate Debtor
3.Further Passavant Energy & Environment India Pvt. Ltd. is a wholly owned subsidiary of Passavant Energy & Environment GMbH, Germany which in turn is a wholly-owned subsidiary of the Drake and Scull International PJSC, UAE, therefore, in accordance with Clause (i) of Section 5(24) Passavant Energy & Environment India Pvt. Ltd. which is a financial creditor of the Corporate Debtor and also a related party of the SRA (Passavant Energy & Environment GMbH, Germany).
4.Counsel for Appellant has alleged that the representative of the Operational Creditors should have been included as a member of the CoC and the RP has failed in his duty by not including the representative of the Operational Creditors in the CoC, thereby making the constitution of CoC defective and null and void.
Decision: There was no error in the order passed by the AA approving the resolution plan.
Rationale:
1.RP sent an email dated 30.04.2019 requesting all the operational creditors to appoint a consensus representative but it is clear from a perusal of the relevant emails that no name of representative by consensus could be decided and while Shri Ashok Kriplani, vide email dated 13.04.2019, wrote to the RP that he is an AR of one of the operational creditors, namely Shiv Shakti Elmech Pvt. Ltd., he is proposing his name as representative in any forthcoming CoC.
2.NCLAT noted that no other document or record submitted by the Appellant or any other party in support of the claim that a connected party of SRA went into insolvency resolution. All that the press note states is that the company Drake and Scull International PJSC, UAE went into ‘Financial Reorganization Process’ which was accepted by the relevant authority and a Financial Reorganization Committee (FRC) to conduct the financial reorganization process was formed.
3.It noted that the CIRP commenced on 30.10.2018 in the present case and even if we consider financial reorganization process that Drake Scull International PJSC, UAE was undergoing as insolvency resolution, it commenced only on May, 2020. Further the resolution plan was submitted by the SRA in July, 2019 and it was approved by the CoC on 13.11.2019 where after it was submitted before the Adjudicating Authority for necessary approval. It is thus clear that even if the financial reorganization process that Drake and Scull International PJSC, UAE is undergoing is taken as an insolvency resolution process, such a financial reorganization process started more than one year after the commencement of CIRP in the present case and not before the commencement of CIRP as is required in Section 29 A(c) in order to make the SRA ineligible to submit a resolution plan
4.The ineligibility of any party to submit a resolution plan has to be seen strictly in the lens of Section 29-A of the IBC
Order:
