Prince Pipes and Fittings Limited vs Amit Chandrashekhar Poddar
I.A. 894/2022 In C.P. No. (IB) 4345/MB/C-III/2019
Facts:
1. Prince SWR Systems Private Limited (‘PSSPL’), the Corporate Debtor is engaged in the business of manufacturing and supply of piping systems. The Corporate Debtor was admitted to CIRP under the provisions of the IBC vide an order of this Tribunal dated 16 April 2021.
2. On 29 October 2021, Respondent No. 1 invited expression of interest from prospective resolution applicants/interested bidders in respect of the Corporate Debtor. On 29 December 2021, the Applicant sent an email to Respondent No. 1 indicating its interest to submit a bid. Thereafter, the Applicant received an email dated 23 February 2022 from the Respondent No. 1, rejecting the Applicant’s intent to participate in the CIRP of the Corporate Debtor basis that the Applicant was not eligible to participate since the Applicant had not submitted its expression of interest before 13 November 2021.
3. Subsequently, on 25 February 2022, the Applicant addressed an email seeking an opportunity to be heard and present the key terms of its financial proposal, including the Applicant’s eligibility to bid as a prospective resolution applicant, Respondent No. 1 agreed to permit the Applicant to present its proposal, in the capacity as a prospective resolution applicant to members of the CoC. Applicant addressed an email to the Respondents on 10 March 2022, submitting an offer for the acquisition of the Corporate Debtor as part of the CIRP. Further, it submitted resolution plan to Respondent No. 1 vide email dated 23 March 2022
4. On 29 March 2022, Respondent No. 1 addressed an email to the Applicant indicating that the Applicant’s resolution plan cannot be considered by the CoC, since the Applicant did not submit its expression of interest for the Corporate Debtor on or before 13 November 2021.
Issue: Whether the applicant can be allowed to submit the plan ?
Arguments:
Applicant:
1. Counsel submitted that the RP did not table the Applicant’s resolution plan before the CoC on the basis that the Applicant had submitted its resolution plan after the last date for submission of resolution plans. Counsel submitted that RP in its reply to the captioned application stated that the Applicant’s plan was not tabled before the CoC, since the Applicant submitted its plan after the stipulated timeline and was ineligible as per Section 29A of the Insolvency and Bankruptcy Code, 2016 (IBC).
2. Counsel submitted that Applicant is not a related party to the Corporate Debtor as per Section 29A of the IBC merely on account of its directors having family relations with the suspended management of the Corporate Debtor. The RP has alleged that by virtue of the director of the Applicant being a relative of the suspended promoter/director of the CD, the Applicant is barred from submitting a resolution plan under Section 29A of the IBC. It was submitted that save and except for some family ties between the director of the Applicant and the suspended promoter/ director of the CD, there is no other element of “connectedness” between the Applicant and the CD.
3. Counsel further submitted that in the absence of there being any business connection or business nexus between the Applicant and the suspended promoter/director of the CD, the Applicant herein cannot and ought not to be considered as ineligible under the IBC. In any event, the business activities of the CD and the Applicant are completely independent of each other and are run as part of distinct companies.
4. It was submitted that Section 5(24A) of the Code does not include the individual partners in a partnership firm and merely includes the partnership firm. The legislature has made a distinction wherein partners of a limited liability partnership are included, however partners in a partnership firm are not included.
Respondent:
1. Counsel submitted that Applicant had not submitted its EOI within the stipulated time and only expressed its willingness to acquire the Corporate Debtor in a competitive valuation, vide its email dated 29th December, 2021. RP submits that despite being aware about the CIRP of the Corporate Debtor, the Applicant failed to submit its EOI at the appropriate stage and thus, the Applicant has no vested right to submits its Resolution Plans for consideration in the CIRP of the Corporate Debtor, even if the same maybe at a competitive valuation.
2. Counsel submitted that RP has taken legal opinion and accordingly to which the Applicant would fall under the definition of ‘related party’ in view of the fact that one of director of the Applicant and one of the suspended directors, being family members were also partners in a partnership firm. It was submitted that the present Interlocutory Application filed seeking reliefs for consideration of its Resolution Plan dated 23rd March, 2022, cannot be allowed as the same is filed at a belated stage and is required to be dismissed with costs.
Decision: NCLT dismissed the application.
Rationale:
1. Hon’ble NCLT noted that only much after a final list of prospective resolution applicants was issued by the Resolution Professional on 08.12.2021 that the Applicant expressed his interest by sending an email to the Resolution Professional on 29.12.2021. Thus, such expression of interest by way of an email should have been discarded as it is as inconsequential.
2. It held that it is the fact of the case that after considering all the facts and circumstances of the case, the CoC in their wisdom have approved one Plan as successful Resolution Plan with a majority of 97.29%. It is also held by Hon’ble Supreme court that for CIRP under IBC the wisdom of CoC is paramount and not justiciable.
3. It held that fundamental principle of partnership firm is that all the partners constitute a partnership firm therefore a partnership firm represents all the partners. If a partnership is disqualified under section 29A of IBC, it leads to the disqualification of all its partners who are obviously actively involved with the business activities
4. It held that clause (g) of 24A clearly refers to a LLP or a partnership firm whose partners in the ordinary course of business act on the advice, directions or instructions of the individual. It means that if a partnership firm has a business nexus with the Resolution Applicant then it would be hit by section 29A.
Order:
