Shri Madhukar Shetty vs Bank of Baroda
Company Appeal (AT) (Insolvency) No. 739-740 of 2024
Facts:
1) Corporate Debtor-Genesis Resorts Pvt. Ltd. had availed a loan of Rs.149.05 cr from the Financial Creditor-Bank of Baroda during the years 2012 to 2014. The loan facility had been granted for construction of a hotel on a plot of land at Vile Parle near the Mumbai Airport. The Corporate Debtor applied for restructuring of the credit facilities which was allowed by Financial Creditor-Bank of Baroda on 18.02.2015. However, the Corporate Debtor failed to repay the outstanding loan to the Bank of Baroda leading to classification of their account as NPA on 30.11.2016
2) The Bank of Baroda thereafter approached the Adjudicating Authority for initiating Corporate Insolvency Resolution Process (‘CIRP’ in short) of the Corporate Debtor for realisation of a total debt amounting Rs.231.09 cr comprising of Rs.149.05 cr as principal and Rs. 82.04 cr as interest. The Adjudicating Authority admitted the Section 7 petition on 11.12.2019 admitting the Corporate Debtor into CIRP.
3) M/s Finquest Solutions Pvt. Ltd.-SRA submitted its plan which was approved by the CoC in its 10th meeting with 100% vote share following which the RP filed IA No. 1177 of 2021 on 05.04.2021 before the Adjudicating Authority for approval of the Resolution Plan. The Appellant – ex Director of the Corporate Debtor filed I.A. No. 1768 of 2021 before the Adjudicating Authority objecting to the approval of the resolution plan of the Corporate Debtor as submitted by the SRA. The Adjudicating Authority rejected I.A. No. 1768 of 2021 filed by the Appellant and approved the resolution plan of the SRA. Assailing the impugned order, the present appeal has been preferred by the Appellant – ex Director of the Corporate Debtor.
Issue: Whether the appeal can be admitted ?
Arguments:
Appellant:
1) Counsel for the Appellant who while making his submissions stated that the resolution plan submitted by the RP suffered from major irregularities. One such major irregularity according to the Appellant is the under-valuation of the assets of the Corporate Debtor.
2) It was submitted that another alleged grave irregularity, that the SRA is a non-banking non-deposit financial company on which the Securities and Exchange Board of India (‘SEBI’ in short) had imposed fine. It was also pointed out that the SRA is a company under the umbrella of M/s Finquest Group promoted by one Sh. Bharat Patel who had failed to make necessary disclosure under the prohibition of insider trading norms on several occasions
Respondent:
1) Counsels for the Respondents submitted that the IBC provides a well-defined mechanism to be followed for valuation of the Corporate Debtor as laid down in the CIRP Regulations. The RP adhered to the relevant CIRP Regulations and got the valuation duly conducted by IBBI registered valuers for determining an estimate of fair value and liquidation value of the Corporate Debtor as on the insolvency commencement date.
2) Counsel for Respondents also vehemently contended that the SRA was not disqualified under Section 29-A of IBC. It was pointed out that the allegation made by the Appellant that the SRA was ineligible for making submission of Resolution Plan owing to imposition of penalty by SEBI against the promoters of SRA was misconceived.
Decision: NCLAT dismissed the appeal.
Rationale:
1) It held that only the valuation conducted by IBBI registered valuers appointed post the admission of Corporate Debtor into CIRP is required to be considered by the CoC. Any valuation conducted in the past by any entity for whatever purposes prior to the initiation of CIRP does not have any relevance for the purposes of CIRP of the Corporate Debtor
2) The allegations raised by the Appellant of the RP not inviting the Appellant to attend the CoC meetings and not being provided with the resolution plan is frivolous and self-contradictory and therefore deserves scant regard. It is clear therefore that the Appellant has unjustifiably claimed that there has been statutory violations and irregularities in the valuation process conducted by the RP.
3) It held that alleged imposition of ban by SEBI on the promoters of the SRA does not hold good because the Securities Appellate Tribunal had set aside the orders of the SEBI. The RP had also appointed M/s Mazars India LLP for conducting an independent due diligence of the SRA. This independent third-party entity in its report had confirmed that the promoters of the SRA had complied with the orders of SEBI and that the SRA was eligible to submit the resolution plan for the Corporate Debtor.
Order:
