Ashique Ponnamparambath vs Vibin Vincent

Justice M. Venugopal, Member (Judicial):

The `Petitioner’ / `Appellant’, has focused the instant IA No. 101 of 2023 in Comp. App (AT) (CH) (INS.) No. 22 of 2023 (filed under Rule 31, read with Rule 11 of the NCLAT Rules, 2016), seeking to `Stay’ the `E-auction Notice’, issued by the `Liquidator’.

According to the Learned Counsel for the Petitioner / Appellant, the `Group Company’ of the present `Corporate Debtor’ (`Platino Classic Motors Private Limited’ / `Group Company’), was a `non-exclusive dealer’ of `BMW India Private Limited’, and was involved in the business of selling BMW cars in the `State of Kerala’. Also that, the `Group Company’ and `BMW India’, entered into a `Dealership Agreement’ and pursuant to the same, `BMW India’ forced / coaxed the `Group Company’, to expand its network, for which, huge capital investments were required.

It is averred by the Petitioner / Appellant in IA No. 101 of 2023 in Comp. App (AT) (CH) (INS.) No. 22 of 2023 that, `BMW India’ coaxed the `Group Company’ of the `Corporate Debtor’, to avail `Loan Facility’, from its `Financial Arm’ / `BMW India Financial Services Pvt. Ltd.’, and even after performing exceptionally well in the beginning years, the `Revenue’ of the `Group Company’ of the `Corporate Debtor’, began to deteriorate, due to harsh internal `Policies’ and `Measures’, taken by `BMW India’, as well as the severe decline in the `Sales’ of the `BMW Vehicles’, at an `International’, as well as `National’ level. Moreover, around the year 2015, BMW FS started to demand the `Group Company’ of the `Corporate Debtor, to repay its `Loan’ obligations.

It is represented on behalf of the Petitioner / Appellant that, because of the constant threat and pressure, on behalf of the `BMW India’ and `BMW FS’, the `Group Company’, was left with no option, but to add the present `Corporate Debtor’, as a `Co-borrower’, to all the `Financing Agreements’, entered into by the `Group Company’. Besides this, the `Agreements’ took place, to add the present `Corporate Debtor’, as the `Co-borrower’, in the `Term Loan Agreement’ dated 17.05.2017 for an extent of Rs.13 Crores only and an `Addendum Agreement’ to `Floor Plan Agreement’, `Credit Facility Agreement’ and `Spare Part Agreement’ dated 17.05.2017.

It is projected on the side of the Petitioner / Appellant that, BMW India and FS in 2017, continued to demand the `repayment of Loans’, on an immediate basis from the `Corporate Debtor’ and the `Group Company’ of the `Corporate Debtor’. Hence, the `Corporate Debtor’, was perforced to `Mortgage’ its Land at Maradur, Kochi, in favour of `BMW FS’ and `BMW India’.

Continuing further, it is pointed out on behalf of the Petitioner / Appellant that the above was made as per `Memorandum of Entry dated 06.06.2017, which was subsequently amended on 23.07.2018. In fact, `BMW FS’, had issued a Notice on 14.01.2019, immediately after which, `BMW India’ terminated the `Dealership Agreement’, and recalled the `Credit Facilities’, to the `Group Company’ of the `Corporate Debtor’, and requested that the payments must be made within seven days from the receipt of communication.

The Learned Counsel for the Petitioner / Appellant proceeds to point out that a `Settlement Agreement’ dated 04.09.2019, was entered into between `BMW India’, `BMW FS’, `Platino Class / Group Company’ of the `Corporate Debtor’, the `Corporate Debtor’ and the `Petitioner / Appellant’ (By applying undue influence upon the `Petitioner’ / `Appellant’).

The Learned Counsel for the Petitioner / Appellant contends that the `Insolvency Admission’ of the present `Corporate debtor’, at the hands of `BMW Finance’, had taken place on 06.10.2021 and the `Corporate Insolvency Resolution Process’, was initiated against the `Corporate Debtor’, which is assailed in pending Comp. App (AT) (INS.) No. 301 of 2021.

The Learned Counsel for the Petitioner / Appellant, brings it to the notice of this `Tribunal’, that the `Petitioner / Appellant’, had put in a `Resolution Plan’, for resolving the `Debts’ (i) Platino Classic and Koyenco Autos and suggested that, since the predominant `Debt’, is being duplicated in `Platino Classic’ and `Koyenco Autos’, let there be a `Joint Resolution’, which was struck down by the `Resolution Professional’ / `Committee of Creditors’ of the `Group Company’ of the `Corporate Debtor’. Later, the `Petitioner’ / `Appellant’, was unable to furnish cogent proposals, as the debt of approx. Rs. 30 Crores of the `BMW Group’, was duplicated and made to Rs. 60 Crores. Hence, it was difficult for the `Petitioner / Appellant’, to furnish a cogent `Resolution Plan’, for both the `Group Companies’, the `Committee of Creditors’, voted in favour of `Liquidating’ the `Corporate Debtor’.

On behalf of the Petitioner / Appellant, a plea is taken that the `Respondent’, had filed an `Application’, for passing an `Order of Liquidation’ of the `Corporate Debtor’, and even though a `Reply’, was filed by the `Petitioner / Appellant’, that the `Corporate Debtor’, is an `MSME’, and the `Debts’, are duplicated in both the `Group Companies and a `Combined Resolution Plan’, qua both the Group Companies before the `Committee of Creditors’, the `Adjudicating Authority’, had rejected the same, and passed an `Order’, `Liquidating’ the `Corporate Debtor’, by an `Order’ dated 04.11.2022.

The submission of the `Petitioner / Appellant’ is that, the `Liquidator’ is proceeding with the `Liquidation Process’ of the `Corporate Debtor’, had issued the `E-auction Notice’ dated 10.01.2023, for `Sale of Assets’ of the `Corporate Debtor’, and the `E-auction’ date is 10.02.2023 between 3 P.M. to 5 P.M., and that the `E-auction process’, is proceeded with, it shall cause severe hardship, inconvenience and irreparable injury to the `Petitioner / Appellant’.

The Learned Counsel for the Petitioner / Appellant points out that the `Adjudicating Authority’, had passed an `impugned order’ without taking cognisance of the fact that the largest `Claimant’, in both the Group Companies is the `BMW Group’, for the very same `Debt’, which was owed by the `Corporate Debtor’, to the BMW Group.

The Learned Counsel for the Petitioner / Appellant comes out with a stands that `BMW Group’ is controlling the `Committee of Creditors’ of both the `Corporate Debtor’, as well as the `Group Company’ of the `Corporate Debtor’, having 68.15% and 74.80% `Voting Shares’, respectively.

According to the Petitioner / Appellant, the `proposed combined offer’, is more than the `Liquidation Value’ of the `Corporate Debtor’, and that the `Adjudicating Authority’, had not borne in mind the main object of the I & B Code, 2016, that `Resolution’ of the `Debts’ of the `Corporate Debtor’, is `Paramount’ and `Liquidation’, is the last resort, when there is no possibility of resolving the `Corporate Debtor’s Debts’.

While rounding up, the Learned Counsel for the `Petitioner / Appellant’, submits that the IA No. 101 of 2023 in Comp. App (AT) (CH) (INS.) No. 22 of 2023, is a `Bona fide’ one (Filed by the `Petitioner / Appellant’) and the `Balance of Convenience’, is in his favour, and prays for an `Order of Stay on E-auction Notice’, issued by the `Respondent’ / `Liquidator’.

Repelling the contentions of the Appellant’s side, the Learned Counsel for the `Respondent / Liquidator’ contends that, the IA No. 101 of 2023 in Comp. App (AT) (CH) (INS.) No. 22 of 2023, is preferred by the `Petitioner / Appellant’, with a `Mala fide’ intention, to procrastinate the `Liquidation Process’. Also that, according to the `Respondent’, the `Committee of Creditors’, had resolved to issue the `Second Invitation’, for an `Expression of Interest’, which was published on 10.05.2022 and bearing in mind that the `Corporate Debtor’, is a Medium and Small Scale Enterprise, the `Committee of Creditors’, gave an extension of time, till 01.07.2022 to the `Petitioner / Appellant’, in submitting the `Resolution Plan’, etc.

The Learned Counsel for the Respondent points out that the `Forensic Transaction Auditors’, appointed for conducting a `Forensic Audit’ of the `Corporate Debtor’, pertaining to the period from 01.04.2016 to 06.10.2021, issued an email on 05.05.2022 to the `Petitioner / Appellant’, seeking clarification on the `Transaction Audit Observations’, and a cryptic reply in regard to the `Evidence of Transactions’, were sent by the `Petitioner / Appellant’, on 17.05.2022, which was woefully incomplete and insufficient one. Also that, another email was sent on 18.05.2022, requesting for further clarification and documentary evidence, by the `Forensic Auditors’, and the `Forensic Audit’, was to be carried out with limited available documents.

The categorical plea of the Respondent is that the Petitioner / Appellant’s conduct in withholding the crucial information is a `condemnable’ one and in clear negation of the ingredients of the I & B Code, 2016. Besides this, serious `Financial Irregularities’ that indicated a `Fraudulent Trading’, with an `intention to defraud’ the `Creditors’ was noticed in the `Auditor’s Report’ and IA No. 182/KOB/2022 in IBA/37/KOB/2020 and an Application in IA No. 183/KOB/2022 in IBA/37/KOB/2020, were filed before the `Adjudicating Authority’ (under Section 43 (1) read with Section 44 (1) and Section 66 of the I & B Code, 2016), seeking appropriate directions from the `Adjudicating Authority’ on 29.06.2022.

At this stage, on behalf of the Respondent, it is brought to the notice of this `Tribunal’, that deadline of 6.00 P.M., was determined by the `Committee of Creditors’, within which, the `Petitioner / Appellant’, was required to submit a `Revised Resolution Plan’ on 01.07.2022. The `Resolution Plan’, was submitted at 6.27 P.M. sans `Earnest Money Deposit’, and `necessary documents’.

It is represented on behalf of the Respondent that, in the `8<sup>th</sup> Meeting’ of the `Committee of Creditors’, the `Resolution Plan’, was scrutinized, after the defects were cured and it was observed that the `Resolution Plan’, was not only in dissonance with `RPRF’ mapping and was also `vague and bereft of important details’. More importantly, regarding the `Source of Finance’, an imperative factor, was missing in the `Resolution Plan’. Furthermore, the `Financial Bid’, that was offered to the `Committee of Creditors’, was way lower than the `Liquidation Value’, and added further, there was no clarity on the `Structure of Business’ or `Company’, post `Approval’ of `Resolution Plan’.

That apart, the Petitioner / Appellant sought the `Release’ of `Personal Guarantee’, furnished by him, after acceptance of the `Resolution Plan’, and the `Committee of Creditors’, was not satisfied with the `Resolution Plan’, on these counts, and despite the `Limitation Period’, which was to be over, on 03.08.2022, the `Committee of Creditors’, had acceded to the `Petitioner / Appellant’s’ request, for a further extension, to submit a `Revised Resolution Plan’, which was allowed to be submitted by 5.00 P.M., on 26.07.2022.

The Learned Counsel for the Respondent / Liquidator, adverts to the fact that the `Petitioner / Appellant’, had furnished a `Revised Resolution Plan’, on 26.07.2022, which was placed before `9<sup>th</sup> Meeting’ of the `Committee of Creditors’ on 28.07.2022 for discussions / deliberations and further that, it was noted by the `Committee of Creditors’, that the present version of the `Resolution Plan’ remained identical, by and large, to that of its earlier one, except for minor changes made in the technical part.

The crystalline stand of the Respondent is that, the `Resolution Plan’, was still not in conformity with `RFRP’ conditions and clauses and there was `no iota of clarity’, in regard to the `Source of Finance of Resolution Plan’. In short, there was no declaration, as per Regulations 37 and 38 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, in the `Resolution Plan’, etc.

The other contention projected on the side of the Respondent is that, neither of the `Resolution Plans’, had contained a mention of the `Proposal’ of `Combined Resolution’, nor was any `oral suggestion’, made to that effect. Also that, there was no `Declaration’ to the effect that the `Petitioner / Appellant’, earlier had furnished the `Resolution Plans’ on 15.06.2022 in `Corporate Insolvency Resolution Process’ of the `Platino Classic Motors (India) Pvt. Ltd’.

In pith and substance , the version of the Respondent is that, the `Second Resolution Plan’, submitted by the `Petitioner / Appellant’, was neither satisfactory nor in tune with the I & B Code, 2016, and its relevant rules was rejected by the `Committee of Creditors’, exercising their `subjective commercial wisdom’, had resolved to `Liquidate’ the `Corporate Debtor’, and appointed the `Liquidator’.

The Learned Counsel for the Respondent points out that one of the `Secured Creditors’ (`IDBI Bank’) in the present proceedings, had realised their `Security Interest’, took possession of the `Assets’, and they are presently, outside the scope of proceedings, taken steps to sell the same through `SARFAESI’ proceedings. Moreover, the `Liquidation Process’, had reached a very advanced stage and the Notice for `E-Bid’, etc., were submitted. Besides this, the `Corporate Debtor’, is not a `Going Concern’, and has not involved in `Business Activity’ for many years. The `Petitioner / Appellant’, was trying his best to `dispose of’ the `Assets’ of the `Concern’, and in reality, the `Liquidation’ of the `Corporate Debtor’, is an `inevitable’ one.

According to the Respondent, the `Increased Offer’ of `Rs.42 Crores’, by the `Petitioner / Appellant’, in case of `Group Resolution’, is made only by way of an `Affidavit’, filed before the `Adjudicating Authority’. In any event, the `Balance of Convenience’, is not in favour of the `Petitioner / Appellant’, and further that, the `Petitioner / Appellant’, has no `prima facie’ case, in the subject matter in issue.

The Learned Counsel for the Respondent, while winding up, prays for the dismissal of IA No. 101 of 2023 in Comp. App (AT) (CH) (INS.) No. 22 of 2023, to secure the `ends of Justice’.

This `Tribunal’, has heard the Learned Counsels appearing for the respective `Parties’, and noticed their contentions.

Admittedly, the `Resolution Professional’ for the `Corporate Debtor’, was appointed by the `Adjudicating Authority’, on 17.01.2022. The specific stance of the `Respondent’ is that, the Petitioner / Appellant’s conduct during the whole `Corporate Insolvency Resolution Process’, in withholding the `relevant’ / `crucial’ information(s), and seeking extension of deadlines are not favourable circumstances in his favour. Despite the fact that the `Corporate Debtor’, is a `Medium and Small Scale Enterprise, it cannot be denied that the `Committee of Creditors’, had readily granted an extension of time, till 01.07.2022, for furnishing the `Resolution Plan’. In fact, the `Resolution Plan’ furnished by the `Petitioner’ / `Appellant’, according to the `Committee of Creditors’, in its `8^th Meeting’, convened on 06.07.2022, was not inconsonance with the `RPRF’ mapping and shorn of necessary details. Even, the `Committee of Creditors’, had permitted the `Petitioner / Appellant’, to furnish a `Final Resolution Plan’, on 26.07.2022.

There can be no second opinion, as to the fact that, in the instant case, the `Corporate Debtor’, is not a `Going Concern’, and for number of years, was not involved in `Business Activity’.

Undoubtedly, the purpose of `Resolution’, is not for `Maximisation of Value’, for a set of `Stakeholders’, `Creditors’ and to promote `Entrepreneurship’, `Availability of Credit’ and `Balance the Interest’. Indeed, a `Resolution Plan’, is not a `Sale’ / `Auction’ / `Not Recovery’. Functionally speaking, a `Resolution Plan’, must resolve `Insolvency’ (`Rescue Failing’, but a viable `Business’), and ought to maximise the `Value’ of the `Assets’.

When no `Resolution Plan’, is approved by the `Committee of Creditors’, an `Adjudicating Authority’ (`Tribunal’), is duty bound to `Order’, `Liquidation’ of a `Company’.

It cannot be gainsaid that, a timely `Liquidation’, is the best `Viable Recourse’, over endless `Resolution’ proceedings. Also that, where the specified time limit had lapsed (under Section 12 of the I & B Code, 2016), an `Adjudicating Authority’ (`Tribunal’), will pass an `Liquidation Order’, against a `Corporate Debtor’, regardless, whether the `Management’ of the `Corporate Debtor’ or a `Resolution Applicant’, had an adequate opportunity, in the considered opinion of this `Tribunal’.

In the instant case, the `Committee of Creditors’, had found that the `Second Resolution Plan’, furnished by the `Petitioner / Appellant’, was not satisfactory and also not in tune with the ingredients of the `I & B Code, 2016’, and the same was ultimately `rejected’, in exercise of their `subjective commercial wisdom’, and opined to `Liquidate’ the `Corporate Debtor’, resulting in the `appointment’ of the `Liquidator’.

Be that as it may, in view of the fact that there was no `oral’ or `proposal’ in `writing’, furnished by the `Petitioner / Appellant’, for a combined `Resolution Process’, keeping in mind a `primordial fact’ that the `Petitioner / Appellant’, had not submitted proper `Resolution Plans’, with `Full Disclosure of Information(s)’, there was no `clarity’, on the source of `Finance’ of `Resolution Plan’, etc., and also the `Corporate Debtor’, is not engaged in any `Business Activity’, for many years and not being a `Going Concern’, and this `Tribunal’, considering the facts and circumstances of the instant case, in an `integral manner’, coupled with the fact that `Speed’, is the essence of the `I & B Code, 2016’, and the `Corporate Insolvency Resolution Process’, is a time bound process, without any haziness comes to a `cocksure’, `inescapable’ and `irresistible’ conclusion that the `Balance of Convenience’, prima facie, is not in favour of the `Petitioner / Appellant’, in seeking the `relief’ of `Stay on E-auction Notice’, issued by the `Respondent / Liquidator’, for the `Sale’ of the `Assets’, under `I & B Code, 2016’. Viewed in that perspective, the instant `IA No. 101 of 2023 in Comp. App (AT) (CH) (INS.) No. 22 of 2023’ fails.

In fine, IA No. 101 of 2023 in Comp. App (AT) (CH) (INS.) No. 22 of 2023 is `dismissed’. No costs.