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Judgment
The present has been filed by the Appellants i.e. Giriraj Prasad and Kamla Gupta under Section 61 of the Insolvency and Bankruptcy Code, 2016 (Code), challenging the Impugned Order dated 09.07.2024 passed by the National Company Law Tribunal, New Delhi Bench-V (Adjudicating Authority), in IA No. 4619/2021 arising from Company Petition No. (IB)-2728/ND/2019.
Mr. Reetesh Kumar Aggarwal who is the resolution professional of the Corporate Debtor is the Respondent No.1 herein. Committee of creditors (‘CoC’) through its resolution professional Mr. Reetesh Kumar Aggarwal is the Respondent No.2 herein. M/s Pooja Marbles through its Partner Mr. Prakash Chandra Rathi is the Respondent No.3 herein, who is the Successful Resolution Applicant.
We note that the Adjudicating Authority in its order dated 08.06.2020, admitted the application filed by the Operational Creditor, OM Logistics Limited, under Section 9 of the Code against the Corporate Debtor, Servel India Private Limited. Consequently, the Adjudicating Authority initiated the Corporate Insolvency Resolution Process (CIRP) against the said Corporate Debtor.
It is also noted that pursuant to the initiation of the CIRP against the Corporate Debtor, the Interim Resolution Professional (IRP), Mr. Reetesh Kumar Agarwal (Respondent No. 1), published Form-G on 05.01.2021, inviting Expressions of Interest (EOI) from the general public for the submission of resolution plans and by the last date for submission of EOIs, i.e., 21.02.2021, nine EOIs were received by the IRP, including a joint EOI submitted by the Appellant.
The Appellants submitted that their submission was timely and in compliance with the requirements set forth in Form-G and the relevant provisions of the Code. The Appellants further submitted that during the CIRP, the CoC in its 6th meeting dated 26.02.2021 granted a 15 day extension (until 19.03.2021) for submitting fresh resolution plans, acceding to a request from a prospective resolution applicant. The Appellants submitted that, pursuant to the extension of time approved by the CoC in its 6th meeting held on 26.02.2021, only two resolution plans were received by the extended deadline of 19.03.2021 one submitted by M/s Pooja Marbles, the Respondent No.3, and the other jointly submitted by the Appellants. The Appellants stated that both resolution applicants were subsequently invited for discussions before the CoC during its 8th meeting held on 08.04.2021 who presented their respective resolution plans before the CoC, however, the CoC advised both applicants to revise their plans by way of an addendum to address certain concerns and improve their proposals in line with the expectations of the stakeholders.
The Appellants submitted that during the ongoing second wave of the Covid-19 pandemic, the CoC convened its 11th meeting on 27.05.2021, during which both resolution applicants were once again advised to revise their respective resolution plans, the CoC directed that the revised plans be submitted within three days, thereby extending the deadline for submission of the revised resolution plans until 01.06.2021.
The Appellants submitted that, unexpectedly, on the last date for submitting the revised resolution plans, the Respondent No. 1 sent an email at 03:49 PM on 01.06.2021, requesting clarifications on nearly 50 points and sought the submission of certain additional documents. The Appellants assailed timing of the said request, as it coincided with the deadline for submission, potentially impacting the ability of resolution applicants to provide the necessary information and documentation within the stipulated timeframe.
The Appellants submitted that, due to the extraordinary circumstances arising from the second wave of the Covid-19 pandemic and the strict lockdown in place during that period, it was not feasible for them to address all the clarifications and queries due to their limited resources and operational challenges during the pandemic. It is the case of the Appellants that they requested an extension of 15 days to resolve the queries and provide the additional documents sought vide email dated 02.06.2021, however, their reasonable request for an extension was rejected by Respondent No. 1 vide email dated 03.06.2021, disregarding the extenuating circumstances caused by the pandemic.
The Appellants submitted that the Respondent No. 1 via email dated 04.06.2021 at 11:54 AM, shared the link for the 12th meeting of the CoC, scheduled on the same day at 3:30 PM and during the said meeting, the CoC rejected their resolution plan on the grounds of non-compliance with the terms of the Request for Resolution Plan (RFRP). The Appellants emphasized that they were in the process of submitting the revised resolution plan but were unable to do so due to extraordinary circumstances arising from the ongoing pandemic and the refusal of Respondent No. 1 to grant an extension of time. The Appellants submitted that as aggrieved resolution applicants, they filed an application before the Adjudicating Authority under IA No. 4619/2021 in Company Petition No. (IB)-2728/ND/2019 and challenged not only the decision itself but also the decision-making process and actions taken by the respondents during the 12th CoC meeting, asserting that the rejection was unjust.
The Appellants submitted that the Adjudicating Authority failed to consider the undue haste and arbitrary decision-making adopted by the Resolution Professional and the CoC during the CIRP. Specifically, in the 12th CoC meeting held on 04.06.2021, the CoC approved the resolution plan of M/s Pooja Marbles, the Respondent No.3 despite the ongoing Covid-19 lockdown, which severely impacted fair participation. The Appellants contended that their resolution plan offered a higher amount of ₹23 crore for Secured Financial Creditors compared to ₹22 crore offered by M/s Pooja Marbles. It is the case of the Appellants that the approval of a comparatively lower resolution plan without adequately assessing its economic impact and feasibility undermined the principles of fairness and maximization of value, jeopardizing public exchequer interests.
The Appellants assailed the conduct of the Respondent No.1 as nexus and collaboration between Respondent No. 1/(Resolution Professional) and the successful resolution applicant/ Respondent No.3, as the actions and omissions of Respondent No. 1 appeared to disproportionately benefit the Respondent No.3 through unethical favoritism during critical stages of the CIRP.
The appellants submitted that the Adjudicating Authority has failed to recognize the deliberate act and omission of the Respondent No.1 in not assisting the appellants during the technical difficulties encountered while attempting to connect to the meeting on June 4, 2021 as it was the responsibility of respondent no. 1, as the resolution professional, to ensure connectivity and facilitate attendance for all stakeholders at the meeting. Despite the documented evidence that the appellants were unable to attend due to these technical issues, the Adjudicating Authority dismissed the appellant's application without due consideration of these critical factors.
Concluding their arguments, the Appellants requested this Appellate Tribunal to set aside the Impugned Order and allow their appeal.
Per contra, the Respondent No.1 denied all averments made by the Appellants as misleading and baseless.
The Respondent No. 1 submitted that the Adjudicating Authority, by way of its Order dated 08.06.2020, commenced the CIRP against the Corporate Debtor under the provisions of the Code, with the statutory period of 330 days, inclusive of any extensions or exclusions as may have been sanctioned by the Adjudicating Authority, culminating on 22.06.2021.
The Respondent No. 1 submitted that consequent to the issuance of Form-G on 05.01.2021, the deadline for submission of resolution plans by prospective resolution applicants was stipulated as 21.02.2021, and that the Appellants duly lodged their proposed Resolution Plan on 20.02.2021, in adherence to the prescribed timeline.
The Respondent No. 1 contended that during the 8th meeting of the CoC, convened on 08.04.2021, the members of the CoC directed the Resolution Applicants, including the Appellants herein, to revise their respective settlement proposals in order to align with the objectives of the CIRP under the Code. Respondent No. 1 further submitted that the deliberations of the said meeting necessitated such revisions to ensure the viability and efficacy of the proposed plans.
The Respondent No. 1 submitted that pursuant to the discussions held in the 8th CoC meeting, an email was dispatched on 09.04.2021 to the Appellants, seeking clarifications on their submitted resolution plan and advising them to furnish a revised plan within a period of three days, in compliance with the directives issued by the CoC.
The Respondent No. 1 submitted that between 10.04.2021 and 12.04.2021, the Respondent No. 1 and the Appellants were engaged in a series of email exchanges concerning the clarifications sought by the Respondent No. 1 with respect to the Appellants’ resolution plan, as mandated by the discussions in the 8th CoC meeting. The Respondent No. 1 further submitted that vide an email dated 14.04.2021, the Appellants requested an extension of time until 17.04.2021 (‘1st extension’) to submit their revised resolution plan, indicating their intent to comply with the CoC’s directives.
It is further contended by Respondent No. 1 that thereafter, vide an email dated 17.04.2021, the Appellants sought additional time until 20.04.2021 (‘2nd extension’) for submitting their revised plan, followed by yet another request on 21.04.2021 for an extension until 30.04.2021 (‘3rd extension’). The Respondent No. 1 submitted that subsequently, vide an email dated 01.05.2021, the Appellants sought a further extension of 10 days (‘4th extension’), and that the Respondent No. 1, vide an email dated 02.05.2021, acceded to this request, thereby extending the deadline for submission of the revised resolution plan to 10.05.2021. The Appellants vide email dated 10.05.2021, submitted an addendum revising its resolution plan.
The Respondent No. 1 submitted that during the 10th meeting of the CoC, held on 18.05.2021, the amendments proposed by the Appellants to their resolution plan were deliberated upon and the members of the CoC advised the Appellants to enhance the plan value for ensuring its feasibility. The Respondent No. 1 further submitted that the Appellants agreed to incorporate the suggested revisions and furnish the amended plan within a period of three days, i.e., by 21.05.2021, as per the consensus reached in the said meeting
The Respondent No. 1 further submitted that vide an email dated 19.05.2021, he issued a reminder to the Appellants, urging them to submit the final revised resolution plan on or before 21.05.2021, in adherence to the timeline agreed upon. The Respondent No. 1 submitted that the Appellants subsequently sought additional details pertaining to the property of the Corporate Debtor, which were duly provided by the Respondent No. 1 through emails dated 19.05.2021 and 20.05.2021. It is averred that, upon reviewing the requested information, the Appellants submitted an Addendum to their resolution plan on 21.05.2021, in compliance with the stipulated deadline.
The Respondent No. 1 submitted that during the 11th meeting of the CoC which convened on 27.05.2021, the revised resolution plan submitted by the Appellants was subjected to thorough scrutiny and discussion by the members of the CoC and the Appellants assured the CoC of their commitment to submit further revised proposals within a period of three days, in order to address the concerns raised and enhance the plan’s. It is averred that the Respondent No. 1, vide an email dated 28.05.2021, requested the Appellants to adhere to their assurance and submit the revised resolution plan by 29.05.2021, as communicated during the 11th CoC meeting.
The Respondent No. 1 submitted that, unexpectedly, the Appellants, vide their email dated 28.05.2021, expressed an intent to reassess their proposal and sought permission to visit the premises of the Corporate Debtor on 30.05.2021. The Respondent No. 1 submitted that the Respondent No. 1 promptly responded to the said email, requesting the Appellants to expedite their visit to 29.05.2021, so as to enable the submission of the revised plan by 30.05.2021. It is averred by the Respondent No.1 that the Appellants, vide their email dated 30.05.2021, indicated their intention to submit the revised resolution plan by 01.06.2021 (‘5th extension’), to which the Respondent No. 1, vide an email dated 30.05.2021, replied, confirming that this would constitute the last and final extension granted to the Appellants for submission of their revised plan by 01.06.2021.
The Respondent No. 1 submitted that the Appellants failed to submit the revised resolution plan by the stipulated deadline of 01.06.2021, despite their unequivocal confirmation vide their email dated 30.05.2021, wherein they had committed to adhering to the said timeline. The Respondent No. 1 further submitted that, instead of complying with the deadline, the Appellants, vide an email dated 02.06.2021, sought an additional extension of 15 days to submit their revised proposal, thereby deviating from the agreed schedule and assurances previously provided.
The Respondent No. 1 submitted that vide an email dated 03.06.2021, he apprised the Appellants that the CIRP period was nearing its expiration, rendering it impermissible for the Respondent No. 1 to unilaterally extend the timeline for submission of the resolution plan beyond the statutory framework. The Respondent No. 1 submitted that, vide the same email, he informed the Appellants that their request for an extension would be placed before the members of the CoC for consideration during the 12th CoC meeting scheduled to be held on 04.06.2021.
The Respondent No. 1 submitted that during the 12th meeting of the CoC, held on 04.06.2021, the Respondent No. 1 duly placed before the members of the CoC the request of the Appellants seeking an extension of time for submission of their revised resolution plan. The Respondent No. 1 further submitted that the members of the CoC, exercising their commercial wisdom as vested under the Code, resolved not to grant any further extension to the Appellants and instead directed the Respondent No. 1 to proceed with putting the Appellants’ last submitted resolution plan to vote, alongside another plan. It is averred that the CoC, in its discretion, approved the resolution plan submitted by Respondent No. 3 herein, while rejecting the resolution plan of the Appellants.
The Respondent No. 1 elaborated that, pursuant to the decision of the CoC, the Respondent No. 1, on 22.06.2021, filed an application under Section 30 of the Code, being I.A. No. 2810/2021, before the Adjudicating Authority, seeking approval of the resolution plan of Respondent No. 3, as duly approved by the CoC. The Respondent No. 1 submitted that the said application remains pending adjudication before the Adjudicating Authority as on date.
The Respondent No. 1 submitted that in light of the aforementioned facts and circumstances, the Appellants were afforded ample opportunities, including as many as five extensions of time, to submit their revised resolution plan during the CIRP. The Respondent No. 1 further submitted that such extensions demonstrate the fairness and reasonableness extended to the Appellants, and consequently, the contention that they were not granted a fair opportunity to revise their plan is wholly devoid of merit and unsustainable in law or fact.
The Respondent No. 1 further contended that, with respect to the issue raised by the Appellants regarding their revised proposal of Rs. 23.45 Cr. as compared to the successful resolution applicant’s final proposal of Rs. 24.56 Cr. plus CIRP expenses (with an actual resolution value of Rs. 22.37 Cr.), the CoC, in its commercial wisdom, duly considered both the question of further extensions and the evaluation of resolution plans during the 12th CoC meeting held on 04.06.2021. The Respondent No. 1 submitted that, once the CoC approved the resolution plan of Respondent No. 3 in accordance with the provisions of the Code, the Respondent No. 1 is precluded from revisiting or altering the CoC’s decision.
The Respondent No. 1 contended that the queries raised by the Respondent No. 1 on 01.06.2021 regarding the plan submitted by the Appellants were not merely inquiries but essential information that the Proposed Resolution Applicant was obligated to provide under the provisions of the Code, and the Request for Resolution Plan (RFRP).
Concluding his pleadings, the Respondent No.1 requested this Appellate Tribunal to dismiss the appeal with cost.
The Respondent No.2 also denied all averments made by the Appellants as frivolous.
The Respondent No. 2 submitted that the reply is being filed through Canara Bank, which holds the majority share in the CoC. The Respondent No. 2 submitted that the Appellants' claim that they were not given a fair opportunity to participate in the CIRP is entirely baseless and contradictory to the facts of the case. Between 20.02.2021 and 21.05.2021, Respondents No. 1 and 2 granted five extensions for the submission of the revised Resolution Plan at the request of the Appellants. Therefore, the assertion that no fair opportunity was provided is false and stands in direct contradiction to their own pleadings and document.
The Respondent No. 2 submitted that the Appellants have no locus standi under the law to seek the reliefs prayed for in I.A. No. 4619 of 2021. The Appellants filed the application on 11.10.2021 challenging the approval of the resolution plan of Respondent No. 3 by the CoC on 04.06.2021, seeking directions to consider their revised resolution plan, declare the approved plan null and void, reconstitute the CoC, exclude certain periods from the CIRP timeline, and other reliefs. The Respondent No.2 submitted that once a resolution plan is approved by the CoC, it can only be set aside under Section 31 of the Code and only if it fails to meet the requirements of Section 30(2) of the Code. The prayers sought by the Appellants are thus contrary to established legal provisions and lack merit.
The Respondent No. 2 submitted that it is a settled proposition of law that once a resolution plan is approved by the CoC, an unsuccessful resolution applicant has no locus standi to challenge the plan or the decisions made by the CoC during the consideration and deliberation of various plans. As per Section 31(1) of the Code an unsuccessful resolution applicant cannot be regarded as a "stakeholder," nor does the appellant qualify as an aggrieved person under Section 61(1) of the Code. Reference was drawn by the Respondent No.2 to the judgment in M.K. Rajagopalan Balaji Villa vs. S. Rajendran, RP Vasan Health Care Pvt. Ltd. and Ors, IA No. 215 of 2023 in Company Appeal (AT) (CH) (INS) No. 58 of 2023, decided on 17.03.2023, which reinforces this legal position.
The Respondent No. 2 submitted that the Appellants lack the locus standi to challenge the commercial wisdom of the Committee of Creditors (CoC). In this case, the CoC of the Corporate Debtor, exercising its commercial judgment, decided not to grant any further extensions to any of the Resolution Applicants for revising their plans after 01.06.2021. Consequently, the plans submitted to the Resolution Professional as of 01.06.2021 were thoroughly deliberated upon by the CoC during its 12th meeting held on 04.06.2021. The Respondent No. 2 submitted that this Appellate Tribunal in the case of Steel Strips Wheels Ltd. v. Shri Anil Menezes, Resolution Professional of AMW Auto Component Ltd. & Ors., reported at 2022 SCC Online NCLAT 150 held that:
"25.Learned Counsel for the Respondent No.3 has emphasized that the plan which is being submitted by Respondent No. 3 is of much higher value and is favourable to the Corporate Debtor. After approval of the Resolution Plan by the CoC by requisite vote and after expiry of CIRP, it is not open for the CoC to contend that it is ready to consider the plan of Respondent No.3 which according to it may be better plan. "
The Respondent No. 2 submitted that the CoC exercised its commercial wisdom in approving the resolution plan of Respondent No. 3 during the 12th CoC meeting held on 04.06.2021. It is the case of the Respondent No.2 that the Adjudicating Authority and this Appellate Tribunal have a very limited scope to interfere with decisions taken by the CoC, which are based on unanimous commercial considerations and reference was drawn to the judgment of the Hon'ble Supreme Court in Kalpraj Dharamshi v. Kotak Investment Advisors Ltd., reported in (2021) 10 SCC 401, wherein it was observed that the legislative scheme under the Code clearly limits judicial interference with the commercial wisdom of the CoC, except within the narrow scope provided under Sections 30 and 31 of the Code.
The Respondent No. 2 submitted that the issue raised by the Appellants regarding their revised proposal of ₹23.45 crore, as compared to the Successful Resolution Applicant's final proposal of ₹24.56 crore plus CIRP expenses (actual resolution value being ₹22.37 crore), is untenable. The Respondent No.2 submitted that even the revised proposal of the Appellants is lower than the proposal of Respondent No. 3, the Successful Resolution Applicant, and hence does not merit consideration. Furthermore, there exists no provision under the Code, its regulations, or the Request for Resolution Plan (RFRP) allowing post-facto modification of a resolution plan once it has been unanimously approved by the CoC. The Respondent No.2 highlighted that as a matter of record that the application for approval of Respondent No. 3's resolution plan (I.A. No. 2810/2021) was filed by the Resolution Professional on 22.06.2021 before the Adjudicating Authority, whereas the Appellants filed I.A. No. 4619/2021 challenging the CoC's decision taken in its 12th meeting held on 04.06.2021 almost four months later, on 11.10.2021.
The Respondent No. 2 submitted that under Code there is no equity jurisdiction, and the Adjudicating Authority is bound to adjudicate matters strictly within the provisions of the Code. Reference was drawn to the judgments in Pratap Technocrats (P) Ltd. & Ors. vs. Monitoring Committee of Reliance Infratel Limited & Anr., Civil Appeal No. 676 of 2021 decided on 10.08.2021, and Ranjeet Singh vs. M/s Karan Motors Pvt. Ltd., Company Appeal (AT) (Ins) Nos. 719, 721, 722, 723 & 728 of 2020 decided on 18.08.2021, which reaffirm this position of law. The Respondent No.2 emphasized that there is no infirmity in the Impugned Order dated 09.07.2024 passed by the Adjudicating Authority dismissing I.A. No. 4619 of 2021.
Concluding his pleadings, the Respondent No.2 requested this Appellate Tribunal to dismiss the appeal with costs.
The Respondent No.3 also denied all averments made by the Appellant as frivolous.
The Respondent No. 3 submitted that the Resolution Professional invited the Resolution Applicants to participate in the 11th CoC meeting held on 27.05.2021 and a final extension until 01.06.2021 was granted via email dated 31.05.2021, affording adequate opportunity to the Resolution Applicants finalize the submission.
The Respondent No. 3 submitted that, on 01.06.2021, the Resolution Professional raised queries and sought clarifications, along with certain documents, in accordance with the Request for Resolution Plan (RFRP). The Respondent No.3 promptly provided the necessary documents and clarifications on the same day and submitted its revised resolution plan to the Resolution Professional on 01.06.2021.
The Respondent No. 3 submitted that on 19.06.2021, the Resolution Professional issued a Letter of Intent via email informing the Respondent No.3 of the CoC approval of its resolution plan and requesting a Performance Bank Guarantee (PBG) of Rs. 2 Crores within 10 days. The Respondent No.3 confirmed the Letter of Intent on 21.06.2021 and submitted the required PBG of Rs. 2 Crores on 22.06.2021. Subsequently, in June 2021, the Resolution Professional filed application I.A. No. 2810/2021 before the Adjudicating Authority under Section 30(6) of the Code, seeking approval of the Respondent No.3's resolution plan. The Appellants filed their objections through I.A. No. 4619/2021, which were dismissed by the Adjudicating Authority vide the Impugned Order dated 09.07.2024, demonstrating the answering Respondent's compliance with all procedural requirements and the validity of its approved resolution plan.
The Respondent No. 3 submitted that the principle of commercial wisdom of the CoC is well-established and non-justiciable, as consistently upheld by judicial precedents. In the present appeal, public sector banks, notably Canara Bank and Union Bank, constituting approximately 86% of the CoC, exercised their commercial judgment in denying the appellants further time to submit a revised resolution plan. This decision reflects their deliberate consideration of the possibility of receiving a commercially superior offer and their conscious choice against granting an extension.
The Respondent No. 3 submitted that the appellants’ claim of offering a commercially superior resolution plan compared to the approved plan of the Respondent No.3 is devoid of merit. At the relevant time, the appellants failed to submit a revised proposal or demonstrate a commercially better plan, despite having the opportunity to do so.
The Respondent No. 3 submitted that the Impugned Order dated 19.07.2024 is devoid of any legal or factual infirmity. The Adjudicating Authority has duly considered the record and noted that the appellants had already availed multiple extensions, rendering their contention of insufficient opportunity baseless. Further, the Impugned Order clearly establishes that the appellants’ claim of seeking extension due to clarifications requested by the Resolution Professional on 01.06.2021 is contradicted by their own email dated 02.06.2021, which attributes the extension request solely to Covid-19-related issues. The Resolution Professional placed the appellants’ extension request before the CoC, which rejected it in its commercial wisdom a decision that is non-justiciable under settled jurisprudence.
The Respondent No. 3 submitted that considerable time has elapsed since the resolution plan was approved by the CoC in June 2021, with over three years spent seeking approval before the Adjudicating Authority, which is now in the final stages of arguments, requesting this Appellate Tribunal to dismiss the appeal.
Findings
It is the case of the Appellants that they complied with of the relevant regulations and the Code in submission of their bid in response to the EoI initiated by the Respondent No.1. The Appellants assailed the Respondent No. 1 & 2 for not providing them sufficient opportunity to revise the Resolution Plan. The Appellants also assailed the CIRP Process adopted by the Respondent Nos. 1 & 2 only to favour Respondent No. 3, in preference to better bid provided by the Appellants. The Appellants also raised the issue regarding multiple queries raised by the Respondent No.1 and giving very short time to respond to the same.
Thus, the limited issue to be decided in the case is whether the Respondent Nos. 1 & 2 acted in fairness to all the bidder who submitted their bid in response to EoI or they acted with bias against the Appellants to favour the Respondent No. 3. We also need to determine whether it is the privilege and the right of the Appellants to seek multiple extensions and whether, the Respondent Nos. 1 & 2 were obligated to provide the same.
We note that under Section 12 of the Code, the CIRP is required to be completed within 180 days. The same has been stipulated under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Debtor), 2016 (“CIRP Regulations, 2016”). Further, the Resolution Professional can seek further extension of time with the approval of the CoC from the Adjudicating Authority under Section 12 of the Code for a further period of 330 days.
At this stage, we take into consideration the relevant Section of the Code, which reads as under :-
“Section 12. Time-limit for completion of insolvency resolution process.
(1)Subject to sub-section (2), the corporate insolvency resolution process shall be completed within a period of one hundred and eighty days from the date of admission of the application to initiate such process.
(2)The resolution professional shall file an application to the Adjudicating Authority to extend the period of the corporate insolvency resolution process beyond one hundred and eighty days, if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of 1[sixty-six] per cent. of the voting shares.
(3)On receipt of an application under sub-section (2), if the Adjudicating Authority is satisfied that the subject matter of the case is such that corporate insolvency resolution process cannot be completed within one hundred and eighty days, it may by order extend the duration of such process beyond one hundred and eighty days by such further period as it thinks fit, but not exceeding ninety days:
Provided that any extension of the period of corporate insolvency resolution process under this section shall not be granted more than once.
2[Provided further that the corporate insolvency resolution process shall mandatorily be completed within a period of three hundred and thirty days from the insolvency commencement date, including any extension of the period of corporate insolvency resolution process granted under this section and the time taken in legal proceedings in relation to such resolution process of the corporate debtor:
Provided also that where the insolvency resolution process of a corporate debtor is pending and has not been completed within the period referred to in the second proviso, such resolution process shall be completed within a period of ninety days from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019.]”
(Emphasis supplied)
Thus, normally the CIRP is required to be completed within 180 days which may be extended to 330 days by the Adjudicating Authority. We have take into consideration that in catena of judgment the Hon’ble Supreme Court of India, it has been has held that these guidelines are directory in nature and not mandatory in nature. In this regard, we would like to refer to the judgement passed by the Hon’ble Supreme Court of India in the case of Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Others, (2020) 8 SCC 531, where it was held that:
“127.Both these judgments in Atma Ram Mittal42 and Sarah Mathew43 have been followed in Neeraj Kumar Sainy v. State of U.P.47, SCC paras 29 and 32. Given the fact that the time taken in legal proceedings cannot possibly harm a litigant if the Tribunal itself cannot take up the litigant's case within the requisite period for no fault of the litigant, a provision which mandatorily requires the CIRP to end by a certain date - without any exception thereto - may well be an excessive interference with a litigant's fundamental right to non-arbitrary treatment under Article 14 and an excessive, arbitrary and therefore unreasonable restriction on a litigant's fundamental right to carry on business under Article 19(1)(g) of the Constitution of India. This being the case, we would ordinarily have struck down the provision in its entirety. However, that would then throw the baby out with the bath water, in as much as the time taken in legal proceedings is certainly an important factor which causes delay, and which has made previous statutory experiments fail as we have seen from Madras Petrochem31. Thus, while leaving the provision otherwise intact, we strike down the word "mandatorily" as being manifestly arbitrary under Article 14 of the Constitution of India and as being an excessive and unreasonable restriction on the litigant's right to carry on business under Article 19(1)(g) of the Constitution. The effect of this declaration is that ordinarily the time taken in relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal, the delay or a large part thereof being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for the Adjudicating Authority and/or Appellate Tribunal to extend time beyond 330 days. Likewise, even under the newly added proviso to Section 12, if by reason of all the aforesaid factors the grace period of 90 days from the date of commencement of the Amending Act of 2019 is exceeded, there again a discretion can be exercised by the Adjudicating Authority and/or Appellate Tribunal to further extend time keeping the aforesaid parameters in mind. It is only in such exceptional cases that time can be extended, the general rule being that 330 days is the outer limit within which resolution of the stressed assets of the corporate debtor must take place beyond which the corporate debtor is to be driven into liquidation.”
(Emphasis Supplied)
In this background, we note that the Resolution Professional i.e., Respondent No. 1 invited the bids by publishing Form G on 05.01.2021 and the last date for submission of bids by Prospective Resolution Applicant was 21.02.2021.
We have already noted that initially 9 EoIs were received by the Resolution Professional including from the Appellants. However, in the 6th CoC meeting held on 26.02.2021, the CoC granted another 15 days extension for submission of fresh EoI i.e., 19.03.2021 based on request received from PRA. We note that the subsequent to invitation of fresh bids based on 6th CoC meeting only two bids were received i.e., one from the Appellants and one from the Respondent No. 3. The CoC considered their bids and asked for better bids from both the bidders i.e., Appellants and Respondent No. 3.
We observe that the Appellants have alleged that they were in process of improving their bid, however, they were adversely affected due to COVID-19 pandemic and accordingly, they sought extension, however, Respondent No. 1 with alleged malafide intentions sent an e-mail on 01.06.2021 around 4:00 P.M seeking 50 clarifications of the Appellants which put unnecessary pressure on the Appellants since they were to meet the deadlines.
The Appellants also alleged that the Resolution Professional as well as the CoC did not give desired extensions and consequently, rejected their unrevised Resolution Plan and thus aggrieved by the same they filed an IA No. 4049 of 2021 in Company Petition No. (IB)-2728/ND/2019 before the Adjudicating Authority but the Adjudicating Authority rejected the IA No. 4049 of 2021 and thus they were forced to prefer the present appeal before this Appellate Tribunal.
At this stage, it will be important for us to take into consideration the few significant dates to understand whether the opportunities were granted to the Appellants or not and whether the process was fair to both the bidders including SRA i.e. the Respondent No.3 or not.
The important dates read as under:-
08.06.2020- The Adjudicating Authority initiated CIRP against the Corporate Debtor i.e. Servel India Pvt. Ltd.
21.02.2021: The Last date for submission of resolution plan in terms of Form G published on 05.01.2021.
20.02.2021: The Appellants submitted resolution plan.
08.04.2021: 8th CoC meeting held whereby CoC members advised Appellants to revise their proposal.
14.04.2021: (1stExtension) Appellants sought time till 17.04.2021 to submit revised plan, which was granted by the Respondent No.1.
17 .04.2021: (2nd Extension) Appellants again sought time till 20.04.2021 to submit revised plan, which was granted by the Respondent No.1.
21 .04.2021: (3rd Extension) Appellants again sought time till 30.04.2021 to submit revised plan, which was granted by the Respondent No.1.
01.05.2021: (4th Extension) Appellants again sought time till 10.05.2021 to submit revised plan, which was granted by the Respondent No.1.
10.05.2021: The Appellants submitted an addendum to their resolution plan.
11.05.2021: The Adjudicating Authority allowed exclusion of 16 days from computation of CIRP period. Accordingly, CIRP period was to expire on 20.06.2021.
18.05.2021: The COC in its 10th meeting advised Appellants to submit revised plan within three days.
21.05.2021: The Addendum was submitted by Appellants.
27.05.2021: The COC in its 11th meeting advised both the resolution Applicants to increase the plan value and submit addendum within three days.
30.05.2021: (5th Extension) Appellants sought time till 01.06.2021 to give revised plan, which was granted by the Respondent No.1.
30.05.2021: The Resolution Professional informed the Appellants vide his email that it was the last and final extension being given to the Appellants, since CIRP was coming to an end.
31.05.2021: The Resolution Professional acknowledged visit to the factory by the Appellants and reminded Appellants to submit the revised plan by 01.06.2021 specifying that this is the final extension.
01.06.2021: Submission of revised resolution plan by Respondent No.3. As no revised plan was submitted by Appellants till 3 :49 pm, the Resolution Professional sought certain information from the Appellants on the plan already submitted.
02.06.2021: The Appellants once again sought l5 days' time to re-evaluate the corporate debtor. The Appellants raised no issue with regard to the information sought by · the Resolution Professional vide its email dated 01.06.2021 on the plan already submitted by the Appellants.
03.06.2021: The Resolution Professional made it clear that no further extension can be given. Vide email dated 03.06.2021 the Resolution professional made it clear that "As you are aware of the order issued by Hon 'ble NCLT denying any further extension of CIRP except exclusion of period for the from 19.04.2021 to 04.05.2021, hence the RP has no authority further, to extend further as the extension was given in this light of CoC to present the plan in the coming CoC meeting as scheduled for tomorrow i.e. 04.06.2021. hence, RP is recommending your request to the CoC for necessary consideration or approval thereon.”
04.06.2021 at 11:54 am: The Resolution Professional around 11 :54 am forwarded the link of CoC meeting fixed at 3.30 pm
04.06.2021 at 4:31 pm: The Appellants submitted to the Resolution Professional that they saw the email forwarded by Resolution Professional only at 4:31 pm and informed that their consultant has been detected of covid positive so it will be difficult to attend the meeting
05.06.2021 at 1:46 pm: The Appellants informed the Resolution Professional that meeting link/information was received by them only 4 hours before the of appeal meeting and moreover the link was not working
05.06.2021 at 4:23pm: Resolution Professional informed the Appellants that the extension period for submission of resolution plan has been denied by the CoC in its meeting dated 04.06.2021
22.06.2021: The Resolution professional filed I.A. No.2810 of 2021 for approval of Resolution Plan of Respondent No.3 as approved by CoC in its meeting dated 04.06.2021.
11.10.2021: The Appellants filed IA no.4619 of 2021
09.07.2024: IA No.4619 of 2021 was dismissed by the Adjudicating Authority.
From above, it is noted that the Appellants were given five extensions as requested by them and 5th extension was granted up to 01.06.2021 as requested by the Appellants. We also note that in the relevant e-mail dated 31.05.2021, the Respondent No. 1/ Resolution Professional categorically advised the Appellants that this is the last extension being given to them.
We have taken into consideration that revised Resolution plan was submitted by the Respondent No. 3 on 01.06.2021, however, no Resolution Plan was submitted by the Appellants during the timeline stipulated by the Resolution Professional extending the opportunity to both the bidders.
It has been brought to our notice that the Adjudicating Authority has denied further extension of CIRP except exclusion of period from 19.04.2021 to 04.05.2021, hence, the hands of the Resolution Professional were tight.
At this stage, we would like to also take into consideration the relevant e-mail exchanged between the Appellant and the Resolution Professional/ Respondent No. 1 on the subject to extension of time limits. The various e-mails exchanged between them are reads as under:-
65.
From above emails, it becomes clear that the Appellants sought several extensions, which were granted by the Respondent No.1. In the last extension (5th extension), the Respondent No.1 made it very clear to the Appellants that this was last extension. The Respondent No.1 also informed the Appellants that the Adjudicating Authority has not ranted any extension of CIRP timelines. Hence, we are of considered opinion that the Respondent No.1 gave ample opportunities to the Appellants, who failed to give their revised bid in time. We do not find any merit in the arguments of the Appellants on this account.
We note that the Adjudicating Authority has gone into details of the various contentions made by both the parties and have examined the facts and the relevant law while disposing the IA No. 4619 of 2021 filed by the Appellants before the Adjudicating Authority for seeking directions to the Resolution Professional to consider the revised Resolution Plan of the Appellants along with prayers. The relevant part of the Impugned Order reads as under:-
“5.We have heard the Learned Counsels for the Applicants and the Respondents, and further perused the averments made in the Application and written submissions presented by the Parties. The Applicants has filed this Application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 seeking directions against the Respondents for consideration of their Revised Resolution Plan.
6.The Applicants has submitted their Resolution Plan on 20.02.2021 pursuant to FORM G issued by the Respondent No. 1. Thereafter, in 8th CoC meeting the CoC members asked the Resolution Applicants to revise their Resolution Plans by way of addendum. Consequently, the Applicants sought extensions for submitting their revised proposals from Respondent No.1 on multiple occasions Le., 14.04.2021, 17.04.2021,21.04.2021, 01.05.2021,30.05.2021. Respondent no. 1 granted these extensions five times at the request of Applicants.
7.The contention of the Applicants that they were not given sufficient opportunities to revise their Resolution Plan does not appear to be correct statement, due to the fact that at the request of Applicants the opportunity was already given five times to them by extending the timelines and the final request of extension was also placed by the Respondent No.1 before the CoC members, which was further rejected due to reasons mentioned in the minutes of the meeting. It is important to note that the CIRP is a time-bound process, and unlimited time cannot be granted to Resolution Applicants for submitting their Resolution Plans. The relevant extract of minutes of 12th CoC meeting held on 04.06.202118 reproduced below:
"i: To discuss and consider, if the CoC think fit, on the request received from the resolution applicant Giriraj Prasad and Kamla Gupta for seeking extension of 15 days for submission of resolution plan duly amended as per advice of CoC IN 11TH meeting. During the meeting, the RP shared the mail sent to Giriraj Prasad Gupta and Kamla Gupta, the details of communication held with respect to extension requested for submission of plan and to carry out further reassessment and evaluation for submission of revised. plan. RP further informed the meeting that the CIRP period is of very short time considering the exclusion granted of lockdown period from 19th April, 2021 to 5th June, 2021, saying of 16 days only, which is not the sufficient time. On deliberate discussion, Mr. Abhay Kumar Singh from Canara Bank proposed not to consider the further extension as the CIRP has limited time and running short to conclude as the Hon'ble NCLT has granted extension for 16 days only. He advised that on behalf of Canara Bank is of view that no further extension be granted and RP should go for final call. He then asked Mr. Abhishek to comment upon and on proposal of Mr. Abhay Kumar Singh, Mr. Abhishek Hindunia, the Manager, NCLT division of Canara Bank seconded stating that the CIRP period is running with very short time and considering the time available, it is not feasible to grant further extension to Giriraj Prasad Gupta and Kamla Gupta. He added that RA has no intension to improve therein so it would be better to move with the revised Resolution Plan, that the RP has received yet. "
8.The argument raised by the Applicants that they were unable to submit their revised Resolution due to a substantial number of clarifications requested by Respondent No. 1 on the last submission date is not tenable as the Applicants vide email dated 02.06.2021 had requested for further extension of time for submitting their revised Resolution Plan on the pretext of Covid-19 pandemic, not because of their inability to answer those clarifications. This clearly indicates that the queries raised by Respondent No. 1 did not prevent the Applicants from submitting the revised plan. Thus, the contention of the Applicants that Respondent No. 1 sought such queries on the last occasion, Le., the last date for submission of the Revised Resolution Plan which disables them for submitting their revised plan cannot be relied upon. The relevant extract of the email dated 02.06.2021 is reproduced below:
"Dear Sir, Please refer to your trailing email. Please note that we tried to re evaluate the Corporate Debtor as suggested by the CoC members in the last meeting. In view of the present Lockdowns imposed by various state governments and also the prevailing circumstances due to the second wave of the pandemic COVID-19, we have not been able to evaluate the assets of the Corporate Debtor and will require time to submit the revised proposal. request you to please give a further time of 15 days to submit the revised proposal. We are genuinely interested to purchase the corporate debtor and would request you to give us time to re evaluate the Corporate Debtor. Regards Giriraj Prasad Resolution Applicants"
9.The Applicants further contended that the Respondent No. 1 has not complied with Regulation 19 of the CIRP Regulations 2016 and Section 30(2) of the code, which implies that a meeting of the CoC shall be called by giving not less than five days' notice in writing to every participant or prior as reduced by the CoC. The Applicants alleged that the Respondent No.1 intimated the Applicants just three hours prior to commencement of the 12th CoC meeting but it does not appear to be correct as on perusal of the email dated 03.06.2021, it emerged that the Respondent No. 1 informed the Applicants about the CoC meeting scheduled for 04.06.2021 in due time and it was due to Applicants themselves that they are unable to attend the CoC meeting due to some technical reasons. It is clear that the contentions raised by the Applicants are just imaginary and without any substantial or convincing evidence, thus cannot be relied upon.
10.The Resolution Plan of the Applicants was rejected by the CoC in the 12th CoC meeting dated 04.06.2021 after taking into account all the relevant facts and circumstances and making a sound decision based on their commercial expertise. Therefore, we are not inclined to interfere in the commercial decision of the CoC. The Hon'ble Supreme Court in Ramkrishna Forgings Limited v. Ravindra Loonkar, Resolution Profession of ACIL Limited & Anr., Civil Appeal No. 1527 of 2022, held as follows:
"30.At this juncture, it also cannot be lost sight of that it is for the FC(s) who constitute the CoC to take a call, one way or the other. Stricto sensu, it is now well-settled that it is well within the CoC's domain as to how to deal with the entire debt of the Corporate Debtor. In this background, if after repeated negotiations, a Resolution Plan is submitted, as was done by the appellant (Resolution Applicants), including the financial component which includes the actual and minimum upfront payments, and has been approved by the CoC with a majority vote of88.56%, such commercial wisdom was not required to be called into question or casually interfered with. Surprisingly, the discussion in both orders is wanting, except for the difference in the figure of the total outstanding dues and the amount of money which the appellant was to put up initially for taking over the Corporate Debtor, for this Court to understand as to what other reasons, grounded in the Code's provisions, compelled the Adjudicating Authority-NCLT to embark upon the novel path of ordering revaluation by the OL. At the cost of repetition, nobody had moved before the NCLT or raised any objection challenging the Resolution Plan pending approval. Even the NCLAT has only indicated that when "figures of crores" are emerging stage-wise, "then there is no harm to look at the Expert opinion", which the Adjudicating Authority-NCLT in this case has asked for. "
11.In light of the above, we do not find any merit in the prayers made by the Applicants seeking reconsideration of their Resolution Plan and do not warrant any further directions to the Committee of Creditors (CoC). Consequently, the relief sought by the Applicants lacks merit and is therefore dismissed. Accordingly, IA No. 4619 of 2021 in CP(IB) No. 2728/ND/2019 is hereby dismissed and disposed of.”
We find the Adjudicating Authority has clearly recorded the sequence of events and opportunities offered to the Appellants. The Impugned Order is well reasoned order and we do not find any error in the same.
Thus, we are of the considered view that all the bidders were given equal opportunities. We also note that various extensions sought by the Appellants were acceded to, however the Appellants failed to submit their revised bid which the Respondent No. 3 gave. We are conscious of the fact that the CIRP is time bound process and the time is of essence in order to seek resolution of the Corporate Debtor. Unnecessary delays effect the chances of revival of the Corporate Debtor adversely which may lead to liquidation of the Corporate Debtor i.e., corporate death of the Corporate Debtor. We do not find any bias as alleged by the Appellants in conduct of the CIRP.
We also take into consideration the allegation of the Appellants that their bid was better. It can be nobody’s case that he has got any exclusive right to match or improve upon his bid once he notes the bids by the rival bidder. Further, it can be nobody’s case that his bids submitted after due date should be considered by the Adjudicating Authority only because a figure might be slightly higher. If such plea is accepted then the whole process can never end, because the rival bidders will keep on offering the improved bids at every stage, whether at the time of consideration of the same by the CoC or even at this stage of consideration of approval of Resolution Plan by the Adjudicating Authority. Such tendencies are required to be rejected.
We do not find any merit whatsoever in the appeal before us. The Appeal devoid of any merit stand rejected. No cost. I.A., if any, are closed.