M/s Afita Constructions Pvt. Ltd. vs Dr. G.V. Narasimha Rao & Anr.

[Per: Shreesha Merla, Member (Technical)]

The Appellant has preferred Company Appeal (AT) (Ins) No. 326/2023, aggrieved by the Impugned Order dated 28/03/2023 in Intervention Application No. 7/2022 in IA No. 1344/2022 in C.P. (IB) No. 241(HDB)/2021, whereby the ‘Adjudicating Authority’ / ‘National Company Law Tribunal, Mumbai Bench’ has dismissed the Application, filed by the Appellant herein seeking to intervene in IA No. 1344/2022, filed by the first Respondent / Resolution Professional (“RP”) of the Corporate Debtor for approval of the Resolution Plan.

Company Appeal (AT) (CH) (Ins) No. 331/2021 is preferred by the Appellant challenging the Order dated 28/03/2023, whereunder the Interim Application No. 1414/2022, filed by the Appellant in IA No. 1344/2022, seeking a direction to allow the Appellant to submit a better Resolution Plan, was dismissed by the ‘Adjudicating Authority’.

Since both these Appeals refer to common facts and circumstances, they are being disposed of by this common Order.

The Learned Counsel for the Appellant submitted that the Resolution Plan submitted by the ‘Successful Resolution Applicant’ (“SRA”) has allocated less amounts to the Operational Creditors, than what would be payable to them in the event of Liquidation. It is also submitted that the Plan does not meet the requirements referred to in Section 30 (2) of the Code as the assets have been undervalued; there was violation of Regulation 36A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 as the invitation for expression ought to be submitted not later than the 75^th day from the date of the Insolvency commencement date, whereas in the instant case, the invitation for expression was submitted after 111 days and further that the CoC Meetings were conducted without giving Notice to the Appellant who is the Representative Nominee of the Operational Creditor, thereby violating Section 24 of the Code.

It is also submitted that when the aggregate dues of the Operational Creditors exceed 10 % of the debt, the Appellant ought to have been included in these Meetings, in the absence of which, there is clear violation of Section 24 of the Code. The Claim of the Appellant was admitted at a very belated stage just prior to the 5^th CoC Meeting and on receipt of the information, the Appellant had immediately taken the necessary steps.

It is the case of the Appellant that a major decision was taken in the 4^th CoC Meeting excluding the Appellant and no publication for extension of time was issued nor was it published on the IBBI website. It is submitted that the RP admitted the Appellant’s Claim on 13/09/2022, even though the Claim was submitted by the Appellant way back on 19/04/2022. As per advertisement dated 20/07/2022, the last date for submission of ‘Expression of Interest’ (“EOI”) was 04/08/2022 and the last date for submission of the Resolution Plan was 09/09/2022. It is the case of the Appellant that the RP without determining the Claim amounts has directed the ‘Prospective Resolution Applicant’ (“PRA”) to submit the Resolution Plan. The RP also did not circulate the Minutes of the Meetings by electronic means to the Appellant by violating Regulation 25 (5) (a). Regulation 37 of CIRP Regulations speaks about maximisation of the value of the Corporate Debtor’s assets, whereas in the instant case, the assets of the Corporate Debtor are grossly undervalued. The Learned Counsel for the Appellant in support of his submissions placed reliance on the Judgment of the Hon’ble Apex Court in the matter of ‘Committee of Creditors of Essar Steel India Limited through Authorised Signatory Vs. Satish Kumar Gupta & Ors.’ reported in [(2020) 8 SCC 531] in which it is observed as follows:

It is the further case of the Appellant that the ‘Adjudicating Authority’ has erred in dismissing IA No. 1410/2022 in which Application the Appellant had sought for a direction to accept its Plan which was for a higher amount and beneficial for all Stakeholders.

The ‘Adjudicating Authority’ has dismissed IA No. 1014/2022 in which the Applicant / the Appellant herein after gaining knowledge about the details of the Resolution Plan of the SRA, was not satisfied with the Plan submitted by the SRA as the Plan was covering only 4 % of the Operational Creditor’s Claim and sought to offer a better Resolution Plan that the one that was already approved by the CoC. The ‘Adjudicating Authority’ has observed that the Application was per se not maintainable firstly for the reason that the CoC had already approved the Resolution Plan which he received pursuant to publication of Form – G. Intervention Application, I.P. No. 07/2022 in IA No. 1344/2022 was dismissed on the ground that the Code did not provide any rule to a third party including the Unsuccessful Resolution Application to intervene in an Application filed under Section 31 of the Code and therefore, the Applicant / the Appellant had no locus standi to intervene.

The Learned Senior Counsel for the 2^nd Respondent / SRA submitted that the Plan was already implemented and the Order in IA No. 1344/2022 approving the Resolution Plan has attained finality as the said Order in IA No. 1344/2022 had not been challenged. The Learned Counsel for the 1^st Respondent / the Resolution Professional submitted that the Company Appeals are not maintainable and are infructuous as the Plan has already been implemented and the Appellant has not challenged IA No. 1344/2022. As regarding the contention of the Appellant that the Resolution Plan fails to maximise the value of the assets of the Corporate Debtor, it is submitted that the CoC in their commercial wisdom has approved the Resolution Plan which provides for the following:

It is also submitted that the offer by the Applicant / the Appellant was submitted after the Resolution Plan was approved by the CoC and the question whether the amount is below the liquidation value or not is left to the commercial wisdom of the CoC and the Operational Creditor being the unsuccessful Resolution Applicant cannot challenge the Plan on that ground.

At the outset, we address to whether the Appellant has any vested right to file a Resolution Plan pursuant to the process in published Form – G. It is seen from the record that the Resolution Plan was approved by the CoC and the ‘Letter of Intent’ (“LOI”) was issued to the SRA on 09/11/2022. IA No. 1410/2022 was filed subsequently on 10/11/2022. IA No. 1314/2022 was filed by the RP seeking approval of the Resolution Plan on 11/11/2022. It is significant to mention that the Appellant sought to intervene in IA No. 1344/2022 by filing an Application only on 25/11/2022. It is also on record that Notice for the 7^th CoC Meeting was sent to the Appellant on 01/11/2022 but the Appellant did not choose to attend the said Meeting. The contention of the Learned Counsel for the Appellant that being the authorised Representative he was not issued the Notice to attend the Meeting, is therefore untenable. It is also pertinent to mention that on 17/09/2022 the Appellant had attended the 5^th CoC Meeting, wherein the entire terms and conditions of the Resolution Plan was discussed. The Appellant did not choose to attend the 6^th CoC Meeting also. In this background, not having given a Plan immediately pursuant to Form – G, seeking to give a better Plan at this stage, subsequent to approval by the CoC, cannot be sustained in the light of the judgment of the Hon’ble Apex Court in the matter of ‘Arcelormittal India (P) Ltd. v. Satish Kumar Gupta’ reported in [(2019) 2 SCC 1] in which the Hon’ble Apex Court has held as follows:

The Principal Bench, NCLAT vide Order dated 19/12/2022 in the matter of ‘Kalinga Allied Industries India Private Limited Vs. Committee of Creditors (Bindal Sponnge Industries Limited)’ in Company Appeal (AT) (Ins) No. 689/2021 has observed as follows:

It is clear from the aforenoted judgments that the Appellant does not have any vested right in submitting the Resolution Plan in the absence of filing one Plan pursuant to Form – G, and taking the right steps at the appropriate time, specifically keeping in view that the Appellant had attended the 5^th CoC Meeting when the entire contours of the Resolution Plan was discussed. At this juncture, we find it relevant to place reliance on the Judgment of the Hon’ble Apex Court in the matter of ‘Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh’, reported in [(2020) 11 SCC 467] in which the Hon’ble Apex Court has held as follows:

The ratio of the aforenoted Judgment directly contradicts the contention of the Appellant that the bid value has to match the liquidation value. It is significant to mention that the Resolution Plan has already been implemented and we do not wish to set the clock back.

For all the foregoing reasons, this Tribunal is of the considered view that there is no illegality in the Order of the ‘Adjudicating Authority’ dismissing the Intervention Application, I.P. No. 07/2022 in IA No. 1344/2022, as well as IA No. 1410/2022 in IA No. 1344/2022, seeking a direction to offer a better Plan. The Company Appeal (AT) (CH) (Ins) No. 326/2023 and Company Appeal (AT) (CH) (Ins) No. 336/2023 are dismissed accordingly. No Order as to Costs. All connected pending Interlocutory Applications, if any, are closed.