Mr. Arun Chadha vs Mr. Pratham Benara

The present application has been filed by the Resolution Professional (RP) of the Corporate Debtor/Person (as CIRP has been ordered u/s 10 of the Insolvency & Bankruptcy Code) for seeking the following reliefs:

a. Pass an order/direction allowing the Applicant Resolution Professional to withdraw the Interlocutory Application No. 370/2022 as approval of CoC to the Resolution Plan dated 12.09.2022 has been cancelled as being non responsive;

b. Pass an Order/ direction for the initiation of liquidation process of the corporate debtor i.e. Benara Automotives Private Limited, under section 33 (2) of the Insolvency and Bankruptcy Code, 2016;

c. Pass an Order for the appointment of the Resolution Professional, Mr. Arun Chadha, as the Liquidator of the corporate debtor under Section 34 of the Insolvency and Bankruptcy Code, 2016;

d. pass any such order(s)/direction(s) as this Hon'ble Adjudicating Authority may deem fit and proper in the facts and circumstances of the case.

The facts of the present case are that petition for initiation of Corporate Insolvency Resolution Process ("CIRP") was filed by the Corporate Person, i.e. Benara Automotives Private Limited ("BAPL"), under Section 10 of the Insolvency & Bankruptcy Code ( hereinafter referred as "the Code" ) read with Rule 7 of the insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter referred as "the Rules") and the same was admitted by this Tribunal, thereby imposing moratorium vide order dated 29.01.2020 and appointing Mr. Arun Chadha as Interim Resolution Professional ( hereinafter referred as "the IRP" )under Section 16 (1) of the Code with directions to take all necessary actions. In compliance with the directions of this Tribunal, public announcement was made by the IRP thereby inviting claims from the Creditors of the Corporate Debtor pursuant to which the IRP received total seven claims and the same were verified and Committee of Creditor (hereinafter referred as “the CoC”) was constituted by him.

The Applicant submitted that in the 1st meeting of the CoC held on 16.03.2020, decisions of appointing Mr Arun Chaddha as Resolution Professional (hereinafter referred as the RP) was taken. Thereafter, Mr. Arun Chaddha performed the functions of the RP.

After being appointed as RP, Mr. Arun Chaddha took steps for running and management of the affairs of the Corporate Debtor as going concern and appointed total four Registered Valuers on 06.04.2020; in which Two Registered Valuers, Mr. Prateek Mittal (Registered Valuer: IBBI/RV/0512018110021) and Mr. Chandan Bhatia (Registered Value: IBBI/RV/0612019111431) were appointed for the purpose of ascertaining the Fair Market and Liquidation Value of the Securities and Financial Assets; and Mr. Sanjay Chopra (Registered Valuer: IBBI/RV/O212018/10001) and Mr. Brahmpal Bharadwaj (Registered Valuer: IBBI/RV/O212019111177) were appointed for the purpose of ascertaining the Fair Value of Plant and Machinery of the Corporate Debtor. No Forensic Auditor was appointed as decided by the CoC.

It is submitted that in the 3rd CoC meeting conducted on 27.07.2020, the majority voting rights holder, Pegasus Assets Reconstruction Private Limited (PARPL), requested review of the claim amount of Rs. 1,39,59,969.261/- to Rs. 1,55,31,998.36/- on the basis of statement of accounts submitted by them. The same was reviewed and updated before this Tribunal.

In the 4th CoC meeting held on 25.08.2020, the RP discussed about the management of affairs and placed the draft Expression of Interest (Form -G as under Regulation 36A) ("the EOI") before the members of the CoC for consideration and the same was approved for publication with 98.06% votes by the majority voting rights holder. Pursuant to the receipt of EOI from one Resolution Applicant which consisted of the Suspended Board of Directors of the Corporate Debtor and no objections from the Committee of Creditors, the Final List of Prospective Resolution Applicants was sent on 03.10.2020 for submission of Resolution Plan on 27.10.2020.

The 180th day of the CIRP period which was getting expired on 04.11.2020, after exclusion of period of lockdown in accordance with Regulation 40C of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulation 2016 as inserted by Notification No. IBBI/2020-21/GN/REG059 dated 20.04.2020 w.e.f. 29.03.2020, was further extended by three months as approved in the 5th CoC meeting held on 16.10.2020, as per Section 12 of the Code. The same has been allowed by this Tribunal vide order dated 14.12.2020 and the CIRP period was accordingly got extended up to 02.02.2021

It is submitted that pursuant to the publication of the EOI, the list of Prospective Resolution Applicants was sent to all CoC members on 03.10.2020. Thereafter, on 27.10.2020, a Resolution Plan was received from Resolution Applicants, Mr. Pratham Benara & Mr. Rajesh Benara who are both Suspended Board of Directors, which was scrutinized and Objections to the same were communicated to the Resolution Applicant on 04.11.2020. Subsequently, 3 weeks extension was provided for the removal of the objections in the Resolution Plan as requested by the Resolution Applicant due to the reason that both Mr Pratham Benara and Mr. Rajesh Benara were hospitalised on account of getting infected by Corona, thus the dead line for submission of rectified Resolution Plan was extended by a period of three weeks till 09.11.2020. Therefore, subsequent dates of submission of the Resolution Plant also stood modified.

The Resolution Plan which was placed before the CoC for its consideration in the 8^th CoC meeting held on 24.12.2020, was rejected with 98.06% votes with the condition that fresh Expression of interest (EOI) will be invited for the effective resolution of the Corporate Debtor. In pursuance to this decision, a Second EOI was published on 30.12.2020 in Times of India (English) and Dainik Jagran (Hindi), both Agra Edition for receipt of EOI till 14.01.2021. After the said publication, one EOI was received again from Prospective Resolution Applicant, Mr. Pratham Benara (Suspended Board of Directors of the Corporate Debtor) by the Resolution Professional.

Further, on 19.01.2021, provisional list of the Prospective Resolution Applicant was sent to all the stakeholders in accordance with the Regulation for want of objections. Subsequently on 29.01.2021, Final List of Prospective Resolution Applicant is prepared, thereby directing the PRA to submit the Resolution Plan by 28.02.2021 as per the EOI published in the prescribed Form – G.

It is submitted that in the 9th CoC Meeting, the RP placed the Resolution Plan received on 28.02.2021 as per the Expression of interest published on 30.12.2020 from the Resolution Applicant, Mr. Pratham Benara. The CoC was informed that the Average Fair Value of the Securities & Financial Assets is Rs.147.62 Lacs, Average Liquidation Value of the Securities & Financial Assets is Rs. 103.92 Lacs, Average Fair Value of the Plant & Machinery is Rs. 15.99 Lacs and Average Liquidation Value of the Plant & Machinery is Rs. 11.72 lacs.

In the Ninth CoC meeting, the revised version of the Plan dated 28.02.2021 submitted by the Resolution Applicant was scrutinised as per the provisions of Section 30(2) of the Code. It has been pointed out by the RP that as apprised by the Legal Counsel that changes which were asked to be made in the Plan and objections which were raised earlier were still pending rectification. It has been observed that it would not be appropriate for the RP or the CoC to give more time to the Resolution Applicant to rectify the resolution plan.

It is apprised by the RP to CoC members that voting on the agenda of the Resolution plan has already been deferred thrice when the Seventh, Eighth & Ninth meetings of the CoC were held. When the first resolution plan dated 09.12.2020 was being considered, it was deferred twice, first in the CoC meeting held on 19.12.2020 and then in the CoC meeting held on 24.12.2020. Thereafter, when the second resolution plan dated 28.02.2021 was being considered, it was deferred third time in the CoC meeting held on 05.03.2021. EOI in Form G was also published twice. In this process, 270 days have already passed, thus the CIRP period has already been completed on 02.02.2021 as per the extension and exclusion granted vide order dated 14.12.2020 of this Tribunal. Therefore, it has now been mandated by the CoC that the CIRP of the Corporate Debtor is to be completed within 330 days otherwise a going concern Corporate Debtor would slip under liquidation.

Subsequently, the RP once again placed the Resolution Plan before the CoC and apprised them about the Valuation Reports already submitted. A last opportunity was given to the Resolution Applicant to rectify and negotiate the Resolution Plan by 16.03.2021 to examine it for the successful resolution of the Corporate Debtor.

It is submitted that in the 11^th CoC meeting, which was scheduled to be held on 24.03.2021 got deferred to 25.03.2021 automatically due to non- participation of the majority stakeholders of the CoC, the RP informed the CoC members that the Resolution Plan received on 28.02.2021 from Mr. Pratham Benara has been scrutinized and found to be non-compliant of Section 30(2) of the Code. Thereafter, modified Resolution Plan was submitted by Mr Pratham Benara on 16.03.2021 after removal of certain objections in terms of Section 30(2) and put up for the CoC's consideration in Eleventh CoC meeting held on 25.03.2021 and was put to e-voting as requested by the CoC, which was passed by the CoC. The RP then gave his confirmation that the Resolution Plan is not in compliance of all the requirements of clauses (a) to (f) of sub - section (2) as under Section 30.

However, the Resolution Professional filed IA 182/2021 under Section 30(6) of the Code seeking approval of the Resolution Plan, wherein vide Order dated 22.03.2022 this Tribunal held:

In pursuance to the Order dated 22.03.2022, the Resolution Professional took steps to get the Resolution Plan rectified further and after receipt of the revised resolution plan along with Regulations compliance chart from the successful resolution applicant, he convened 12th meeting of COC on 17.11.2021 for considering the revised Resolution Plan as per the direction of this tribunal.

Thereafter, this Tribunal vide Order dated 09.05.2022 while acknowledging that the revised resolution plan had been received, ordered for approval of the revised resolution plan if and when the same is approved by the CoC. Accordingly, the earlier IA No. 182/2022 vide which the defective resolution plan was filed as discussed in previous para, was dismissed.

As per the direction of this Tribunal, the revised Resolution Plan submitted by the SRA is put up before the CoC for consideration in the 13th CoC meeting held on 06.05.2022. the RP presented the revised resolution Plan. Subsequently on 23.08.2022, the 14th CoC meeting of the CoC was held to confirm and approve the changes as requested in the Resolution Plan.

Finally, Modified Resolution Plan dated 10.09.2022 was put up for the CoC's consideration in the 15th meeting of the COC as per the provisions of Section 30(2) and voting was conducted through Ballot Paper as requested by the CoC. The following resolution which was put to voting, was passed:

Resolution Professional filed an IA No. 370/2022 for approval of Resolution Plan submitted by Resolution Applicant, Mr. Pratham Benara, as approved by the Committee of Creditors of the Corporate Debtor with 100% voting under Section 30(4) of the Code vide Item B1 of the 15th CoC Meeting held on 11.10.2022.

Further, in terms of clause 1.9.1 of the Request for Resolution Plan, the SRA was required to submit Performance Bank Guarantee of 10% of the amount of the Resolution Plan within 10 days of the approval of the Resolution Plan by the CoC. However, the SRA failed to provide the Performance Guarantee and accordingly, in terms of clause 1.9.1. of the Request for Resolution Plan (hereinafter referred as “RFRP”), the present Resolution Plan became non responsive. Therefore, in the 16th Meeting of the CoC dated 17.07.2023, the members decided to cancel the approval accorded to the Resolution Plan and to initiate the Liquidation process of the Corporate Debtor as approved with 98.06% voting by the Committee of Creditors. In this regard, two resolutions i.e. B1 and B2 were passed. They are as under:

The following resolution is proposed for e-voting:

The Applicant/RP, Mr Arun Chaddha submitted that he consented to act as the liquidator of the Corporate Debtor. His IBBI registration number is IBBI/IPA-001/IP-P00165/2017-18/10334, address EB 184, Maya Enclave, South West, National Capital Territory of Delhi-110064 and email chadharun@yahoo.com. Also, the AFA of the Applicant/RP which is sought to be proposed as Liquidator is going to be valid until 19.12.2024.

Accordingly, the present Application IA No.368/2023 has been filed under Section 33(2) of the Code, seeking rejection of the Resolution Plan as it is contended by the Applicant that that it is not in conformity with the RFRP and further to initiate the Liquidation Process of the Corporate Debtor.

In response to the present Application, the Respondent Resolution Applicant filed a reply on 30.11.2023 wherein it is submitted that this Tribunal vide order dated 09.05.2022 acknowledged that the revised resolution plan was placed before the CoC, and therefore IA No.182/2021 stood dismissed, and accordingly, it was directed to file afresh application for approval of resolution plan. However, as further stated by the Respondent that the Applicant asked for deposit of 100% Performance Bank Guarantee of the amount equivalent to the resolution plan payment amount as per clause 1.9.1 of RFRP, which was subsequently revised to 10%.

On insistence of the CoC for deposit of 10% performance guarantee, the Respondent requested for Performance Bank Guarantee to be waived vide communication dated 22.07.2022 and 25.07.2022 but as contended by the Respondent, this request was neither considered nor even placed before the CoC and deposit of the same was kept on being insisted.

It has been contended by the Respondent that the only reason for the liquidation of the Corporate Debtor is that the Respondent requested for waiving of Performance Bank Guarantee and getting the Resolution Plan approved by this tribunal only on the basis of the deposit of an amount of Rs. 5 lacs, which was deposited at the time of submission of the Resolution Plan. It is also pointed out that at the time of approving the Resolution Plan by the CoC, no such objection was raised.

The Respondent further contended that the Applicant called CoC meeting on his own and circulated the agenda on 13.07.2023 for cancellation of Resolution Plan and starting the liquidation of the Corporate Debtor without putting forward the arguments before this tribunal in the IA no. 370/2022, which was pending at that time before this tribunal for consideration.

The Applicant/RP filed a written submission on 30.01.2024 wherein the Applicant relying on the provision of Section 33 (2) of the Code submitted that the Application for liquidation must be submitted prior to the confirmation of the Resolution Plan submitted under Section 30(6) of the Code and the resolution seeking liquidation must receive the approval of the Committee of Creditors (CoC) with a majority of not less than sixty-six per cent under Section 33(2) of the Code. In the instant case, both conditions as stipulated by the wisdom of the Legislature encoded in the Code are complied with as this Tribunal had not confirmed the Resolution Plan which was submitted on 17.10.2022 in IA No. 370/2022 and the resolution to liquidate the corporate debtor was approved with 98.06% voting in its favour.

Further, the CoC, in its 16th meeting held on 17.07.2023, passed a resolution seeking liquidation of the Corporate Debtor on the ground(s) that the SRA failed to comply with the terms of the RFRP. The non-fulfilment of the condition as outlined under clause 1.9.1 of the RFRP, the Resolution Professional convened and held 16th Meeting of the CoC on 17.07.2023 which resulted into a conclusive decision to rescind the approval granted to the Resolution Plan in terms of clause 1.9.5 of the RFRP. It is further submitted that the CoC, after exercising its due wisdom, decided with a majority of 98.06% to initiate the Liquidation process for the Corporate Debtor in the instant case. Moreover, the Respondent's failure to adhere to the prescribed condition of payment of Performance Bank Guarantee of 10% of the amount of the Resolution Plan within 10 days of approval of the Resolution Plan led to decision of the CoC voting for liquidation.

The Respondent filed written submission dated 13.02.2024 wherein reliance has been placed upon the judgement of Hon'ble Supreme Court in the matter of Ebix Singapore Private Limited Vs Committee of Creditors of Educomp Solutions Limited & Anr., in which it was held that once the Resolution Plan submitted by the Successful Resolution Applicant and approved by the COC, there is no scope of withdrawal/modification in terms of the Resolution Plan. In the present case, the matter was approved by COC and resultantly IA No. 370/2022 was filed for approval of this Authority.

As the Resolution Applicant stated that the final decision on the Resolution Plan is to be taken by this Adjudicating Authority, we heard the Ld. Counsel for the Applicant as well as the Ld. Counsel for the Respondent Resolution Applicant and thereafter, a detailed order was passed on 02.04.2024 in which the undertaking given by the Resolution Applicant that the Performance Bank Guarantee would be furnished within a period of two weeks, was recorded. This order is reproduced as below

In compliance of the order dated 02.04.2024, it is submitted by the Resolution Applicant in the hearing held on 29.07.2024 that as envisaged in RFRP, the Members of the Suspended Board of Directors being part of Resolution Applicant have furnished the Performance Bank Guarantee to the RP though belatedly and a soft copy of the same has been provided to the RP only on 25.07.2024. It has been further contended during the hearing that the Performance Bank Guarantee now submitted meets the requirements of the Resolution Plan which could not be submitted earlier due to some unavoidable circumstances. In this regard, it has been stated by the Ld. Counsel for the RP that the scanned copy of the Performance Guarantee was supplied only on 25.07.2024, therefore the agenda for considering the same could not be brought before the CoC, and hence a short adjournment was sought to take the matter before the CoC for its consideration to comply with our order dated 02.04.2024 for considering the Performance Bank Guarantee in an objective manner.

The RP stated that a meeting of the CoC took place to consider the Performance Bank Guarantee being sent by the Resolution Applicant, who also happens to be the Ex-Director of the Corporate Applicant (as CIRP was initiated u/s 10) himself. A supplementary affidavit comprising of the resolution passed by the CoC to this effect, has also been filed in the registry of the Tribunal on 20.08.2024, giving the details of the 17^th meeting of COC held on 08.08.2024 to finally consider the Resolution Plan moved by the Resolution Applicant. It has been decided in the resolution of the 17^th CoC meeting that the Resolution Plan furnished by the Resolution Applicant be cancelled forthwith as no Performance Bank Guarantee was furnished by the Resolution Applicant, and therefore in the same very meeting another agenda item was taken up for initiating and pursuing the application under Section 33 of the Code for liquidation of the Corporate Debtor. The Resolution passed by the CoC in its 17^th meeting held on 08.08.2024 as discussed above has been considered by us in the hearing held on 18.09.2024. In this hearing, no representation has been made from the side of the Resolution Applicant. The relevant part of the resolution passed in 17^th meeting of the CoC is reproduced as under: -

In view of the above resolution passed by the CoC and no compliance having been made by the Resolution Applicant to submit proper Performance Bank Guarantee in compliance of our order dated 02.04.2024 and only a scanned copy was provided, which was not accepted by the CoC and nobody appeared on behalf of the Resolution Applicant in the hearing held on 18.09.2024 to explain about their failure to comply with our order dated 02.04.2024, we were satisfied that the Resolution Applicant who was also the Ex Director of the Corporate Applicant/Debtor was not found serious about complying with the terms of RFRP of the Resolution Plan for its implementation. Therefore, we passed order dated 18.09.2024 allowing withdrawal of the IA No.370/2022 as per the prayer no. (a) made in IA 368/2023 to that extent of withdrawing the said Resolution Plan. Subsequently, hearing was carried out in IA 368/2023 for approval of liquidation proposal of CoC and the matter was finally heard on 19.11.2024.

We have heard the Ld. Counsel for the Applicant and perused the material available on record.

After allowing in order dated 18.09.2024, the withdrawal of IA 370/2022 in respect of submitting the Resolution Plan as prayed in the present application i.e. IA No.368/2023, we considered the prayer (b) and (c) for initiating the liquidation proceedings for the Corporate Applicant/Debtor and appointing the Liquidator for which a resolution has been passed by the CoC in its meeting held on 14.07.2023 in which after the e-voting, the resolution has been passed by the CoC to move an appropriate application for initiating the liquidation proceedings of the assets of the Corporate Debtor. The RP further submitted that the liquidation cost is to be born in accordance with the provisions of the Code and the liquidation proceedings is proposed to be initiated for sale of the Corporate Person/Business of Corporate Person as a going concern under Regulation 32(e) & (f) thereof of the Liquidation Regulations, 2016. The agenda Item No. B4 to this effect has been recorded at Page No.42 of the application and the Resolution to that effect has been passed.

The Hon'ble Supreme Court in the matter of K. Sashidhar Versus Indian Overseas Bank & Ors in Civil Appeal No. 10673 of 2018 has held that the commercial decision of CoC is non- justiciable. In this case, it is seen that CoC with 98.06% majority has passed the resolution seeking liquidation of the Corporate Debtor. Moreover, the Hon'ble Supreme Court of India, in the recent ruling of Vallal RCK vs M/s Siva Industries and Holdings Limited & Ors, held as under: -

The CoC with requisite voting as given under section 33(2) of IBC, 2016 have approved liquidation of Corporate Debtor in view of not getting any viable and acceptable resolution plan, despite repeatedly considering revised resolution plan as submitted by the Ex Director of the Corporate Applicant and was required to be modified on a number of occasions. The Corporate Debtor could not even fulfil the requirement of Resolution Plan even during the course of the hearing by not depositing the Performance Bank Guarantee while considering the Resolution Plan filed before us vide IA No.370/2022, hence same was allowed to be withdrawn by the Applicant RP as it has already been discussed in para no.35 of this order.

In light of the above facts and circumstances, the decision of liquidation of the Corporate Debtor has been taken by the CoC with 98.06% voting share in the 16th meeting held on 17.07.2023 and further affirmed in the 17th CoC meeting held on 08.08.2024 (held as our direction vide order dated 29.07.2024 of this tribunal), particularly in view of the fact that no viable resolution plans have been received. Therefore, the present application deserves to be allowed for the initiation of the liquidation process. In this regard, we order that the Liquidator shall first sell the Corporate Debtor as a going concern in terms of Regulation 32A read with Regulation 32(e) and (f) of the IBBI (Liquidation Process) Regulations, 2016 and carry out the liquidation process strictly in terms of the provisions of the Code and IBBI (Liquidation Process) Regulations, 2016 made thereunder.

Further, Mr. Arun Chadha has been considered for appointment as Liquidator in this case after considering his consent as discussed in Para 23. The Law Research Associate of this Tribunal, Mr. Sarim Husain, has checked the credentials of Mr. Arun Chadha, and found that there are no disciplinary proceedings pending against the proposed Resolution Professional and also there is nothing adverse against him. Upon verification from the website of IBBI, it is found that Mr Arun Chadha holds valid authorization till 19-12-2024. After considering these details, we appoint Mr. Arun Chadha, Registration No. IBBI/IPA-001/IP-P00165/2017-18/10334 as Liquidator. It is also directed that the fees of the Liquidator shall be in accordance with Regulation 4(2) of IBBI (Liquidation Process) Regulations, 2016, and this liquidation order shall be deemed to be a notice of discharge to the officers, employees and workmen of the Corporate Debtor.

Accordingly, the present I.A. No. 368 of 2023 is allowed and stands disposed of.