Mr. Dinesh Kothari vs Mrs. Rajalakshmi Varadarajan & Anr.

[Per; Ms. Shreesha Merla, Member (Technical)]:

Challenge in these `Appeals’ viz. Comp. App. (AT) (CH) (Ins.) No.17/2023 and Comp. App. (AT) (CH) (Ins.) No.18/2023 under Section 61 of the Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as `The Code’) is to the `Impugned Orders’ dated 09.11.2022, passed in IA/IBC/984/CHE/2022 in IBA/990/2019 and IA/IBC/983/CHE/2022 in IBA/988/2019, respectively, ordering `Liquidation’ of the `Corporate Debtors’ `M/s. JKS the Banyaan Private Limited’ and `M/s. Pondicherry Extraction Industries Private Limited’, respectively, by which `Impugned Order’, the `Adjudicating Authority’ has allowed the `Applications’ filed by the Resolution Professional (`RP’) seeking `Liquidation’ of the `Corporate Debtors’. Since both these `Appeals’ deal with common facts, they are being disposed of by this `Common Order’.

Learned Senior Counsel appearing on behalf of the `Appellant’ submitted that the `Appellant’ is a `Shareholder’ and a `Member’ of the suspended `Board of Directors’ in all the three entities of the `JR Group’ comprising of `M/s. JR Foods Limited’, `M/s. Pondicherry Extraction Private Limited’ and `M/s. JKS the Banyaan Private Limited’ and all these entities have been admitted to CIRP by virtue of Applications initiated by the respective `Corporate Debtors’ under Section 10 of the Code. Learned Counsel drew our attention to the dates on which the `Corporate Debtors’ went into Corporate Insolvency Resolution Process (`CIRP’) and the same is detailed as hereunder:

It is submitted that the `Assets’ and `Liabilities’ of all the three `Corporate Debtors’ are intertwined and if these `Corporate Debtors’ are allowed to be resolved independently, such Resolution may not lead the maximum value for the respective `Corporate Debtors’. It is submitted that exhaustive guidelines were laid down in ‘State Bank of India’ Vs. ‘Videocon Industries Limited’, M.A.1306/2018 in CP (IB) 02/2018, vide `Order’ dated 08.08.2019, for consolidating the CIRP of all `Corporate Debtors’. It is submitted that during the course of CIRP, the Committee of Creditors (`CoC’), invited Expression of Interest (`EOI’) by publishing `Form-G’ on more than one occasion, but received no response. The `Appellant’ had preferred an IA.483/2022 in CP (IB) 84/CHE/2020, IBA990/2019 and IBA998/2019 on 18.04.2022 before the `Adjudicating Authority’ for `Consolidation’ of CIRP of all the three entities. But the `Adjudicating Authority’ without taking up for discussion this IA seeking `Consolidation’, has passed the `Liquidation Order’. It is submitted that one of the `Resolution Applicants’ has also given a `comprehensive plans’ for all the three `Corporate Debtors’ and that the CoC assuming supremacy and stepping into the shoes of the `Adjudicating Authority’ has rejected the Plan of the ‘Resolution Applicant’ who has given a `Comprehensive Combined Plan’ for all the three `Corporate Debtors’ and instead has sought for `Liquidation’. In the 9<sup>th</sup> Meeting of CoC held on 02.09.2022, the CoC passed a `Resolution’ to liquidate the `Corporate Debtor’ and then filed an `Application’ IA983/2022 before the `Adjudicating Authority’. praying for `Liquidation’. Learned Senior Counsel Mr. Arvind Pandian submitted that the `Adjudicating Authority’ has failed to exercise its `discretionary powers’ to consolidate the CIRP of the three `Corporate Debtors’ under Rule 11 of the NCLT Rules, 2016, specially when there is no provision in the Code to prohibit or preclude `Consolidation’.

Learned Counsel appearing on behalf of the `Liquidator’ submitted that the `Adjudicating Authority’ on 23.04.2021, ordered for the CIRP in `M/s. Pondicherry Extraction Private Limited’ and in `M/s. JKS the Banyaan Private Limited’. Subsequently vide ‘Order’ dated 11.02.2022, CIRP also commenced in relation to `M/s. JR Foods Limited’. It is submitted that pursuant to the commencement of the CIRP the `Appellant’ and the suspended `Board of Directors’ failed to extend cooperation to the RP and were also refusing to hand over the `Assets’ and the books and records of the `Corporate Debtor’. The RP was constrained to file an `Application’ bearing IA744/2022 under Section 19(2) before the `Adjudicating Authority’ as the `Appellant’ and the other ex-Directors refused to cooperate. The `Adjudicating Authority’ vide ‘Order’ dated 12.12.2022 directed the `Shareholders’ to extend all assistance and cooperation. It is submitted that more than 60% of the `Assets’ owned by the `Corporate Debtor’ is with the `related party’ of the `Appellant’ for approximately 20 years and did not fetch any revenue to the `Corporate Debtor’ causing financial distress. The `Appellant’ also did not make any effort to collect the rental revenue from the occupant who is a `related party’ of the properties owned by the `Corporate Debtor’. The `Corporate Debtor’ preferred to file an `Application’ under Section 10 only to prevent the property being realized by the lender through SARFAESI Act. 2002. The RP in her attempt to vacate the premises occupied by the `related party’ and to realize the rentals for the period of CIRP filed an `Application’ IA741/2022 under Section 60(5) as the `Appellant’ and the `related party’ refused to vacate the premises and/or to pay rentals. Vide ‘Order’ dated 12.12.2022, the `Adjudicating Authority’ directed the ‘Applicant’ to take necessary steps. It is submitted that the CoC of the `Corporate Debtor’ was constituted by a single Member namely `Bank of Baroda’ holding 100% Voting Shares. After issuing EoI since no one evinced interest to submit a Resolution Plan, the CoC resolved to liquidate the `Corporate Debtor’ with 100% voting in favour of the `Liquidation’. It is submitted that the CoC after deliberation in the 6<sup>th</sup> CoC Meeting rejected the proposal of `Consolidation’. It is submitted that the `Appellant’ is only trying to delay the `Liquidation Process’ by filing these frivolous `Appeals’.

It is relevant to note the dates on which the CIRP was initiated in `M/s. JKS the Banyaan Private Limited’ and in `M/s. Pondicherry Extraction Industries Private Limited’, the `Shareholder’ of which Companies have preferred these `Appeals’. CIRP was admitted in `M/s. Pondicherry Extraction Industries Private Limited’ on 23.04.2021. It is significant to mention that even ‘M/s. JKS the Banyaan Private Limited’ went into CIRP on the same date. CIRP was admitted for the third Company `M/s. JR Foods Limited’ on 11.02.2022. It is pertinent to mention that all three Companies were admitted into CIRP under `Section 10 of the Code’. It is not in dispute that both `M/s. Pondicherry Extraction Private Limited’ and `M/s. JKS the Banyaan Private Limited’ had stood as `guarantor’ for the loans availed by M/s. JR Foods Private Limited which had defaulted the `loan’ availed and `Bank of Baroda’ had taken action under the provisions of SARFAESI Act, 2002. It is also evident from the record that without invoking CIRP against the `Principal Borrower’, the `Corporate Debtor’ themselves initiated CIRP against the `guarantors’ under Section 10 of the Code. It is also the case of the RP that as per the `shareholding pattern’ of M/s. JR Foods Limited, as per the Bombay Stock Exchange (`BSE’) site as on quarter ending 22<sup>nd</sup> March reveals that the `Appellant’ is no longer a `Shareholder’ in the `Principal Borrower Company’. There is no material on record to establish that all the `Corporate Debtors’ have common `Assets’ and that they cannot be sold separately. Merely because the Directors are common, does not mean that all the `Assets’ of the three `Corporate Debtors’ are common. There is no documentary evidence on record to establish that the `operations’ of both the `Corporate Debtors’ are supporting each other. `M/s. Pondicherry Extraction Industries Private Limited’ owns a `Commercial Building’ generating a minimum `rent’ from that part of the `building’. `M/s. JKS the Banyaan Private Limited’ owns a `Residential Complex’ which is half constructed and `M/s. JR Foods Limited’ is in the `business of Oil Extraction’. It is also seen from the record that after deliberation in the 6^th CoC meeting, the proposal for consolidation of the CIRP Proceedings was rejected by the CoC. It is also relevant to see the timing of filing these `Applications’ seeking consolidation. CIRP was admitted on 23.04.2021 for `M/s. both Pondicherry Extraction Private Limited and `M/s. JKS the Banyaan Private Limited’ but the `Application’ of `Consolidation’ was filed on 09.04.2022 after a year of admission under CIRP. This is of more relevance because the CIRP was initiated by the `Corporate Debtor’ themselves under Section 10 of the Code. Further, when the `Adjudicating Authority’ has already allowed the `Application’ for `Liquidation’ of the `Corporate Debtors’, ordering for consolidation of CIRP at this stage and thereby starting a `De Novo CIRP’, would amount to defeating the spirit and objective of the time bound process envisaged under the I & B Code, 2016.

Further, this `Tribunal’ is of the earnest view that the `Appellant’ has failed to meet the basic requirements for `consolidation of CIRP’ Viz. that the `Assets’ of a `Corporate Debtor’, cannot be sold as a `standalone’ unit. The `Committee of Creditors’, in its 8<sup>th</sup> `CoC’ Meeting, had resolved to recommend the `Liquidation’ of the `Corporate Debtor’ by 100% Voting Shares. Having regard to the fact that, the `CIRP’, was invoked under Section 10 of the `Code’ way back in the year 2021, the `Application’ for `Consolidation’, was filed belatedly after one year and also the fact that the `Corporate Debtor’, has failed to satisfy the requirements necessary for `Consolidation’, this `Tribunal’, does not see any `illegality’ or `infirmity’ in the `Impugned Order’ of the `Adjudicating Authority’, (`National Company Law Tribunal’, Division Bench-I, Chennai), allowing `Liquidation’.

For all the aforenoted reasons, these `Appeals’ are `dismissed’ accordingly. No costs. The connected pending `Interlocutory Applications’, if any, are closed.