Mr. Mukesh Verma vs Committee of Creditors

[Per: Justice Mohd. Faiz Alam Khan, Member (Judicial)]

The instant appeal has been filed by the Appellant/Ex-Resolution Professional of CD- IMP Powers Ltd. under Section 61 of the Insolvency and Bankruptcy Code, 2016 (‘Code’) challenging the impugned order dated 19.12.2023, passed by the Ld. National Company Law Tribunal, Ahmedabad Bench (Adjudicating Authority), while disposing IA/987(AHM)2023, IA/993(AHM)2023, IA/1354(AHM)2023, IA/620(AHM)2023, IA/942(AHM)202, IA/1097(AHM)2023, IA/1098(AHM)2023 and IA/1298(AHM)2023 in CP (IB) 203/AHM/2020 whereby certain adverse remarks have been made by Ld. Adjudicating Authority precisely in paragraph no. 74, 84, 85 and 87 of the impugned order.

Necessary facts required for the disposal of the instant appeal are that the CIRP against the CD was commenced vide order dated 29.03.2022 of the Adjudicating Authority passed in CP (IB) No. 203 of 2020 and the appellant herein was appointed as Interim Resolution Professional (IRP) and he made the public announcement on 02.04.2020.

It is further reflected that after filing of the claims by the creditor the CoC was formed by the IRP comprising of 11 financial creditors and the first meeting of the CoC was held on 28.04.2022 wherein the aforesaid IRP was appointed as the Resolution Professional (RP).

It is further reflected that in pursuance of the issuance of Form G, Twelve Expression of Interest (EOI) were received and a final list of 12 Prospective Resolution Applicant (PRA’s) was issued by the RP on 17.07.2022, out of which 9 PRA’s complied with the conditions of EOI and the final list of 9 PRA’s was prepared and also Mr. Ram Niwas Dhoot who is the Promoter of the CD was also considered eligible to submit the plan as the CD was/is a MSME and finally 4 Resolution Plans were submitted.

It is further reflected that on 23.09.2022, the CoC authorised the RP to seek extension of CIRP period by 90 days which was granted vide order dated 09.10.2022 of Ld. Adjudicating Authority passed in IA No. 839 of 2022.

It is also reflected that ultimately 4 Resolution Plans were received by the RP and CoC entered into negotiation with all the 4 Resolution Applicants and in its 8^th meeting held on 21.12.2022 the CoC asked the RP to differ the agenda items for voting on the plans and to submit an application to the adjudicating authority to seek further extension of the CIRP by 60 days and an opportunity was also given to the Resolution Applicants to submit their revised and final financial offer.

It is further reflected that RP accordingly filed IA No. 102 of 2023 seeking extension/exclusion of 60 days which was allowed by Ld. Adjudicating Authority and the RP was directed to complete the process up to 23.03.2023.

It is further reflected that on the basis of the Resolution passed in the 10^th meeting of the CoC held on 21.03.2023, the IRP moved an application for extension of 45 days to the CIRP period and which was accordingly granted by the adjudicating authority and thereafter the CoC directed the RP to open the voting window for a period of 22 days for the CoC members to cast their votes.

It is also reflected that after 21 days of opening of aforesaid voting window the Banks held a Joint Lender Meeting (JLM) on 12.04.2023 and directed the RP to abandon the voting process as one of the Resolution Applicant had submitted a proposal for certain structural changes in the Resolution Plan and on this the voting process was abandoned mid-way.

It is also evident that 12^th meeting of the CoC was held on 25.05.2023 whereon two Resolution Plans were put to vote however the voting could not take place and finally the CoC directed the RP to put the plans to vote and for that purpose the voting window was opened till 15.06.2023 which was further extended up to 27.07.2023 and finally no plan was approved by the CoC.

It is also reflected that the 13^th Meeting of the CoC was held on 10.07.2023, wherein the RP was directed by the CoC to move an application before the Ld. Adjudicating Authority for extension/exclusion of 60 days. On 28.07.2023, the meeting of the CoC was adjourned at the request of the participants asking RP to circulate brief note in terms of Regulation 39 (3)

of the CIRP Regulations, 2016 and thereafter 14^th CoC meeting was held on 31.07.2023, to consider the email sent by the one PRA i.e. Mr. Ram Niwas Dhoot and his request was accordingly rejected. In the same meeting of the CoC the RP asked the CoC to consider fresh publication of Form G before considering liquidation of the CD, however the same was rejected as the extended period of 487 days was coming to an end on 31.07.2023, IA No. 987 of 2023, was moved by the Resolution Professional before the Tribunal for passing necessary orders and it is with regard to the disposal of the said IA No. 987 of 2023 and the other IA’s mentioned herein before, the aforesaid remarks were made by the Ld. Adjudicating authority against the appellant and aggrieved by the same the instant appeal has been preferred.

Ld. Counsel for the appellant submits that there was no occasion for the Ld. Adjudicating Authority to have recorded adverse remarks/observations against the appellant without taking into consideration that the appellant has constantly demonstrated dedication towards the revival of the Corporate Debtor and throughout the process the appellant was acting under the directions of the CoC.

It is further submitted that there is no obligation on the IRP or the RP to have filed any progress report unless asked for and therefore the remarks of the Ld. Adjudicating Authority with regard to non-filing of the progress reports is not substantiated by any provision of law as there was no specific direction by the Ld. Adjudicating Authority to file such progress reports.

It is further submitted that Ld. Adjudicating Authority has also recorded adverse remarks against the appellant for causing multiple revisions and canvassing for a specific Resolution Plan in utter disregard to the fact that the CoC on its own has decided to consider Suo Moto the 2^nd Revision to the Resolution Plan submitted by the Promoter Resolution Applicant before casting vote by any of the CoC Member and the Appellant had no option but to act upon the Resolution Passed by the CoC.

It is further submitted that Ld. Adjudicating Authority has not considered the fact that the CoC had conducted negotiations with the PRA’s and the value of the plans offered by the PRA who was not a promoter of the CD was extremely low and the plan as offered by the Ex-Promoter of the CD contained many provisions of release of their personal guarantees extended by his family members and the CoC was not inclined to releasing these personal guarantees and this deadlock prolonged negotiations between the parties and the appellant was not at all in fault with regard to the same.

It is further submitted that despite the prolong negotiation and revision of the Resolution Plan the CoC did not approve any of the Resolution Plan and on that the appellant recommended the liquidation of the CD in accordance with Section 33 (2) of the Code and on an application moved in pursuance of the same the Ld. Adjudicating Authority has initiated liquidation process by passing the impugned order however unnecessarily recorded adverse remarks against the appellant.

It is further submitted that the Resolution plan was amended only once, owing to the suggested revision by the PRA to which the CoC has expressly decided to consider and thus the revision and the voting on the revised plan has been done only once.

It is further submitted that the RP has not canvassed for the acceptance of any Resolution Plan and have merely articulated the provisions of the Code and the CIRP Process Regulations and only informed the CoC of its options for the purpose of taking a decision for the betterment of the CD and the same cannot be considered as canvassing.

It is further submitted that the appellant is having an unblemished record and the adverse remarks recorded by the Ld. Adjudicating Authority being not commensurate with the factual aspect of the case would bring a bad name to the otherwise good reputation of the appellant and the same are liable to be expunged or modified.

Ld. Counsel for the Respondent/COC while relying on the reply filed by it before this appellate tribunal submits that so far as the adverse remarks recorded in para no. 74 and 84 of the impugned order are concerned, the RP had filed all applications including those seeking extension of CIRP as and when instructed by the CoC.

It is also submitted that in the 8^th meeting of the CoC held on 21.12.2022, the Resolution Plans were to be put to vote, however as the discussions with the Resolution Applicant was ongoing the CoC decided that the final up dated Resolution Plans would be considered by 15.01.2023 and thereafter directed the RP to seek extension of time from Ld. Adjudicating Authority.

It is further submitted that in the meeting of the CoC held on 20.04.2023, the discussion was held with regard to the eligibility of the Resolution Applicant and owing to the confusion regarding the viability and eligibility of the Resolution Plans the CoC requested the Appellant for extension of the time period for e-voting leading to the delay in filing of IA No. 942 of 2023 before Ld. Adjudicating Authority.

It is further submitted that so far as the adverse remarks emerging in para no. 85 of the judgment with regard to laxity in filing progress reports are concerned the appellant regularly informed in each meeting of the CoC with regard to the financial and operational status of the CD and have also filed progress reports before the Ld. Adjudicating Authority.

It is further submitted that so far as the adverse remarks recorded in para no. 87 of the impugned order pertaining to canvassing of the CoC to vote on the Resolution Plan, are concerned the appellant has informed the CoC in its 8^th meeting held on 21.12.2022 pertaining to his determination with regard to Section 43, 45, 50 and 66 of the Code and as per the direction of the CoC the Resolution Applicants were also called for one final round of discussions on 28.12.2022. While in the 9^th meeting of the CoC held on 04.01.2023, final bids of the Resolution Applicants were opened and the CoC desired a comparative statement of the financial proposals and the CoC itself desired that the meeting be adjourned which was subsequently held on 06.01.2023 whereon the CoC took note that only two Resolution Plans were compliant.

It is further submitted that in the 10^th CoC meeting held on 21.02.2023, the appellant informed the CoC about the compliant of the one Resolution Plan with the Code and also with request for Resolution Plans(RFRP) however the CoC decided to adjourn the meeting which was resumed on 21.02.2023 wherein the appellant clarified the issues, which could not be considered as negotiations and the Resolution Plans were put to vote and in the same meeting the CoC further directed the appellant to seek further extension of CIRP by 45 days.

It is further submitted that on 25.05.2023 the CoC voted on the Resolution Plan and none of the Resolution Plan was approved and in 13^th meeting of the CoC held on 10.07.2023, owing to the confusion among the members of the CoC the appellant invited the members to submit their views and the members in turn agrees to vote on the Resolution Plans and appellant also urged for the completion of the voting till 17.07.2023.

It is further submitted that in the 14^th meeting of the CoC held on 28.07.2023, the appellant informed the CoC about the scheme of Regulation 39 (3) (b) of the CIRP Regulations, 2016 informing that in case none of the Resolution Plan is approved, the one receiving the highest votes has to be put for vote again. The CoC however decided to discuss the matter internally and requested the appellant to circulate a note to enable the said discussion.

It is also submitted that the appellant only articulated the provisions of the Code and relevant Regulations as and when requested by the CoC and despite his efforts none of the Resolution Plan was approved.

It is also submitted that since the issue is with regard to the adverse remarks recorded by the Ld. Adjudicating Authority against the RP, the same is not adversarial, however the prayers made by the appellant in the Appeal are not contested by the answering Respondent, in view that the appellant has provided adequate support for the CIRP of the CD and has guided the CoC appropriately and had acted upon the instructions of the CoC.

We have heard Ld. Counsel for the appellant as well as Ld. Counsel for the Respondent and perused the record. It is however recorded that at the time of conclusion of the hearing of the appeal, we had granted time to the parties to file their written submissions, but none of the party has filed the same.

Perusal of the record would reveal that Ld. Adjudicating Authority has recorded following adverse remarks against the appellant including the impugned remarks recorded in para no. 74, 84, 85 and 87 of the impugned order; para 60, 62, 66,68,74,84,85 and 87 is reproduced as under:

So far as the remarks recorded under para 60 and 62 of the impugned order are concerned the same are pertaining to the IA No. 620 of 2023 and IA No. 942 of 2023 and it is stated therein that IA No. 620 of 2023 was filed on 27.04.2023 while affidavits were affirmed on 10.03.2023. Similarly, it is stated that in IA No. 942 of 2023 the application is shown to have been affirmed on 12.07.2023 but the physical copy of the same could be filed only on 16.08.2023. In para no. 66 of the impugned order it is stated that extended period of CIRP of the CD was expired on 01.06.2023 and CoC authorized extension for 60 days, which was to end on 31.07.2023 and the IA No. 942 of 2023 was received in the tribunal on 16.08.2023 after the end of the period, for which the extension was sought and by that time the said application has become infructuous.

The record would further reveal that the CoC has authorized the appellant to move an appropriate application in its meeting dated 10.07.2023. The appellant in para no. 7.1.22 of the memo of appeal has stated to have filed this application on 13.07.2023. Respondent CoC has not denied the fact of filing of IA No. 942 of 2023 on 13.07.2023. The appellant however, in para no. 1.4 of the appeal has admitted that IA No. 942 of 2023, was filed with the delay of 40 days and explained this delay as has been caused due to non-approval of requisite Resolution by the CoC. It is further stated by the appellant that the minutes of the 12^th meeting of the CoC, held on 25.05.2023 were circulated on 27.05.2023 and e-voting window was scheduled to close on 30.05.2023 and on the request of CoC multiple extension of e-voting were granted and ultimately the same was closed on 27.07.2023 and since the CIRP period expired in between, he convened 13^th CoC meeting on 10.07.2023 seeking the approval of the CoC and thereafter the application was affirmed and e-filed on 13.07.2023.

From the above observation of the Adjudicating Authority made in para no. 66 of the impugned judgment and also from the contention of the Appellant in his Appeal, it appears that the physical copy of the IA No. 942 of 2023 was received in the office of the Tribunal on 16.08.2023. Thus, it may be safely concluded that the meeting of the CoC which has been called by the appellant/RP on 10.07.2023 may very well be convened at an earlier date as it was in the knowledge of RP that the extended time of the CIRP was going to expire on 01.06.2023 or even the CoC members may be requested to vote on the agenda of extension of time and certainly the hard copy of the application appears to have been filed with delay.

Similarly, in para no. 68 of the impugned order Ld. Adjudicating Authority has observed with regard to IA No. 1097 of 2023 that the same was affirmed on 01.07.2023 and was physically received in the Registry of the Adjudicating Authority on 18.09.2023. Likewise, in para no. 71 and 74 it is observed with regard to IA No. 1098 of 2023 that this application was affirmed on 09.05.2023, and was received in the Registry on 18.09.2023 and it is on the basis of the discussion made in the aforesaid paragraphs with regard to IA No. 620 of 2023, 942 of 2023, 1097 of 2023 and 1098 of 2023, it is observed in para no. 74 that appellant is in habit of e-filing the application and hard copies of the same were submitted very late. This observation made in para no. 74 of the impugned judgment, which is based on the facts stated in earlier paragraphs of the judgment appears to be based on correct facts and could not be said to have been recorded without any substance. Thus, we do not find any good reason to expunge or modify these observations/Remarks being based on correct factual matrix.

In para no. 84 of the impugned judgment Ld. Adjudicating Authority has recorded that on the date of extension application being IA No. 942 of 2023, CoC had no resolution plan pending and by that time had rejected the Resolution Plans submitted by various PRA’s and RP has filed the application seeking extension of the CIRP period with delay and at times when the extended period of CIRP, sought has already expired and as such RP was lax in presenting the extension application. We have already held earlier in the judgment that extension application 942 of 2023 has been moved by the appellant/RP with delay and it has been admitted by the RP also and this application was admittedly moved when the time sought to be extended was already over and admittedly the application has become infructuous. So the observation/remarks of the adjudicating authority in para No. 84 of the Judgment is also factually correct and is not required to be interfered with.

Coming to the impugned para no. 85 by which the appellant is also aggrieved, Ld. Adjudicating Authority has stated therein that the appellant was lax in filing the progress reports and only four such reports have been filed during the entire period of 487 days. This observation of the Adjudicating Authority, in our considered opinion, is not substantiated from facts of the case, as available on record. Ld. Adjudicating Authority while making such observations has not stated any order of it by which any duty has been entrusted on the RP to file periodical progress reports and has not even mentioned the relevant provisions of either of the Code or of the Regulations where under the IRP or RP is duty bound to submit periodical reports of the progress of the Resolution of the CD. Thus, we hold that this observation of the Ld. Adjudicating Authority is not substantiated from the established facts of the case and would not be read as adverse against the appellant.

In second part of the impugned para no. 85, the Remarks has been made by the Ld. Adjudicating Authority with regard to filing of liquidation initiation application after 41 days from the date of rejection of the Resolution Plan by the CoC and according to Ld. Adjudicating Authority the same should have been filed within 7 days. In the time line provided in the impugned order the Resolution plan is shown to have been finally rejected by the COC on 31.07.2023 and the application for getting further direction of the Ld. Adjudicating Authority was e-filed on 24.08.2023. Certainly this application has been filed with delay. Thus, this observation of the Adjudicating Authority is also based on correct facts and is not required to be interfered with.

Lastly, the appellant appears to be aggrieved by the observations of Ld. Adjudicating Authority made under para no. 87 of the impugned order. In para no. 87 Ld. Adjudicating Authority has observed that the applicant in IA 993 of 2023 has revised his Resolution Plan three times and again once the voting was over and has referred to Regulation 39 (1) (A) of the CIRP Regulations, 2016 which permits revision in the Resolution Plan only once and goes on to hold that the appellant has revised the plan three times in violation of the aforesaid Regulation. The Ld. Adjudicating Authority has also observed that the RP has also canvassed the CoC to vote in favour the the said Resolution Plan or to issue the fresh Form G and thereafter the IBBI and IPA were requested to note the same and sensitize the RP to refrain from taking any side during the CIRP.

The appellant in para no. 7.1.37 of the appeal has explained this scenario in terms that he did not permit multiple amendment/ modification in the Resolution Plan submitted by the Resolution Applicant and it was only after the negotiations of the CoC in the 10^th meeting held on 21.02.2023, and continued on 21.03.2023 the plan was revised by the Resolution Applicant and the e-voting process was abandoned on 12.04.2023 at the behest of the CoC members and they voluntarily proposed to revise Resolution amount. It is also stated that Members of the CoC had a JLM and agreed to consider proposal of RA Mr. R.N Dhoot regarding further improvement in the plan and in this background the Resolution Plan was revised and therefore there was only one amendment to the plan.

It is also stated by the appellant that the Resolution Applicants Voluntarily proposed to update revised plan before voting, cannot be termed as amendment in the plan. It is also highlighted that the CoC abandoned the voting midway as Mr. R.N Dhoot has proposed some further improvements in the plan and as the lenders had conducted the JLM and the call was made from their end, RP had no option but to abandon the e-voting process and thereafter the CoC negotiated the plan amount with the RA which became the second revision and the same has occasioned on account of the expiry of bank guarantees in the meantime and the increase in the amount towards release of Personal Guarantees (PG’s) however there was no change in the amount earmarked in the Resolution of the CD.

We also notice that the CoC in its reply filed with regard to the appeal, in para no. 19 stated that in the 14^th meeting of the CoC held on 28.07.2023, the appellant had informed the CoC of the scheme of Regulation 39 (3) (B) of the CIRP Regulations, 2016 stating that in case none of the Resolution Plan is approved, the plan receiving the highest assenting votes has to be put for vote again. It is also stated that the CoC decided to discuss the matter internally and requested the appellant to circulate a note which was accordingly circulated and the RP has only articulated the provisions of the Code and Regulations as and when requested by the CoC.

The CoC in para no. 20 of its reply has stated about the consideration of the revised Resolution Plan of Mr. Dhoot and incidentally in para no. 23 has clearly stated that the appellant has provided adequate support for the CIRP of the CD and has guided the CoC appropriately and acted upon the instructions of the CoC.

Thus, the above factual matrix would reveal that it was the CoC which was negotiating with the RA’s and specifically with the Promoter Mr. R.N Dhoot and it was on the instance of the CoC certain revisions were made by the RA in the plan. It is also reflected that CoC is not having any grievance with the performance of the appellant and whatever has been done by the appellant appears to have been done on the direction of the CoC. We recall at this juncture that the Resolution of the CD is primarily driven by the creditors and the CoC is to take appropriate decisions in its commercial wisdom with regard to the same and the role of the RP or IRP as the case may be is of supervising the same in accordance with law. Thus the revision of the plan by the Resolution Applicant at the instance of the CoC and a reminder given to the CoC members by the RP pertaining to Regulation 39 of the CIRP Regulations, 2016, in our considered opinion, may not be termed as canvassing. Therefore, we are of the considered view that the observations of the Adjudicating Authority with regard to the fact that the appellant was canvassing for approval of any particular plan does not appears to be based on facts and circumstances of the case and therefore we hold the observation of the Adjudicating Authority so far as they are concerned with imputing allegations to the appellant/RP with regard to canvassing amongst the CoC members for approval of any particular resolution plan are not based on correct facts and therefore shall not be read adverse to the interest of the appellant.

Thus, for the reasons given here in above and keeping in view all the facts and circumstances of the instant appeal, the appeal is partly allowed in following terms:

We do not find any substance for interference so far as the remarks made by the Ld. Adjudicating Authority in para no. 74, 84 and in second part of the para No. 85 (pertaining to late filing of the Liquidation commencement application) of the impugned order are concerned and the prayer of the appellant to expunge or modify these Remarks is hereby rejected.

So far as remarks made by Ld. Adjudicating Authority in First part of Para No. 85 (pertaining to the alleged laxity on the part of the RP in filing the progress reports) and in para no. 87 of the Judgment are concerned, the same for the reasons given by us in the judgment, shall not be read adverse to the interest of the Appellant/RP.

There is no order as to costs.

Pending IA’s if any are also closed.