Phoenix ARC Private Limited vs GPI Textiles Limited

PER: HARNAM SINGH THAKUR, MEMBER (JUDICIAL)

Both these applications i.e. IA No.1381 of 2022 and IA No.1355 of 2022 are taken up together for discussion, being interrelated and interconnected.

This application has been filed on behalf of Phoenix ARC Private Limited, which is majority stakeholder in the Committee of Creditor having voting share of 92.55%, under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as the ‘Code’) seeking clarification of order dated 10.10.2022, passed by this Adjudicating Authority.

Brief facts necessary for adjudication of the present application are that this Adjudicating Authority, vide order dated 10.10.2022 partly allowed IA No.656 of 2022, and passed a specific direction in Para 54 of the said order to the Resolution Professional and Committee of Creditors of the corporate debtor to invite respondent No.1 herein and other resolution applicants of the earlier round i.e. Navraj Mittal (H2), M/s Shivani Trendz Private Limited (H3) and Pankaj Bhatia & Shreeji Cotfab (H4) and also other resolution applicants (under the new process) for the purpose of negotiations for finalization of the resolution plan in accordance with law. For ready reference, Para 54 of order dated 10.10.2022 is reproduced below:-

Thus, in view of the above, it is submitted by the applicant that it seeks to invite all the Resolution Applicants of the earlier round/process for their participation in terms of the directions passed by this Adjudicating Authority in order dated 10.10.2022.

It is contended by the applicant that so as to not give the other remaining participants any ground of grievance and without prejudice to the rights and contentions of the applicant, Committee of Creditors be permitted to invite all the other resolution applicants of the earlier negotiation process as well. It is further contended that invitation to the other Resolution Applicants of the earlier round of negotiation process would aid in maximization of the value of the assets of the corporate debtor, which is the underlying objective of the order passed by this Adjudicating Authority.

Thus, it is prayed by the applicant that its application may be allowed and order dated 10.10.2022 passed by this Adjudicating Authority be clarified to the extent permitting the Resolution Professional and the Committee of Creditors to invite all the Prospective Resolution Applicants for the negotiation process.

This application has been preferred by Mr. Raghav Jain, under Section 60(5) of the Code, seeking the following reliefs:-

The brief facts, as stated in this application are that the resolution plan given by the applicant was submitted after satisfying Section 30 & 31 of the Code, however, for the reasons best known to the respondent No.1/Resolution Professional and respondent No.2/Committee of Creditors, without considering the resolution plan given by the applicant, the Resolution Plan of M/s Aggarsain Spinners Limited was accepted.

It is further stated that once admittedly a sum of Rs.25 Lacs was paid and still lying with the resolution professional, the minimum which is expected from the Resolution Professional is to examine the resolution plan of the applicant and put it before the Committee of Creditors for consideration and approval particularly when Resolution Plan was prepared on the basis of information memorandum and was submitted by the applicant or rejected before going for any other resolution plan from any other prospective resolution applicant. Thus, it is submitted that the Resolution Professional would not have invited fresh resolution plans when there are already plans pending for consideration.

It is alleged by the applicant that Resolution Professional is involved in money minting and recipient of CIRP cost of more than Rs.8 Crores (which was supposed to be Rs.1 Crores only) at the beginning and therefore, the action of the Resolution Professional is to delay the process so that he could get maximum gains in the shape of various fee and rewards in the benefit of Phoenix ARC Private Limited- respondent No.2 herein. It is further alleged that the behavior of the Resolution Professional is also prejudicial to the State Bank of India, respondent No.3 i.e. minority financial creditor.

According to the applicant, the Resolution Professional is having specific instructions from respondent No.2 to not approve any plan wherein the stake of HSBC claim is not sacrificed in favour of respondent No.2 and he is putting every effort to harass the resolution applicant.

The applicant is claiming himself to be the most eligible Resolution Applicant as all the other Resolution Applicants have withdrawn their earnest money deposits, but admittedly the earnest money deposited by the applicant herein is still lying with the Resolution Professional and it has been submitted that the applicant is still willing to give a revised and better resolution plan in comparison to the Resolution Plan of ineligible Resolution Applicant, namely, M/s Aggarsain Spinners Limited and request to that effect has already been made to the Resolution Professional, vide e-mail dated 28.08.2022 (Annexure A-5). Thus, it is prayed by learned counsel for the applicant that in view of the above circumstances, the present application be allowed in the interest of justice.

Upon notice, it is submitted by learned counsel for respondent Nos.1 and 2 in IA No.1381 of 2022 that there is no need to file the reply and they will argue the matter directly. Similarly, it is submitted by learned counsel for respondent Nos.1 and 2 in IA No.1355/2022 that there is no need to file the reply as a similar application being IA No.1381/2022 has been filed on behalf of the Committee of Creditor inviting the other resolution applicants of the earlier round of negotiation process including the applicant in IA No.1355 of 2022. There is no need to issue notice to respondent No.3 in IA No.1355/2022 as it is a minority financial creditor and its interest is being watched by the applicant (in IA No.1381/2022) itself, as pleaded above.

We have heard learned counsels for the parties in both these applications and have carefully gone through the records.

After hearing all the parties and careful perusal of order dated 10.10.2022, we are of the considered view that there is no ambiguity in the said order for which clarification is required as sought in IA No.1381/2022 by the Committee of Creditors. It seeks to invite all the resolution applicants of the earlier round/process including the applicant in IA No.1355 of 2022. Now the cardinal question for determination in both these applications is ‘whether Committee of Creditors can be allowed to do so in order to avoid any grievance of such resolution applicants”?

The reply to this question is already recorded by this Adjudicating Authority in Paragraph 47 of order dated 10.10.2022, which is reproduced hereinbelow for ready reference:-

Thus, when other Resolution Applicants were not included in the final list of H1 to H4 by the Committee of Creditors then it can be safely deduced that they were not in the fray of competing Resolution Applicants finally. If other Resolution Applicants of the earlier round including the applicant in IA No.1355/2022 were/are interested to compete then none stopped them to apply when fresh EOI/Form G inviting fresh resolution plans was approved by the Committee of Creditors and issued by the Resolution Professional. In these circumstances when order dated 10.10.2022 has become final as no appeal has been stated to be preferred against it, then no other earlier Resolution Applicants including the applicant in IA No.1355/2022 except H2, H3 & H4 can be allowed to participate in negotiations of Resolution Plan. Moreover, the claim of the applicant in IA No.1355/2022 is stinking stale, particularly when he kept sleeping upon his right, if any, for last more than 3½ year as Committee of Creditors in its 12^th Meeting held on 27.03.2019 had drawn the final list of Prospective Resolution Applicants, excluding the applicant in IA No.1355/2022. This unexplained inordinate delay is not only culpable but also suicidal. Although, IA No.1355/2022 deserves dismissal with heavy costs but we refrain ourselves from imposing such costs because Committee of Creditors itself has prompted to file IA No.1381/2022, wherein it sought clarification of unambiguous order dated 10.10.2022.

Consequently, both these applications i.e. IA No.1381/2022 and IA No.1355/2022 deserve dismissal and ordered accordingly. The Committee of Creditors is directed to complete the CIRP within the time frame strictly, granted by this Adjudicating Authority.

Vide separate detailed order of even date, IA No.1381 of 2022 & IA No.1355/2022 have been dismissed.