Punjab National Bank vs Tirupati Balaji Enterprises Pvt. Ltd.

Per: Ms. Reeta Kohli, Judicial Member

The present Application bearing IA (IBC) (Plan) 01/JPR/2025 is filed by Garima Diggiwal ('Applicant'/ 'RP'), Resolution Professional of Tirupati Balaji Enterprises Private Limited ('Corporate Debtor'), under Section 30(6) and Section 31 of the Insolvency and Bankruptcy Code, 2016 ('Code') read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ('CIRP Regulations') seeking approval of the Resolution Plan submitted by Shreenathji Realmart Private Limited ('Successful Resolution Applicant' / 'SRA') which is approved with 100% voting share of Committee of Creditors ('CoC') of the Corporate Debtor. This Application has been filed seeking the following reliefs:

The captioned Company Petition was filed by Punjab National Bank ('Financial Creditor') under Section 7 of the Code for initiation of Corporate Insolvency Resolution Process ('CIRP') against the Corporate Debtor, and the same was admitted by this Adjudicating Authority vide Order dated 31.10.2023. Ms. Garima Diggiwal was appointed as IRP ('Interim Resolution Professional'). Further, the CoC in its 1st CoC meeting dated 29.11.2023 confirmed and appointed the Applicant as Resolution Professional ('RP') for the Corporate Debtor.

In compliance with the provisions of the Code, in the 2nd CoC meeting held on 19.12.2023, the chairman informed the CoC that the updated list of creditors had been prepared based on claims received up to 11.12.2023. The list includes one secured financial creditor and two unsecured financial creditors.

Further, the registered Valuers appointed by the Applicant submitted their respective valuation reports for all the classes of assets of the Corporate Debtor. The average fair and liquidation value of the Corporate Debtor calculated on the basis of said valuation reports are reproduced hereunder:

The Applicant in accordance with Regulation 36A of the CIRP Regulations, published Form-G on 30.12.2023 in Economic Times and Mahanagar Times, both having circulation in Jaipur, Rajasthan, for submission of Expressions of Interest (“EOIs”) by prospective resolution applicants. The last date for submission of EOIs was 14.01.2024. However, no EOIs were received within the stipulated timeline. Accordingly, the Applicant issued an addendum to Form G, which was published on 15.01.2024, and, upon the request of the CoC, published another Form G on 17.01.2024. The revised last date for submission of EOIs was extended to 29.01.2024.

Thereafter, the Resolution Professional received 4 EoIs. The provisional list of Prospective Resolution Applicant (‘PRAs’) was issued on 08.02.2024 with the initial submission deadline set for 15.04.2024. This deadline was extended to 05.05.2024 following the approval by CoC at its 6th meeting.

In the 8th CoC meeting the Applicant informed the CoC that three resolution plans were received from different PRAs. The Applicant apprised the CoC about the appointment of M/s SAM & Associates, Chartered Accountants as a consultant to evaluate resolution plan. The Applicant also presented a letter received from one of the PRA's on 14.05.2024, offering Rs. 6.51 crores. However, the Applicant clarified that the letter was submitted after the final deadline of 13.05.2024 for plan submission and EMD. The CoC opined that the offer made in the said letter still corresponds to the Liquidation value of the Corporate Debtor.

Subsequently, the CoC advised the Applicant to issue a fresh Form-G with keeping the eligibility criteria, EMD and other terms and conditions same as before. Accordingly, a fresh Form G was issued on 06.06.2024. In the 11th CoC meeting held on 12.08.2024, Applicant informed the CoC that the final list of eligible Prospective Resolution Applicants had been issued on 16.07.2024. Further, the Applicant issued the Information Memorandum, Evaluation Matrix, and Request for Resolution Plan ("RFRP") to the CoC and the PRAs on 19.07.2024.

Further, Financial Bidding Process among the PRAs was conducted on 24.10.2024. Subsequently, the PRAs were asked to share the Final Resolution Plan by 7.11.2024 according to the financial bid submitted by them.

Upon approval of the resolution plan by the Committee of Creditors (CoC) with a 100% voting share during the 14th CoC meeting, and upon conclusion of the voting window, the Applicant issued a Letter of Intent in favour of Shreenathji Realmart Pvt. Ltd. on 11.12.2024, declaring it as the Successful Resolution Applicant. The Applicant further called upon the Successful Resolution Applicant to submit a Performance Security of Rs. 1,00,00,000/- (Rupees One Crore Only) on or before 18.12.2024, either in accordance with Appendix-5 of the RFRP or by way of direct deposit through the real-time gross settlement system into the designated bank account of the Corporate Debtor. The Letter of Intent was duly acknowledged and unconditionally accepted by the Successful Resolution Applicant. Thereafter, the Successful Resolution Applicant furnished a Performance Guarantee of up to Rs. 1,00,00,000/- (Rupees One Crore Only) in favour of the Corporate Debtor on 16.12.2024.

The brief contours of the approved Resolution Plan of the Successful Resolution Applicant Shreenathji Realmart Pvt. Ltd. as highlighted by the Applicant RP are provided hereunder:

The compliance of Section 30 of the Code and Regulation 37 and 38 of the CIRP Regulations 2016 and various other provisions of the Code as provided under the Resolution Plan is reproduced hereunder:

It is submitted that the Resolution Professional has perused the Resolution Plan and the same is in compliance with Section 30 of the Code and in compliance with Regulations 37, 38, and 39 of the CIRP Regulations. Further, the RP has provided necessary details with respect to compliance of these provisions in Form H.

This Adjudicating Authority has perused all the documents filed and carefully considered the submissions of the learned counsels for the Parties. Before proceeding further, it is incumbent to analyse that whether the Resolution Plan submitted by Shreenathji Realmart Pvt. Ltd. satisfies the mandatory requirements of the Code.

To address the aforementioned issue, it is relevant to refer to Section 30 of the Code, 2016 and the same is reproduced hereunder:

Further, besides the requirements prescribed in Section 30 (2) of the Code, the Resolution Plan shall also comply with Regulation 38 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (‘CIRP Regulations’) which deals with mandatory contents of the Resolution Plan. For ease of reference, Regulation 38 of CIRP Regulations is reproduced hereunder: -

Apropos a Resolution Plan, the scope of jurisdiction of the Adjudicating Authority concerning approval or rejection of the Resolution Plan under Section 31 of IBC is no more Res-integra. The Hon’ble Apex Court in the recent Judgment dated 12.02.2024 in the case of Greater Noida Industrial Development Authority v Prabhjit Singh Soni and Anr, (2024) ibclaw.in 53 SC, has observed as under:

Thus, the position of law is well settled that while considering a Resolution Plan, the Adjudicating Authority has to ensure that the Resolution Plan complies with the mandatory requirements prescribed under Section 30(2)(a) to (f) and failing which the Adjudicating Authority will not have any discretion but to reject the Resolution Plan as per Section 31(2) of the Code.

Hence, the instant Resolution Plan has to be tested on the touchstone of the mandatory requirements prescribed under Section 30(2) of the Code and Regulation 38 of the CIRP Regulations.

Regulation 38(3)(a) of the CIRP Regulations makes it mandatory for a Resolution Plan to address the cause of default. Chapter 3 of the Resolution Plan deals with causes of default by the CD and their redressal by the SRA. In the said Chapter, the SRA has identified ‘lack of revenue/operations since FY 2015’ as a sole cause of default.

The aforementioned cause of default has been addressed by the SRA in Chapter 3 of the Plan in the following manner:

A bare reading of aforementioned para makes it clear that the Resolution Plan does not thoroughly deals with the “Cause of Default” as envisaged in Regulation 38(3)(a) of the CIRP Regulations, rather the SRA has made an open-ended statement without going into the specifics. The SRA cannot bypass the mandatory requirements prescribed under the CIRP regulations by making vague and abstract statements without precisely dealing with causes of default. It is relevant to mention that the Resolution Plan is silent about how the SRA proposes to achieve this overhauling of assets of the CD. The statements provided in the Resolution Plan submitted by the SRA cannot be considered to be in compliance of Regulation 38(3)(a) of CIRP Regulations as there is no demonstration provided by SRA dealing with cause of default and hence, the Resolution Plan fails to deal with the causes of default which is a mandatory requirement under Regulation 38(3)(a) of CIRP Regulations.

Further, as per Regulation 38(3)(b) the Resolution Plan must demonstrate that it is feasible and viable. Moreover, as per Section 30 (4) of the Code, the CoC is required to assess the feasibility and viability of the Resolution Plan before approving the same.

In the instant case, it is merely mentioned as a formality by the RP under the compliance of the Regulation 38(3)(b) that “Yes, the plan demonstrates that it is feasible and viable which has also been considered by the Committee of Creditors.”. Further, in the disclaimer and undertaking to the Plan, the SRA has stated that “The Resolution Applicant clarifies that the Resolution Plan is viable and feasible, and the information given about the Resolution Applicant in the Resolution Plan is true and correct.”

Moreover, the Resolution Plan was approved by the CoC in its 14th CoC meeting dated 05.12.2024 vide Agenda no. 14B. The same is reproduced as follows: -

Besides, the aforementioned statement there is not a single whisper about the feasibility and viability of the plan in the said CoC meeting and the Resolution Plan. The said meeting does not encapsulate exercise of commercial wisdom by the CoC apropos the feasibility and viability of the instant Resolution Plan.

Further, as per Regulation 38(3)(c) the Resolution Plan must demonstrate that it has provisions for its effective implementation. This Adjudicating Authority has come across an impediment in the Resolution Plan itself which contests its effective implementation. The Resolution Plan is conditional in nature and same can be demonstrated via following features of the Resolution Plan: -

The Hon’ble Supreme Court in Ebix Singapore Pvt. Ltd. v. CoC of Educomp Solutions Ltd. & Anr., (2022) 2 SCC 401 has discussed the scope of Regulation 38(3) as follows: -

The Resolution Plan in question is uncertain and conditional with regards to the timelines and implementation as it is contingent upon the ‘effective date’, which in turn is further contingent upon removal of attachment of CD’s property by ED. Thus, in our considered view this plan cannot be effectively implemented. Therefore, this kind of uncertainty provided under the plan cannot be approved under the provisions of the Code.

It is settled law, that conditional Resolution Plans cannot be approved under the Code and such Resolution Plans would diminish the objective for which the Code was enacted. If at all, this plan is approved it cannot be effectively implemented. The Proviso to Section 31(1) of the Code does not permit us to approve such conditional Resolution Plan. The Hon’ble Supreme Court of India in Ebix Singapore Pvt. Ltd. (supra) has held that a Resolution Plan conditional to future events/ negotiations cannot be approved in its present form.

This Adjudicating Authority is conscious of the fact that the instant plan has been approved by the Committee of Creditors in its 14th meeting and it is a well-settled principle that the scope of judicial intervention in matters falling within the domain of the commercial wisdom of the Committee of Creditors is limited and restricted. Nevertheless, this Adjudicating Authority cannot remain a mere mute spectator when the CoC fails to discharge their responsibility as envisaged under the Code. While the commercial wisdom of the Committee of Creditors is respected and generally not subject to judicial interference, such deference is not absolute. As the statutory pivot of the insolvency framework, the decisions of the Committee of Creditors must be in consonance with the legal provisions.

In respect to the judicial scrutiny in the decisions taken by CoC, it is pertinent to refer to the Judgment of Hon’ble Supreme Court in the case of M.K. Rajagopalan v. Dr. Periasamy Palani Gounder & Anr., (2023)ibclaw.in60SC wherein it was observed that: -

Thus, the decisions of the CoC have to be in compliance of the provisions of the Code and the relevant laws. In the instant case, the CoC approved the plan without deliberating upon the feasibility and viability, particularly with respect to the implementation of the plan.

On the basis of the foregoing discussions, it can be undoubtedly said that this instant Resolution Plan is not focused on the resolution of the Corporate Debtor. On the appreciation of the definition of 'effective date', it is evident that the purpose and motive of the definition is to seek release of attachment of sole property of CD from the ED. The focus is not on resolution of the Corporate Debtor or implementation of the Plan but on getting the release of Attachment of sole asset of CD under the garb of the Plan. In this regard it is relevant to refer to the Judgment of Hon'ble Supreme Court in the case of S. Rajendran v. The Deputy Commissioner of Income Tax (Benami Prohibition) & Ors., wherein it was observed that: -

This Adjudicating Authority deems it necessary to take note of the conduct of the Resolution Professional in the instant case. She had failed to duly examine the resolution plan prior to placing it before the Committee of Creditors, as mandated under Sections 30(2) and 30(3) of the Code. The plan in question does not comply with Regulation 38(3) of the CIRP Regulations and appears neither feasible nor viable, with its effective implementation remaining doubtful. Although the RP has placed a compliance table on record, the same seems to have been submitted as a mere formality, without any substantive or diligent scrutiny of the plan as required under the statutory framework

Thus, the Resolution Plan is rejected being in violation of Section 30 (2) of the Code and Regulation 38(3) of CIRP Regulations 2016 and also being against the mandate and spirit of Code.

Further, the Hon'ble NCLAT in the Judgment of Exclusive Motors Pvt. Ltd. v/s Sapan Mohan Garg (RP) and Anr. (2025) ibclaw.in 803 NCLAT observed that: -

Since the instant Resolution Plan stands rejected, the Adjudicating Authority is left with no other option but to order the Corporate Debtor to go under liquidation in terms of the provision of Section 33(1) of the Code, which is reproduced as follows: -

Thus, guided by the Judgment of the Hon'ble Apex Court and Hon'ble NCLAT and in view of Section 33(1)(b) of the Code, we deem it appropriate to initiate liquidation proceedings of the Corporate Debtor to maximize creditor value and conclude the insolvency process.

In view of the above, it is hereby ordered as follows: -

Accordingly, IA (IBC) Plan No. 01/JPR/2025 stands dismissed and disposed of.

The Registry is also directed to send e-mail copies of the order forthwith to all the parties/ their Learned Counsel for information and for taking necessary steps.

Further, the Assistant Registrar, Jaipur shall ensure compliance to the directions given to the Registry in Para 39 (n) and Para 41 of the Order failing which necessary action will be taken against the Assistant Registrar, Jaipur.

Per: - Kavita Bhatnagar, Technical Member

I have gone through the order by the Ld. Member(J) rejecting the resolution plan submitted in the present case. Upon an independent consideration of the pleadings, the material placed on record, and the provisions of the Code, I am in agreement with the conclusion that the resolution plan cannot be approved. I, however, consider it appropriate to supplement the reasoning with certain additional observations.

I have also considered the broader issue as to whether, in view of the attachment of the sole asset of a CD by the ED the very the exercise of inviting and considering resolution plans is rendered otiose and whether in such uncertain conditions receiving any unconditional resolution plan is even a possibility. In this regard, first of all it is clarified that the insolvency framework under the Code does not preclude initiation or continuation of the CIRP merely on account of such attachment even if it is the sole asset of the CD. Secondly, the process of inviting resolution plans is intended to test the market for viable and implementable proposals, and it remains open to prospective resolution applicants to structure plans taking into account such legal contingencies and risks.

However, what is required to be approved under Section 31 of the Code is a resolution plan which is capable of implementation in praesenti and is not rendered wholly contingent upon the occurrence of uncertain events beyond the control of the stakeholders under the Code. In the present case, the resolution plan as approved by the CoC is expressly conditional upon the prior release of the attached asset by the ED and the subsequent transfer of title in favour of the Successful Resolution Applicant. The said condition is fundamental to the feasibility and viability of the plan, inasmuch as the lifting of such attachment is neither certain nor within any determinable timeline, and is subject to independent statutory proceedings under the PMLA.

Thus, while the CIRP process itself cannot be faulted, the plan placed for approval is, in substance, a contingent arrangement lacking present enforceability, and therefore fails to satisfy the mandate of Section 30(2)(d) of the Code. Approval of such a conditional plan would, in effect, place the insolvency process in abeyance pending the outcome of independent proceedings, which is contrary to the time-bound framework of the Code.

In this context, I also consider it appropriate to address the observations made in relation to the conduct of the Resolution Professional. While certain deficiencies have been noticed in the examination of the resolution plan, the record reflects that the RP has undertaken the CIRP in accordance with the procedural requirements of the Code, including issuance of public announcement, collation and verification of claims, constitution and conduct of meetings of the CoC and placing the resolution plan along with the requisite compliance documentation before the CoC for its consideration and after approval by the CoC of the Resolution Plan, placing the recommendation of the CoC before this Adjudicating Authority as he is bound to do.

The infirmity leading to rejection of the plan, in my considered view, arises primarily from the intrinsic nature of the resolution plan itself, which is wholly contingent upon the prior release of the attached asset by the ED, an event which is uncertain and beyond the control of the stakeholders under the Code. The assessment of feasibility and viability of such a plan falls within the judicial scrutiny of this Adjudicating Authority at the stage of approval under Section 31, and cannot be regarded as a matter resting solely upon the conduct of the RP.

In these circumstances, the rejection of the resolution plan ought not to be construed as a reflection on the discharge of statutory duties by the RP, but rather as a consequence of the legal and practical limitations inherent in the plan itself.

I have also considered the issue as to whether, in the course of liquidation proceedings, the existence of an attachment over the sole asset of the CD by the ED would render the liquidation process itself unworkable and also end up in the same manner as the Resolution Plan or require the Liquidator to await the outcome of proceedings under the PMLA before taking steps under the Code.

In this regard, it is necessary to distinguish the nature of a resolution plan from that of liquidation proceedings. While a resolution plan is required to be capable of immediate and effective implementation and cannot be based entirely on uncertain future events, liquidation under Chapter III of the Code is a process which envisages taking custody, control and eventual realisation of the assets of the CD in accordance with law, even where such assets are subject to continuing legal encumbrances.

The existence of an attachment by the ED does not, therefore, bar the initiation of liquidation, though it may have a bearing on the manner and timeline of realisation of the asset. The Liquidator is empowered under Section 35 of the Code to take custody and control of the assets of the CD and to take such steps as may be necessary for their preservation and realisation, including approaching the competent forum for appropriate relief in respect of such attachment.

Accordingly, while the liquidation of the CD is to proceed in terms of Section 33 of the Code, it is clarified that the Liquidator shall take custody and control of the assets of the CD subject to the attachment proceedings initiated by the ED and shall be at liberty to take appropriate steps in accordance with law before the competent authority for release, de-attachment, or appropriate dealing with such asset.

In view of the rejection of Resolution Plan a consequential direction is hereby given that the Earnest Money deposited by the SRA shall be refunded in accordance with the terms of process documents there being no default attributable to the said Applicant. The CIRP costs incurred shall be dealt with in accordance with the provisions of the Code and shall form part of the Liquidation costs to be paid in priority in terms of section 53 thereof.

Subject to the above additional observations, I concur with the conclusion and directions contained in the order of Ld. Judicial Member(J).