Raigarh Ispat And Power Pvt. Ltd. vs Rajesh Jhunjhunwala

Per Shri Jinan K.R., Hon'ble Member (Judicial)

RAIGARH ISPAT AND POWER PVT. LTD a proposed resolution applicant filed this unnumbered application u/s. 60(5) of the Insolvency and Bankruptcy Code, 2016 (In short, 'I & B Code') read with Rule 11 of the NCLT Rules, 2016 being I.A.(IB) No. ... /CTB/2020 in T.P. No. 203/CTB/2019 (arising out of CP(IB) No. 1411/MB/2018, transferred from Mumbai Bench) challenging the rejection of the resolution plan of the applicant by the CoC declaring that the applicant is not eligible u/s. 29A of the 'I & B Code. The Corporate Debtor, SALASAR STEEL AND POWER LTD., is undergoing Corporate Insolvency Resolution Process (In short, 'CIRP') vide order dated 27/09/2019 passed by this Adjudicating Authority, Cuttack Bench.

The urgency set out in the application has been found satisfactory. As lockdown was declared due to pandemic COVID-19, the normal operation of NCLT, Cuttack Bench is yet to be resumed; the unnumbered application was listed on today for hearing through video conferencing (VC) by giving advance notice from the Registry to the applicant as well as to the respondent directing him to submit his written notes of defence, if any.

The Applicant submitted a Resolution Plan prepared in accordance with the Code and the regulations to the RP. During consideration of the Resolution Plan, the RP alleged there were loan defaults in another company, namely “ISL” wherein a Director of Applicant, is a Director there also. The RP asked for clarification on status of defaults. It was clarified immediately. Then RP intimated that Banks have declared ISL as wilful defaulters & to obtain clarification from all Banks within just 3 working days. The Applicant was denied further time. Then it was categorically clarified with available documents that all defaults of Banks prior to 31.3.2018 by ISL have been taken over by an asset reconstruction company “EARCL”, which is also a member of the CoC & all Banks have assigned their loans to EARCL by executing assignment deeds. ISL’s Management has also changed due to which aforesaid Director was made Addl. Director of ISL on 10.4.2018 for the first time & his name is also not there in wilful defaulter list. Even the concerned Indian Overseas Bank has confirmed on 22.6.2020 there is no outstanding loan due from ISL & are taking steps for removing ISL from Wilful defaulter list. Thus ISL is not wilful defaulter when the default itself doesn’t exist. But RP didn’t place the Plan before CoC & also denied opportunity to Applicant & held it ineligible u/s. 29A, without giving reasons to explanation provided by Applicant, just a few minutes before declaration of 2 Successful RAs for Negotiation, out of total 3 RAs. Hence, present application,

Heard both sides. Perused the records, defence note and the copy of minutes forwarded to us at the time of hearing.

Ld. Counsel for the applicant Mr. Saswat K. Acharya, submits that the ineligibility u/s 29A was taken by the RP and not the CoC and that RP has no power to reject or approve the resolution plan other than to place it before the CoC for their consideration. He also submits that two plans were submitted to the RP one was within time and second was about one and half hour later since there was a mistake crept in regarding uploading attachments. According to him revised Resolution Plan was submitted on 17/06/2020 at 11.38 AM by email (Cut off time was 12 noon) but immediately noticing the wrong attachment attached sent the correct attachment by email by 1-1/2 hour later on the very same day i.e. 17/06/2020 at about 1.25 PM and that plan was not placed before the CoC by the RP and hence the RP contravened the provisions of the Code and regulations. He further attempted to convince us that at the time of consideration of the applicant plan by the RP the Ind Synergy Ltd. (ISL) wherein one of the Directors of the Applicant Company is also a Director of that company, was not a wilful defaulter. According to him, since 2014 onwards the debt of ISL has been assigned to Edelweiss Asset Reconstruction Company Ltd. (Edelweiss) and deed of assignment has been executed. Hence, no default stands at present and to stress the said submission he relied upon an email copy not placed before us. He submitted that the Bank replied to its letter informing that ISL at present is not a wilful defaulter/defaulter and that Bank has removed that declaration.

Ld.Counsel Mr. Jishnu Chowdhury, submitted that the RP has not contravened any of the provisions of the Code or regulations, but submitted that all the plans received by him in time were placed before the CoC and CoC has deliberated the issue regarding the disqualification of the applicant under section 29A in the meeting held on 18/06/2020 and rejected their application being satisfied that the applicant is ineligible under section 29A(b) as well as 29A(j). He further submitted that the applicant's attempt is to disrupt the CIRP of the Corporate Debtor, as earlier also an application was preferred wherein this Hon'ble Tribunal was pleased to provide an opportunity to another applicant to submit a resolution plan, which was ultimately not submitted. This application again would derail the CIRP process. To stress his submission he referred to the copy of email dated 18.06.2020 and the copy of minutes dated 18.06.2020. The copy of the email is reproduced here under for a better understanding:

Countering to the said submission on the side of the RP the ld. Counsel for the applicant referred a judgment of Hon'ble Supreme Court in Arcelor Mittal (2019) 2 SCC 1, Para 80 where in it was held that RP isn't empowered to take any decision, but to place the Plans before CoC to approve it. Also relied upon Rural Electrification Corp. vs. Ferro Alloys Corp., CP(IB)251/KB/2017, order 8.3.2018, an order of this AA wherein it was observed that rejection or approval of a resolution plan is the right of the CoC and Resolution Professional cannot reject any plan without a decision of committee of creditors. The above said proposition held in the Arcelor Mittal case or the observation of this AA in Rural Electrification case not at all help the applicant herein, since, the RP has submitted that he has placed the resolution plan of the applicant and as deliberated by the CoC in regards the disqualification of the applicant as per section 29A, and thereafter he issued the mail rejecting the plan submitted by the applicant. A reading of the above referred mail issued by the RP and the copy of minutes produced before us prima facie satisfied that RP placed the documents submitted by the applicant and the Plan before the CoC and from the available document as on 18.06.2020, the applicant was found ineligible as one of the directors of the applicant who is also a director of ISL was in the list of defaulter, fall under section 29-A (b) of the Code. Even according to the applicant he was unable to place all the documents relating to disqualification as the bank has not given proof proving that the bank has removed the Ind Synergy Ltd. (ISL) from the RBI defaulters list and an email dated 22.06.2020, issued by Indian Overseas Bank, placed before us at the time of hearing that the bank has removed the said company from the list of defaulters. So as on 18.6.2020 the applicant was a defaulter as per the list. In view of the above said circumstances we do not find any merit in the application. However, we are not go into merit of the decision if any taken by the CoC in regards the disqualification of the applicant u/s.29-A. It is left open for determination if any challenge in that regards raised by the applicant at the time of filing any application by the RP for approval of the resolution plan under the consideration of CoC.

In view of the matter this application is liable to be dismissed with the above said observation.

Unnumbered IA(IB) No. /CTB/2020 in TP No. 203/CTB/2019 arising out of CP(IB) No 1411/MB/2018 is dismissed. No order as to cost.

The Registry is directed to send e-mail copies of the order forthwith to all the parties.