Sh. Raghav Jain vs Jalesh Kumar Grover & Ors.

Per: Justice Rakesh Kumar Jain:

This appeal arises from the order dated 04.11.2022 passed by the ‘Adjudicating Authority’ (National Company Law Tribunal, Chandigarh Bench), by which an application bearing I.A. No. 1355 of 2022 filed by the Appellant under Section 60(5) of the ‘Insolvency and Bankruptcy Code, 2016’ (in short ‘Code’), has been dismissed.

Brief facts of the case are that ‘M/s. Phoenix ARC Private Limited’(Financial Creditor) filed an application under Section 7 of the Code for the initiation of the ‘Corporate Insolvency Resolution Process’ (for short ‘CIRP’) against M/s. GPI Textiles Limited (Corporate Debtor) for the resolution of an amount of Rs.129,02,00,000/-. The said application was admitted on 06.07.2018 and Jalesh Kumar Grover was appointed as an ‘Interim Resolution Professional’ (IRP) vide a separate order dated 12.07.2018.

The IRP constituted the ‘Committee of Creditors’ (CoC) of two Financial Creditors, namely, M/s. Phoenix ARC Private Limited and State Bank of India, constituting 92.55% and 7.45 %voting shares respectively. On 15.09.2018, the CoC approved the invitation of Expression of Interest (EoI) on Form-G to invite prospective resolution applicants to submit their resolution plans and fixed the last date for submission of EOI as 05.10.2018 and the last date for submission of Resolution as 30.11.2018. Pursuant thereto, ten prospective resolution applicants submitted their EOI. Since only one plan was received, therefore, the CoC convened its 6^th meeting on 17.12.2018 and decided to re-publish Form-G to invite more Resolution plans. The IRP re-published Form-G on 22.12.2018 inviting fresh EOIs, fixed the last date of submission of EOI’s as 02.01.2019 and the last date for submission of resolution plan was extended to 28.01.2019. Pursuant thereto, 17 EOIs were received and in the 7^th Meeting of the CoC dated 10.01.2017 the CoC was apprised of the said fact. It is pertinent to mention that out of 17 prospective Resolution Applicants only six submitted their plans including the Appellant till the last date of submission of Resolution Plan i.e. 28.01.2019 and this fact was made known by the Resolution Professional to the CoC in the 8^th meeting of the CoC held on 30.01.2019. According to the Appellant, in the 8^th meeting of the CoC, the following had transpired:

Thereafter, the Resolution Applicants, including the Appellant, was called for negotiations in the 9^th Meeting of the CoC held on 05.02.2019. The Appellant submitted its Resolution Plan for an amount of Rs. 28.15 Crore. The Appellant allegedly submitted two Resolution plans, one with condition and another without condition. As per the RP, the non-conditional plan was put up before the CoC on 05.02.2019. In the 9^th Meeting of the CoC held on 13.02.2019, item No. 9:04 was discussed regarding four prospective Resolution Plans. According to the Appellant, his plan was not considered and the plan of H1 to H4 namely, Aggarsain Spinners Limited, Shivani Trendz Pvt. Limited, Navraj Mittal and Ors. & Pankaj Bhatia and Shreeji Cotfab were considered. In the said meeting, the following minutes were recorded:

In the 9^th Meeting of the CoC the process of negotiations and valuation of matrix score was discussed and the Resolution Applicants were called to explain to them the process of negotiations. The procedure of negotiations was explained as follows:

It is further recorded in the said meeting that “After Lunch, Resolution Professional disclosed the updated ranking of the resolution applicants with Committee of Creditors and after discussion, all the resolution applicants were called for open negotiation with the CoC members to maximize the recovery to all the stakeholders. Thereafter, Resolution Professional initiated the open negotiation & disclosed the ranks as per the Evaluation Matrix to all the resolution applicants. Resolution Professional called up the lowest rank holder namely Raghav Jain & others to improve their proposal to stay in negotiation process. Resolution Applicant asked for one week time to submit revised proposal but CoC members declined their request as further negotiations with resolution applicants is the utmost agenda to move forward and revised timelines based on each resolution applicant’s request will not lead to the desired objectives, since the negotiation process with other applicants was already in process. Therefore, the applicant opted to quit the negotiation and left the meeting venue.”

It is the case of the Appellant that he had never quit the meeting held on 05.02.2019. It is rather submitted that the Appellant sent an email dated 10.02.2019 at 7:52PM to the RP. The said email read thus:

The said email was replied by the RP on the same day i.e. 10.02.2019 at 9:26 PM “Dear Sir, the plans were given by you. Please provide me with the final figures”. Thereafter, on 12.02.2019 at 7:02PM, the Appellant sent a further email to the RP “final figures Plan 2 total to Secured Crs. 50 Crores, Plan Value 53.58 Crore GPI Textiles Ltd, _5^th February (Tuesday) at 11:30AM at Hotel lalit, IT Park Chandigarh”.

It is submitted that plans were also attached with the email but counsel for the RP has submitted that the attachment is not a resolution plan but an ‘Excel Sheet’ showing particulars of the amount. The 10^th meeting of the CoC was held on 21.02.2019 in which the RP apprised the CoC about the amount proposed by the Prospective Resolution Applicant and the CoC was to negotiate with the prospective resolution applicants i.e. H1 to H4 namely, Aggarsain Spinners Limited, Shivani Trendz Pvt. Limited, Navraj Mittal and Ors. & Pankaj Bhatia and Shreeji Cotfab.

Thereafter in 12^th Meeting of the CoC held on 27.03.2019, the CoC declared that the resolution plan submitted by H1 (Aggarsain Spinners Limited) was approved with 92.55% voting share. After the CoC approved the Resolution Plan of H1, the RP filed an application bearing IA No. 287 of 2019 before the Adjudicating Authority for approval of the said plan of the H1 but the Adjudicating Authority rejected the application vide its order dated 24.05.2022. The Adjudicating Authority observed that “Consequently, to avoid the liquidation of the Corporate Debtor period of CIRP is extended by 90 days for exploring the possibility of resolution of the Corporate Debtor. Accordingly, matter is referred back to the Committee of Creditors, which is ordered to be reinstated and revived to make another attempt for consideration of other resolution plans in accordance with law.”

The H1 (Aggrasain) filed a Company Appeal (AT) (Ins) No. 637 & 638 of 2022 to assail the order dated 24.05.2022, whereas the CoC in its 26^th meeting held on 01.06.2022 resolved to issue fresh Form-G inviting fresh EOIs and resolution plan. On 02.06.2022, the RP issued Form-G providing the last date for submission of EOIs as 17.06.2022 and the last date for submission of resolution plan as 19.07.2022. According to the RP, the Appellant had never participated in this round whereas Counsel for the Appellant submits that it is not within his knowledge.

It so happened that in June 2022, IA No. 656 of 2022 was filed by another prospective resolution applicant i.e. Shreeji Cotfab, challenging the second round of inviting Form-G, in view of the decision taken in the 26^th Meeting of the CoC held on 01.06.2022. The RP apprised the CoC on 01.07.2022, in its 29^th meeting that till 17.06.2022 he had received 18 EOIs and further informed the CoC on 20.07.2022, in its 30^th Meeting, that he had received 11 resolution plans and further informed the CoC, in its 31^st meeting, held on 27.07.2022, that out of 11 Resolution Plan only 9 resolution plans were complaint. According to the RP, the Appellant sent an email dated 22.08.2022 to enhance the amount of resolution plan to the tune of Rs. 84 Crores. According to the RP, the offer made by the Appellant was not considered as according to him it was not in form- G. Be that as it may, the Appellant then filed IA No. 1355 of 2022 before the Adjudicating Authority in September, 2022 making the following prayers:

At the same time, the CoC also filed an application bearing IA No. 1381 of 2022 in which prayer made by the CoC was to invite all the Resolution Applicants who were there in the 1^st round for their participation in the 2^nd round as well. Both the applications were dealt with together by the same impugned order which was passed on 04.11.2022.

The application IA No. 1381 of 2022 filed by the CoC was dismissed as well as the application filed by the Appellant and the Adjudicating Authority made observations in the both the applications which read as under:

In the meantime, while the application in question was pending before the Adjudicating Authority, the Company Appeal (AT) (Ins) No. 637 & 638 of 2022 filed by the Aggrasain was dismissed by this Tribunal on 14.09.2022. The said decision was challenged by it by way of a Civil Appeal (Diary) No. 30238 of 2022. While the said Civil Appeal (diary) was pending before the Hon’ble Supreme Court, 34^th Meeting of the CoC was held on 20.09.2022, convened at the instance of the RP, wherein CoC negotiated with all the PRA’s being 9 in number. IA No. No. 656 of 2022 filed by Shreeji Cotfab before the Adjudicating Authority, in which it was prayed that second round of Form-G is illegal and only the prospective resolution applicants from first round should be invited was allowed by order dated 10.10.2022 only to the extent that besides the 9 fresh applicants who have come in the second round, the earlier Resolution Applicants namely, Navraj Mittal & Ors., Shivani Trendz Pvt. Limited, Pankaj Bhatia and Shreeji Cotfab be also added. Thus, the number of Resolution Applicants was increased to 12. The Application filed by the Appellant and the CoC, was dismissed on 04.11.2022 and thereafter on 15.11.2022, the Hon’ble Supreme Court passed an interim order which read as under:

Thereafter, on 09.12.2022, the Hon’ble Supreme Court decided the Civil Appeal Nos. 9080-9081 of 2022 with the following observations:

In the light of the order of the Hon’ble Supreme Court, 38^th Meeting of the CoC was convened by the RP on 09.12.2022 and Aggarsain Spinners ltd was granted 30 days time to submit their resolution Plan but they did not submit their plan. Thereafter, 39^th meeting of the CoC was held on 12.01.2023 and the plans of the following 9 prospective resolution applicants were placed before the CoC for consideration:

Thereafter on 12.01.2023, all the 9 resolution plans were put before the members of the CoC and the resolution plan of Anil Sharma & Satvinder Singh (Consortium) for an amount of Rs. 165 Crore was approved by the CoC. Thereafter, the RP filed an application bearing IA No. 452 of 2023 seeking approval of Resolution Plan filed by the Respondent No.1 before the Adjudicating Authority in which the order has been reserved on 16.03.2023.

Counsel for the Appellant has submitted that the RP has failed in his duty in not presenting the resolution plan submitted by the Appellant in terms of Section 25(2)(i) of the Code as well as Regulation 39 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016 whereas according to the Respondent the plan submitted by the Appellant was put up and discussed in the meeting held on 05.02.2019 in which the following transaction was recorded “thereafter, Resolution Professional initiated the open negotiation & disclosed the ranks as per the evaluation matrix to all the resolution applicants. Resolution Professional called up the lowest rank holder namely Raghav Jain & Others to improve their proposal to stay in negotiation process. Resolution Applicant asked for one week time to submit revised proposal but CoC members declined their request as further negotiations with resolution applicants is the utmost agenda to move forward and revised timelines based on each resolution applicant’s request will not lead to the desired objectives, since the negotiation process with other applicants was already in process. Therefore, the Applicant opted to quit the negotiation and left the meeting venue. Resolution Professional called the next lowest rank holder, namely, Pankaj Bhatia & Shreeji Cotfab.”

Thus, from the minutes of the meeting dated 05.02.2019, it is evident that the plan of the Appellant was considered but the Appellant opted to quit the negotiation and left the meeting venue. Whereas according to the Appellant he did not quit the meeting but was rather thrown out.

The Appellant has thereafter relied upon the emails exchanged between him and the RP on 10.02.2019 whereby the Appellant was asked to give final figures of the plan. It is contended that if the Appellant was not in the race and had opted to quit as has been recorded in the minutes dated 05.02.2019 then the offer made by the Appellant could not have been negotiated with by the RP. In this regard, he has referred to the minutes of the meeting dated 13.02.2019 which took place after the emails dated 10.02.2019 and 12.02.2019 mentioned herein before.

According to the RP, the request received from the Appellant was also put up before the CoC but CoC took a decision not to allow the Appellant for further negotiation with the CoC members. In this regard discussion before the CoC has been referred to which read as under:-

It is thus submitted that the allegation of the Appellant is totally ill founded as on that date the plea of the Appellant was not put up rather it is the case of the RP that the CoC took a decision in its commercial wisdom, after taking a legal opinion, that the resolution applicant who skipped from the negotiation process and left the meeting cannot participate in the further negotiations.

The allegation of the Appellant is that they had not quit the meeting rather were thrown out cannot be decided in these summary proceedings in the absence of any evidence and the Tribunal shall rely upon the minutes of the meeting recorded in its normal course of business as an evidence about whatever has transpired in the meeting.

Otherwise also, there were two applications one by the CoC i.e. I.A. No. 1381 of 2022 in which it had made a prayer to the Adjudicating Authority that it may allow all the applicants in the first round to participate but the said application was dismissed by the impugned order while dismissing the application bearing I.A. No. 1355 of 2022 by which the prayer made by the Appellant has been rejected and the order passed in I.A. No. 1381 of 2022 has attained finality as regards the right of the Appellant as well.

Thus, in view of the aforesaid discussion, we are of the considered opinion that there is no merit in the present appeal and as such the same is hereby dismissed. No costs.