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Judgment
Ashok Bhushan, J.
These two Appeals have been filed by same Appellant challenging different orders passed by the Adjudicating Authority (National Company Law Tribunal), Jaipur Bench, Jaipur. Both the Appeals have been heard together.
Company Appeal (AT) (Ins.) No. 910 of 2021 has been filed challenging the order dated 16.07.2021 passed by the Adjudicating Authority rejecting the I.A. No. 201/JPR/2019 filed in CP (IB) No. 86(ND)/2017 (T.A. No. 83(ND)/ 2018). The Appellant's Resolution Plan was rejected by the Committee of Creditors (hereinafter referred to as "CoC") in its meeting dated 04.06.2019. By I.A. the said decision was challenged by the Appellant before the Adjudicating Authority, which Application came to be rejected by order dated 16.07.2021.
Company Appeal (AT) (Ins.) No. 909 of 2021 has been filed by the Appellant questioning the order dated 13.10.2021 passed by the Adjudicating Authority in I.A No. 186/JPR/2019 in CP (IB) No. 86(ND)/ 2017 (T.A. No. 83(ND)/2018) whereby the Adjudicating Authority has approved the Resolution Plan submitted by 'Kals Distilleries Private Limited'- 'Successful Resolution Applicant'.
We have heard Shri Sumesh Dhawan, Learned Counsel for the Appellant, Shri Abhishek Sharma, Learned Counsel for the Resolution Professional and Shri Arun Kathpalia, Learned Senior Counsel for 'Successful Resolution Applicant'.
Learned Counsel for the Appellant challenging the order dated 16.07.2021 by which his Application questioning the CoC's Resolution dated 04.06.2019 was rejected submits that the Appellant being H-1, his Resolution Plan has been rejected illegally. It is submitted that 'M/s. Mahalaxmi Traders' who is one of the members of the CoC holding a voting share of 22.4% colluded with the 'Successful Resolution Applicant' due to which the Appellant's Resolution Plan got rejected and Resolution Plan of 'Kals Distilleries Private Limited'- 'Successful Resolution Applicant' was approved. It is submitted that the allegations have been made by the Appellant in his Application of malafide and fraud committed by 'M/s. Mahalaxmi Traders' which has not been correctly adverted to and decided by the Adjudicating Authority. It is submitted that the only observation made by the Adjudicating Authority with regard to allegations of collusion and fraud in Paragraph 16 of the order is that even after deducting the 22.4% voting share of the 5th Respondent- 'Mahalaxmi Traders', the Resolution Plan of the Appellant could have been rejected by 77.76%, therefore, the said contention of the Appellant need not to be considered at all. It is further submitted that the Resolution Plan of 'Kals Distilleries Private Limited' which has been approved by the CoC in the same meeting was also approved by the Adjudicating Authority by allowing the Application filed by the 'Successful Resolution Applicant'. The Resolution Plan of the 'Successful Resolution Applicant' was not in compliance with the provisions of the Insolvency and Bankruptcy Code, 2016 ("I&B Code" for short) and the Regulations framed thereunder and the Adjudicating Authority without considering the said compliance approved the Resolution Plan.
Learned Counsel for the Resolution Professional submits that there was no procedural breach in consideration of the Resolution Plan of the Appellant. It is submitted that the CoC in its meeting dated 04.06.2019 with 100% votes rejected the Resolution Plan of the Appellant and with 100% vote approved the Resolution Plan of the 'Successful Resolution Applicant'. It is submitted that the mere fact that the Appellant was declared H-1 earlier does not give any indefatigable right in the Appellant. It is further submitted that the Resolution Plan of 'Kals Distilleries Private Limited' was taken into consideration in view of the order dated 04.04.2019 passed by the Adjudicating Authority in I.A filed by 'Kals Distilleries Private Limited'. The order dated 04.04.2019 never came to be challenged. It is submitted that the CoC is the best judge to watch commercial interest and decision of the CoC which was taken with 100% vote is not to be interfered by in exercise of judicial review. It is submitted that there was no collusion of fraud as alleged by the Appellant.
Learned Counsel for the 'Successful Resolution Applicant' supported the decision of the Adjudicating Authority approving the rejection of the Resolution Plan of the Appellant as well as the order approving the Resolution Plan of the 'Successful Resolution Applicant. It is submitted that the commercial wisdom of Financial Creditors in rejection of a Resolution Plan is not challengeable.
We have considered the submissions of the Learned Counsel for the parties and perused the record.
The Resolution Plan of the Appellant got rejected by 100% vote in the 19th meeting of the CoC dated 04.06.2019 on which date the Resolution Plan of the 'Successful Resolution Applicant' was approved with 100% votes. The commercial wisdom of the Financial Creditors which has support of 100% votes has to give due weight by Adjudicating Authority as well as this Court. The CoC is well aware about the contents of the Resolution Plan of both the Appellant as well as the 'Successful Resolution Applicant' and it was with the deliberation of the CoC that decision was taken to reject the Resolution Plan of the Appellant. The complaint of Appellant is that 'Kals Distilleries Private Limited' was surreptitiously permitted to submit his Resolution Plan without knowledge of the Appellant has no legs to stand. It has been noted in the order of the Adjudicating Authority that by order passed on 04.04.2019, the Adjudicating Authority permitted 'Kals Distilleries Private Limited' to submit a Resolution Plan, hence the same was duly accepted by the Resolution Professional. On 11.04.2019, the Appellant sent a protest to the Resolution Professional regarding Resolution Plan of 'Kals Distilleries Private Limited' which protest was immediately replied by Resolution Professional on 12.04.2019 informing that the plan has been accepted by the order dated 04.04.2019 of the Adjudicating Authority.
The Hon'ble Supreme Court in "K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150" had occasion to consider the relevant provisions of the 'I&B Code', including the provisions of Section 30. With regard to commercial wisdom of the Financial Creditor, the Hon'ble Supreme Court laid down that there is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed Resolution Plan. In paragraph 52 of the Judgment, following was laid down:-
"52. As aforesaid, upon receipt of a "rejected" resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I&B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of the Sick Industrial Companies Act, 1985 or under other such enactments which has now been forsaken. Besides, the commercial wisdom of CoC has been given paramount status without any judicial intervention, for ensuring completion of the stated processes within the timelines prescribed by the I&B Code. There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject-matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justiciable."
The decision as noted above, the CoC has rejected the Resolution Plan with 100% votes which is an important factor to reckoned with. The submission of the Learned Counsel for the Appellant is that there is collusion and fraud between 'M/s. Mahalaxmi Traders' and the 'Successful Resolution Applicant'. Admittedly, 'M/s. Mahalaxmi Traders' was one of the CoC's member holding a voting share of 22.4%. There can be no doubt that any fraud in process may vitiate the entire process but it is easy to allege fraud and collusion but difficult to prove the same. Apart from the bald allegation of the Appellant that 'M/s. Mahalaxmi Traders' colluded with the 'Successful Resolution Applicant', there is no other material to come to a finding that actually any fraud was played. The commercial wisdom of the Financial Creditors cannot be disregarded on bald allegation of fraud and collusion as raised by the Appellant. The Adjudicating Authority has in detail considered the submissions of the Appellant and has rightly come to the conclusion that the decision of the CoC rejecting the Resolution Plan of the Appellant does not require any interference. We do not find any error in the order dated 16.07.2021 rejecting the I.A filed by the Appellant.
Now coming to the Company Appeal (AT) (Ins.) No. 909 of 2021 by which the order dated 13.10.2021 has been challenged, after rejection of Appellant's Resolution Plan, the Resolution Plan of 'Kals Distilleries Private Limited' was approved by the CoC with 100% voting as noted above. I.A. was filed before the Adjudicating Authority. In paragraph 11 of the judgment, it has been noticed by the Adjudicating Authority that members of the CoC after detailed discussion rejected the Resolution Plan of Appellant mainly on the grounds of credit worthiness of 'Som Distilleries Pvt. Ltd.'. The Adjudicating Authority has in detail considered the compliance of Resolution Plan of the 'Successful Resolution Applicant' with provisions of Sections 30 & 31 and the Regulations 38, 39 of the CIRP Regulations. In paragraphs 14 to 24, a finding was recorded by the Adjudicating Authority that Resolution Plan submitted by 'Kals Distilleries Private Limited' as approved by the CoC satisfies all the requirements of the Code and Regulations made thereunder. None of the grounds to challenge the Resolution Plan had been made out. Hence the Adjudicating Authority rightly approved the Resolution Plan. No ground has been made out to interfere with the order dated 13.10.2021 of the Adjudicating Authority.
In view of the forgoing discussion, we do not find any merit in these Appeals. Both the Appeals are dismissed.