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Judgment
B.S.V. Prakash Kumar, J
This is a reference to third Member on the points of difference between two Hon'ble Members of National Company Law Tribunal, Mumbai Bench in disposing of MA 1785/2019, MA 1770/2019 & MA 1750/2019. The points of difference are as follows:-
A) MA 1785/2019
In MA 1785/2019, one of the Resolution Plan Applicants namely SSG Group has assailed the decision of the RP for not short listing its Resolution Plan despite its plan is in compliance with Section 30(2) of the Insolvency and Bankruptcy Code, 2016 (for brevity 'Code') and the decision of RP for short listing and approving the CarVal's Resolution Plan as successful Resolution Plan.
B) MA 1770/2019
In MA 1770/2019, one of the Operational Creditors namely Noble Resources International Pte Limited (in short Noble), having more than 10% of the total debt payable by the Corporate Debtor, assailed the approval of CarVal Resolution Plan dated 19.04.2019 by the CoC on the premise the approval of CarVal plan is in violation of the procedure set out under the Code.
On these two applications, the Learned Judicial Member of Bench-II of NCLT, Mumbai allowed both the applications with a direction to the Resolution Professional to convene a meeting of Committee of Creditors afresh on 18.12.2019 and put up both the plans (SSG Group plan and CarVal Group plan) for due diligence and thereafter to conclude the process of voting, latest by 19.12.2019.
As against this order, the Learned Technical Member of Bench-II of NCLT, Mumbai dismissed MA 1785/2019 and 1770/2019 holding that not short listing the Resolution Plan of SSG Group and the approval of CarVal Resolution Plan is in accordance with the procedure set out under the Code.
The reasons given by these two learned members for arriving to the decisions conflicting to each other are as follows:-
The Learned Judicial Member has stated that,
- the e-mail dated 29.03.2019 sent by the Resolution Professional to the SSG Group stating that its Resolution Plan was not shortlisted has not disclosed the reasons for not short listing therefore the impugned decision is bad in law.
- the CoC should have suggested SSG Group for improvement of its Initial Resolution Plan dated 21.09.2019 instead of re-issuing another Request for Resolution Plan (RFRP), therefore the Learned Judicial Member recorded his dissatisfaction, disapproval and condemnation of the conduct of the Committee of Creditors.
- he is doubtful of the veracity of Delph and Phelps Report on the belief the Evaluation Report was given in one day.
The Learned Technical Member has stated that,
- before informing SSG Group about not-short listing its plan, in 12th CoC meeting held on 26.03.2019, the CoC deliberated on the plans of SSG Group and CarVal Group and thereafter asked both the Resolution Applicants to give their final commercial offer by 27.03.2019, then upon submission of their revised offers on 28.03.2019, the CoC, based on the updated Evaluation Report of Delph and Phelps submitted over both the plans on 29.03.2019, has shortlisted the CarVal Resolution Plan strictly in accordance with the marks awarded in the evaluation matrix, and the SSG Group plan being rated as inferior to the plan of Carval, it was not shortlisted, accordingly short listing of Carval Plan and not shot listing of SSG Plan intimated to them, therefore intimation of the same to SSG cannot be construed as devoid of reasons because it has been categorically mentioned that SSG Group plan has not been shortlisted for the next stage of process pursuant to comparative evaluation of the quantitative and qualitative terms of SSG Resolution Plan compared to the plan submitted by CarVal,
- SSG Group was given several opportunities to revise its bid in the first round, when SSG failed in revising its plan to the satisfaction the CoC, the CoC has rightly reissued RFRP so as to invite fresh bids hoping that new bidders would participate in the bidding process,
- Incidentally CarVal Group has for the first time participated and submitted better plan showing a quantum jump of more than `1000Crore to the earlier plan submitted by SSG Group, of course soon after CarVal filed its plan with a quantum jump over the earlier plans, SSG Group had for the first time increased to match the plan given by the CarVal Group. But that increase also could not match with the plan submitted by Carval. When SSG plan after revision also, has remained inferior to the CarVal plan, the CoC has rightly short listed CarVal plan and rightly informed even SSG that its plan has not been shortlisted.
As to application MA 1770/2019 filed by Noble, one of the Operational Creditors, the Learned Judicial Member held that -
- this applicant having "representation rights" in Committee of Creditors meeting, the right to attend Committee of Creditors meeting is not a mere procedural formality but an essential safeguard to ensure fairness and transparency, and since the CoC supplied the copy of the resolution to Noble on 22.04.2019, that was one day after plan was approved, he held that the equity and fairness missing in the impugned process, therefore, it is null and void in the eye of law. Since the CoC has not supplied D&P report to Noble within time, it is not fair on the part of the CoC to approve the plan of the CarVal.
- SBI has shown favouritism in favour of the CarVal plan in short listing it without putting it before the CoC, therefore, the Learned Judicial Member set aside approval of the Resolution Plan of the CarVal based on the allegations made by Noble.
As against this, the learned Technical Member stated that Noble was provided with Resolution Plan submitted before 15th CoC meeting dated 21.04.2019 i.e., in the meeting held on 19.04.2019. As to Evaluation Report, the Learned Technical Member says that Noble itself admitted in para 18 of its application that ""Although Respondent 1 (RP) shared the report of Delph and Phelps verifying the Resolution Plans dated 28th March 2019 submitted by Carval and SSG and the revised minutes of 13th COC, Respondent 1 did not share the report of Delph and Phelps certifying the Resolution Plan submitted by Carval on 16 April 2019" So, Noble grievance is not about supplying information, it is about the RP not supplying the Report certified by Delph and Phelps. With regard to e-voting, he says that since all the CoC Members were present, physical voting was opted. In fact option of e-voting is to facilitate the people not present at the meeting. In this case, since all the Members were there, the Learned Technical Member held that voting, which was not disputed by any of the CoC Members, could not be held as invalid on the ground e-voting has not taken place. With regard to the allegations of favoritism by SBI, in favor of CarVal, SBI simpliciter taking lead role shall not be attributed as favoritism.
On looking at the orders passed by both Hon'ble Judicial Member and Hon'ble Technical Member, submissions made by both the parties and in the light of the legal provisions of the Code, I am of the view that the learned Technical Member has rightly decided with reasons that non-short listing SSG plan and short listing CarVal plan is in accordance with law. Therefore, I hereby agree with the findings given by the learned Technical Member. To say that I agree with the order of the learned Technical Member, I need not reiterate the reasoning given by the learned Technical Member in dismissing the applications.
I hereby further hold that it is not the case of SSG group that the plan presented by them before the CoC on 28.03.2019 is superior to Carval Plan. The only case they canvass is, after their plan not being shortlisted on 29.03.2019, for they have on 16.04.2019 provided another plan far superior to Carval Plan shortlisted on 29.03.2019, which is before approval of Carval Plan on 21.04,2019, their plan subsequently filed being superior, they say, should have been considered and approved instead of approving the Carval Plan.
This point has no merit, because by that time, Carval Plan was shortlisted and SSG Group was officially informed that their plan was not shortlisted, therefore question of repeating the process will not arise. It all depends upon the decision of the CoC which plan is viable and which one is not viable, because money coming in via plan and its viability will make difference in payment to them. Moreover it is not to hold out every detail to everybody and take their approval before clearing the process for approval. It is an affair in between the creditors and other contributories. Yes, it is understandable that the operational creditors having right to get payment as set out under section 53 of the Code, they do have right to know and wish for a better plan. But it does not mean that they can halt the process by making a mountain out of molehill. Short listing has not been objected by any of the financial creditors. It is not the case of anybody that short listing has not been in accordance with Evaluation Matrix.
Expressing doubt over providing D&P Report on the ground Report was given hurriedly, I say two things. First, in Civil Law probabilities will be examined, the concept of benefit of doubt is not applicable. Second, since the applications being filed assailing the process, the applicants shall prove out their case, mere raising assumptions and presumptions and doubts not backed by proof shall not invalidate civil actions.
For that matter; CoC had discussions with both the plan applicants on 26.03.2019 and thereafter asked both of them to revise their plans and file them before the CoC on 28.3.2019, then revised plans were also sent to D&P and on the Evaluation Matrix given by them, short listing was done as per law. Short listing is to be done based on the evaluation matrix. That is what the CoC has done. For short listing, no voting is required. Plans were considered and discussed at length on the strength of the plans on 26.03.2019; thereafter minor revisions made to the plans, they were further examined by D&P and based on the evaluation matrix given by D&P, short listing was done.
I need not say separately that SSG Group has been all along trying its level best to get this Corporate Debtor Company for a lower rate, despite being so, the CoC gave multiple chances to SSG Group to revise its plan so as to meet the satisfaction of the CoC but they have not done so. Therefore, since law permits the CoC to reissue RFRP within the time stipulated, it was issued. That cannot be questioned by a Resolution Applicant on the ground that he should be given another chance to revise its plan.
The point to be seen is, as to whether the economic interest of this Applicant is getting prejudiced because his plan has not been admitted. It is not the case of SSG group. It has no legal right over the assets of the Corporate Debtor to insist upon the CoC to allow it to revise its plan until it is accepted by the CoC. If this is the approach there will not be any end for revision of the plans. In the past, though SSG Group was twice asked to revise its plan, it kept on changing figures from one slot to other slot, but whereas when CarVal Plan has come with a quantum jump of `1000cr over and above the earlier plan of SSG against first RFRP. Against second RFRP, SSG came out with a plan increasing its plan value, but that is also not superior to the plan of Carval.
Once plan is shortlisted, if at all any remedy is assumed to be present, it is only with regard to the procedure, as to the procedure is concerned, in Regulation 39 of the CIRP Regulations it has been categorically mentioned that the Committee of Creditors shall evaluate the resolution plan received under Regulation 39 strictly as per the evaluation matrix to identify the best resolution plan, when evaluation matrix figures are there, that being the special subject, as long as there is no objection from any of the Committee of Creditors over the process of evaluation, if the evaluation matrix discloses marks identifying the best plan, the CoC will have to opt for the best plan provided it is viable and feasible. That is the subject matter of the CoC. In Regulation 39(3), when it comes to second clause, since approval is required to be given to the plan shortlisted, it was approved by the CoC with requisite majority. At this juncture, SSG subsequently coming with an unsolicited plan cannot become an impediment to proceed with the shortlisted plan.
After short listing, assuming that SSG Group plan is again considered looking at the figures inflated, again if Carval comes out with a superior plan, is it that again SSG is to be given another chance to come with a further superior plan, if that is the case, where is the end for this rat race? Ultimately payment has to go to the creditors, therefore as per IBC, CoC alone is competent to decide which plan is feasible and viable, not this Adjudicating Authority.
Inspite of it, the CoC has given full fledged answer as to how subsequently submitted plan of SSG to the Resolution Professional is no way feasible because the Mega Subsidy factored in is the money that has to come from the Government in staggered manner, it is not an undertaking of the SSG that it would provide money. Moreover in the same plan, it has snuck in a clause seeking exemption over the liability of the guarantors so as to help out the Promoters/Directors of the Corporate Debtor. However, I am not getting into the merit of the plan subsequently filed, here there is a process set out, when CoC has taken a conscious decision and putting it for approval of the CoC, it can neither be questioned by the Applicant whose plan has not been shortlisted, nor by an Operational Creditor who has no voting rights in the CoC, nor even by this Adjudicating Authority unless it is hit by Section 30(2) of the Code. Whoever is interested to abstain from the meeting, they have already abstained; in spite of it, CarVal has got the approval of 81.29% of CoC voting. Merely by having an open discussion in the CoC meeting and asking about SSG plan by some CoC Members having minority voting in the CoC cannot become a reason to invalidate the plan approved. Moreover, none of the CoC Members who abstained to the voting of CoC have filed any objection before this Bench. The point to be noted, these Applicants have not stated that D & P Report is factually incorrect.
In view of the same, the objection raised by SSG over not short listing its plan is unsustainable. Once plans are submitted, it is the CoC to take a decision thereafter it is only an intimation to the plan Applicants as to whether their plan is shortlisted or not, it is nowhere mentioned in the Code that Plan Applicants have right to participate in short listing the plan applications. Learned Technical Member has already held in its order that the Committee of Creditors has to record its deliberations on the feasibility and viability of the plans. It has recorded that CarVal plan is feasible and viable for the reasons mentioned there. Notwithstanding the fact that there is no provision of assigning reasons for not short listing; the CoC through its RP has categorically mentioned that the Resolution Plan of SSG is comparatively inferior to the plan of the CarVal. Therefore, the reason for not short listing the plan of SSG is evident in the email intimation.
Moreover this Adjudicating Authority is only limited to see as to whether Section 30(2) of the Code is complied with or not. In this case it is true that both the plans are in compliance with Section 30(2) of the Code. When both are in compliance, the CoC will take a call which plan is superior to maximize the value of the Corporate Debtor Company. Since it is clear indication in the evaluation matrix that CarVal plan is superior, the CoC proceeded with Carval plan in accordance with law. For Carval has further added value to the plan after short listing, these applicants tried to show it as an opportunity given to Carval behind the back of SSG. If the CoC conceded to something less than already shortlisted, it could be assumed that the CoC acted prejudicial to the interest of SSG group. Indeed the CoC tried for something better than the value already agreed, therefore such action cannot be looked at as an opportunity given to Carval and not given to SSG. In view of the same, I hereby agree with the order passed by Hon'ble Technical Member.
As to Noble (Operational Creditor) application is concerned, it's only grievance is that SBI has shown favoritism to CarVal group, Noble says that the CoC supplied the information with regard to the approval of Carval Plan after meeting dated 21.04.2019 was held. In this case, the Resolution Plan of CarVal along with all annexure including evaluation matrix was supplied to Noble on 19.04.2019 itself i.e. before voting.
As to the Operational Creditor having more than 10% shareholding and suspended Directors, they are entitled to participate in the meeting and whatever papers i.e. relevant for consideration in meeting, they shall be supplied. But this right cannot be stretched out to say that CoC has to notify each and every action which does not require meeting or voting of the CoC to the operational creditor or suspended directors. To extent of supplying information before holding meeting, it is mandatory. But such right cannot tie down the CoC not to proceed with any action unless the operational creditor is made privy to every act it does during CIRP. In the case of intimation of short listing, it was even ratified by the CoC.
There are certain decisions where approval of CoC is imperative, for which meeting is essential for those approvals as envisaged in section 28 of the Code. As per record, 13th CoC meeting was held on 9th April, 2019, 14th CoC meeting was held on 17th April 2019 and 15th CoC meeting was held on 21st April 2019. It is the case of Noble, CoC recorded in its 13th meeting dated 9.4.2019 about short listing Carval Plan, Noble, itself stated that RP on 4th of April 2019 supplied Carval and SSG Resolution Plans to Noble, therefore it could not be said that material papers were not provided to Noble before the meeting dated 9.4.2019. It is a known practice minutes of meeting will be circulated post meeting because there could not be minutes unless meeting is held. It is not the case of Noble that Resolution Plan was not supplied to it and it is not the case of Noble that evaluation matrix was not provided to the Operational Creditor. Noble only complains that evaluation matrix and other details certified by Delph and Phelps (D&P) have not been provided to it. Moreover the money i.e. coming into the Company is not even sufficient to the Financial Creditors. Though 2-3 Financial Creditors who are Members of CoC abstained to the voting to the approval of the plan, they have not come before this Bench saying that they are aggrieved either by the approval of the plan or in not short listing SSG plan.
In view of the same I am of the view that Operational Creditor is not aggrieved of any of the actions of the CoC. Thumb rule i.e. followed in dealing with civil remedies is, when a person seeks remedy before Court of law, he shall be aggrieved by the action assailed in his application. When grievance is not present in its complaint, such person cannot seek relief before any Court of law. What does this Operational Creditor get on declaration of this entire process as null and void? Noble has not deliberated anything on it. Maybe it is either to help SSG or for some undisclosed reasons, which cannot be seen as grievance of Noble. NOBLE must have seen in the unsolicited plan of SSG, an effort was made to screen the guarantors from liabilities. It is not the case of Noble that the distribution to be reached to it under section 53 has not been provided, if that is the case, it could become the grievance of the Applicant. But that is not the case of this Applicant and that cannot be the case of the applicant.
With regard to the complaint against SBI showing favoritism to Carval, it has to be established that SBI has done something that cannot be done under law, such kind of infraction is nowhere present in the case, SSG plan submitted on 28.03.2019 is admittedly inferior to Carval Plan as per evaluation matrix supplied by D & P. SBI is one of the financial creditors, leading majority of the bankers which have a share of more than 70% of the voting in the CoC. In a scenario like this, it is quite obvious that one of the Bankers take lead role, here in this case, SBI has taken lead role. If its role is objected by other bankers and proves something against SBI, then its action relating to CoC functioning could be called as favorable to Carval group. That is not the case here. Taking a lead for approval of a superior plan, which the CoC has approved with thumping majority considering it as feasible and viable cannot be called as SBI favoring Carval group. In any event, the Hon'ble Technical Member has already given sound reasoning over all the aspects, therefore I agree with the decision of Hon'ble Technical Member with regard to these two applications and other consequential reliefs mentioned in other Applications.
Before closing it, I must say, if any procedural infraction has crept in, and so long as such procedural infraction does not affect substantial right of any of the parties, and Act has not envisaged express nullification of an action for simpliciter non compliance, courts normally will not invalidate accomplishments. This RP and the CoC, for the last one and half years putting their efforts to ensure CIRP is accomplished.