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Supreme Court of India
The Karad Urban Cooperative Bank … vs Swwapnil Bhingardevay on 4 September, 2020Author: V. Ramasubramanian
Bench: Hon’Ble The Justice, A.S. Bopanna, V. Ramasubramanian
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.2955 OF 2020
THE KARAD URBAN COOPERATIVE
BANK LTD. ….APPELLANT(S)
VERSUS
SWWAPNIL BHINGARDEVAY & ORS. ….RESPONDENT(S)
WITH
CIVIL APPEAL NO. 2902 OF 2020
JUDGMENT
V. RAMASUBRAMANIAN, J.
1. Challenging an order passed by the National Company Law
Appellate Tribunal (hereinafter referred to as ‘NCLAT’) (i) setting
aside the approval granted by the National Company Law
Tribunal (hereinafter referred to as ‘NCLT’) to a Resolution Plan
and (ii) remanding the matter back to the NCLT with a direction
to have the Resolution Plan resubmitted before the Committee of
Signature Not Verified
Creditors, the financial creditor and the Resolution Professional
Digitally signed by
Sanjay Kumar
Date: 2020.09.04
15:25:55 IST
Reason:
have come up with these appeals.
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2. We have heard learned counsel appearing on both sides.
3. The Karad Urban Cooperative Bank Ltd., which is the
financial creditor, filed an application on 04.09.2017 under
Section 7 of the IBC before the NCLT against M/s. Khandoba
Prasanna Sakhar Karkhana Limited, which is the corporate
debtor. NCLT admitted the application on 01.01.2018 and an
Interim Resolution Professional was appointed. The first meeting
of the Committee of Creditors (hereinafter referred to as ‘CoC’)
took place on 02.03.2018. As per the decision taken therein, one
Mr. Jitendra Palande was appointed by the NCLT, by an order
dated 06.03.2018, as Resolution Professional.
4. Pursuant to the second meeting of the Committee of
Creditors held on 27.03.2018, the Resolution Professional issued
an advertisement on 30.03.2018 inviting Expression of Interest.
In the meantime, a Director/Promoter of the corporate debtor
moved the High Court of Judicature at Bombay by way of a writ
petition in Writ Petition No.4746 of 2018, challenging the orders
of the NCLT dated 01.01.2018 and 06.03.2018. Initially, the High
Court granted stay of further proceedings before the NCLT on
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18.04.2018. However, the writ petition was eventually dismissed
on 23.08.2018.
5. Several meetings of the Committee of Creditors were held
thereafter and eventually the Committee of Creditors, in its 8 th
Meeting held on 09.02.2019 resolved to approve the Resolution
Plan submitted by one M/s. Sai Agro (India) Chemicals. On the
basis of the approval of the Resolution Plan by the Committee of
Creditors, the Resolution Professional moved an application on
15.02.2019 before the NCLT, Mumbai. At this stage, the
Director/Promoter of the corporate debtor also came up with an
application seeking permission to file a resolution plan. But by a
common order dated 01.08.2019, NCLT, Mumbai Bench, rejected
the application filed by the Director/Promoter of the corporate
debtor and approved the Resolution Plan submitted by M/s. Sai
Agro (India) Chemicals. Thus, M/s. Sai Agro (India) Chemicals,
have become the Successful Resolution Applicant (hereinafter
referred to as the ‘SRA’).
6. The Director/Promoter of the corporate debtor (who
unsuccessfully approached the High Court of Bombay at the
earliest point of time), filed an appeal before the NCLAT in
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Company Appeal (AT) (Ins) No.943 of 2019, as against the order
of the NCLT dated 01.08.2019, granting approval of the
Resolution Plan of the SRA.
7. By an order dated 02.06.2020, NCLAT allowed the appeal
and remanded the matter back to the adjudicating authority,
with a direction to send back the Resolution Plan to the
Committee of Creditors. The operative portion of the order of
NCLAT dated 02.06.2020 reads as follows:
“The Appeal is allowed. For the above reasons,
we set aside the Impugned Order and remit the matter
back to the Adjudicating Authority with a direction to
send back the Resolution Plan to the Committee of
Creditors to resubmit the Plan taking into consideration
observations made above and after satisfying the
parameters as laid down by the Hon’ble Supreme Court
in the Judgment in the matter of “Essar Steel” referred
(supra) and IBC. The Adjudicating Authority may give
specific time period to the Resolution Professional to
place matter before Committee of Creditors for
resubmitting the Resolution Plan taking into
consideration observations made above and after
satisfying the parameters laid down by the Hon’ble
Supreme Court and IBC. Further incidental Orders may
also be passed.
On resubmission of the Resolution Plan, the
Adjudicating Authority will deal with the same in
accordance with law.
The Appeal is disposed accordingly. No costs.”
8. It is against the aforesaid order of remand passed by
NCLAT that the financial creditor has come up with one appeal
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and the Resolution Professional has come up with another
appeal.
9. It is seen from the order of the NCLAT that the Appellate
Tribunal was convinced to interfere with the order of NCLT
granting approval of the Resolution Plan, on four grounds. They
are:
(i) That the Resolution Plan suffers from issues of
viability and feasibility;
(ii) That in as much as the liquidation value
mentioned by the Successful Resolution Applicant in its
Resolution Plan tallied exactly with the liquidation value
obtained by the Resolution Professional, there appears
to have been a breach of confidentiality, violating
Regulation 35(2);
(iii) That the Resolution Plan does not take note of
one important fact namely, that the ethanol plant and
machinery shown as part of the assets of the corporate
debtor, actually belonged to another company by name,
Sarvadnya Industries Private Limited, and that a bank
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by name, Janata Sahkari Bank Limited, Pune had taken
possession of the same under the SARFAESI Act; and
(iv) That even the advertisement issued by the
Resolution Professional on 30.03.2018 inviting
Expression of Interest, was vitiated in as much as the
invitation contained therein was for outright sale of the
Company as a going concern, and was in violation of
Regulation 36A.
10. The order of the NCLAT is assailed by the appellants on the
ground, inter alia, (i) that the question of viability and feasibility,
is to be left to the commercial wisdom of the CoC and the same
cannot be lightly interfered with by the Tribunal, in view of the
law laid down by this court in Essar Steel India Ltd.1 and K.
Sashidhar;2 (ii) that a mere suspicion that there was breach of
confidentiality cannot take the place of proof; (iii) that once the
Successful Resolution Applicant has taken note of the issue
relating to the ethanol plant and machinery and submitted a
resolution plan, the Director/Promoter of the corporate debtor
cannot make an issue out of it, and (iv) that the advertisement
1 Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta and others, (2019) SCC OnLine SC 1478
2 K. Sashidhar vs. Indian Overseas Bank, (2019) 12 SCC 150
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issued was actually in tune with the regulations, including
Regulation 36A.
11. Supporting the order of the NCLAT, it is contended by Mr.
Jayant Bhushan, learned Senior Counsel, (i) that the Resolution
Plan proceeds on the basis as though the ethanol plant, owned
by a third party, is part and parcel of the assets of the corporate
debtor and hence, the examination of the viability and feasibility
on the basis of such wrong notion stands vitiated; (ii) that the
very selfdeclaration accompanying the Resolution Plan bears
the date 09.02.2019, but the email exchanged between the
Resolution Professional and the Successful Resolution Applicant,
on the question of leakage of information relating to the
liquidation value is dated 07.02.2019, showing thereby that
there was collusion between the Resolution Professional and the
Successful Resolution Applicant; (iii) that the issue relating to
legal possession of the ethanol plant and machinery had already
been left open by NCLAT in a collateral proceeding between its
legal owner namely, Sarvadnya Industries Pvt. Ltd. and its
banker, Janata Sahkari Bank Ltd. and hence, this machinery
could not have formed part of the assets of the corporate debtor
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to enable the Successful Resolution Applicant to take over the
corporate debtor as a going concern and run it; and (iv) that the
very fact that the Successful Resolution Applicant was the only
person who submitted a bid in response to the advertisement
and the fact that the Resolution Plan was approved within 23
hours in the 8th meeting of the CoC in a hasty manner, would
show that the Resolution Plan was tainted, and that therefore,
NCLAT was justified in setting aside the approval granted by the
NCLT to the Resolution Plan.
12. We have carefully considered the rival submissions. On the
first question regarding the viability and feasibility of a
resolution plan, the law is now wellsettled. In K. Sashidhar
(supra), it was held as follows:
(i) “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…The opinion on the subject matter
expressed by them after due deliberations in the 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 nonjusticiable.”(paragraph 52)
(ii) “The provisions investing jurisdiction and
authority in NCLT or NCLAT as noticed earlier, have not
made the commercial decision exercised by CoC of not
approving the resolution plan or rejecting the same,
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justiciable. This position is reinforced from the limited
grounds specified for instituting an appeal that too
against an order “approving a resolution plan” under
Section 31.” (paragraph 57)
(iii) “Further, the jurisdiction bestowed upon the
appellate authority (NCLAT) is also expressly
circumscribed. It can examine the challenge only in
relation to the grounds specified in Section 61(3) of the
I&B Code, which is limited to matters “other than”
enquiry into the autonomy or commercial wisdom of the
dissenting financial creditors.” (paragraph 58)
(iv) “At best, the adjudicating authority (NCLT) may
cause an enquiry into the “approved” resolution plan on
limited grounds referred to in Section 30(2) read with
Section 31(1) of the I&B Code. It cannot make any other
inquiry nor is competent to issue any direction in relation
to the exercise of commercial wisdom of the financial
creditors — be it for approving, rejecting or abstaining, as
the case may be. Even the inquiry before the appellate
authority (NCLAT) is limited to the grounds under Section
61(3) of the I&B Code. It does not postulate jurisdiction
to undertake scrutiny of the justness of the opinion
expressed by financial creditors at the time of voting.”
(paragraph 64)
Thereafter, in Essar Steel India Ltd. (supra), this Court held:
(i) “Thus, it is clear that the limited judicial review
available, which can in no circumstance trespass upon a
business decision of the majority of the Committee of
Creditors, has to be within the four corners of Section
30(2) of the Code, insofar as the Adjudicating Authority is
concerned, and Section 32 read with Section 61(3) of the
Code, insofar as the Appellate Tribunal is concerned.”
(paragraph 48)
(iv) “Thus, while the Adjudicating Authority cannot
interfere on merits with the commercial decision taken by
the Committee of Creditors, the limited judicial review
available is to see that the Committee of Creditors has
taken into account the fact that the corporate debtor
needs to keep going as a going concern during the
insolvency resolution process; that it needs to maximise
the value of its assets; and that the interests of all
stakeholders including operational creditors has been
taken care of.” (paragraph 54)
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13. The principles laid down in the aforesaid decisions, make
one thing very clear. If all the factors that need to be taken into
account for determining whether or not the corporate debtor can
be kept running as a going concern have been placed before the
Committee of Creditors and the CoC has taken a conscious
decision to approve the resolution plan, then the adjudicating
authority will have to switch over to the hands off mode. It is not
the case of the corporate debtor or its promoter/Director or
anyone else that some of the factors which are crucial for taking
a decision regarding the viability and feasibility, were not placed
before the CoC or the Resolution Professional. The only basis for
the corporate debtor to raise the issue of viability and feasibility
is that the ownership and possession of the ethanol plant and
machinery is the subject matter of another dispute and that the
resolution plan does not take care of the contingency where the
said plant and machinery may not eventually be available to the
Successful Resolution Applicant.
14. But the aforesaid argument, coming as it does from the
Promoter/Director of the corporate debtor is like the wolf
shedding tears for the lamb getting drenched in rain. The
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records very clearly show that the Successful Resolution
Applicant, the Resolution Professional and the financial creditor
were fully aware of the said issue. The order passed by the
NCLAT in Company Appeal (AT) (Insolvency) No.897 of 2019 on
16.12.2019 shows that the possession of the ethanol plant and
machinery was restored to Sarvadnya Industries Pvt. Ltd., in the
appeal to which the Successful Resolution Applicant was also a
party. The Successful Resolution Applicant also appears to have
offered to Janata Sahkari Bank to purchase the said plant and
machinery. In the appeal before the NCLAT out of which the
present Civil Appeals arise, Sarvadnya Industries Pvt. Ltd. which
claims ownership of the ethanol plant and machinery, were also
a party.
15. In any case, the Resolution Professional has taken a
specific plea in his grounds of appeal before this Court, that the
Successful Resolution Applicant is itself into the ethanol
manufacturing business and that they have sufficient ethanol
production capacity required to fulfil their Resolution Plan. In
paragraph 4.P of the Civil Appeal filed by the Resolution
Professional, he has stated as follows:
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“Further, the said Ethanol Plant was functional only
between April 2016 and August 2016. That Respondent
No. 3/SRA is itself into the ethanol manufacturing
business and has sufficient ethanol production capacity
required to fulfil its resolution plan. Additionally, there is
a provision for capital expenditure in the approved plan
of SRA which includes the cost of a new ethanol facility, if
required. Additionally, Janata Bank Pune, which holds
symbolic possession of the ethanol plant, had
approached Respondent No. 3/ Successful Resolution
Applicant for the sale of the said ethanol plant to the said
SRA. That further the Respondent No. 3/ successful
resolution applicant was planning to expand and
integrate other facilities with the distillery plant of the
Corporate Debtor which was functional since 2007;”
16. Therefore, the fact that there was an issue with regard to
the ethanol plant and machinery, had been taken note of by the
Resolution Professional, the Committee of Creditors and the
Successful Resolution Applicant. Once all these three parties
have taken note of the said fact and taken a conscious decision
to go ahead with the Resolution Plan, it cannot be stated that
the question of viability and feasibility was not examined in the
proper perspective.
17. Therefore, the first ground and actually the main ground on
which NCLAT interfered with the decision of the NCLT to approve
the Resolution Plan, is wholly untenable, misconceived and
unjustified.
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18. In fact, our discussion could have ended here without going
into the other grounds, for one simple reason. Though the
Director/Promoter of the corporate debtor, who was the
appellant before the NCLAT, raised other grounds apart from
viability and feasibility, NCLAT issued limited notice in the
appeal, on 12.09.2019, only with regard to viability and
feasibility. Even in the impugned order dated 02.06.2020, it is
made clear in the last sentence of paragraph 1 that “this appeal
on 12.09.2019 was admitted to limited extent of examining
viability and feasibility of the Plan”.
19. It is true that in the last paragraph of the impugned order,
namely paragraph 14, the Appellate Tribunal holds that the
CIRP suffered from material irregularities and the Resolution
Plan approved suffers from feasibility and viability. But then the
operative portion of the impugned order does not take the
findings on other issues to their logical end. For instance, the
Tribunal holds that the advertisement inviting Expression of
Interest itself was defective and that there was breach of
confidentiality in as much as the liquidation value appears to
have been leaked out. These findings should have taken the
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Appellate Tribunal to the point of setting aside the entire process
and directing the Resolution Professional to start the process all
over again from the stage of issue of a fresh advertisement. The
NCLAT did not do so. In the operative portion, NCLAT merely
remanded the matter back to the Adjudicating Authority with a
direction to send back the Resolution Plan to the Committee of
Creditors to resubmit the plan after taking into consideration
the law laid down by this Court.
20. In other words, the reliefs that would normally flow in the
light of the findings with regard to breach of confidentiality and
defective Invitation to Offer, were not granted by NCLAT. The
Director/Promoter of the corporate debtor has not come up with
any appeal against the failure of NCLAT to grant appropriate
reliefs, connectable to the aforesaid findings. The
Director/Promoter of the corporate debtor is obviously happy
with the limited relief, if at all it is one, granted to him for the
resubmission of the Resolution Plan.
21. It must be pointed out at this stage that the order of the
NCLT, Mumbai Bench dated 01.08.2019 became the subject
matter of a single appeal before NCLAT. But it was actually a
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common order passed in three applications namely, MA
Nos.1509/2019, 2104/2019 and 662/2019. The details of these
applications are as follows:
(i) MA No.1509/2019 was filed by an operational
creditor, by name Sarvadnya Industries Pvt. Ltd. (whose
ethanol plant and machinery also became a matter of
dispute). Their claim was that they had a rental
agreement with the corporate debtor with regard to the
plant and machinery and that there was default in
payment of the rent.
(ii) MA No.2104/2019 was filed by the
Director/Promoter of the corporate debtor seeking to
submit a resolution plan. But it was obviously filed after
270 days and also after the approval of the Resolution
Plan by the CoC.
(iii) The third application, MA No.662/2019, was by
the Resolution Professional for the approval of the
Resolution Plan which was accepted by the CoC.
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22. By its common order dated 01.08.2019, the NCLT
dismissed MA Nos.1509 and 2104 of 2019, filed respectively by
the operational creditor (lessor of the ethanol plant) and the
Promoter/Director of the corporate debtor. But the application
filed by the Resolution Professional was allowed.
23. But the Director/Promoter of the corporate debtor filed only
one appeal and the Memorandum of Appeal suggests that the
Director/Promoter of the corporate debtor prayed for two reliefs,
namely (i) to set aside the approval of the Resolution Plan, and
(ii) to consider his own resolution plan.
24. By the order impugned in the present Civil Appeals, the
NCLAT granted only a limited relief, as can be seen from the
operative portion of the order of NCLAT which we have extracted
earlier.
25. Therefore, in the light of the above facts, the consideration
of all other issues, such as breach of confidentiality and
defective Invitation to Offer would only be academic, as NCLAT
did not grant any relief to the Promoter/Director of the corporate
debtor, which could logically flow out of those other grounds.
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26. But be that as it may, we will still deal with the other three
grounds also, as the same would put things in the right
perspective and clear any air of suspicion.
27. The second ground on which NCLAT interfered with the
decision of the NCLT is the alleged breach of confidentiality. The
contention of the Promoter/Director of the corporate debtor is
that the liquidation value mentioned in the Resolution Plan
submitted by the SRA exactly tallied with the liquidation value
obtained by the Resolution Professional and that the whole
sequence of events would show clearly that there was an attempt
to cover up.
28. According to the Director/Promoter of the corporate debtor,
the selfdeclaration signed by the Resolution Applicant, and
which forms part of the Resolution Plan, bears the date 9 th
February 2019. This document mentions the liquidation value as
Rs. 13.53 crores. It was the same value as obtained by the
Resolution Professional. It is the contention of the Director/
Promoter of the corporate debtor that the Resolution Professional
wrote an email on 07.02.2019 itself (2 days before the
submission of the Resolution Plan by the SRA), asking for
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clarification as to how the liquidation value matched. This,
according to the Director of the corporate debtor, was proof
enough to show that there was not merely a leakage of
information, but also an attempt to coverup.
29. But we are unable to accept the above contention. The
Resolution Plan actually runs to 31 pages. Pages 30 and 31
contain Annexure A, which provides the business plan. Page 29
contains a selfdeclaration certificate signed by the partners of
the SRA. Just below the signatures of the partners at page 29,
the date “09th February 2019” is typewritten.
30. But the cover page of the entire document contains the
date “7th February 2019” as the date of submission of the
Resolution Plan. The last date for submission of the resolution
plan was 08.02.2019.
31. Nowhere in the Memorandum of Appeal filed by the
Promoter/Director of the corporate debtor before the NCLAT, has
he claimed that the Resolution Plan was submitted by the SRA
after the last date. We have perused the Memorandum of Appeal
filed by the Promoter/Director of the corporate debtor before the
NCLAT. It was not his case at all that the Resolution Plan was
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submitted by the SRA after the last date, but the same was
predated by the Resolution Professional acting in collusion.
32. It appears from the impugned order of NCLAT that only in
the course of hearing of the appeal, the date “09th February
2019” typewritten at the bottom of the selfdeclaration (page 29
of the Resolution Plan) was sought to be taken advantage of.
Since this was not raised as one of the grounds in the
Memorandum of Appeal but raised in the course of arguments,
the Resolution Professional could do no more than to file the
printout of the email correspondence between him and the SRA
dated 07.02.2019. In the first email dated 07.02.2019, the
Resolution Professional had sought a clarification from the SRA
as to how they discovered the liquidation value and the source
for the same. In response to this mail, the SRA sent a reply email
contending that they undertook a due diligence to know the
current market value and liquidation value and that what was
quoted by them in the Resolution Plan, was something that an
independent agency provided to them.
33. Unfortunately, NCLAT rejected the printout of the email
correspondence dated 07.02.2019 on the sole ground that the
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same was not supported by affidavit and that it was filed after
the conclusion of the oral arguments.
34. But NCLAT failed to take note of the fact that the
Resolution Professional did not have any alternative except to
respond in the manner that he did, to a point raised only in the
course of arguments, but not raised in the Memorandum of
Appeal. If the Promoter/Director of the corporate debtor had
raised the issue of collusion or the submission of the Resolution
Plan after the expiry of the last date, even in the Memorandum
of Appeal, a duty would have been cast upon the Resolution
Professional to respond in an appropriate manner. But that was
not the case. Therefore, we do not approve the manner in which
NCLAT rejected the contents of the email correspondence.
35. The fact that there was an email correspondence between
the Resolution Professional and the SRA on 07.02.2019,
touching upon one of the contents of the Resolution Plan, would
show (i) that the SRA had submitted the Resolution Plan before
the last date and (ii) that the Resolution Professional had
obviously scrutinised it, as otherwise he could not have found
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out the liquidation value mentioned therein matching the
confidential information that he had.
36. In any case, the proof of the pudding is in the eating. The
liquidation value mentioned in the Resolution Plan of the SRA is
Rs. 13.53 crores. But the actual total payout as per the
Resolution Plan is Rs. 29.74 crores.
37. This meant that the workers and employees of the
corporate debtor were to be paid 100% of their dues; that all
statutory dues would be cleared 100% and that the financial
creditors who constituted the CoC were to be paid 60% of their
dues.
38. It offends common sense to think that a resolution
applicant who had the benefit of leakage of information relating
to liquidation value would quote a figure of Rs. 29.74 crores as
the total payout, as against a liquidation value of Rs. 13.53
crores. The question of breach of confidentiality and leakage of
confidential information can easily be tested on the touchstone
of the benefit that accrued to the party who got the information.
In the case on hand, no benefit accrued to the SRA.
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39. It is obvious from the material on record that the
Promoter/Director of the Corporate Debtor has tried to take
advantage of two small mistakes on the part of the SRA, one of
which was a typographical error mentioning the date “09th
February 2019” at the bottom of the selfdeclaration and the
other, which happened as a matter of coincidence. The NCLAT
appears to have made a mountain out of a molehill and has
recorded a finding even beyond the pleadings in the
Memorandum of Appeal. Hence, the second ground on which the
NCLAT was convinced to pass the impugned order, is legally and
factually untenable.
40. The third ground on which NCLAT proceeded, related to the
ethanol plant and machinery. We have already dealt with this
issue in detail, while dealing with the first issue. As stated
therein, the SRA admittedly did not make his Resolution Plan on
the strength of the ethanol plant and machinery in question. The
threat looming large over the availability of the ethanol plant and
machinery has admittedly been taken note of by the SRA and
the CoC. The Resolution Plan does not give an indication
anywhere that without this plant and machinery the whole
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resolution plan will fail. In paragraph 8.04 of the Resolution
Plan, the SRA has undertaken to continue the operations in the
normal course of business. It is a commercial decision that they
have taken. The corporate debtor cannot cry wolf over the said
decision. Therefore, the third ground on which NCLAT chose to
interfere, is also bound to be rejected.
41. The last ground revolves around the advertisement issued
by the Resolution Professional on 30.03.2018. NCLAT holds that
the advertisement was not in conformity with Regulation 36A of
The Insolvency and Bankruptcy Board of India (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016 and
as per Form G of the Schedule.
42. But the conclusions reached by NCLAT in this regard
cannot hold water for two reasons. If NCLAT was convinced that
the very process of inviting Expression of Interest was vitiated,
NCLAT should have issued a direction to start the process afresh
all over again by issuing a fresh advertisement. NCLAT did not
do this and the person who raised this point is not on appeal.
43. In any case, it does not lie in the mouth of the
Promoter/Director of the corporate debtor to raise any issue in
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this regard. It is seen from the Minutes of the 2 nd Meeting of the
Committee of Creditors that the Promoter/Director of the
corporate debtor attended the meeting held on 27.03.2018. In
Item No. 3 of the Agenda for the said meeting, the draft of the
Invitation for Expression of Interest was approved. The
Promoter/Director did not raise any objections either on
27.03.2018 in the meeting in which the draft was approved or at
any time thereafter, until the approval of the Resolution Plan.
44. The Promoter/Director of the corporate debtor who was the
appellant before NCLAT attended the 3rd meeting of the CoC on
15.09.2018, the 4th meeting of the CoC held on 12.10.2018 and
the 5th meeting of the CoC held on 26.11.2018. He did not raise
any whisper about the contents of the advertisement. Even when
the very same Promoter/Director of the corporate debtor went
before the High Court of Judicature at Bombay by way of a writ
petition challenging the orders of NCLT dated 01.01.2018 and
06.03.2018, his focus was on his own application under Section
10 of the Insolvency and Bankruptcy Code. His grievance before
the High Court was that his own application under Section 10
was dumped by the NCLT and the application of the financial
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creditor was admitted thereafter. In fact the conduct of the
Promoter/Director of the corporate debtor came to adverse
notice before the Bombay High Court.
45. Regulation 36A was inserted only with effect from
06.02.2018 under Notification No. IBBI/201718/GN/REG024
dated 06.02.2018. It underwent a change under Notification No.
IBBI/201819/GN/REG031 dated 03.07.2018, with effect from
04.07.2018. Regulation 36A, as it stood during the period from
06.02.2018 to 04.07.2018, did not mandate the publication of
the invitation of Resolution Plans, either in Form G or otherwise,
in newspapers. It is only the amended Regulation 36A, which
came into effect from 04.07.2018, that requires the publication
of Form G in newspapers. Therefore, the publication in
newspapers made by the Resolution Professional, in the case on
hand, on 30.03.2018, was something that was statutorily not
required of him and hence the Promoter/Director of the
corporate debtor cannot take advantage of the amendment that
came later, to attack the advertisement. The unamended and
amended Regulation 36A are provided in a tabular column for
easy comparison and appreciation.
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Regulation 36A before Regulation 36A after amendment
amendment
36A. Invitation of Resolution 36A. Invitation for expression of
Plans. – (1) The resolution interest – (1) The resolution
professional shall issue an professional shall publish brief
invitation, including evaluation particulars of the invitation for
matrix, to the prospective resolution expression of interest in Form G of
applicants in accordance with clause the Schedule at the earliest, not
(h) of subsection (2) of section 25, to later than seventyfifth day from the
submit resolution plans at least insolvency commencement date,
thirty days before the last date of from interested and eligible
submission of resolution plans. prospective resolution applicants to
submit resolution plans.
(2) Where the invitation does not
contain the evaluation matrix, the (2) The resolution professional shall
resolution professional shall issue, publish Form G
with the approval of the committee,
the evaluation matrix to the (i) in one English and one regional
prospective resolution applicants at language newspaper with wide
least fifteen days before the last date circulation at the location of the
for submission of resolution plans. registered office and principal office,
if any, of the corporate debtor and
(3) The resolution professional may any other location where in the
modify the invitation, the evaluation opinion of the resolution
matrix or both with the approval of professional, the corporate debtor
the committee within the timelines conducts material business
given under subregulation (1) or operations;
subregulation (2), as the case may
be. (ii) on the website, if any, of the
corporate debtor;
(4) The timelines specified under
this regulation shall not apply to an (iii) on the website, if any,
ongoing corporate insolvency designated by the Board for the
resolution process purpose; and
(a) where a period of less than thirty (iv) in any other manner as may be
seven days is left for submission of decided by the committee.
resolution plans under sub
(3) The Form G in the Schedule shall
regulation (1);
(b) where a period of less than
(a) state where the detailed invitation
eighteen days is left for submission
for expression of interest can be
of resolution plans under sub
downloaded or obtained from, as the
regulation (2).
case may be; and
(5) The resolution professional shall
(b) provide the last date for
27
publish brief particulars of the submission of expression of interest
invitation in Form G of the which shall not be less than fifteen
Schedule: days from the date of issue of
detailed invitation.
(a) on the website, if any, of the
corporate debtor; and (4) The detailed invitation referred to
in subregulation (3) shall
(b) on the website, if any, designated
by the Board for the purpose. (a) specify the criteria for prospective
resolution applicants, as approved
by the committee in accordance with
clause (h) of subsection (2) of
section 25;
(b) state the ineligibility norms
under section 29A to the extent
applicable for prospective resolution
applicants;
(c) provide such basic information
about the corporate debtor as may
be required by a prospective
resolution applicant for expression
of interest; and
(d) not require payment of any fee or
any nonrefundable deposit for
submission of expression of interest.
(5) A prospective resolution
applicant, who meet the
requirements of the invitation for
expression of interest, may submit
expression of interest within the
time specified in the invitation under
clause (b) of subregulation (3).
(6) The expression of interest
received after the time specified in
the invitation under clause (b) of
subregulation (3) shall be rejected.
(7) An expression of interest shall be
unconditional and be accompanied
by
(a) an undertaking by the
prospective resolution applicant that
28
it meets the criteria specified by the
committee under clause (h) of sub
section (2) of section 25;
(b) relevant records in evidence of
meeting the criteria under clause (a);
(c) an undertaking by the
prospective resolution applicant that
it does not suffer from any
ineligibility under section 29A to the
extent applicable;
(d) relevant information and records
to enable an assessment of
ineligibility under clause (c);
(e) an undertaking by the
prospective resolution applicant that
it shall intimate the resolution
professional forthwith if it becomes
ineligible at any time during the
corporate insolvency resolution
process;
(f) an undertaking by the prospective
resolution applicant that every
information and records provided in
expression of interest is true and
correct and discovery of any false
information or record at any time
will render the applicant ineligible to
submit resolution plan, forfeit any
refundable deposit, and attract
penal action under the Code; and
(g) an undertaking by the
prospective resolution applicant to
the effect that it shall maintain
confidentiality of the information
and shall not use such information
to cause an undue gain or undue
loss to itself or any other person and
comply with the requirements under
subsection (2) of section 29.
(8) The resolution professional shall
conduct due diligence based on the
29
material on record in order to satisfy
that the prospective resolution
applicant complies with
(a) the provisions of clause (h) of
subsection (2) of section 25;
(b) the applicable provisions of
section 29A, and
(c) other requirements, as specified
in the invitation for expression of
interest.
(9) The resolution professional may
seek any clarification or additional
information or document from the
prospective resolution applicant for
conducting due diligence under sub
regulation (8).
(10) The resolution professional
shall issue a provisional list of
eligible prospective resolution
applicants within ten days of the last
date for submission of expression of
interest to the committee and to all
prospective resolution applicants
who submitted the expression of
interest.
(11) Any objection to inclusion or
exclusion of a prospective resolution
applicant in the provisional list
referred to in subregulation (10)
may be made with supporting
documents within five days from the
date of issue of the provisional list.
(12) On considering the objections
received under subregulation (11),
the resolution professional shall
issue the final list of prospective
resolution applicants within ten
days of the last date for receipt of
objections, to the committee.
30
46. The second meeting of the Committee of Creditors was held
on 27.03.2018. The advertisement was approved in the said
meeting. It was the unamended Regulation 36A that was in force
at that time. This has not been appreciated by NCLAT. Therefore,
the NCLAT was wrong in its approach even in this regard.
47. Therefore, in fine, the impugned order of NCLAT is flawed
and hence, liable to be set aside. Accordingly, the Civil Appeals
are allowed, the impugned order of the NCLAT is set aside and
the order of the National Company Law Tribunal, Mumbai Bench
dated 01.08.2019 is restored. There will be no order as to costs.
…………………………..CJI.
(S. A. Bobde)
……………………………..J.
(A. S. Bopanna)
…..………………………….J.
(V. Ramasubramanian)
NEW DELHI
SEPTEMBER 04, 2020
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