July 4, 2021 In Uncategorized

NCLAT SETS ASIDE DECISION OF CREDTIORS ALLOWING EXPRESSION OF INTEREST BEYOND DUE DATE

The National Company Law Appellate Tribunal, Principal Bench, New Delhi (#NCLAT) comprising of Justice Mr. Jarat Kumar Jain Member (Judicial) and Mr. Kanthi Narahari Member (Technical) passed a #Judgment dated 30-06-2021 in the case of Dwarkadhish Sakhar Karkhana Ltd. v. Pankaj Joshi and Anr and connected matters and held that the decision of Committee of Creditors (#CoC) accepting the Expression of Interest (#EOI) of Dwarkadhish Sakhar Karkhana Ltd. (DSKL) after #due date, is not a commercial decision.

In the present case, the National Company Law Tribunal, Special Bench, Mumbai (Adjudicating Authority) passed an Order dated 10-10-2019 in CP (IB) 2156/MB/2019 wherein the Canara Bank had filed a Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Corporate Insolvency Resolution Process (CIRP) was initiated in respect of the Corporate Debtor ‘KGS Sugar and Infra Corporation Ltd’. Thereafter, moratorium was declared under Section 14 of IBC and one, Mr. Balady S. Shetty was appointed as the Interim Resolution Professional (IRP). The CoC in its first meeting, appointed Mr. Balady S Shetty as Resolution Professional (RP). Mr. Shetty published the Invitation for Expression of Interest (EOI) on 18-01-2020, wherein the last date for submission of EOI was 10-02-2020 and that for submission of Resolution Plan, was 05-04-2020. DSKL was asked to submit the EOI before the 7th CoC Meeting. The CoC passed the Resolution unanimously and rejected the request of DSKL for submitting EOI. This decision was communicated by the RP to DSKL on 09-04-2020. Later, the Adjudicating Authority, at the recommendation of the CoC, replaced Mr. B S Shetty and appointed Mr. Pankaj Joshi as the RP, vide Order dated 27-05-2020.

The newly appointed RP, Mr Joshi allowed an extension of 10 days to DSKL to submit EOI within 10 days. The said EOI was then submitted to CoC. Meanwhile, Gangamai Industries and Constructions Ltd. (GIACL) submitted its EOI and was in the list of Prospective Resolution Applicant. Aggrieved by the decision of CoC to permit DSKL to submit EOI beyond due date, GIACL filed an Application before the Adjudicating Authority, which passed the Impugned Order dated 01-03-2021, thereby setting aside the decision of CoC and deprecating the conduct of RP to allow submission of EOI of DSKL beyond due date.

Aggrieved, appeals were filed challenging the Impugned Order dated 01-03-2021 before the NCLAT.

After taking into consideration the arguments advanced by the parties to the dispute, the following issues were framed:

  1. “Whether the Adjudicating Authority does not invest with the Jurisdiction to interfere before the quasi-judicial determination is made, under S. 31 of IBC?
  2. Whether GIACL did not have locus standi to challenge the inclusion of DSKL in the CIRP?
  3. Whether ‘DSKL’ was a necessary party to the Application I.A. No. 1029 of 2020?
  4. Whether to allow DSKL after due date to file EOI is a commercial decision?”
  5. Whether the adverse remarks in Para 54 of the impugned order are baseless and uncalled for?”

The NCLAT concluded that according to “As per Section 30 of the IBC, when the CoC approved a Resolution Plan by a vote of not less than 66 % of voting share of the Financial Creditors after considering its feasibility and viability, such decision of CoC is a commercial decision. Thus, the decision taken by the CoC in the 09th CoC meeting to allow DSKL after due date to file EOI is not a commercial decision.”

The NCLAT further observed that Mr. Pankaj Joshi has not acted in a fair and balanced manner. In fact, he suppressed material facts and misguided the CoC in order to achieve desired results in favor of DSKL. In one instance, when one of the CoC Members proposed to publish fresh invitation for EOI, the RP suggested that it would be impracticable and further delayed the CIRP process.

Hence, based on the aforesaid observations, the NCLAT held that decision taken in the 9th CoC Meeting was not transparent, fair and was under the influence of the RP. Thus, as there is no merit in the case, the Appeals were dismissed.

Suchitra Upadhyay

Associate

The Indian Lawyer & Allied Services

 

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