IBC Digest by AVM Resolution Professionals LLP.

1.Whether the Resolution Plan is confidential document even after the approval by the Adjudicating Authority

In the matter of Association of aggrieved workmen of Jet Airways (India) Limited vs Jet Airways India & Anr, the NCLAT, New Delhi decided whether a Resolution Plan (Plan) approved by the Adjudicating Authority (AA) is a public document or not.

In the present matter an appeal is filed by the Applicant who is the association of the workmen of the Jet Airways India Ltd to direct the Respondent No.3 - Resolution Professional to produce records that is Resolution Plan and its annexures with full set of documents relating to Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor.

Contentions of the Appellant

The Appellant submits that confidentiality in the CIRP proceeding as mentioned in Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ‘Code’) is very limited and where confidentiality is required to be maintained, the Code and Regulation clearly provides for them. The reasoning behind such confidentiality is to ensure the maximisation of bids and to prevent the undue advantage to competitors from posing as applicants to surreptitiously use information for their own gain. Further, the appellant stated the Resolution Professional is required to submit the document to the Insolvency and Bankruptcy Board of India for recording keeping purpose. Hence, the information is not meant to be confidential after the CIRP has concluded. It was further submitted that in the impugned order, there is no discussion of compliance of Section 30, sub-section (2) and Regulation 37 and 38 and to effectively support the grounds taken in the Appeal, the Appellant is entitled for copy of Resolution Plan.

Contentions of the Respondent

The Respondent contended that the Resolution Plan is a confidential document and contains confidential information about the Corporate Debtor and the Successful Resolution Applicant, which are not available in the public domain. The Respondent further stated that only members of the Committee of Creditors shall be served with the copy of the plan. Whereas, the Appellant not being the member of CoC are not entitled to receive the copy. Respondent also stated that the submission of all records with IBBI is for record keeping purposes and cannot be construed as publicly available document.

Decision of the Appellate Tribunal

The NCLAT stated that the scheme of the Code indicates that after Resolution Plan is submitted to the Adjudicating Authority and it is approved by the Adjudicating Authority, it no longer remains a confidential document, so as to preclude Regulator and other persons from access the said document. Further, the tribunal referred to provision under Section 61 of the Code wherein an appeal can be filed to the tribunal for several grounds enumerated hence the contents of the resolution plan needs to be disclosed for such appeal.

NCLAT thus, are of the view that Resolution Plan after its approval by the Adjudicating Authority is no more a confidential document, so as to deny access to even a claimant. It is true that the Resolution Plan even though it is not a confidential document after its approval, cannot be made available to each and to anyone who has no genuine claim or interest in the process.

2.Majority decision of the CoC is final and cannot be overturned by the RP.

In the matter of CRPL Infra Pvt. Ltd. Vs. Shri Anil Agarwal, RP, Transafe Services Ltd, the NCLAT if the Committee of Creditors (CoC) has approved with sixty-six percent majority as per the provisions of Section 12(2) of the Insolvency and Bankruptcy Code, 2016 (IBC/Code) then the Resolution Professional (RP) cannot take any contrary decision.

Facts of the case:

The present appeal is preferred under Section 61(1) of the Code against the impugned order of the Adjudicating Authority(AA) wherein the AA dismissed the by M/s. CRPL Infra Private Limited, the Applicant/Appellant herein against the Resolution Professional/(RP) and the Members of Committee of Creditors (CoC) praying to set aside the resolution passed at the 12th COC Meeting held on 10.09.2020, on the ground that the CoC had rejected the Applicant’s request for extension of time to submit the Resolution Plan and to consider the Resolution Plan proposed to be submitted by the Applicant/Appellant.

The Adjudicating Authority in its impugned order stated that:

"This is a case where the CIRP had commenced on 21.11.2019, the first invitation to EoI was published on 18.01.2020. The last date of submission of resolution plan had been extended four times at the instance of prospective resolution applicants including the Applicant herein.

Upon receiving an email from the RP, the resolution applicants, including the Applicant herein, had submitted their revised resolution plans before the eleventh CoC meeting was held on 03.09.2020. In the meeting the extension was again sought by the applicant. However, CoC declined the request for another extension for the submission of the Resolution Plan."

The NCLAT further stated that the Minutes of the 12th COC Meeting established that the CoC offered to the Appellant to continue to be a part of the ongoing process so that it may have an opportunity at any later stage. The Appellant had sought 15 minutes time for discussion and thereafter decided not to participate in the open bidding process and exited the Meeting. Thereafter the CoC went on to approve the Resolution Plan submitted by M/s. Om Logistics Ltd.

Therefore, the Appellate Court stated once the CoC has approved with 66% majority as provided under Section 12(2) of the Code and has decided not to extend the time, the RP cannot take any contrary decision. The decision of the CoC is final and binding as per the scheme of the Code.

3.NCLAT dismissed application for CIRP due to material procedural irregularity and preexisting dispute.

In the matter of M/s Essjay Ericsson Pvt. Ltd Vs. M/s Frontline (NCR) Business Solutions Pvt. Ltd., the NCLAT dismissed the appeal for the admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC/Code) for the initation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor on grounds of pre-existing dispute and procedural requirement.

Background of the Case:

The appeal has been filed against the order dated 08.06.2021 passed by the ‘Adjudicating Authority’ rejecting the application u/s 9 of the Code filed by the Appellant on the ground that there is preexisting dispute and further the notice which was served by the ‘Operational Creditor’ was in FORM – 3 although it ought to have been in FORM– 4.

Operational Creditor was given Purchase Order by the Respondent (Corporate Debtor) for supply of ‘Hybrid Solar Power System, spare parts of Hybrid Solar Power System for their WiFi Project’. The Corporate Debtor has sent email on 25.07.2018, 03.08.2018, 14.08.2018 bringing it to the notice of the Appellant Company that the material supplied by them were of inferior quality and the same need to be replaced. There was a delay in supply of the materials. A notice under Section 8 of the Code was issued to the Respondent and thereafter the application under Section 9 of the Code was filed in March, 2020. In response to Section 8 notice, reply was filed where dispute was raised in reply to Section 9 notice also, it was stated that there is a dispute regarding payment and with regard to which the Appellant was earlier informed.

The ‘Adjudicating Authority’ rejected the application on two grounds (i) that notice ought to have been in Form-4 whereas it was in Form – 3 and (ii) secondly there is preexisting dispute.

Decision:

The NCLAT stated that submission of Learned Counsel for the Appellant that there was no dispute subsisting after 03.08.2018 does not appear to be correct. Admittedly, the bills which were issued to the Corporate Debtor were bills for 1,974 complete set whereas in the email dated 13.3.2019 which is at page 86 of the paper book, according to the e.mail sent by the Appellant, complete set with battery were only 1110. This mail is said to be sent by the Appellant with object of reconciliation of the material sent and receipt. The above is clearly a subject of dispute.

Hence, upholding the impugned judgement of the Adjudicating Authority on the above mentioned reasons, the NCLAT dismissed the appeal.

4. NCLAT asks CoC of DHFL to reconsider the valuation.

In a major update on the DHFL insolvency case which was acquired by the Piramal Enterprises Ltd. the National Company Law Appellate Tribunal (NCLAT) on Thursday asked the committee of creditors (CoC) to reconsider Piramal Capital and Housing Finance assigning a value of only ₹1 to the bad loans of Dewan Housing Finance Corp. Ltd (DHFL).

In the petition filed by the63 Moons Technologies Ltd which has an exposure to DHFL's Non-Convertible Debentures (NCDs) worth Rs 200 crore. 63 Moons was also classifed as a financial creditor . The petition questioned the “commercial wisdom" of the CoC in approving the resolution plan.

Assigning a value of ₹1 means that the amount will be written off by the lenders and recover as and when it happens, will be credited to the resolution applicant Piramal Group.

However, The Piramal Group on Friday said it is planning to move the Supreme Court to appeal against an order by insolvency appellate tribunal NCLAT, which sent back its winning bid for DHFL to the debt-laden finance company's lenders for reconsidering the valuation. Piramal Capital & Housing Finance Ltd in a statement said that "the Dewan Housing Finance Corporation Ltd (DHFL) acquisition by Piramal Group remains unaffected and the business integration continues as envisaged".

The special case of Financial Service Providers:

Financial service providers ("FSPs") were initially kept outside the purview of the IBC. FSPs have been defined in section 3(17) of the IBC and would include non-banking financial companies, microfinance institutions, etc.

The Central Government retained the power to notify FSPs whose insolvency and liquidation proceedings would be conducted under IBC. Such power of the Central Government is under Section 227 of the IBC ("Section 227"). It is under this provision that the Central Government notified the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 ("FSP Rules").

Unlike in the case of a corporate debtor where a financial creditor or an operational creditor or the corporate debtor itself can initiate a CIRP, in the case of an FSP, an application for initiation of a CIRP of an FSP can be made only by the 'appropriate regulator'.

About AVM- Insolvency Professionals LLP

AVM- Insolvency Professionals LLP is a registered Insolvency Professional Entity (IPE) by The Insolvency and Bankruptcy Board of India (IBBI).(Registration number:IBBI/IPE/0099) ( The partners of IPE are Registered Insolvency Professionals (IP) under Insolvency and Bankruptcy Code, 2016 (IBC) having expertise and rich experience to advise on / carry out all aspects of Insolvency Resolution, Restructuring, Bankruptcy & Liquidation.

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