LAW FOR ALL : When the 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.

Sunday, September 6, 2020

When the 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.

When the 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.

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

J U D G M E N T

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

Creditors, the financial creditor and the Resolution Professional

have come up with these appeals.

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

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 8th

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

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

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

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;

(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

Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta and others, (2019) SCC OnLine SC 1478

K. Sashidhar vs. Indian Overseas Bank, (2019) 12 SCC 150

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

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,

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)

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

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:

“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.

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

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

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.

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.

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 9th

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

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

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

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

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.

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

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

this regard. It is seen from the Minutes of the 2nd 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

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.

Regulation 36A before

amendment

Regulation 36A after amendment

36A. Invitation of Resolution

Plans. – (1) The resolution

professional shall issue an

invitation, including evaluation

matrix, to the prospective resolution

applicants in accordance with clause

(h) of subsection (2) of section 25, to

submit resolution plans at least

thirty days before the last date of

submission of resolution plans.

(2) Where the invitation does not

contain the evaluation matrix, the

resolution professional shall issue,

with the approval of the committee,

the evaluation matrix to the

prospective resolution applicants at

least fifteen days before the last date

for submission of resolution plans.

(3) The resolution professional may

modify the invitation, the evaluation

matrix or both with the approval of

the committee within the timelines

given under subregulation (1) or

subregulation (2), as the case may

be.

(4) The timelines specified under

this regulation shall not apply to an

ongoing corporate insolvency

resolution process

(a) where a period of less than thirtyseven days is left for submission of

resolution plans under subregulation (1);

(b) where a period of less than

eighteen days is left for submission

of resolution plans under subregulation (2).

(5) The resolution professional shall

36A. Invitation for expression of

interest – (1) The resolution

professional shall publish brief

particulars of the invitation for

expression of interest in Form G of

the Schedule at the earliest, not

later than seventyfifth day from the

insolvency commencement date,

from interested and eligible

prospective resolution applicants to

submit resolution plans.

(2) The resolution professional shall

publish Form G

(i) in one English and one regional

language newspaper with wide

circulation at the location of the

registered office and principal office,

if any, of the corporate debtor and

any other location where in the

opinion of the resolution

professional, the corporate debtor

conducts material business

operations;

(ii) on the website, if any, of the

corporate debtor;

(iii) on the website, if any,

designated by the Board for the

purpose; and

(iv) in any other manner as may be

decided by the committee.

(3) The Form G in the Schedule shall

(a) state where the detailed invitation

for expression of interest can be

downloaded or obtained from, as the

case may be; and

(b) provide the last date for

publish brief particulars of the

invitation in Form G of the

Schedule:

(a) on the website, if any, of the

corporate debtor; and

(b) on the website, if any, designated

by the Board for the purpose.

submission of expression of interest

which shall not be less than fifteen

days from the date of issue of

detailed invitation.

(4) The detailed invitation referred to

in subregulation (3) shall

(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;

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

(a) an undertaking by the

prospective resolution applicant that

it meets the criteria specified by the

committee under clause (h) of subsection (2) of section 25;

(b) relevant records in evidence of

meeting the criteria under clause (a);

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

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

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 subregulation (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.

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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