airro (mauritius) holdings i v. abhilash lal and ors, National Company Law Tribunal, Judgment, Law, casemine.com

Citation Codes

Equivalent Citations

citation codes

Case Number

IA No. 01/2019 in CP (IB) No. 282/7/HDB/2017

Attorney(S)

For Petitioner : Appearing PartiesFor Respondent : Niranjan Reddy, Sr. counsel, Rubaina S. Khatoon, Rusheek Reddy K.V., L. Aravid Reddy, Advocates, S. Ravi, R. Raghunandan Rao, Sr. counsels, Sitesh Mukherjee, Siddharth Ranade, Manini Bharathi, Ram Babu, Advocates, Avinash Desai, TPS Harsha, Sindhura C., Advocates

Judges

[K. Anantha Padmanabha Swamy, Member (J)]

Acts

Section 30(2)(e) of IBC, 2016
Section 62 of the I&B Code,

See more information ...

Smart Summary

Factual and Procedural Background

The present application was filed by a shareholder holding 49.9% of the equity share capital of the Corporate Debtor against the Resolution Professional under Section 60(5) of the Insolvency and Bankruptcy Code (IBC). The applicant sought directions to disclose and place before the Adjudicating Authority all correspondence, discussions, minutes of meetings, and documents exchanged between the Municipal Corporation of Greater Mumbai (MCGM), the Committee of Creditors (CoC), the Resolution Professional (RP), and the Resolution Applicants. The applicant also requested copies of a revised Resolution Plan dated 09.10.2018, which was stated to be under consideration by MCGM but was neither disclosed nor placed before the Adjudicating Authority. The applicant alleged preferential treatment to MCGM, an operational creditor without voting rights, who had access to confidential CoC meetings and the Resolution Plan, contrary to the statutory scheme under the IBC.

The RP responded with a detailed memo describing subsequent events, including discussions of the Supreme Court judgment in Vijay Kumar Jain vs. Standard Chartered, meetings of the CoC, sharing of the Resolution Plan with suspended Board members (including nominee directors appointed by the applicant), and reaffirmation of the Resolution Plan by the CoC after considering comments from the suspended Board. The matter had also seen interim orders and appeals before the NCLAT, which had attained finality.

Legal Issues Presented

Whether the Resolution Professional and other respondents were obligated to disclose the revised Resolution Plan dated 09.10.2018 and related documents to the applicant shareholder under the IBC.
Whether the preferential treatment alleged to have been given to MCGM, an operational creditor without voting rights, violated the statutory obligations of the Resolution Professional and the principle of parity among creditors under the IBC.
Whether the applicant shareholder had locus standi to seek the reliefs prayed for in the application at this stage of the proceedings.

Arguments of the Parties

Applicant's Arguments

MCGM received a revised Resolution Plan on 09.10.2018 which was not disclosed or placed before the Adjudicating Authority, indicating the Resolution Plan before the Authority was not final.
MCGM, although not a financial creditor, was given notice and participated in CoC meetings, including confidential discussions, which was suspicious and amounted to preferential treatment.
The Code mandates equal treatment of creditors of the same class; the alleged preferential treatment to MCGM violated this principle and statutory obligations of the Resolution Professional.
The applicant prayed for directions to disclose all relevant documents and explanations for withholding the revised Resolution Plan.

Resolution Professional's Arguments

The Resolution Plan was shared with the suspended Board of Directors, including nominee directors appointed by the applicant, who provided comments that were duly considered by the CoC.
Following the Supreme Court judgment in Vijay Kumar Jain vs. Standard Chartered, the Resolution Plan and related particulars were shared with relevant stakeholders, ensuring transparency.
The CoC unanimously reaffirmed the approval of the Resolution Plan originally accorded on 03.09.2018 after considering all comments.
No material evidence was presented to substantiate allegations that the Resolution Plan contravened Section 30 of the IBC.
The applicant lacked locus standi to challenge the Resolution Plan at this stage, and the application was without merit.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Vijay Kumar Jain vs. Standard Chartered	Requirement to share the Resolution Plan and related information with relevant stakeholders, including suspended Board members, to ensure transparency in the CIRP process.	The court noted that pursuant to this judgment, the Resolution Plan and particulars were shared with the suspended Board and nominee directors, whose comments were considered by the CoC before reaffirming the Resolution Plan.
Section 30(2)(e) of the Insolvency and Bankruptcy Code, 2016	Requirement that the Resolution Plan must comply with the provisions of the IBC.	The court observed that no material evidence was placed to substantiate the applicant's bald allegation that this provision was contravened.
Section 62 of the Insolvency and Bankruptcy Code, 2016	Procedure for challenging the approval of a Resolution Plan before the Appellate Authority or the Supreme Court.	The court reiterated that once the Resolution Plan is approved by the CoC and placed before the Adjudicating Authority, challenges must be made through appeals under Section 62, and the present application was not maintainable.

Court's Reasoning and Analysis

The court examined the applicant’s allegations of non-disclosure and preferential treatment to MCGM. It found that the revised Resolution Plan dated 09.10.2018 and all relevant information had been shared with the suspended Board of Directors and nominee directors appointed by the applicant, in line with the Supreme Court’s directive in Vijay Kumar Jain vs. Standard Chartered. The CoC had duly considered the comments and objections from these directors and unanimously reaffirmed the Resolution Plan.

The court noted the absence of any material evidence substantiating claims that the Resolution Plan contravened Section 30 of the IBC, observing that mere bald allegations were insufficient. It further emphasized established legal principles that challenges to the approval of a Resolution Plan must be brought via appeals under Section 62 of the IBC, and that the applicant did not have locus standi to seek the prayers in the instant application at this stage.

Accordingly, the court found the application to be without merit and irrelevant, as the vital information had already been disclosed to the applicant through its nominee directors and the objections raised were unsustainable.

Holding and Implications

The court DISPOSED OF the present application bearing IA No. 01/2019.

The direct effect of this decision is that the applicant’s request for disclosure of the revised Resolution Plan and related documents was rejected, affirming that the Resolution Plan process complied with procedural fairness and statutory requirements. The decision clarifies that once a Resolution Plan is approved by the CoC and placed before the Adjudicating Authority, objections unsupported by material evidence and not brought through proper appellate channels are not maintainable. The court did not set any new precedent but reaffirmed existing legal principles regarding disclosure, creditor parity, and challenge mechanisms under the IBC.

Show full summary ...

airro (mauritius) holdings i v. abhilash lal and ors

K. Anantha Padmanabha Swamy, Member (J)

1. The present Application is filed by one of the shareholder holding 49.9% of the Equity Share capital of the present Corporate Debtor against the Resolution Professional U/s 60(5) of the IBC praying following:

a) To direct Respondent No. 1 to 4 to place the entire correspondence, discussions, minutes of meeting, documents exchanged between MCGM on one hand and COC, RP & Resolution Applicants including Respondent No. 4 & 4(a) on the other before this Adjudicating Authority.

b) That the MCGM & the remaining Respondents should place before this Adjudicating Authority the Revised offer/Resolution plan dated 09.10.2018 which is under consideration by the MCGM.

c) That the Applicant be provided with complete copies of the correspondence, discussions, minutes of meetings, documents exchanged between MCGM on one hand and COC, RP & Resolution Applicants including Respondent No. 4 4(a);

d) That the Applicant be provided with a copy of the revised offer/Resolution plan dated 09.10.2018, which is under consideration by the MCGM;

e) That Respondent No. 1 to 4 be directed to file affidavits and provide reasons for concealing and not placing the revised Resolution plan before this Adjudicating Authority.

1. Brief facts of the present application are as follows:

i. It is stated that during the pendency of IA filed by RP for approval of the Resolution Plan, MCGM made a statement before this Adjudicating Authority on 28.11.2018 & 05.12.2018 that a revised Resolution Plan was provided to them on 09.10.2018 and that the said revised Resolution Plan was under consideration by MCGM for its approval. As such a revised Resolution Plan dated 09.10.2018 was neither disclosed nor was it placed before this Adjudicating Authority. It is stated that even this Adjudicating Authority has been kept in the dark about the supposed changes made in the Resolution Plan by way of a revised Resolution Plan. It is further stated that, in view of the above, it is clear that the Resolution Plan placed before this Adjudicating Authority for its approval is not the final Resolution plan.

ii. It is stated that on perusal of some of the Notices and Minutes of meetings including abridged minutes of the CoC, shows that MCGM though not being a Financial Creditor has not only been given notice of the CoC minutes as an invitee but has also participated in the CoC meetings, especially when confidential matters were being discussed. This special treatment being given to MCGM is undoubtedly suspicious. MCGM was invited by the RP & CoC (without voting rights) in the 4th to 10th CoC meetings. From a perusal of the 9th CoC meetings, it appears that the members of Respondent No. 4 met the relevant officials of MCGM to understand their perspective and requirements for the Resolution Plan. The Resolution Plan was also shared with the representatives of MCGM relating to the Mumbai Hospital. However, there is no requirement under the Code, to share the Resolution Plan with any of the Operational Creditors of the Corporate Debtor.

iii. It is stated that, this clearly a case of preferential treatment to one Operational Creditor over the others without any legal basis to the same. The Code does not recognize any preferential treatment and same class of creditors have to be treated on parity. The RP is in clear violation of its statutory obligations under the Code. Reiterating the above, counsel for the Applicant prayed to allow the application.

2. On 26.04.2019, the RP in IA 408/2018, has submitted a detailed memo narrating the subsequent events that took place with regard to CIRP after the interim order passed by Hon'ble NCLAT, on 11.04.2018, staying the Common order dated 23.01.2019 passed by this Adjudicating Authority.

3. In the said memo, RP has stated:

a) That a meeting of CoC was convened on 20.02.2019, with the purpose of discussing the judgment of Hon'ble Supreme Court in Vijay Kumar Jain vs. Standard Chartered' and to deliberate upon the further steps to be taken in the light of the Said decision of the Hon'ble Supreme Court.

b) That on the Unanimous agreement of the Members of the CoC, the Resolution plan was shared with the members of the Suspended Board of Directors with a request to provide their comments on the Resolution Plan submitted by Dr. B.R.Shetty through Dr. Shetty's New Medical Centre Private Limited, at this meeting, Mr. Neeraj Gupta and Mr. Tanmaya Gupta, Nominee Directors appointed by AIRRO Mauritius holdings I (Applicant in IA No. 01/2019) tendered there duly executed confidentiality undertakings.

c) That the Resolution Plan was shared with the Members of Suspended Board of Directors on 21.02.2019. On 01.03.2019, Dr. Maganti, one of the Suspended Board of Directors, addressed an email to the RP on behalf of himself, Mr. Vankineni Kuchela Babu and Ms. Renukarani Maganti with some comments in relation to the eligibility of the Resolution Applicant and other issues related to Resolution Process he also reserved his comments on the Resolution Plan itself. On 01.03.2019, Dr. Ashok Asthana, a member of the Suspended Board sent an e-mail to the RP that the Resolution Plan for the Corporate Debtor is a viable one in his view.

d) That on 05.03.2019, 12th CoC meeting was held to discuss the comments of members of the suspended Board of Directors on the Resolution Plan and to discuss the issues raised by Mr. Neeraj Gupta in the previous meeting. The said CoC meeting was attended by all the suspended directors of the Board barring M/s. Renukarani Maganti. The RP proceeded to discuss comments on Resolution Plan as requested by Dr. Maganti, letter of commitment issued by the Bank in favour of Resolution Applicant was uploaded on the virtual data room.

e) That Mr. Neeraj Gupta and Mr. Tanmaya Misra, Nominee Directors of Applicant in IA No. 01/2019 had no comments except to say that they are in agreement with the comments of Dr. Maganti.

f) That the suspended Board of Directors were asked whether they had any comments on the commercial viability of the Resolution Plan to which they did not offer any comments except Dr. Asthana who had earlier stated that the plan is viable vide his email dated 01.03.2019.

g) That the e-voting portal for voting items for 12th CoC remained open on 07.03.2019 and 08.03.2019 for the CoC members cast their votes.

h) That the CoC members after considering the Comments raised by suspended Board of Directors, in line with the decision of Hon'ble Supreme court in Vijay Kumar Jain vs. Standard Chartered, unanimously reaffirmed their approval to the Resolution plan as accorded on 03.09.2018.

4. Heard both the sides and perused the record including the written submissions.

5. The main prayer in the present Application is with regard to the entire dealings with MCGM, CoC, RP & the Resolution Applicants.

6. As of now, the challenges that have been made by various parties in NCLT, Hon'ble NCLAT have attained a finality.

7. On 29.04.2019, MCGM has filed a memo expressing No objection to the proposed Resolution Plan submitted by the Resolution Applicant provided the Conditions stipulated in para 11 of the Written Submissions of MCGM are incorporated in the Resolution Plan, although at this juncture, the MCGM took a contradictory stand, the same has no relevance in the present Application. Furthermore, it has come to light of this Adjudicating Authority that pursuant to the Judgment rendered by Hon'ble Supreme Court in the matter of Vijay Kumar Jain vs. Standard chartered Bank, the entire Resolution Plan and particulars relating to the same have been shared with the erstwhile members of the board including the nominee directors Namely Mr. Neeraj Gupta and Mr. Tanmay Mishra of the Corporate Debtor appointed by the Applicant herein.

8. The Comments/suggestions/objections of the said Nominee Directors were also duly considered by the CoC and eventually the proposed Resolution Plan dated 09.09.2018 was reaffirmed by the CoC.

9. It is appropriate to bear in mind the Law laid down by Hon'ble NCLAT that once an Application for Approval of a Resolution Plan is filed before the Adjudicating Authority, Applications that do not allege that the Resolution plan approved by the CoC contravenes section 30 of IBC are not maintainable. In the present case on hand, except a bald allegation that Section 30(2)(e) of IBC, 2016 has not been followed, No material evidence is placed before this Adjudicating Authority to substantiate such claim.

10. In view of the above discussion, the present Application containing prayers with regard to the claim of the MCGM and its connected papers is found to be irrelevant at this juncture since, the vital information have been shared to the Applicant through its nominee directors of the Corporate Debtor.

11. Since in the 12th CoC meeting, the entire Resolution plan was made available to the all the stake holders, including the nominee directors appointed by the Applicant, and their comments/objections were duly considered by the CoC, the objections of the Applicant to the Resolution plan is found to be unsustainable.

12. It is the well settled position of law as laid down by Hon'ble NCLAT as under:

'..........that Once the 'resolution plan' is approved by the 'Committee of Creditors' and has been placed before the Adjudicating Authority, the determination of the Adjudicating Authority can be challenged before the Appellate Adjudicating Authority or before the Hon'ble Supreme Court under Section 62 of the I&B Code, if the question of law arises out of such order.'

13. In view of the aforesaid, this Adjudicating Authority is of the view that the Applicant has no locus standi to seek such prayers and even otherwise, there are no merits in the Instant Application which warrant the indulgence of this Adjudicating Authority for granting the reliefs prayed therein.

14. With the above observation, the present Application bearing IA No. 01/2019 is hereby disposed of.