The National Company Law Appellate Tribunal (NCLAT) allowed the appeal filed by Kotak Investment Advisors Limited (KIAL) challenging an order passed by the Mumbai bench of the National Company Law Tribunal (NCLT) which had approved the resolution plan submitted by a consortium of Kalpraj Dharamshi and Rekha Jhunjhunwala. KIAL was one of the bidders for Ricoh India Limited (Ricoh).
The Principal Bench headed by Justices Bansi Lal Bhat, Acting Chairperson, V.P.Singh, Member (Technical), Alok Srivastava Member (Technical) held -
"In the circumstances as stated above, we are of the considered opinion that the Resolution Professional committed a grave error in accepting the Resolution Plan of the Resolution Applicant Kalpraj Dharmshi & Rekha Jhunjhunwala after the expiry of the deadline for submission of the Bid/Resolution Plan without notifying/publishing the extension of the timeline for submission of EOI, as per provision of the I&B Code and Regulations thereof. The Adjudicating Authority has also failed to appreciate the illegalities and irregularities pointed out by the Appellant."
The Appellants had contended that Mr. Krishna Chamadia, the Resolution Professional (RP) had unduly accepted two resolution plans that had been submitted after the expiry of deadline for submission of Resolution Plan, without obtaining any resolution from the Committee of Creditors (CoC) to extend the deadline and issuing notice for inviting expression of interest from other potential resolution applicants. The bids by other resolution applicants had already been opened and deliberated upon by the CoC and offers made by it were disclosed to all the participants, including the resolution professional. RP had committed illegalities in the conduct of the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (IBC).
The Appellate tribunal directed Ricoh's CoC to take an afresh decision within 10 days on the resolution plans and further held -
"If no decision is communicated to the Adjudicating Authority and the timeline for completion of CIRP has already expired, then the Adjudicating Authority is to pass an order for liquidation of the corporate debtor."
RP had argued that the correct procedure prescribed under the IBC was duly followed and the Dharamshi - Jhunjunwala consortium's plan was approved by CoC with 85% of the votes in favour.
Rejecting it's claim, the Appellate Bench in its 43-page order asserted that the act of the RP to accept the resolution plan after opening the other bids could not by any means be justified and was a blatant misuse of the authority invested in the RP. The 3 member Bench questioning the RP's conduct further held –
"We fail to understand as to why the Resolution Professional had deviated from the earlier procedure of publication of notice for the invitation of EOI. Per contra, the Resolution Professional has accepted the Resolution Plan of the successful Resolution Applicant Kalpraj Dharamshi & Rekha Jhunjhunwala after the expiry of the deadline for submission of Resolution Plan without following the due process, under the guise of maximization of value. The act of the Resolution Professional to accept the Resolution Plan after opening the other bids, which were all submitted within the deadline for submission of Resolution Plan cannot be justified by any means and is a blatant misuse of the authority invested in the Resolution Professional to conduct CIRP. However, if the CoC took a commercial decision to extend the timeline, it should have done so by publishing a fresh notice in Form 'G' under Regulation 36A of the CIRP Regulations. By adopting a special procedure for accepting the Resolution Plan of the Successful Resolution Applicant, under the guise of maximization of value, the Resolution Professional and the CoC have deviated from the norms prescribed under the Code and the Regulations framed there under, which vitiates the Corporate Insolvency Resolution Process conducted by the RP."
The order of the Hon'ble NCLAT is a big blow on the nexus of resolution professionals and resolution applicants who want to exploit the provisions of the IBC for their vested personal benefits.
Earlier in 2018, two resolution plans were filed in time by Phoenix Asset Reconstruction Company Limited (an Associate of KIAL) and Karvy Group, and both were opened by CoC on January 10, 2019. In addition, two more resolution plans were belatedly accepted after expiry of the deadline for submission from WeP Peripherals and consortium of Dharamshi.
KIAL had further contended that only a single-member bench of the NCLT had heard the arguments and reserved its order on the resolution plan. However, the final order had been passed by a two-person bench, which was in violation of principles of natural justice. The salutary principle applicable in the instant case was that of the maxim, "one who hears the matter must decide", the Appellate bench observed.
Mr Ramji Srinivasan, Sr Advocate with Mr Suresh Dutt Dobhal, Mr Rishab Kapoor and Mr Shikhar Singh, Advocates appeared for Kotak Mr Krishnendu Datta, Mr Prateek Kumar, Ms Raveena Raj and Mr Rohit Ghosh, Advocates appeared for Kalpraj Dharamshi and Rekha JhunjhunwalaMs Pooja Mahajan and Ms Avni Shrivastav Advocates appeared for RPCompany Appeal (AT) (Insolvency) No. 344 – 345 of 2020
Mr Ramji Srinivasan, Sr Advocate with Mr Suresh Dutt Dobhal, Mr Rishab Kapoor and Mr Shikhar Singh, Advocates appeared for Kotak
Mr Krishnendu Datta, Mr Prateek Kumar, Ms Raveena Raj and Mr Rohit Ghosh, Advocates appeared for Kalpraj Dharamshi and Rekha Jhunjhunwala
Ms Pooja Mahajan and Ms Avni Shrivastav Advocates appeared for RP
Company Appeal (AT) (Insolvency) No. 344 – 345 of 2020
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