NCLT, Mumbai Says CoC Not Right In Rejecting Resolution Plan Only Coz It Was Sent After Cut-Off Date [Read Order]
Tribunal says Code is paramount, not the Regulations
Observing that when there is a conflict between the Regulations and the Insolvency Code, the object of the Code is paramount and not the Regulations which are formed only for the just implementation of the Code, the Mumbai bench of National Company Law Tribunal has held that the Committee of Creditors of a corporate debtor was wrong in refusing to open the envelope of the Resolution Plan sent by an applicant and return it merely because it was sent at the 12th hour.
“We are of the considered view that the spirit of the Code is first and then comes the other things. The rejection of the Resolution Plan by the CoC even without opening the envelope containing the Resolution Plan on the ground that the same is submitted after the expiry of the stipulated time fixed by the CoC, is certainly against the law/Code," said a bench of Member (Justice) Bhaskara Pantula Mohan and V Nallasenapathy.
The tribunal said so while deciding the application of Omkara Asset Reconstruction Pvt. Ltd, a member of the Committee of Creditors (CoC), against the resolution professional (RP) of Unimark Remedies Ltd (corporate debtor) as its resolution plan was rejected for being submitted after the expiry of the deadline.
The applicant through its counsel Advocate Kunal Kanungo from Cogito Legal said the CoC be directed to consider the resolution plan submitted by it as the same would maximize the asset value of the corporate debtor while also submitting that by refusing to accept the plan submitted by it, the CoC has effectively monopolised the Corporate Insolvency Resolution Process (CIRP) in favour of Asset Reconstruction Company India Limited (ARCIL), another resolution applicant.
In the instant case, the corporate debtor was put into CIRP by an order of the tribunal on April 3, 2018. The applicant submitted its claim to the IRP and on the admission of the claim, it was made as a member of the CoC of the corporate debtor.
On June 8, the CoC invited prospective resolution applicants to submit Expression of Interest (EoI) on or before 29.06.2018, which was subsequently extended to 31.10.2018 and the RP received three EOIs from prospective resolution applicants.
The CoC fixed 31.10.2018 as the cut-off date for the resolution applicants to submit the resolution plan for approval by the CoC but the applicant was unable to submit the resolution plan within the time specified and could only forward a copy of the same on December 11.
In its meeting on December 12, the CoC refused to open the cover containing the resolution plan submitted by the applicant solely on the ground that it was submitted after the cut-off date even without appreciating and scrutinizing the plan on its merits.
The applicant contended before the tribunal that in the same meeting, the CoC had permitted ARCIL to revise their plan and submit a fresh revised resolution plan, effectively monopolizing the CIRP in its favour.
The applicant further submitted that they were making efforts to tie up with some prospective investors to revive the prospects of the company and therefore, the delay in submitting the resolution plan was neither deliberate nor wanton and purely on account of the reasons beyond their control.
“This Bench after hearing both the parties, looked into the Regulations which would not allow the acceptance of any proposal by any resolution Applicant beyond the date as fixed by the CoC. It is clear that the Resolution Applicant had approached the RP with a proposal at the 12th hour but certainly before accepting or finalization of any Resolution Plan.
“Now the point is whether the Resolution Plan of the Applicant can be considered at this belated hour or should the same be rejected even without looking into the same. In our view of the case and keeping in view the very object of the Code, when there is a clash/ conflict between the Regulations and the Code, the object of the Code is paramount and not the Regulations which are formed only for the just implementation of the Code. Purely on the basis of technicalities, the rejection of Resolution Plan even without looking into its merits, is certainly an act which shall go against the very spirit of the Code and may even result in a huge loss to the Company. Any Regulation which does not anticipate such a situation and if the same comes in the way of proper justification and implementation of the principles of the Code, the same need not be considered nor can be treated as an impediment in the implementation of the Code,” said the tribunal.
“We are of the considered view that the spirit of the Code is first and then comes the other things. The rejection of the Resolution Plan by the CoC even without opening the envelope containing the Resolution Plan on the ground that the same is submitted after the expiry of the stipulated time fixed by the CoC, is certainly against the law/Code and we hereby direct the Respondent to forthwith consider the Resolution plan of the Applicant on its merits and judicious decision may be taken in the best interest of the parties concerned. The Application is allowed,” ordered the tribunal.
Read the Order Here