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2024 Supreme(Online)(NCLAT) 1164
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
ASHOK BHUSHAN, J
Cosmos Cooperative Bank Ltd. – Appellant
Versus
Edelweiss Asset Reconstruction Company Ltd. – Respondent
Company Appeal (AT) (Insolvency) No.499 of 2023 | Company Appeal (AT) (Insolvency) No.519 of 2023
For the Appellants: Mr. Abhijeet Sinha, Mr. Aditya Gauri, Mr. Jayesh Gupta
For the Respondents: Mr. Neeraj Malhotra, Mr. R.P. Agarwal, Ms. Reema Mishra, Mr. Nimish Kumar, Shreyas Edupuganti, Kaarunya Lakshmi, Ms. Dyuti
Extension of payment timeline under a Resolution Plan is not a modification of the plan per the Insolvency and Bankruptcy Code, and the majority decision of the Committee of Creditors must prevail.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 33(3) - Liquidation process - Company Appeal challenging the Adjudicating Authority's order for liquidation of Corporate Debtor - Court held that extension of timeline for payment is not modification of the Resolution Plan; to liquidate a Corporate Debtor requires adequate justification, hence the majority opinion of CoC should prevail - Adjudicating Authority erred in ignoring decision of CoC to continue with Resolution Plan despite failure of the SRA to adhere to payment timeline. (Paras 26, 28, 32)
Facts of the case:
Two Appeals were filed against the decision allowing liquidation of a Corporate Debtor, despite a majority of Financial Creditors voting against it. The Appellants argued that proper procedures were not followed and that extension of time given was not a modification of the original plan.
Findings of Court:
The Appeals were allowed as the Adjudicating Authority failed to uphold the majority decision of the Committee of Creditors regarding continuation of the resolution plan.
Issues: The primary issue was whether the decision to allow extension of time for payment constituted modification of the resolution plan.
Ratio Decidendi: The court ruled that extension of time does not equate to modification of the resolution plan, reinforcing that the majority vote of the CoC should be taken into account in such proceedings.
Result: Appeals allowed.
| Table of Content |
|---|
| 1. appeals regarding liquidation order of corporate debtor. (Para 2 , 11) |
| 2. arguments regarding improper procedures followed in liquidation. (Para 6 , 7) |
| 3. court's position on majoritarian decision and timeline extensions. (Para 10 , 20 , 28) |
| 4. court's decision versus majority decision of coc. (Para 31) |
| 5. final judgment allowing the appeals. (Para 33) |
JUDGMENT
ASHOK BHUSHAN, J.
These two Appeals have been filed against the order dated 13.02.2023 passed by National Company Law Tribunal, Court-III, Mumbai Bench, allowing IA No.2767 of 2022 filed by Edelweiss Asset Reconstruction Company Limited (Respondent No.1 herein) under Section 33 , sub-section (3) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “Code”). The Adjudicating Authority by the impugned order directed the liquidation of the Corporate Debtor – S.K. Wheels Private Limited. Aggrieved by which order, Company Appeal (AT) (Insolvency) No.499 of 2023 has been filed by Cosmos Cooperative Bank Limited, a Financial Creditor, who has vote share of 48.42% in the Committee of Creditors (“CoC”) of the Corporate Debtor. Company Appeal (AT) (Insolvency) No.519 of 2023 has been filed by Successful Resolution Applicant, challenging the order of liquidation. Both the Appeals having been filed against the same order, have been heard together and are being decided by this common judgment.
2. Brief facts necessary for deciding the Appeals are:
(i) The Adjudicating Authority vide order dated 29.03.2019 directed for commencement of Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor - S.K. Wheels Private Limited. Mr. Vishal Ghishulal Jain was appointed as Interim Resolution Professional (“IRP”), who was confirmed as Resolution Professional (“RP”).
(ii) The Corporate Debtor being a MSME, the Resolution Plan submitted by Anil Kumar, the Promoter/ Director of the Corporate Debtor was approved by the CoC in its 12th Meeting held on 23.01.2020 with 75.78% vote share. The RP filed IA No.976 of 2022 for approval of the Resolution Plan and Adjudicating Authority vide order dated 09.11.2021, approved the Resolution Plan.
(iii) IA No.80 of 2022 was filed by Successful Resolution Applicant (“SRA”) for exclusion of time due to Covid-19 pandemic and extension of time for making further payments, which Application was dismissed by the Adjudicating Authority vide order dated 04.05.2022.
(iv) IA No.1054 of 2022 was filed by the RP under Section 33 , sub-section (3) seeking liquidation of the Corporate Debtor. The Adjudicating Authority vide order dated 04.05.2022 directed the RP to convene a Meeting of the CoC and file appropriate application for liquidation if suggested by the CoC with the mandate of the CoC. IA 1054 of 2022 was disposed of accordingly.
(v) In the meeting dated 08.07.2022, RP invited all Members of CoC where a Resolution was put before the CoC as to whether the Corporate Debtor be liquidated or not. With voting share of 59.73%, CoC decided not to liquidate the Corporate Debtor.Respondent No.1, who had vote share of 20.28% voted against the majority decision.
(vi) An Application dated 26.09.2022 was filed by Respondent No.1 being IA No.2767 of 2022 before the Adjudicating Authority under Section 33 , sub-section (3) seeking commencement of liquidation process.
(vii) On 02.12.2022, a Meeting of Financial Creditors of the Corporate Debtor was held where with a majority decision of 69.04%, the Financial Creditors decided to extend the time for Resolution Applicant to make the payments as per schedule contained in the Resolution.
(viii) Respondent No.1 in IA No.2767 of 2022, did not implead either CoC, RP or SRA. IA was heard by the Adjudicating Authority and by the impugned order dated 13.02.2023, the Adjudicating Authority directed for liquidation. The Adjudicating Authority although noted the decision of the Financial Creditors dated 08.07.2022, where the Financial Creditor with 59.73% voted not to liquidate the Corporate Debto
