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2024 Supreme(Online)(NCLT) 4080
NATIONAL COMPANY LAW TRIBUNAL
Dr. Venkata Ramakrishna Badarinath Nandula, MEMBER (JUDICIAL), Shri Charan Singh, MEMBER (TECHNICAL)
Mr. Virigneni Anjaiah – Appellant
Versus
M/s. Pridhvi Asset Reconstruction and Securitization Company Limited – Respondent
CP (IB) No. 153/7/HDB/2021 | IA (IBC) 1698/2024 | IA (IBC) 1704/2024
For the Applicant:Mr. P. Pratap, Advocate
For Respondent no. 1:Mr. V V S N Raju, Advocate
For Respondent no. 2:MS Mano Ranjani, Advocate
The rejection of a resolution plan on grounds of conditionality and non-compliance with RFRP was found to be unjustified, allowing the suspended director's plan to be reconsidered.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 60(5) - Resolution Plan - The application submitted by the Suspended Director of a corporate debtor was rejected by the Committee of Creditors on grounds of being conditional and not compliant with the Request for Resolution Plan (RFRP) - The Tribunal held that such reasons were not maintainable, directing the CoC to reconsider the plan - The additional proposal for personal guarantees is permissible and should not invalidate the plan. (Paras 24-26)
(B) Right of a Resolution Applicant - The scope of CIRP is to resolve debts of the corporate debtor, and while plans may include proposals impacting personal guarantees, they do not compromise the substantive provisions of the IBC. (Paras 6.1-6.2)
| Table of Content |
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| 1. the application seeks approval of a resolution plan against corporate debts. (Para 1 , 2) |
| 2. respondents argue the plan lacks compliance and tries to address guarantees improperly. (Para 3 , 4 , 5) |
| 3. the necessity for clarity and compliance in resolution plans was emphasized. (Para 6 , 7 , 8 , 9 , 10) |
| 4. reasoning of coc for rejecting the plan declared unjustified; the proposal's additional nature should not negate validity. (Para 16 , 24) |
| 5. tribunal allowed the application and ordered reconsideration of the resolution plan. (Para 26 , 27) |
ORDER
1. This Application is filed by the Suspended Director of M/s. Sri Pavana Keerthi Hotels India Private Limited (hereinafter referred as Corporate Debtor) under Section 60 (5) of the Insolvency and Bankruptcy Code, 2016 (“IBC”) read with Rule 11 of the National Company Law Tribunal Rules, 2016, seeking the following reliefs:
i. To direct the 1st Respondent to pass the Resolution Plan dated 23- 07-2024 submitted by the applicant as the same is neither conditional nor against the RFRP and also not in violation of section 30(2) of IBC 2016.
ii. To direct the 1st Respondent to pass the Resolution plan as the provision of separate compensation for extinguishment of personal guarantees is in accordance with Regulation 37 of IBBI (CIRP) Regulation 2016.
iii. To grant Interim Stay of all further proceedings in the pursuance of the 8th COC meeting dated 01-08-2024 pending adjudication of this Application including the "Form-G" dated 02-08-2024.
2. Brief of the Application:
2.1. The Andhra Bank (as it then was) assigned the debt portfolio of the corporate debtor to the Respondent No.1/Financial Creditor vide an assignment agreement dated 27.09.2017. Basing on this Assignment Agreement, the Respondent No.1/Financial Creditor filed a Petition before this Tribunal vide C.P. (IB) NO. 153/7/HDB/2021 under Section 7 of Code seeking Corporate Insolvency Resolution Process (hereinafter referred as CIRP) of the Corporate Debtor.
2.2. This Tribunal admitted the said company petition by an order dated 11.04.2022 and initiated CIRP against the Corporate Debtor by appointing Mr. Gunturu Raghu Babu as the Interim Resolution Professional. Later, Mr. Govada Venkata Subbarao was appointed as Resolution Professional (Respondent no. 2) of the Corporate Debtor. The 1st respondent/Financial Creditor is the sole member of the Committee of Creditors (CoC) of the Corporate Debtor with 100% voting rights.
2.3. The Respondent No.2 invited an Expression of Interest in respect of the Corporate Debtor under Form G dated 18-05-2024. That the applicant submitted his EOI on 01-06-2024. Subsequently, a final list of Prospective Resolution Applicants (PRAs) was prepared on 22-06-2024 and the Applicant was one of the eligible PRAs.
2.4. Thereafter, the applicant proposed a Resolution Plan on 23.07.2024 quoting different valuations for the asset value of Corporate Debtor along with a separate compensation for extinguishment of personal guarantees for release and discharge of collateral properties.
2.5. The said proposed Resolution plan submitted by the applicant on 23.07.2024 was rejected by CoC on 30-07-2024, the respondent no. 1 is the sole member of CoC. The Resolution plan was rejected on the ground that it is conditional and not in compliance with the request for Resolution Plan (RFRP). The applicant contended that firstly, the rejection of the resolution plan on the ground that it is conditional is misleading as the respondent no. 1 failed to show the alleged condition on account of which the plan was rejected during the 7th CoC meeting. Secondly, the rejection of the resolution plan on the ground that it is not in compliance with the RFRP is far from truth, as the contents of the plan are as per the terms and conditions of RFRP and Section 30(2) of the Code.
2.6. The applicant further contended that the resolution plan provides two separate values of Rs.13.50 Crores towards the value of the Corporate Debtor and a furth
