NCLAT–Tata Steel V Liberty–04.02.2019

2. The main plea taken by the Appellant is that the Adjudicating Authority cannot provide the numerous opportunities at the belated stage.

5. ‘Tata Steel Limited’ and ‘JSW Steel Limited’ (“JSW Steel” for short) both had submitted their ‘Resolution Plans’.

7. ‘Tata Steel Limited’ objected the ‘improved financial offer’ before the ‘Resolution Professional’ and the ‘Committee of Creditors’ on 26th July, 2018. The ‘Committee of Creditors’ in its meeting held on 27th July, 2018 to give equal opportunity to all the three ‘Resolution Applicants’ namely—‘Tata Steel Limited’, ‘Liberty House’ and ‘JSW Steel Limited’ allowed them to submit ‘improved financial offers’ by 31st July, 2018

8. ‘Tata Steel Limited’ instead of filing an ‘improved financial offer’, filed an I.A. No. 1096 of 2018 before this Appellate Tribunal for restraining the ‘Resolution Professional’ and the ‘Committee of Creditors’ from considering the ‘improved financial offers’. Though such prayer was made, Appellant failed to implead ‘JSW Steel’ as a party Respondent though the Appellant was aware that ‘JSW Steel’ would be aggrieved if application is allowed.

10. The ‘Operational Creditors’ raised grievance that they were not allowed to take part in the meeting of the ‘Committee of Creditors’, so an interim order was passed directing the ‘Committee of Creditors’ to allow their representatives to take part in the meeting of the ‘Committee of Creditors’.

17. ‘Tata Steel Limited’ thereafter filed an affidavit on 23rd August, 2018, alleging malafide conduct on the part of the ‘Committee of Creditors’ and alleged that in its meeting held on 14th August, 2018, the ‘Committee of Creditors’ was favoring ‘JSW Steel’. As the Appellant- ‘Tata Steel Limited’ somehow or the other was trying to drag the appeal, this Appellate Tribunal directed the ‘Committee of Creditors’ to consider all the ‘Resolution Plans’ and to submit the ‘Resolution Plan’ approved by it in a sealed cover.

20. Learned Senior Counsel appearing on behalf of the ‘Tata Steel Limited’ submitted that ‘Resolution Plan’ submitted by ‘Tata Steel Limited’ being highest bid was approved as H-1, but such submission was disputed by learned counsel appearing for the ‘Committee of Creditors’. According to‘Committee of Creditors’, only a prima facie view was expressed but no decision was taken by the ‘Committee of Creditors’, in fact, no voting took

21. Learned Counsel for the ‘Tata Steel Limited’ submitted that the ‘Committee of Creditors’ had earlier received five bids from ‘JSW Steel’ through repetitive revisions and sought permission of this Appellate Tribunal to submit 6th revised offer. Thereby, the ‘JSW Steel’ has submitted as many as six ‘Resolution Plans’, which were wrongly considered by the ‘Committee of Creditors’.

22. It was submitted that after the order of this Appellate Tribunal, after 13th August, 2018 no ‘Resolution Plan’ could have been accepted by the ‘Committee of Creditors’. Further, according to learned Senior Counsel, the ‘Resolution Applicants’ have no right to revise their bids endlessly and the ‘Committee of Creditors’ are not authorized to entertain fresh or revised bids without exhausting available bids.

24. According to learned Senior Counsel for the ‘Committee of Creditors’, the orders of this Appellate Tribunal dated 1st August, 2018 and 6th August, 2018 do not restrict the ‘Committee of Creditors’ from exercising its powers and obligations and to seek clarifications from the ‘Resolution Applicants’ as permitted under the Code and Regulations. In fact, the ‘Committee of Creditors’ has acted in accordance with law.

27. We have noticed that the ‘Tata Steel Limited’ also filed five ‘revised financial offers’, including the offer given in the original ‘Resolution Plan’. Therefore, ‘Tata Steel Limited’ cannot take plea that after submission of the original ‘Resolution Plan’, no ‘revised financial offer’ can be submitted.

29. Further, according to him, [ JSW ] a ‘Resolution Applicant’ cannot challenge a decision of the ‘Committee of Creditors’ at any stage, till a ‘Resolution Plan’ is approved by the Adjudicating Authority under Section 31.

30. Admittedly, the Adjudicating Authority has not taken any decision on any of the ‘Resolution Plan’. Therefore, we hold that there is no cause of action for the Appellant- ‘Tata Steel’ to prefer the appeal. By impugned order dated 23rd April, 2018, the Adjudicating Authority has only allowed the ‘Committee of Creditors’ to consider the ‘Resolution Plan’ submitted by ‘Liberty House’, but that does not mean that the ‘Resolution Plan’ submitted by ‘Liberty House’ has been approved.

31. In Arcelormittal India Private Limited v. Satish Kumar Gupta & Ors.─ (Civil Appeal Nos. 9402-9405 of 2018 etc.)” the Hon’ble Supreme Court observed that the ‘Resolution Applicant’ has no vested right or fundamental right to have its ‘Resolution Plan’ considered or approved. The Hon’ble Supreme Court observed and held as follows:

“75. What has now to be determined is whether any challenge can be made at various stages of the corporate insolvency resolution process. Suppose a
resolution plan is turned down at the threshold by a Resolution Professional under Section 30(2). At this stage is it open to the concerned resolution applicant
to challenge the Resolution Professional’s rejection? It is settled law that a statute is designed to be workable, and the interpretation thereof should be designed to make it so workable……

76. Given the timeline referred to above, and given the fact that a resolution applicant has no vested right that his resolution plan be considered, it is clear
that no challenge can be preferred to the Adjudicating Authority at this stage. A writ petition under Article 226 filed before a High Court would also be turned down on the ground that no right, much less a fundamental right, is affected at this stage. This is also made clear by the first proviso to Section 30(4), whereby a Resolution Professional may only invite fresh resolution plans if no other resolution plan has passed muster.

79. Take the next stage under Section 30. A Resolution Professional has presented a resolution plan to the Committee of Creditors for its approval, but the Committee of Creditors does not approve such plan after considering its feasibility and viability, as
the requisite vote of not less than 66% of the voting share of the financial creditors is not obtained. As has been mentioned hereinabove, the first proviso to Section 30(4) furnishes the answer, which is that all that can happen at this stage is to require the
Resolution Professional to invite a fresh resolution plan within the time limits specified where no other resolution plan is available with him. It is clear that
at this stage again no application before the Adjudicating Authority could be entertained as there is no vested right or fundamental right in the resolution applicant to have its resolution plan approved, and as no adjudication has yet taken

81. If, on the other hand, a resolution plan has been approved by the Committee of Creditors, and has passed muster before the Adjudicating Authority, this determination can be challenged before the Appellate Authority under Section 61, and may further be challenged before the Supreme Court under Section 62, if there is a question of law arising out of such order, within the time specified in Section 62. Section 64 also makes it clear that the timelines that are to be adhered to by the NCLT and NCLAT are of great importance, and that reasons must be recorded by either the NCLT or NCLAT if the matter is not disposed of within the time limit specified. Section 60(5), when it speaks of the NCLT having jurisdiction to entertain
or dispose of any application or proceeding by or against the corporate debtor or corporate person, does not invest the NCLT with the jurisdiction to interfere at
an applicant’s behest at a stage before the quasijudicial determination made by the Adjudicating Authority. The non-obstante clause in Section 60(5) is designed for a different purpose: to ensure that the NCLT alone has jurisdiction when it comes to
applications and proceedings by or against a corporate debtor covered by the Code, making it clear that no other forum has jurisdiction to entertain or dispose of such applications or proceedings.”

32. It is true that the ‘Committee of Creditors’ will have to ensure a time bound process, to better preserve the economic value of the asset. Simultaneously, it is duty of the ‘Committee of Creditors’ to ensure that the ‘Resolution Plan’ is viable, feasible and should maximize the assets of the ‘Corporate Debtor

33. In “Binani Industries Limited Vs. Bank of Baroda & Anr. – Company Appeal (AT) (Insolvency) No. 82 of 2018 etc.”, this Appellate Tribunal by its judgment dated 14th November, 2018 held that the ‘Corporate Insolvency Resolution Process’ is not a litigation, nor it is money suit. The persons are not required to submit bid. The ‘Committee of Creditors’ has a statutory mandate to ensure value maximization within the timeframe prescribed by the ‘I&B Code’. In the said case, this Appellate Tribunal noticed almost similar facts of submission of ‘revised offer’ and observed:

“32 .………… It appears that the ‘process document’ was issued on 20th December, 2017 which inter alia stipulated general and qualitative parameters. It clearly indicated that ‘Committee of Creditors’ will negotiate only with the ‘Resolution Applicant’ which reveals highest score based on the evaluation criteria and whose ‘Resolution Plan’ is in compliance with the requirements of the ‘I&B Code’ as confirmed by the ‘Resolution Professional’. We have dealt with the object of the ‘I&B Code’ as recorded above. The ‘Resolution Professional’ as well as the ‘Committee of
Creditors’ are duty bound to ensure maximization of value within the time frame prescribed by the ‘I&B Code’………..”

34. In the said case of “Binani Industries Limited” (Supra), this Appellate Tribunal further held that improved financial offer(s) submitted by a ‘Resolution Applicant’ is a continuation of its ‘Resolution Plan’ already submitted, as quoted below:

“34. Section 25 (2) (h) provides invitation of prospective lenders, investors and any other persons to put forward a ‘Resolution Plan’. Submission of revised offer is in continuation of the ‘Resolution Plan’ already submitted and accepted by the ‘Resolution Professional’. It is not in dispute that after invitation was called for, the ‘Ultratech Cement Limited’ submitted the revised ‘Resolution Plan’ on 12th
February, 2018 i.e. well within the time. It is not the case of the ‘Committee of Creditors’ that the plan of the ‘Ultratech Cement Limited’ was in violation of
Section 30(2) of the ‘I&B Code’. The ‘Resolution Plan’ having submitted by ‘Ultratech Cement Limited’within time on 12th February, 2018, it was open to the
‘Committee of Creditors’ to notice the revised offer given by ‘Ultratech Cement Limited’ on 8th March, 2018. The ‘Committee of Creditors’ has taken note of
revised offer given by the ‘Rajputana Properties Private Limited’ on 7th March, 2018 but refused to notice the revised offer submitted by ‘Ultratech Cement Limited’ on 8th March, 2018 i.e., much prior to the decision of the ‘Committee of Creditors’ (14th March, 2018).”

35. From the aforesaid decision in “Binani Industries Limited” (Supra), it is clear that prior to the ‘Committee of Creditors’ voting upon ‘Resolution Plan’, it is open to the ‘Committee of Creditors’ to call for and consider the ‘improved financial offer(s)’ in accordance with the statutory mandate to ensure value maximization.

36. The ‘Process Document’ for the ‘Corporate Insolvency Resolution Process’ of the ‘Corporate Debtor’ does not curtail the powers of the ‘Committee of Creditors’ to maximize value. In this regard, we may refer the relevant provisions of the ‘Process Document’ issued by the ‘Resolution Professional’ in consultation with the ‘Committee of Creditors’ which are as follows:

37. From the ‘Process Document, it is clear that the ‘Committee of Creditors’ have absolute discretion but without being under any obligation to do so, update, amend or supplement the information, assessment or assumptions and right to change, update, amend, supplement, modify, add to, delay or otherwise annul or cease the ‘Resolution Process’ at any point in time. Thus, the ‘Resolution Plan’ can be modified as per dates or other terms and conditions set out in the ‘Process Document’

38. As per Clause 1.3.6, the ‘Committee of Creditors’ have right to negotiate better terms with the ‘Compliant Resolution Applicant(s)’. In terms of Clause 1.14.13, the ‘Resolution Professional’ in consultation with the ‘Committee of Creditors’ can extend the timelines at its sole discretion if expedient for obtaining the best ‘Resolution Plan’ for the Company.
Therefore, granting more opportunity to all the eligible ‘Resolution Applicants’ to revise its ‘financial offers’, even by giving more opportunity, is permissible in the Law. However, all such process should complete within the time frame

39. Similar provisions were noticed by this Appellate Tribunal in “Binani industries Limited” (Supra), and held that the ‘Committee of Creditors’ in its sole discretion can ask the ‘Resolution Professional’ to negotiate better terms with the ‘Compliant Resolution Applicant(s)’. However, such negotiation to be made and completed within the timeframe i.e. within 180 days’ subject to extension if granted by the Adjudicating Authority which should not be extended beyond 270 days.

40. In this background, while we hold that this appeal preferred by ‘Tata Steel Limited’ is premature, uncalled for, in absence of any final decision taken by the Adjudicating Authority under Section 31, this appeal is also not maintainable.

44. On plain reading of sub-section (4) of Section 30, it is clear that the members of the
‘Committee of Creditors’ only after considering its feasibility and viability, and such other requirements as may be specified by the Board is entitled to approve or reject the ‘Resolution Plan’.

45. A member of the ‘Committee of Creditors’ who is not present in the meeting either directly or through Video Conferencing and thereby not considered its feasibility and viability and such other requirements as may be specified by the Board, their voting shares, therefore, cannot be counted for the purpose of counting the voting shares of the members of the ‘Committee of Creditors’. Therefore, we hold that only the members of the ‘Committee of Creditors’ who attend the meeting directly or through Video
Conferencing, can exercise its voting powers after considering the other requirements as may be specified by the Board. Those members of the ‘Committee of Creditors’ who are absent, their voting shares cannot be counted

46. We find that the ‘Resolution Plan’ submitted by ‘JSW Steel’ has been approved by the ‘Committee of Creditors’ with 97.12% voting shares and voters having 2.88% voting shares remained absent. If some members of the ‘Committee of Creditors’ having 2.88% voting shares remained absent, it cannot be held that they have considered the feasibility and viability and other requirements as specified by the Board, therefore, their shares should not have been counted for the purpose of counting the voting shares of the ‘Committee of Creditors’. In fact, 97.12% voting shares of members being present in the meeting of the ‘Committee of Creditors’ and all of them have casted vote in favour of ‘JSW Steel’, we hold that the ‘Resolution Plan’submitted by ‘JSW Steel’ has been approved with 100% voting shares.

48. The case is remitted to the Adjudicating Authority (National Company Law Tribunal), Principal Bench, New Delhi, for passing appropriate order under Section 31. The ‘Resolution Professional’ will immediately place the ‘approved Resolution Plan’ before the Adjudicating Authority for its order.

49. The Adjudicating Authority at the time of consideration of the approved ‘Resolution Plan’ of ‘JSW Steel’ will only ensure that all the stakeholders, particularly the ‘Operational Creditors’ are treated similarly. It should ensure that no discrimination is being made between the ‘Financial Creditors’ or the ‘Operational Creditors’ as held by this Appellate Tribunal in “Binani Industries Limited”.

50. In case, the Adjudicating Authority is of the opinion that the discrimination has been made between the ‘Financial Creditors’ and the ‘Operational Creditors’, it may give opportunity to the ‘JSW Steel’ to improve its plan and thereby, by substituting the approved ‘Resolution Plan’ with such improvement.

Let the period of pendency of this appeal i.e. from 7th May, 2018 till date be excluded for the purpose of counting of the period of 270 days.

51. As we have noticed the rival contentions of the parties in this appeal, the parties cannot re-agitate such submission again before the Adjudicating Authority at the time of the approval of the ‘Resolution Plan



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