M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR

Citation: (2019) 12 SCC 150, (2020) 8 SCC 531, (2022) 1 SCC 401, [2023] 9 S.C.R. 783, (2020) 11 SCC 467, 2023 INSC 486, (2021) 3 SCC 475, (2019) 4 SCC 17

Court: Supreme Court of India

Bench: DINESH MAHESHWARI AND VIKRAM NATH, JJ.

Judgment text

SUPREME COURT OF INDIA M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. Civil Appeal Nos. 1682-1683 of 2022 [2023] 9 S. C. R. 783 : 2023 INSC 486 M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. (Civil Appeal Nos. 1682-1683 of 2022) MAY 03, 2023 [DINESH MAHESHWARI AND VIKRAM NATH, JJ. ] Insolvency and Bankruptcy Code, 2016 - ss.

12A, 29-A(e), 30(2)(e) & 30(6) - Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Regulation 36-A(2)(iii) - Disapproval of resolution plan by the Appellate Tribunal (NCLAT) for want of presentation of final resolution plan before CoC - Held: Is unexceptionable and calls for no interference - When the modified resolution plan, even if carrying minor modification /revision was not finally approved by CoC, its presentation to the Adjudicating Authority amounts to a material irregularity and this defect cannot be cured - There is no and there cannot be any concept of post facto approval of any resolution plan by CoC which had not been placed before it prior to the filing before the Adjudicating Authority - Requirement of CIRP Regulations, particularly of placing the resolution plan in its final form before the CoC, has to be scrupulously complied with - This is so for the specific reason concerning law that if the process as adopted in the present matter is approved, the very scheme of the Code and CIRP regulations would be left open-ended and would be capable of inviting arbitrariness at any level - The irregularity in the process of approval by CoC and filing before Adjudicating Authority are not the matters of such formal nature that deviation in that regard could be ignored or condoned - When commercial wisdom of CoC is assigned primacy, it presupposes a considered decision on the resolution plan in its final form - The principles underlying the decisions of this Court respecting the commercial wisdom of CoC cannot be over-expanded to brush aside a significant shortcoming in the decision making of CoC when it had not duly taken note of the operation of any provision of law for the time being in force - On facts, disapproval of the resolution plan in question by the Appellate Tribunal (NCLAT) in the impugned order is not to be interfered with but, not for all the reasons which weighed 783 with the Appellate Tribunal - The reasons and findings of the Appellate Tribunal in relation to the valuation process and alleged non-compliance of some of the procedural provisions as also the observations against increase of fees of resolution professional are not approved - Similarly, the Appellate Tribunal was not right in holding the resolution applicant ineligible to submit a resolution plan with reference to s.

164(2)(b) of the Companies Act, 2013 - The disapproval by the Appellate Tribunal, with reference to the settlement offer of promoter in terms of s.

12-A of the Code, and its purported non-consideration is also not approved and such findings of the Appellate Tribunal are required to be set aside - Similarly, the Appellate Tribunal erred in applying the principles of non- discrimination in relation to the related party - However, even while respecting the commercial wisdom of CoC, in the present case, the resolution plan in question could not have been approved by the Adjudicating Authority for two major reasons: one, for the ineligibility of the resolution applicant; and second, for not placing of the revised resolution plan in the CoC before seeking approval from the Adjudicating Authority - So far the subsequent events concerning invitation of fresh Expression of interest (EOIs) and approval of the fresh settlement proposal of the promoter by the CoC are concerned, all the relevant aspects are kept open for consideration of the Adjudicating Authority.

Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and Ors. (2020) 8 SCC 531 : [2019] 16 SCR 275; Jaypee Kensington Boulevard Apartments Welfare Association and Ors. v. NBCC (India) Limited and Ors. (2022) 1 SCC 401; Swiss Ribbons (P) Ltd. and Anr. v. Union of India and Ors. (2019) 4 SCC 17 : [2019] 3 SCR 535 - relied on. K. Sashidhar v. Indian Overseas Bank(2019) 12 SCC 150 : [2019] 3 SCR 845;Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh and Ors. (2020) 11 SCC 467 : [2020] 2 SCR 1157;Phoenix ARC (P) Ltd v. Spade Financial Services Ltd. and Ors. (2021) 3 SCC 475;C. Raja John v. R. Raghavendran and Ors. Comp. Appl. (AT)(CH)(Ins) No. 207 of 2021;Kalpraj Dharamshi M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. and Anr. v. Kotak Investment Advisors Limited and Anr. (2021) 10 SCC 401;EBIX Singapore Pvt. Ltd. v. Committee of Creditors of Educomp Solutions Ltd. and Anr. (2022) 2 SCC 401; Pratap Technocrats (P) Ltd. and Ors.

v. Monitoring Committee of Reliance Infratel Ltd and Anr. 2021 SCC OnLine SC 569;Facor Alloys Ltd. v. Bhuvan Madan and Ors. Civil Appeal No. 5129 of 2021;Venus Recruiters Private Limited v. Union of India and Ors. 2020 SCC Online Del. 1479; Vallal RCK v. Siva Industries and Holdings Ltd. and Ors. 2022 SCC OnLine SC 717 and Brilliant Alloys (P) Ltd. v. S. Rajagopal and Ors. (2022) 2 SCC 544 - referred to. Case Law Reference [2019] 16 SCR 275 relied on Para 15. 4. 1 [2019] 3 SCR 845 referred to Para 17 [2020] 2 SCR 1157 referred to Para 17 (2021) 3 SCC 475 referred to Para 19. 7 (2021) 10 SCC 401 referred to Para 28. 5 (2022) 1 SCC 401 relied on Para 17 (2022) 2 SCC 401 referred to Para 29 [2019] 3 SCR 535 relied on Para 31. 1 (2022) 2 SCC 544 referred to Para 35. 1 CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1682- 1683 of 2022. From the Judgment and Order dated 17. 02. 2022 of the National Company Law Appellate Tribunal, Chennai Bench in Company Appeal (AT) (CH) (Insolvency) No.

164 and 219 of 2021. With Civil Appeal Nos. 1756, 1759, 1757, 1807, 1810 And 1827 of 2022. Dr. Abhishek Manu Singhvi, Jaideep Gupta, Sr. Advs. , Devashish Bharuka, Justine George, Ms. Sarvshree, Abhijeeet Singh, Advs. for the Appellant. Tushar Mehta, SG, K. V. Vishwanathan, Vijay Narayan, Sr. Advs. , Sanjay Kapur, Ms. Megha Karnwal, Arjun Bhatia, Ms. Akshata Joshi, Ms. Shubra Kapur, Ms. Aastha Gumbr, Goutham Shivshankar, T. Ravichandran, K. V. Mohan, K. V. Balakrishnan, Ms. Niveditha, Ms. Samyuktha J. , Rahul Kumar Sharma, Shreeyash U. Lalit, Ms. Raveena Lalit, Abhinav Agarwal, Mrs. Pragya Baghel, Ms. Haripriya Padmanabhan, V. Syamohan, Ms. Astu Khandelwal, Martin G. George, Dheeraj Nair, Advs. for the Respondents. The Judgment of the Court was delivered by DINESH MAHESHWARI, J. Preliminary and brief outline .......................................... 2* Particulars of the proceedings and the parties ................... 7* The relevant factual and background aspects ..................

13* Initiation of CIRP ........................................................... 14* CoC Meetings and ancillary proceedings................... 16* Resolution plan approved by the Adjudicating Authority (NCLT)............................................................................. 26* Disapproval of the Appellate Tribunal (NCLAT) ............. 40* Proceedings in this Court.................................................. 59* The events during pendency of these appeals............. 62* Rival submissions........................................................... 65* Points for determination.................................................... 84* Relevant statutory provisions............................................ 87* Objectives and scheme of IBC: crucial role-players: ..... 109* Point A - Valuation: Regulations 27 and 35..................... 116* Point B - Publication of Form G: Regulation 36-A .........

118* Point C1 - Effect of Section 164(2)(b) Companies Act 120* Point C2 - Effect of Section 88 Trusts Act................... 121* Point C3 - Effect of Section 166(4) Companies Act ..... 125* Point D1 - Revision of resolution plan after approval by CoC................................................................................. 126* Ed. Note : Pagination is as per the original Judgment. M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J. ] Point D2 - Increase of fees of resolution professional .... 132 Point E - The matter concerning related party ................ 133 Point F - NCLAT's findings regarding settlement offer of promoter........................................................................... 135 Point G - Impact and effect of subsequent events .......... 138 Summation ........................................................................ 142 Conclusion........................................................................

144 Preliminary and brief outline 1. These civil appeals are essentially directed against the common judgment and order dated 17. 02. 2022, as passed by the National Company Law Appellate Tribunal, Chennai Bench,1 in a batch of appeals in relation to the Corporate Insolvency Resolution Process2 under the Insolvency and Bankruptcy Code, 2016,3 concerning the corporate debtor, Appu Hotels Limited4, whereby the Appellate Tribunal has reversed the order dated 15. 07. 2021, as passed by the National Company Law Tribunal, Chennai5; and while rejecting the resolution plan in question, has remanded the matter to the committee of creditors6 with directions to the resolution professional7 to proceed from the stage of publication of Form 'G', and invite the expression of interest8 afresh as per the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 20169. 2.

In view of multiple issues raised in this batch of matters, where several steps have been taken at different stages and different parties are having different stands and interests, we may draw a brief outline with salient features of the factual and background aspects, in order to indicate the contours of the forthcoming discussion. 1 Hereinafter also referred to as 'NCLAT' / 'the Appellate Tribunal'. 2 'CIRP', for short. 3 Hereinafter also referred to as 'IBC' / 'the Code'. 4 Hereinafter also referred to as 'the corporate debtor'. 5 Hereinafter also referred to as 'NCLT'/ 'the Tribunal' / 'the Adjudicating Authority'. 6 'CoC', for short. 7 'RP', for short. 8 'EOI', for short. 9 Hereinafter also referred to as 'the CIRP Regulations'. 2. 1. CIRP against the corporate debtor got initiated on 05. 05. 2020, with the NCLT admitting an application moved under Section 7 of the Code by one of its financial creditors, Tourism Finance Corporation of India Limited10.

In the course of proceedings, after various rounds of CoC meetings, ultimately, the resolution plan in question was approved with 87. 39 per cent. majority of voting share on 22. 01. 2021. However, the CoC recommended certain changes to be made in the resolution plan. After incorporating the changes as suggested by CoC, an application was moved before the Adjudicating Authority (NCLT) under Section 30(6) of IBC for approval of the resolution plan. During the proceedings before NCLT, several objections were raised by various financial creditors, other resolution applicants and by the promoter and erstwhile director of corporate debtor against the resolution plan. The promoter also stated his grievance about want of consideration of his settlement proposal in terms of Section 12-A of the Code. However, the NCLT dismissed all the objections and approved the resolution plan declaring it binding on the corporate debtor and other stakeholders by the common order dated 15. 07. 2021. 2. 2.

Challenging approval of the resolution plan, several appeals were preferred before the Appellate Tribunal (NCLAT), which were decided in the impugned common judgment and order dated 17. 02. 2022. The Appellate Tribunal, while upholding several of the objections against the process of consideration of the resolution plan as also the eligibility of the successful resolution applicant, allowed all the appeals; set aside the aforesaid order dated 15. 07. 2021; rejected the resolution plan so approved by the NCLT; declared the resolution applicant ineligible in terms of Section 88 of the Indian Trusts Act, 188211 and disqualified in terms of Section 164(2)(b) of the Companies Act, 201312; and issued directions to the resolution professional to proceed with CIRP from the stage of publication of Form 'G' while inviting EOI afresh as per the CIRP Regulations.

The Appellate Tribunal also issued directions to the resolution professional to place the settlement proposal of promoter and erstwhile director of the corporate debtor for consideration before the CoC; and if such a proposal was approved with 90 per cent. voting share of CoC, to initiate the proceeding for withdrawal of CIRP under Section 12-A of the Code read with Regulation 30-A of the CIRP 10 'TFCI', for short. 11 Hereinafter also referred to as 'the Trusts Act'. 12 Hereinafter also referred to as 'the Companies Act'. M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J. ] Regulations. The Appellate Tribunal also directed that the claim of the related party financial/operational creditors be not discriminated from that of the unrelated financial/operational creditors. 3. The aforesaid order of NCLAT dated 17. 02.

2022 is under challenge before this Court by the resolution applicant as also by the resolution professional on several counts, which could be broadly summarised thus: First, that Regulation 35 of the CIRP Regulations does not mandate sharing of the valuation report to the CoC and instead mandates only sharing of liquidation value. Second, that the non-core assets were not significant in value and the valuation was communicated to and agreed upon by the members of the CoC on 15. 12. 2020. Third, that non-publication of Form G on the designated website was a mere procedural irregularity which did not prejudice interests of any of the parties. Fourth, that the commercial wisdom of CoC was not justiciable and once the CoC had approved the resolution plan by the requisite majority, there was very limited scope of interference by the Courts.

Fifth, that the Appellate Tribunal has overstepped its jurisdiction by declaring the resolution applicant ineligible under Section 88 of the Trusts Act and disqualified under Section 164(2)(b) of the Companies Act. Sixth, that the claims of related party creditors cannot be treated at par with the unrelated creditors. And seventh, that Section 12-A IBC application of the promoter was merely a dilatory tactic and that he was not entitled to file any such application. These and other grounds raised in these appeals have been duly contested by the respondents with their respective stands and positions in these cases. This apart, some of the financial creditors have also moved the applications for impleadment and have placed their respective viewpoints for consideration. 4. During the pendency of these appeals, this Court did not stay the operation of impugned order dated 17. 02. 2022; and during the course of hearing of these appeals, on 07. 03.

2022, it was informed by RP that pursuant to the order impugned, another meeting of CoC had been conducted on 03. 03. 2022. It is noticed that in the said CoC meeting held on 03. 03. 2022, the settlement proposal of the promoter was voted against by 51. 81% of the voting share. After conclusion of initial hearing, while reserving judgment, this Court also took note of the fact that further meeting of CoC was slated for 21. 03. 2022; and it was provided that the meetings/proceedings of the CoC could go on but the entire process shall remain subject to the final orders to be passed in these appeals. 4. 1. These matters were again taken on board on 20. 05. 2022 when this Court took note of the submissions made in another application moved by the resolution applicant for directions while pointing out that the fresh process had been initiated by the RP by publication of Form G on 26. 04. 2022, inviting fresh EOIs.

Therein, the resolution applicant sought interim stay over the fresh process initiated by RP or in the alternative, to stay the operation of the impugned order as regards declaration of his disqualification, and to direct the RP to consider his EOI in the fresh process so initiated. This Court, however, declined to pass any other order with reference to the fact that all the proceedings remain subject to the final orders in these appeals. 4. 2. Yet again, Civil Appeal No. 1682-1683 of 2022 was taken on the board on 17. 11. 2022 and learned counsel for the parties were heard further, in view of an application moved on behalf of the promoter and erstwhile director of the corporate debtor (IA No. 168602 of 2022), seeking permission to bring on record subsequent events that his proposal of settlement under Section 12-A of the Code was accepted by CoC on 12. 10. 2022 by 100% of the voting share, i. e.

, unanimously; and the same had been placed before the Adjudicating Authority for approval. Having regard to the events aforesaid and looking to the overall circumstances, while keeping the judgment reserved, we requested the Adjudicating Authority to await the decision of this Court in these matters. Particulars of the proceedings and the parties 5. In view of the issues arising for determination in these appeals, with several parties carrying different roles, interests, and positions, worthwhile it would be to narrate at the outset, in brief, the relevant particulars of the proceedings leading to these appeals as also the principal parties involved herein. 6. As noticed, the CIRP against the corporate debtor got initiated on 05. 05. 2020, with the NCLT admitting an application moved under Section 7 of the Code by one of its financial creditors, TFCI. This application had been registered as IBA No. 1459 of 2019.

The application for approval of the resolution plan, moved before NCLT was registered as IA No. 150/CHE/2021 in the said IBA No. 1459 of 2019. This application and several other correlated applications were considered together and were dealt with in the common order dated 15. 07. 2021 whereby, the National Company Law Tribunal, Chennai rejected the M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J. ] objections and approved the resolution plan approved by the committee of creditors. 6. 1. Four separate appeals were preferred before the National Company Law Appellate Tribunal, Chennai Bench against the aforesaid order dated 15. 07. 2021, being Company Appeal (AT) (CH) (Insolvency) Nos. 164, 176, 218 and 219 of 2021.

The appeals bearing numbers 164 of 2021 and 219 of 2021 were filed by the promoter and erstwhile director of corporate debtor, respectively in challenge to the approval of resolution plan and rejection of his application for consideration of a settlement proposal. On the other hand, the appeal bearing number 176 of 2021 was filed by one of the creditors of the corporate debtor, whose claim as financial creditor as also operational creditor was declined in the approved resolution plan, for being a related party of the corporate debtor. The other appeal bearing number 218 of 2021 was filed by an NRI shareholder and erstwhile director of the corporate debtor, essentially being aggrieved by denial of any relief to shareholders in the approved resolution plan. As noticed, these four appeals were decided together by the NCLAT in its impugned common judgment and order dated 17. 02. 2022. 6. 2. In the present set of appeals in this Court against the aforesaid judgment and order dated 17. 02.

2022, one sub-set is of appeals preferred by the resolution applicant which could be noticed as follows: 6. 2. 1. The resolution applicant has questioned the orders passed in relation to the objections and claim of the promoter and erstwhile director of the corporate debtor (in Appeal Nos. 164 of 2021 and 219 of 2021 before NCLAT) by way of Civil Appeal Nos. 1682-1683 of 2022. The resolution applicant has further questioned the order passed in relation to the claim of the related party (in Appeal No. 176 of 2021 before NCLAT) by way of Civil Appeal No. 1827 of 2022. Yet further, the resolution applicant has questioned the order passed in relation to the claim of the NRI shareholder (in Appeal No. 218 of 2021 before NCLAT) by way of Civil Appeal No. 1810 of 2022. 6. 3. Another sub-set is of appeals preferred by the resolution professional against the aforesaid judgment and order dated 17. 02. 2022, which are as follows: 6. 3. 1.

The resolution professional has questioned the orders passed in relation to the objections and claim of the promoter and erstwhile director of the corporate debtor (in Appeal Nos. 164 of 2021 and 219 of 2021 before NCLAT) by way of Civil Appeal Nos. 1756 of 2022 and 1807 of 2022 respectively. The resolution professional has further questioned the order passed in relation to the claim of the related party (in Appeal No. 176 of 2021 before NCLAT) by way of Civil Appeal No. 1757 of 2022. Lastly, the resolution professional has questioned the order passed in relation to the claim of the NRI shareholder (in Appeal No. 218 of 2021 before NCLAT) by way of Civil Appeal No. 1759 of 2022. 7. Now, we may take note of the relevant particulars of the principal parties involved in this litigation. The parties could broadly be divided into three categories with reference to their respective stands vis-à-vis the order of the Appellate Tribunal, the CIRP, and the resolution plan in question. 7.

1 The first category is of the parties who are aggrieved of the order passed by the Appellate Tribunal on several counts and are opposing the rejection of resolution plan and remand of the matter to CoC. They are: 7. 1. 1. Mr. M. K. Rajagopalan He is the resolution applicant and had submitted the resolution plan in question, which was approved by a majority of 87. 39 per cent. of the voting share of CoC but was rejected by the Appellate Tribunal, as being in contravention of Section 30(2) of the Code. He is appellant in Civil Appeal Nos. 1682-1683 of 2022, 1827 of 2022 and 1810 of 2022. In all the civil appeals filed by the resolution professional, he is arrayed as one of the respondents. 7. 1. 2. Mr. RadhakrishnanDharmarajan He is the resolution professional, who was appointed by the CoC in the third meeting dated 04. 09. 2020 and his appointment was confirmed by the NCLT in order dated 02. 11. 2020. He is appellant in Civil Appeal Nos.

1756 of 2022, 1807 of 2022, 1757 of 2022 and 1759 of 2022. In all the civil appeals filed by the resolution applicant, he is arrayed as proforma respondent No. 2. 7. 2. The second category is of the contesting respondents in this batch of appeals, who are essentially supporting the order passed by the Appellate Tribunal. They could reasonably be introduced as follows: M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J. ] 7. 2. 1. Dr. Periasamy Palani Gounder13 He is the promoter and erstwhile director of the corporate debtor, Appu Hotels Limited. He is also the Chairman of Dharani Finance Limited, the related party. He is respondent No. 1 in Civil Appeal Nos. 1682-1683 of 2022, 1756 of 2022 and 1807 of 2022. 7. 2. 2. Dharani Finance Limited The claim of this company, in its capacity as an operational creditor as also a financial creditor of the corporate debtor, was rejected by NCLT for being a related party.

However, NCLAT directed the CoC to not discriminate it from unrelated financial/operational creditors. This company is respondent No. 1 in Civil Appeal Nos. 1757 of 2022 and 1827 of 2022. 7. 2. 3. Dr. V. Janakiraman He is an NRI shareholder and erstwhile director of the corporate debtor who had, along with other shareholders, invested money in the corporate debtor. He is aggrieved of denial of the claim of shareholders in the resolution plan in question and has raised a few other questions too alongwith the aforesaid promoter and director of the corporate debtor. He is respondent No. 1 in Civil Appeal Nos. 1810 of 2022 and 1759 of 2022. 8. Apart from the above-mentioned parties, who are directly impleaded in these appeals, there are other stakeholders, standing in their capacity as financial creditors and having their own role in CIRP in question. They include: 8. 1. StateBankofIndia14 This financial creditor of the corporate debtor with nearly 26.

41% voting share in CoC, though had earlier voted in favour of the resolution plan in question but now, looking to the order of NCLAT relating to eligibility deficiency of the successful resolution applicant as also the deficiency in process, is essentially supporting the rejection of resolution plan in question and remand of matter to CoC for consideration afresh. 13 Hereinafter also referred to as 'the promoter'. 14 'SBI', for short. 8. 2. Edelweiss Asset Reconstruction Company Limited along with IDBI Debentures Trusteeship Limited and Allium Finance Private Limited15 These financial creditors, with about 21. 13% voting share in CoC, too had voted in favour of the resolution plan in question. They have raised questions on the order passed by NCLAT on various grounds.

This apart, they have underscored certain other areas of concern including the amount deposited by the resolution applicant, and have also suggested that CIRP must be allowed to go on while leaving the promoter a right to better the resolution plan by way of a Swiss Challenge Process only after depositing the matching amount in an escrow account prior to voting on his settlement offer. 8. 3. Tourism Finance Corporation of India Limited This financial institution with 5. 62% of the voting share in CoC got initiated the CIRP in question with admission of its application under Section 7 of the Code by the NCLT on 05. 05. 2020 (IBA No. 1459 of 2019). The relevant factual and background aspects 9. Having taken note of the relevant particulars of the proceedings as also the principal parties involved, we may now take note of the relevant factual and background aspects, in brief, as infra. 10.

The corporate debtor, Appu Hotels Limited, is a limited company with corporate identification number U92490TN1983PLC009942 and registered office at PGP House, No. 57, Sterling Road, Nungambakkam, Chennai - 600 034. The promoter group of the corporate debtor consists of around one hundred non-resident investors living in the United States of America, who are said to have invested over twenty-two million US dollars in foreign exchange in the corporate debtor. The corporate debtor had availed project loans to construct 'Le Meridian, Coimbatore', from a consortium of bankers led by Indian Bank. It appears that the business did not materialise as per the estimated projections. The promoters and directors brought in nearly Rs. 100 crore as unsecured loans over and above the cash flow to keep the corporate debtor's asset as standard.

It further appears that though the hotel was making operational profit, but the profit was insufficient to 15 'Edelweiss & associates', for short and collectively. M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J. ] service the loan repayment to the optimum requirement and the corporate debtor defaulted in payment of overdues. Initiation of CIRP 11. The default on the part of corporate debtor in payment of overdues led to the application under Section 7 of the Code for initiation of CIRP by one of its financial creditors, TFCI (who holds about 5% of the total loan amount) before the NCLT, in Application No. IBA/1459/ 2019. It appears that a few propositions of One Time Settlement 16 were mooted on behalf of the corporate debtor but without any effective result, for the corporate debtor having not been able to make payment against the dues of the financial creditor.

The NCLT observed that there being the existence of a financial debt and there being a default on the part of the corporate debtor, the application moved by the financial creditor was bound to be admitted and as a consequence, triggering the corporate insolvency resolution process. Accordingly, the NCLT, by its order dated 05. 05. 2020, admitted this application and appointed one Mr. Mukesh Kumar Gupta as interim resolution professional17 with other necessary directions in the following terms: - "12. Heard the Counsel for both the parties and perused the documents placed on record. It Is a fact borne on record that the Corporate Debtor is unable to repay the dues to the Financial Creditor and as such on the garb of OTS settlement the Corporate Debtor wanted to gain time to settle of the dues to the Financial Creditor. Further, a perusal of the record of proceedings dated 04. 02.

2020, also shows that the Corporate Debtor was putting in efforts to settle of the dues of the Financial Creditor and upon such representation being made, the Corporate Debtor was granted time to settle the matter and the matter was finally posted to 02. 03. 2020 for reporting settlement or to proceed with the matter. Thus, when the matter was taken up for enquiry on 02. 03. 2020, it has been brought to the notice of this Tribunal by the Counsel for the Financial Creditor that the Corporate Debtor has not paid the dues of the Financial Creditor and also the Learned Counsel for the Financial Creditor submitted that even in the affidavit filed by the Corporate Debtor, the outstanding debt has been admitted which Is owed to the Financial Creditor. 16 'OTS', for short. 17 'IRP' for short. 13. Thus, we are satisfied that there is a debt and default on the part of the Corporate Debtor and the Corporate Debtor is unable to repay its dues to the Financial Creditor.

It has also been consistently held by the Hon'ble Supreme Court both in Innoventive Industries Ltd. -Vs-ICICI Bank and another (2018) 1 SCC 407 aswell as Mobilox Innovations Pvt. Ltd .. -Vs- Kirusa Software Pvt. Ltd. (2018) 1 SCC 353 after going through the Scheme of l&B Code, 2016 in depth in relation to an Application under Section 7 filed by a Financial Creditor as compared to the one filed under Section 9 by an Operational Creditor, in relation to a Section 7 Application where there is an existence of a 'financial debt' and when there is a default, this Tribunal is bound to admit the Application and as a consequence trigger the Corporate Insolvency Resolution Process (CIRP) and in relation to a Section 7 Application defence of set off or counter claim put forth by the Corporate Debtor cannot be considered as a dispute In relation to the Financial debt and default In relation to It. In the present case, it is clear that there is a default on the part of the Corporate Debtor. 14.

Thus taking into consideration the facts and circumstances of the case as well as the position of Law, we are of the view that this Application as flied by the Applicant - Financial Creditor is required to be admitted under Section 7 (5) of the I&B Code, 2016. 15. The Financial Creditor has proposed the name of one MUKESH KUMAR GUPTA having Registration Number [IBBI/IPA-001/IP-P00207/2017-18/10407] (Email id :- guptam11@ gmail. com) (Mob:- +91-9810798961) asInterim Resolution Professional (IRP) and a written communication in the format prescribed under Form 2 of the Insolvency and Bankruptcy Board of India (Application to Adjudicating Authority) Rules, 2016 has been filed by the proposed IRP who is appointed as the IRP to take forward the process of Corporate Insolvency Resolution of the Corporate Debtor.

The IRP appointed shall take in this regard such other and further steps as are required under the Statute, more specifically in terms of Section 15,17,18 of the Code and file his report within 20 days before this Bench. The M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J. ] powers of the Board of Directors of the Corporate Debtor shall stand superseded as a consequence of the initiation of the CIR Process in relation to the Corporate Debtor in terms of the provisions of I&B Code, 2016. *** *** *** 19. Based on the above terms, the Petition stands admitted in terms of Section 7 of the Code and the Moratorium shall come into effect as of this date. A copy of the order shall be communicated to the Petitioner as well as to the Respondent above named by the Registry. In addition, a copy of the order shall also be forwarded to IBBI for its records.

Further, the IRP above named be also furnished with copy of this order forthwith by the Registry, who will also communicate the initiation of the CIRP in relation to the Corporate Debtor to the Registrar of Companies concerned. " CoC Meetings and ancillary proceedings 12. CIRP in relation to the corporate debtor having thus been initiated, various steps were taken in terms of the requirements of the Code and the CIRP Regulations, including the meetings of CoC which ultimately led to the approval of the resolution plan in question. Some of those steps carry their own relevance in these appeals in view of the issues raised by the parties. We may briefly take note of the relevant steps/proceedings in their feasible chronology as follows: 12. 1. Pursuant to the initiation of CIRP, IRP issued a public announcement in Form A on 08. 05. 2020 inviting claims from various stakeholders in the corporate debtor. Further, for conducting the first meeting of the committee of creditors on 22. 06.

2020, IRP issued a notice on 18. 06. 2020. The said meeting was attended by all the members of the CoC including the promoter and erstwhile director of the corporate debtor. 12. 2. In the second CoC meeting conducted on 06. 08. 2020, the proposal of IRP in relation to information memorandum and to seek EOI by publication of Form G was approved. Two sets of valuators were engaged as registered valuators by IRP for all the three categories of assets, being Mr. Vikas Agarwal, Mr. Anil Kumar Saxena and Mr. Anubhav Aggarwal (one set); and Future Value Advisors India (P) Ltd, a registered valuer entity registered with the Insolvency and Bankruptcy Board of India18. Their fees were also approved by the CoC. 12. 3. On or about 17. 08. 2020, the IRP published Form G under Regulation 36A of the CIRP Regulations, inviting expression of interest from prospective resolution applicants to submit resolution plans. 12. 4. Thereafter, in the third CoC meeting held on 04. 09.

2020, a resolution was adopted to appoint Mr. Radhakrishnan Dharmarajan as the resolution professional. It was in the same meeting that the list of fifteen EOIs received from the prospective resolution applicants and placed by IRP, was approved by CoC. It was further informed to CoC in the said meeting by IRP that the valuation was in process and the valuers may visit the premises of corporate debtor. On 26. 09. 2020, the IRP published the final list of prospective resolution applicants. It may be observed in this regard that pursuant to publication of provisional list and upon preliminary scrutiny, thirteen of the EOIs received were initially found eligible, of which, one had withdrawn and the other namely, Sri Balaji Vidyapeeth (of which the successful resolution applicant was the managing trustee), was declared ineligible since a charitable trust cannot run a profit-making entity. Hence, the final list of eleven prospective resolution applicants was submitted before the CoC on 26.

09. 2020. Finally, three resolution plans were received, from Mr. Madhav Dhir, Mr. M. K. Rajagopalan (the resolution applicant - appellant herein) and Kotak Special Solutions. 12. 5. In the fourth CoC meeting held on 12. 10. 2020, IRP apprised the members about the valuers visiting the properties of the corporate debtor and the valuation being in process. 12. 6. On 27. 10. 2020, the appellant Mr. M. K. Rajagopalan submitted his resolution plan alongwith a demand draft in the sum of Rs. 2 crore. On 02. 11. 2020, the Tribunal approved the appointment of Mr. Radhakrishnan Dharmarajan as the resolution professional. 12. 7. In the fifth CoC meeting held on 12. 11. 2020, in the first item on the agenda, the members took note of the appointment of Mr. Radhakrishnan Dharmarajan as the resolution professional. Thereafter, on the second item, the CoC approved that the resolution professional shall file an application before NCLT to seek extension of time period 18 'IBBI', for short. M. K.

RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J. ] from 05. 05. 2020 to 31. 10. 2020 under Section 12(2) of the Code due to Covid-19 and lockdown. In the third agenda item as regards updates from RP and to decide on the resolution plan deadline extensions/possible reissuance of Form G, various views were expressed by various stakeholders which culminated in the following observations and resolution: - "Since there were mixed views of CoC the process and way forward, RP declared that it is the CoC who needs to decide on the commercial viability of the Resolution Process to its best advantage, be it re issuance of the Form G and or extension of the timelines and he will act as per the directions of the CoC. CoC members further discussed on the Form G, receipt of Resolution Plans and any potential requests from any of the RA's about extension of time.

With the consensus of CoC members, it was decided that no extension of timeline for submission of Resolution Plan should be done and the RP was directed to expedite the valuation process and check the feasibility and viability of the Resolution Plans already submitted and present the eligible Resolution Plans before the CoC for consideration. " 12. 8. In the sixth CoC meeting held on 16. 12. 2020, the RP apprised the CoC members about three resolution plans having been received out of which, the plan received from Kotak Special Solutions did not meet the criteria laid down under the Code. The RP also informed that there had been a revision in the claims and composition of financial creditors and as it was mandatory to give the revised details to the two resolution applicants, the formal presentation and the resolution applicants could be called after they revise the plans.

In this meeting, the RP also apprised the CoC members about filing of time exclusion application, which was heard on 15. 12. 2020 and order was reserved. 12. 8. 1. In the said sixth meeting, the RP also informed that he had provided the CoC members with the fair value and liquidation value to all those who had submitted the confidential undertaking and that that due to significant difference in the value of land and building submitted by the valuers appointed by IRP, he shall have to appoint third valuer in accordance with Regulation 35 of the CIRP Regulations. It was also noted that valuation of non-core assets was not done earlier but, the third valuer appointed by RP had submitted the value of non-core assets and the same had been shared with CoC members who had submitted their undertaking. The RP emphasized that their value was not very significant, and it would not affect the liquidation value much.

The relevant part of the minutes of this sixth CoC meeting could be reproduced as under: - "The RP apprised the CoC members that based on the resolution passed in 5th CoC meeting an exclusion application along with an urgent application was filed before the NCLT Chennai on 19. 11. 2020. The application was listed for hearing 15. 12. 2020 and the Order has been reserved. The RP further apprised that he has provided the CoC members with the fair value and liquidation value to all those who have submitted the confidential undertaking. RP further apprised, that due to significant difference in the value of land and building submitted by the valuers appointed by IRP, the RP has to appoint third valuer in accordance with provisions of Regulation 35 of CIRP Regulations 2016.

After it was noted that valuation of non-core assets was not done, the third valuer appointed by RP has submitted the value of non- core assets and the same has been shared with CoC members who have submitted their undertaking. The RP emphasized that their value is not very significant, and it will not affect the liquidation value much. However, second valuation for the non-core assets will be needed in order to reach a final value. RP apprised the CoC members that the valuers appointed by IRP are based in Delhi and they are asking much higher price for carrying the valuation of non-core assets. Therefore, the RP will hire a local valuer keeping the cost in mind. " The RP agreed to try and convene the next CoC meeting before Christmas eve, subject to getting the revised resolution plans. 12. 9. In the interregnum, the Tribunal, by its order dated 23. 12. 2020, allowed the application moved by RP for exclusion of the period between 05. 05. 2020 and 31. 10.

2020 - 179 days - while calculating the time for completion of CIRP of the corporate debtor; and excluded the said period from the period of CIRP in terms of Section 12(2) of IBC because of pandemic conditions, in the following words: - M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J. ] "6. Heard the submission made by the Learned Counsel for the Applicant and perused the records placed on file. In the facts of the present case, it is to be noted that the CIRP in relation to the Corporate Debtor was initiated only on 05. 05. 2020 i. e. during the period of lockdown and as such the Applicant has sought to exclude the period from 05. 05. 2020 till 31. 10. 2020. The Applicant placed on record the G. O. Ms. No. 482, Revenue and Disaster Management (DM-IV) Department, Government of Tamil Nadu dated 12. 09. 2020 and G. O. Ms. No. 447, Revenue and Disaster Management (DM-IV) Department, Government of Tamil Nadu dated 30. 08.

2020 in order to substantiate the during such time, where the exclusion is sought for, the lockdown was in existence in the Government of Tamil Nadu. 7. Further, it is pertinent to note here that due to Covid-19 pandemic coupled with attendant lockdown imposed by the Central/ State Government, the Regulator viz. IBBI has introduced an Amendment in the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, so as to exclude the period of lockdown from the CIRP timeline. Regulation 40C of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 states as follows: 40C. Special provision relating to time-line.

Notwithstanding the time-lines contained in these regulations, but subject to the provisions in the Code, the period of lockdown imposed by the Central Government in the wake of Covid-19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process. 8. The Learned Counsel for the Applicant submitted that he sought to exclude the period from 05. 05. 2020 till 31. 10. 2020, a total of 179 days from the period of CIRP. Thus, as to the facts of the present case, in view of Regulation 40C of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 the period from 05. 05. 2020 till 31. 10. 2020 is excluded from the period of CIRP in terms of Section 12(2) of IBC, 2016. The Applicant shall make every endeavour to complete the CIRP in relation to the Corporate Debtor within the timelines as prescribed under the Code.

Accordingly, the application stands allowed. " 12. 9. 1. Two equity shareholders of the corporate debtor challenged the aforesaid order of the Tribunal before the Appellate Tribunal in Company Appeal (AT)(CH)(Ins. ) Nos. 19 of 2021 and 20 of 2021 but, the appeals were dismissed on 05. 05. 2021 with the following observations19: - "33. ..... In the instant case, even though we find that Regulation 30-C could have been applied for exclusion of 179 days on account of the unprecedented situation created by the Covid 19 pandemic and some of the Financial Creditors opined for fresh publication of form G for the invitation of EOI. But the COC had unanimously decided only for seeking exclusion of 179 days, i. e. from 5 May 2020 to 31 October 2020, for completion of CIRP. But the CoC, under its commercial wisdom, did not prefer for publication of Form-G afresh to invite Expression of Interest. Therefore such a decision of the CoC is not justiciable. 34.

In the circumstances stated above, we are of the considered opinion that the decision taken by the Adjudicating Authority needs no interference, and both the Appeals deserves to be dismissed. " 12. 10. In the seventh CoC meeting held on 29. 12. 2020, the RP briefly discussed the resolution plan submitted by Mr. M. K. Rajagopalan, resolution applicant herein, as the other successful prospective resolution applicant, Mr. Madhav Dhir, could not submit his resolution plan even after being granted extension once, whose request for further extension was denied by CoC and it was decided to continue with the resolution plan received from Mr. M. K. Rajagopalan. After discussing on the resolution plan so submitted, the resolution applicant was asked to submit the revised resolution plan after incorporating the changes suggested by the CoC members and he promised to do so by 30. 12. 2020.

Further, the RP apprised the CoC that the third valuer as appointed had visited the premises and conducted valuation of the non-core assets and promised to submit the draft valuation by 30. 12. 2020. 19 There had been other observations occurring in this judgment and order dated 05. 05. 2021, which have been relied upon by NCLT while approving the resolution plan in question and have formed a part of contentions in these appeals, as shall be noticed later. M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J. ] 12. 11. In the eighth CoC meeting held on 04. 01. 2021, the revised resolution plan of the resolution applicant was presented and discussed with CoC members. After long deliberation on various aspects of the plan, it was decided that the plan could be put to vote through CoC meeting on 22. 01. 2021. 12. 12. On 21. 01. 2021, just a day before the resolution plan was to be put to voting, the promoter and erstwhile director of the corporate debtor - Dr.

Periasamy Palani Gounder - submitted another OTS proposal with reference to Section 12-A of the Code to the CoC. A so-called "Term Sheet" dated 22. 01. 2021 issued by Deutsche Bank was relied up as a proof of funding. 12. 13. However, the CoC stuck to the agenda before it and the resolution plan submitted by the resolution applicant - Mr. M. K. Rajagopalan - was put to vote in the ninth CoC meeting held on 22. 01. 2021. Though, the said plan was approved with 87. 39% of the total voting share of financial creditors present and voting in the meeting, the RP was required to send the resolution plan back to the resolution applicant as there was dissent by some of the financial creditors and in terms of Section 30 (2) of the Code, the amount to be paid to dissenting financial creditors shall not be less than the amount paid to such creditors in accordance with Section 53 in the event of liquidation of the corporate debtor.

Therefore, resolution applicant was asked to further revise the resolution plan. The relevant resolution on Agenda Item No. A. 1. in the ninth CoC meeting, having its relevance to the present matter is reproduced as under: - "Agenda Item No. A. 1 - To discuss and put to vote the Resolution Plan submitted by Mr. M. K. Rajagopalan. The Resolution Professional apprised the CoC members that as decided in the last CoC meeting the revised Resolution Plan submitted by Mr. M. K. Rajagopalan will be put to physical voting for approval of the CoC members. The Resolution Professional then asked each member of CoC present in the meeting whether the revised Resolution Plan have their approval or not and the result of physical voice voting is as follows: The revised Resolution Plan was approved with 87. 39% of total voting share of Financial Creditors present and voted in the meeting.

Since there was dissent by some of the financial creditors, the Resolution Professional will send back the Resolution Plan to the Resolution Applicant for further revision, as Section 30 (2) of IBC 2016, provides that the amount paid to dissenting financial creditors shall not be less than the amount paid to such creditors in accordance with Section 53 in the event of liquidation of the Corporate Debtor. Representative from Bank of India Tokyo emphasized that they have voted in favour considering the fact that they will be getting their full amount. Resolution Professional assured them and other CoC members who have voted in favour of the Resolution Plan that there will not be any changes in the amount provided for assenting financial creditors. RP further apprised that the RA has given an undertaking that RA will comply with Section 30(2) of IBC and there will not be any change in the amount provided in the Resolution Plan for assenting creditors. " 12. 14. On 25. 01.

2021, the resolution applicant submitted the revised resolution plan incorporating the changes. He also submitted a bank guarantee to the tune of Rs. 25 crore to the resolution professional on 01. 02. 2021. Thereafter, on 03. 02. 2021, the resolution professional M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J. ] furnished Form H Compliance Certificate, containing the details of the compliance of the resolution plan submitted by the resolution applicant. 12. 15. Though, in the chronology of events, after the aforesaid proceedings of CoC and submission of Form H by the RP, the proceedings before the Adjudicating Authority are to be noticed but, there remains one significant feature of this case that in the ninth meeting dated 22. 01. 2021, even while approving the resolution plan, the CoC asked the resolution applicant to further revise the resolution plan, particularly in relation to the dissenting financial creditors.

The resolution applicant indeed revised the resolution plan but, such a revised plan was not placed in CoC before presenting the matter to the Adjudicating Authority for approval. This aspect has formed a part of contentions in these appeals and, in this regard, it has been one of the contentions on the part of the resolution applicant that there had not been any material change in the plan and in any case, in the later meeting of CoC, there had been a deemed post facto approval of the revised resolution plan incorporating the changes earlier suggested by CoC. In view of the issues involved, apt it would be that before adverting to the decision of the Adjudicating Authority, we refer to the tenth meeting of CoC, which was held on 15. 06. 2021, and where the RP's updates on the latest developments were taken note of by CoC. The relevant part of the minutes of the tenth CoC meeting dated 15. 06. 2021 read as under: - "Agenda Item No.

A 1- Update of Resolution professional on the latest developments. • The Resolution Professional welcomed the CoC members and others to the meeting • RP informed that post approval of the Resolution plan in the nineth CoC meeting held on 22. 01. 2021, the plan was put up for revision to the RA to provide for liquidation value where relevant based on voting and the revised Resolution plan was received on 25/01/2021 and it was filed with the NCLT on 04. 02. 2021 • RP confirmed that the CD has been kept on a going concern basis from that date, however there are challenges from the advent of severe Covid wave from the beginning of April 2021, which has dented the business and cash flows of the CD. • Cash monitoring is ongoing at Chennai, Coimbatore hotels and Kumbakonam Resort. • RP updated that the current occupancy at the Coimbatore hotel dropped to 4% which is all time low. The turnover for the FY 2021 is about 25 crores with a negative GOP of-20%" 12. 16.

Before proceeding further, another ancillary aspect may also be usefully referred to, which has also formed a part of contentions in these appeals. It relates to another settlement proposal of the promoter. It is noticed that while the proceedings before the Adjudicating Authority were pending, the promoter, again, on 08. 03. 2021, submitted a settlement proposal to TFCI and sought consequent withdrawal of CIRP under Section 12-A of the Code; and also submitted a 'letter of support' dated 14. 07. 2021 issued by one Saveetha Institute of Medical and Technical Sciences addressed to the CoC to demonstrate its ability and bonafide in support of its withdrawal proposal. However, the said support was subsequently withdrawn by Mr. Veerayan, the President of the said Saveetha Institute of Medical and Technical Sciences. 13.

Having taken note of the basic background aspects in relation to the initiation of CIRP and CoC meetings as also the ancillary matters, we may now examine the decision of the Adjudicating Authority leading to the approval of the resolution plan in question in necessary details. Resolution plan approved by the Adjudicating Authority (NCLT) 14. As noticed, upon approval of the resolution plan of the resolution applicant - Mr. M. K. Rajagopalan - by CoC with 87. 39% majority of the voting share, the application bearing IA No. 150 of 2021 was filed by the resolution professional under Section 30(6) of IBC before the Adjudicating Authority (NCLT) for approval of the resolution plan. 14. 1. During the proceedings before the Adjudicating Authority, several objections were raised by the related party, the promoter, an unsuccessful potential resolution applicant and by some of the unsecured financial creditors. 14. 2.

One of the objectors to the resolution plan was the suspended director/promoter of the resolution plan - Dr. Periasamy Palani Gounder - who filed MA No. 13 of 2021 alleging procedural irregularities in the conduct of CIRP; non-compliance of Regulation 35(1)(a) of the CIRP M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J. ] Regulations, in carrying out valuation of non-core assets of corporate debtor alongwith several other procedural errors; and for consideration of his proposal under Section 12-A of the Code with the option to modify the same on the request of the members of CoC. 14. 3. Two applications were filed by Dharani Finance Limited seeking that resolution professional be directed to admit its claim of Rs. 1,94,14,024, as operational creditor in application bearing MA No. 18 of 2021; and of Rs. Rs. 4,81,62,175/- as financial creditor in application bearing MA No. 48 of 2021.

In both the applications, the common relief sought for was not to be treated as a related party of the corporate debtor and not to be discriminated in the resolution plan. 15. The Adjudicating Authority dismissed the applications and allowed the resolution plan as approved by CoC. The observations and findings of the Adjudicating Authority in its order dated 15. 07. 2021 had been as follows: 15. 1. As regards the questions surrounding the valuation of assets and valuation reports, the Adjudicating Authority referred to the minutes of second, third, sixth and seventh CoC meetings, taking note of the appointment of valuers and the proceedings conducting by them. The Adjudicating Authority further extracted Regulations 27 and 35 of the CIRP Regulations and thereafter, recorded its satisfaction that RP had arrived at a fair value and a liquidation value based on average of the three valuers in accordance with the requirements of Regulations.

The Adjudicating Authority also referred to the order passed by NCLAT on 05. 05. 2021 in Company Appeal (AT) (Ins) Nos. 19 and 20 of 2021 and observed that the Appellate Tribunal had rendered finding that resolution plan amount had been arrived at after following the prescribed procedure. Thus, the Adjudicating Authority found no error committed by IRP or RP in appointing registered valuers and further found that there was no error in regard to the valuation submitted by those registered valuers. Accordingly, the objections in relation to valuation were overruled. 15. 1. 1. The relevant observations and findings of the Adjudicating Authority in regard to the questions pertaining to valuation and the valuation reports, after extensive extraction of the relevant minutes of the meetings of CoC had been as under: - "(I) VALUATION REPORT:- *** *** *** 80.

In the present case, it is seen from the minutes extracted supra from the 6th CoC meeting that RP further apprised the CoC members, that due to significant difference in the value of land and building submitted by the valuers appointed by IRP, the RP had to appoint third valuer in accordance with provisions of Regulation 35 of CIRP Regulations, 2016. Accordingly, the third valuer has submitted his report before the RP and accordingly the fair value and the Liquidation value in relation to the Corporate Debtor was arrived at by the Resolution Professional. 81. Thus, it is clear that the RP has arrived at a Fair Value and the Liquidation Value based on the average of all the three valuers and the same has been done in accordance with Regulation 35 of the IBBI (IRPCP) Regulations 2016.

Further, the valuation certificate dated September 2019 relied on by the promoter / suspended Director of the Corporate Debtor would be of no relevance as the same was not done in accordance with the Regulations framed under the IBC, 2016. Also, the RP who is in charge of the affairs of the Company Debtor once the CIRP has been triggered in relation to the Corporate Debtor, he has to act as per the provisions of the Regulations and cannot act according to the whims and fancies of the promoters I erstwhile directors of the Corporate Debtor. The valuation certificate dated September 2019 relied on by the promoter I suspended Director of the Corporate Debtor was done during pre-Covid period and the same cannot be a yardstick for the valuers who have been appointed pursuant to the Regulations framed under the provisions of IBC, 2016.

Also, the stance of the Learned Senior Counsel for the promoter I suspended Director of the Corporate Debtor that the CIRP was triggered during the peak of Covid would be of no relevance since at that point of time, there was no statutory bar for this Adjudicating Authority to initiate CIRP in relation to a Company. However, it is seen that the Application for initiation of CIRP was filed by the Financial Creditor as early as in the year 2019 itself and during that point of time there was no cases of Covid in India and the matter was heard in detail and the orders were reserved during March 2020. While this being the fact, the contention of the Learned Senior Counsel that only because of Covid they were not able to settle the creditors of the Corporate Debtor, does not hold much water. Eventhough, the valuation as M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J.

] arrived at by the valuers may not be acceptable to the erstwhile promoters / Directors of the Corporate Debtor, it cannot give them a right to challenge the same before this Adjudicating Authority on ostensible grounds. 82. Further, it is also seen that as against the order of exclusion of CIRP, passed by this Tribunal in IA/1001/IB/2020, the erstwhile promoter or Corporate Debtor has filed an appeal before the Hon'ble NCLAT and the Appellate Tribunal vide its order dated 05. 05. 2021 in Company Appeal (AT)(Ins) No. 19 & 20 of 2021 while dealing with the valuation of the Corporate Debtor in para 14 and 15 has held as follows; 14. In response to the above, the Counsel for the Respondents contended that the entire CIRP was conducted as per the procedure prescribed by the I&B Code.

The Appellant who is holding some equity shares in 3rd Respondent/Corporate Debtor has come before this Appellate Tribunal by filing the present Appeal only to distract and delay the Insolvency Resolution Process and to bring about a halt to the approval of the Resolution Plan which the Committee of Creditors has approved with a majority of 87. 34% which is pending for approval before the Adjudicating Authority. 15. The Appellant's contention about the valuation of the Corporate Debtor of 1600 crores is unsupported by any evidence. The fact remains that the Resolution Plan amount has arrived after following the procedure prescribed under the Code and the Rules and Regulations made thereunder (emphasis supplied) 83. Thus, the Hon'ble NCLAT also has rendered a finding that the Resolution Plan amount has been arrived at after following the procedure prescribed under the Code and the Rules and Regulations made thereunder. 84.

Hence for reasoning stated supra, this Adjudicating Authority finds that there was no error committed by the IRP / RP in so far as appointing the registered valuers in relation to the Corporate Debtor, nor there was any error on the valuation being submitted by those Registered valuers and as a consequence thereof, the objections as raised by all the objectors in relation to the valuation of the Corporate Debtor are overruled. Accordingly, MA/13/CHE/ 2021 stands dismissed. " 15. 2. As regards the question of non-consideration of the proposal given under Section 12-A IBC by the promoter, the Adjudicating Authority referred to the proposition made by another erstwhile promoter of the corporate debtor which was considered by CoC in its ninth meeting and it was found that even the original applicant of CIRP, i. e. , TFIC was kept in dark about such a proposal. It was also noticed that even the proposal with the term sheet from Deutsche Bank came with a disclaimer.

The Adjudicating Authority formed the opinion that such a proposal had only been of dilatory tactics and was mooted only at the eleventh hour to stall the resolution plan. Thus, the allegations of promoter about non- consideration of Section 12-A application were found meritless and were rejected. The Adjudicating Authority observed and held in this regard as under: - "(II) ON NON-CONSIDERATION OF SEC. 12A APPLICATION: - 85. The Learned Senior Counsel Mr. P. S. Raman, appearing on behalf of the erstwhile Promoter I Director of the Corporate Debtor contended that the Resolution Professional and the CoC has not considered the proposal as given under Section 12A of IBC, 2016. In this regard, it is pertinent to refer to certain communications that exchanged between the parties in relation to the same. In the 9th CoC meeting wherein the Resolution Plan was about to be put for vote, the erstwhile promoter of the Corporate Debtor Mr.

Senni Malai, requested the RP to consider an application filed under section 12A of IBC, 2016. The record of the minutes as found in the 9th CoC meeting is extracted hereunder; " ....... As the Resolution Plan agenda was about to be put up for voting, Mr. Senni Malai, MD of the CD and Mr. Kaliannan representing the CD, requested the RP about a Sec 12 A, Application for withdrawal request letter, prepared by them and circulated to the CoC about two hours before this meeting. RP Informed them, that discussions on that can't be part of this agenda as that has not come from the Applicant and it was not part of the agenda for this meeting. However, the Corporate Debtor's representative insisted that this be discussed. RP said he would seek the opinion of the Applicant, being TFCI in this M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J. ] case. Mr. Anoop Bali from TFCI said that he can't opine on this letter as it is addressed to the CoC, when prompted by Mr.

Kaliannan, that this letter is being put up through TFCI, Mr. Anoop Bali said that this can't be taken up as it has not come in the appropriate required form and he will not be able to comment on this and requested the RP to carry on with the agenda for the day, that of voting on the Resolution Plan. Mr. Senni Malai requested other creditors to comment. Mr. Arun Shah of Aryav Exports said that CoC can discuss this. However other creditors with significant voting share such as SBI, Bank of India said that we should stick to the Agenda on hand and not deviate from the main agenda. RP then requested the representatives from Corporate Debtor to allow for the agenda items to go through as the majority of the CoC in favour of that and no further discussions can be made on the letter sent to the CoC. " 86.

A perusal of the aforesaid minutes would show that the promoter of the Corporate Debtor has proposed for a 12A settlement only at the 9th CoC meeting, when the Resolution Plan of the Resolution Applicant was about to be put to vote. Further, it is also seen that the Petitioning Creditor viz. Toursim Finance Corporation of India (TFCI) was also kept in dark about the 12A proposal by the promoters and also flagged an issue stating that the letter has been addressed to the CoC and not to them. However, it is seen that the said agenda of proposal to be made under Section 12A was not considered by the CoC and that they proceeded to vote for the Resolution Plan. 87. It is also seen that the Term Sheet relied on by the Learned Senior Counsel for the promoter in order to substantiate that they have the source to settle the entire dues of the CoC, it is seen that the said Term Sheet dated 22. 01.

2021 issued by Deutsche Bank would start of with a disclaimer as follows; "Please note that the terms set out in this Term Sheet are indicative only and do not constitute an offer to finance the Facility. The terms and conditions of the term sheet remain subject to the diligence, internal approvals, credit committee approval, successful syndication, KYC and satisfactory documentation. " 88. Thus, it is seen that the proposal as projected by the Learned Senior Counsel for the promoters to be made under Section 12A, seems to be only an eye wash and a dilatory tactics to delay the process of CIRP in relation to the Corporate Debtor and that the fact that the proposal has been mooted only during the eleventh hour is to stall the Resolution Plan as moved by the Resolution Applicant. Hence, for the. aforesaid reasons, the allegations of the promoters that their Section 12A Application was not considered by the RP and the CoC do not hold any merits and stands overruled. " 15. 3.

As regards the alleged procedural irregularities, the Adjudicating Authority found the objections to be of no substance where the objectors had failed to establish any prejudice caused to them while also observing that a statutory provision regulating a matter of practice and procedure would generally be read as directory and not mandatory. The Adjudicating Authority observed that the objections in relation to the procedural irregularities were not so grave as to defeat the resolution plan. It was also observed that some of the objectors were, in fact, getting 100% of the claimed amount in the resolution plan and it raised a suspicion if the objections by them were rather motivated. 15. 3. 1. The Adjudicating Authority, in relation to the question of procedural irregularities, observed and held as under: - "(II) PROCEDURAL IRREGULARITIES: - 89.

Another major objection in relation to the Resolution Plan was that the IRP I RP has violated umpteen provisions of the Regulations by not adhering to the timelines framed thereunder. In this regard, it is to be seen that the model timelines given under the IBBI Regulations were designed by keeping into mind the CIRP period of 180 days; however in many cases the CIRP period has exceeded more than 330 days and still continues. Thus, it cannot be gainsaid that the IRP or the RP as the case may be has to strictly adhere to the model timelines stipulated under the Regulations. For instance, an avoidance Application as found in Section 43, 45 and 50 can be filed either by the RP or by the Liquidator and the model timeline prescribed under the attendant Regulations states that the same should be filed in T+75 days. If the said model timelines is construed as mandatory then the M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J.

] avoidance transactions which entitle the Liquidator to file an Application, would be rendered as nugatory. 90. It is significant to note here that, a statutory provision regulating a matter of practice or procedure will generally be read as directory and not mandatory. Thus, even though the objectors to the Resolution Plan have alleged many procedural irregularities in relation to the conduct of the proceedings in relation to the CoC; however those objectors have miserably failed to establish as to what prejudice has been caused to them in respect of the same. Further, a person who has been inducted as a member of the CoC in its 6th meeting cannot be allowed to question the actions taken by the CoC in the past meetings.

However, in relation to the objections raised by the Applicants in IA/181/CHE/2021 and IA/ 183/CHE/2021, this Tribunal is unable to comprehend their objections in relation to the plan, especially when they are getting 100% of their claim amount to be paid by the Resolution Applicant. Hence, this raises a suspicion as to whether that these Applications as filed by the objectors are motivated. 91. Thus, the objections as raised by the objectors in relation to the procedural irregularities in relation to the conduct of the Corporate Insolvency Resolution Process, are not so grave in order to defeat the Resolution Plan as filed by the Resolution Professional. Hence, for the said reasons, the objections as raised by the objectors in respect of the same are overruled. Accordingly, IA/181/CHE/2021, IA/183/CHE/2021, IA/192/CHE/2021, IA/172/ CHE/2021 and IA/291/CHE/2021 stand dismissed. " 15. 4.

Moving on to the questions concerning the related party - Dharani Finance Limited - and the applications moved by it, the Adjudicating Authority took note of the submissions on its behalf with reference to Section 21(2) of the Code that it could not have been categorised as related party but rejected this contention while observing as under: - "93. A bare perusal of the said provision shows that, even though the Applicants viz. M/s. Dharani Finance Limited are regulated by a financial service regulator, they have miserably failed to establish that the debts due to them have become due solely on account of conversion or substitution of debt into equity shares or instruments convertible into equity shares. Further the phrase "completion of such transactions as may be prescribed" would also be of no avail, since the transactions as such have not been prescribed by the Board.

In any case, this Tribunal is of the considered view that the Applicants in MA/18/CHE/2021 and MA/ 48/CHE/2021 are related party in respect of the Corporate Debtor and that the decision of the IRP / RP in categorizing the Applicant viz. M/s. Dharani Finance Limited as "Related Party" of Corporate Debtor is free from all legal infirmities and does not warrant any interference by this Adjudicating Authority. Accordingly, MA/18/ CHE/2021 and MA/48/CHE/2021 stands dismissed. " 15. 4. 1. The Adjudicating Authority also examined the question of discrimination in the resolution plan in respect of distribution of amount to the financial creditor-related party compared with the financial creditorunrelated party. The Adjudicating Authority referred to the principles stated by this Court in Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and Ors.

: (2020) 8 SCC 531 and rejected those contentions while observing that in the scheme of the Code, there was no provision which mandatorily requires payment to the related party in parity with the unrelated party. In this regard, the Adjudicating Authority, inter alia, observed as under:- "(IV) DISCRIMINATION IN THE RESOLUTION PLAN:- 94. Another rival contention put forth by the Learned Senior Counsel for the objectors was that there was is a discrimination in respect of the distribution of amount to the Financial Creditor Related Party compared with the Financial Creditor - unrelated Party. It was contended that no amount is paid by the Resolution Applicant, to the Related Party of the Corporate Debtor, be it Financial Creditor or Operational Creditor. In this regard, it is to be noted here that the way in which the amount has to be distributed and paid, purely falls within the domain of the Resolution Applicant and further the CoC in its commercial wisdom has accepted the same.

Further, there is no provision in the IBC, 2016 which mandates that the Related party should be paid in parity with the unrelated party.... 95. It must be noted here that so long as the provisions of the Code and the Regulations have been met, it is the commercial M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J. ] wisdom of the requisite majority of the CoC which is to negotiate and accept a resolution plan, which may involve differential payment to different classes of creditors, together with negotiating with a prospective resolution applicant for better or different terms which may also involve differences in distribution of amounts between different classes of creditors... 96.

Thus, the contentions of the Learned Senior Counsel for the objectors that differential treatment are being made to them since they are related party in respect of the Corporate Debtor do not hold any merit in view of the discussions made supra and also the decisions referred in support of the same. Hence the objections raised by the objectors in relation to the said issues are overruled. " 15. 5. The Adjudicating Authority also took note of the question relating to the pending avoidance application and recorded its satisfaction that the provision had duly been made in the resolution plan as to the fate of the avoidance application and hence, the objections in that regard were required to be eschewed. 15. 6. Apart from the above, the Adjudicating Authority also dealt with the objections raised by one of the other prospective resolution applicants but those aspects need not be dilated for the present purpose. 16.

After recording its findings on the issues raised by the parties, the Adjudicating Authority proceeded to approve the resolution plan while recording its satisfaction as regards all the mandatory compliances by the plan in the following manner: - "(V) APPROVAL OF RESOLUTION PLAN 103. Thus, after overruling all the objections raised in relation to the Resolution Plan, this Adjudicating Authority in so far as the approval of the Resolution Plan is concerned, section 30(6) of the IBC, 2016 cast certain duties upon this Adjudicating Authority to examine the Resolution Plan as to whether the Plan falls within the contours of the said Section. Hence, a comparison of the mandatory compliance as required under IBC, 2016 vis-a-vis the compliance as made in the Resolution Plan is being tabulated hereunder. M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J. ] 17.

The Adjudicating Authority, thereafter, referred to the decisions of this Court in the cases of Essar Steel (supra); K. Sashidhar v. Indian Overseas Bank: (2019) 12 SCC 150;Jaypee Kensington Boulevard Apartments Welfare Association and Ors. v. NBCC (India) Limited and Ors. : (2022) 1 SCC 401 and Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh and Ors. : (2020) 11 SCC 467 as regards the principles that the Adjudicating Authority would not be sitting in appeal over the commercial wisdom of CoC and also observed that there was no requirement that the bid of the resolution applicant has to match the liquidation value of the corporate debtor. The Adjudicating Authority also left the questions of various reliefs/concessions sought for by the resolution applicant to be taken up in the appropriate forum or before the appropriate authority in accordance with law. 17. 1.

With the above-mentioned observations and findings, the Adjudicating Authority concluded on the matter with approval of the resolution plan and with further directions in the following terms: - "113. Thus the Resolution Plan is hereby approved and is binding on the Corporate Debtor and other stakeholders involved so that revival of the Debtor Company shall come into force with immediate effect and the "Moratorium" imposed under section 14 of IBC, 2016 shall not have any effect henceforth. The Resolution Professional shall submit the records collected during the commencement of the Proceedings to the Insolvency & Bankruptcy Board of India for their record and also return to the Resolution Applicant or New Promoters. Certified copy of this Order be issued on demand to the concerned parties, upon due compliance. Liberty is hereby granted for moving any Miscellaneous Application, if required, in connection with implementation of this Resolution Plan.

That in respect of stepping by the New Promoters/Resolution Applicant into the shoes of the erstwhile Company and taking over the business, the provisions of Companies Act, 2013 shall be applicable and because of this reason a copy of this Order is to be submitted in the Office of the Registrar of Companies, Chennai. 114. The Resolution Professional is further directed to handover all records, premises / documents to Resolution Applicant to finalise the further line of action required for starting of the operation as contemplated under the Resolution Plan. The Resolution Applicant M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR. [DINESH MAHESHWARI, J. ] shall have access to all the records premises / documents through Resolution Professional to finalise the further line of action required for starting of the operation. Accordingly, the Application IA/150/ CHE/2021 stands allowed. All other connected Applications, as arrayed in the cause title, stands dismissed.

" Disapproval of the Appellate Tribunal (NCLAT) 18. Being aggrieved of the order dated 15. 07. 2021 so passed by the Adjudicating Authority, approving the resolution plan of the resolution applicant and declaring it to be binding on the corporate debtor and other stakeholders, four appeals were preferred before the Appellate Tribunal, respectively by the promoter Dr. Periasamy Palani Gounder, the related party Dharani Finance Limited and the NRI shareholder Dr. V. Janakiraman, the details whereof have been noticed hereinbefore in the particulars of proceedings and parties. 19. After considering the said appeals together, the Appellate Tribunal (NCLAT) proceeded to allow the same by its impugned judgment and order dated 17. 02. 2022.

The Appellate Tribunal reversed the order of the Adjudicating Authority and while rejecting the resolution plan in question, remanded the matter to the CoC with directions to the resolution professional, inter alia, to proceed from the stage of publication of Form 'G', and to invite the EOI afresh as per the CIRP Regulations. Having regard to the questions raised in these appeals, it shall be apposite to take note of the observations, findings, and conclusions of the Appellate Authority as relevant for the present matter in necessary details20. 19. 1.

As regards the issue of valuation, the Appellate Tribunal, after discussing the requirements of Sections 30(2) and 61(3) of the Code and taking note of the minutes of the second CoC meeting as to the appointment of valuators and the other legal issues concerning the valuation of assets, held that the valuation process had been in violation of the Regulation 27 and 35 of the CIRP Regulations for the reasons that the appraisal of a property situated in Tamil Nadu by Delhi-based valuers was a point of contention during the second CoC meeting; the non-core assets were not valuated by the registered valuers; the valuation report was never circulated either to the promoters or to the other members of the CoC; and physical verification of the assets of the 20 It may be indicated that the emphasis in bold/italics/underlining in the extractions from the judgment of the Appellate Tribunal are as in the copy thereof placed on record before us.

corporate debtor was not carried out by the two valuers appointed by CoC. 19. 1. 1 The observations of the NCLAT as to the issue of valuation could be reproduced