The Hyderabad bench of the National Company Law Tribunal ( NCLT ) held that the Comittee of Creditors ( CoCs ) can take decision to consolidate the Corporate Insolvency Resolution Process ( CIRP ).
The application has been filed by the suspended director of M/s. Manjeera Retail Holdings Private Limited ( MRHPL ),Gajjala Yoganand which, along with its holding company, Manjeera Constructions Limited ( MCL ), is undergoing the CIRP.
The Corporate Debtors were admitted into CIRP and the Resolution Plans approved by their respective Committees of Creditors ( CoC ) have been submitted by the common Resolution Professional ( RP ).
The applicant submitted that both companies have common assets and liabilities being inextricably intertwined apart from the other criteria laid down in binding precedents such as common directorship, common financial creditors, common resources, interlinkages of finances, common registered office etc and therefore CIRP of both Corporate Debtors be consolidated which will lead to value maximisation and benefit several stakeholders of the Corporate Debtors.
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It was submitted that the total quantum of the resolution plan proposed by the Applicant for both companies exceeds the combined value of the individual plans submitted by the resolution applicants and approved by the respective CoCs.
Per contra, the respondents stated that the filing is an afterthought and claimed that this application was at late stage by the Applicant/suspended director.
The tribunal found that the application has not been filed in good faith as it has been filed more than six months after the initiation of CIRP and is intended solely to delay the resolution process, has not been unfounded.
The bench observed that the Applicant, being the suspended director of both companies, has no role in the management or operations of the companies and is not a stakeholder in the CIRP for either of the Corporate Debtors (CDs). Having previously led the CDs to insolvency, resulting in the initiation of CIRP for both entities, he has repeatedly attempted to obstruct their resolution.
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The tribunal referred the Supreme Court judgment in Ebix Singapore (P) Ltd. v. Educomp Solutions Ltd. (CoC), (2021) wherein it was observed that under Insolvency and Bankruptcy Code, CIRP is a creditor-driven process, and settlements between the corporate debtor and the CoC may be in the best interests of all stakeholders.
The tribunal observed that the CoCs are the primary stakeholders for both CDs. It was held that “ if the CoCs, exercising their commercial wisdom, do not perceive any benefit in consolidating the CIRPs, their decision should be respected and not substituted by the claims of the suspended director, regardless of how compelling or reasonable they may appear—which, in fact, they are not.”
The bench of Sri Rajeev Bhardwaj ( Judicial Member ) and Sri Sanjay Puri ( Technical Member ) viewed that the resolution plans have already been approved by the COCs of both the corporate debtors and which are pending for approval before the Adjudicating Authority therefore the facts and circumstances of the present case are starkly different from the above case. The Tribunal dismissed the application.
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Now, this determination of economic benefit to the stakeholders can only be done by the CoCs of the respective CDs with their commercial wisdom, which as the Supreme Court emphasized in the case of K. Sashidhar11, is paramount and not subject to judicial review.
The bench viewed that “for both Corporate Debtors, MCL and MRHPL, the CIRPs are at an advanced stage. Both have separately attracted a substantial number of EoIs and received multiple viable resolution plans. The CoCs of both CDs have approved the respective Resolution Plans with the requisite majority, and applications for their approval are currently pending before this Authority. This application, seeking consolidation of the CIRPs of both CDs at such a late stage by a suspended director with no stake in the outcome, is only an attempt to disrupt the successful resolution process of the Corporate Debtors.
This application is without merit and is therefore dismissed, with a cost of Rs 5.0 lakhs, to be deposited in `Bharatkosh’.”
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