The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Ashok Bhushan, Chairperson, Ms. Shreesha Merla and Naresh Salecha, Technical Members was hearing an Appeal and found that there is no material irregularity to warrant the Appellate Authority's interference or exercise its powers under Section 30(2) of the Code. The Appellate Authority held that it can't exercise its power under section 30(2) of the IBC to interfere with the commercial wisdom of the Committee of Creditors.
Challenge in these Appeals is to the Impugned Order passed by the Learned Adjudicating Authority, NCLT, Mumbai Bench, by which, the Adjudicating Authority dismissed the Applications filed by the Appellant seeking a direction for admitting the Appellant’s Claim in the Resolution Plan. The Adjudicating Authority has also approved the Resolution Plan. Since both these Appeals deal with common facts, they were disposed of by the common Order.
The Corporate Debtor/M/s. Ricoh India Limited was a Company engaged in providing IT-related services, Visual Industrial and Communication Systems. A Master Rental Agreement was executed between Connect Residuary and Ricoh India. Ricoh India filed an Application on 29.01.2018 under Section 10 of the Code. On 16.02.2018, Connect Residuary served a Demand Notice for Rs.6,24,00,577/-. On 14.05.2018, the Petition filed under Section 10 was admitted by the Adjudicating Authority and a Public Announcement was made inviting claims from the Creditors.
Appellate Tribunal’s Analysis:
It was an admitted fact that the RP filed an Avoidance Application before the Adjudicating Authority, in which Application, the Appellant/Connect Residuary was made a party and the grounds raised in that Application were based on the findings of the A&M Report dated 15.01.2019. The Adjudicating Authority based on this Report has come to the conclusion that the transaction was extortionate in terms of the value paid and demanded.
The Supreme Court in Anuj Jain, IRP for Jaypee Infratech Ltd. v. Axis Bank & Ors., REED 2020 SC 02502, held that the Resolution Professional is duty bound under Section 25(2)(j) of the Code to identify the avoidance transactions including preferential transactions under Section 43 of the Code, which in the instant case, the RP has dutifully done.
During arguments, Sr. Counsel Mr. Ramji Srinivasan for the Appellant contended that the RP has not chosen to admit the Claim even prior to the receipt of the A&M Report. A brief perusal of the material on record shows that the draft of the A&M Report was received in October 2018 and was already available with the RP and the same was also tabled before the CoC on 14.11.2018 prior to non-admission of the Claim. It was only the final Report which was shared by A&M on 15.01.2019 and it was the consistent case of the RP that the opinion was not based on A&M findings alone but also based on the nature of transactions, the examination of account books and records and enquiry made with the concerned officials. SEBI had also noted large-scale fraud in the IT service business conducted by Corporate Debtors in the past. Be that as it may, the contention of the Appellant that only the buyback value demanded by Connect Residuary was classified as extortionate is not correct as we note that the RP had classified the entire transactions with Connect Residuary as extortionate given the very nature of the transactions. Since the Claim of the Appellant was not admitted and never figured in the Creditors List, the Plan did not provide any payment towards it. As regards the addendum, it was clarified that even if the Appellant’s Claim was later admitted, it would be paid NIL; when read with Clause 9.2 of the Resolution Plan, the addendum was merely clarificatory. The Resolution Plan was approved by the CoC in its Commercial Wisdom by a majority of 84.36%. At this juncture, it was relevant to note the observations of the Supreme Court in the combined Appeals preferred by the SRA the RP and the CoC in Kalparaj Dharamshi & Anr. v. Kotak Investment Advisors Ltd. & Anr., REED 2021 SC 03545.
From the aforenoted observations, it was evident that the Commercial Wisdom of the CoC is non-justiciable except when there is any material irregularity or error apparent on the face of the record, which in the instant case was absent. The Appellate Authority did not find any material irregularity to warrant its interference or exercise its powers under Section 30(2) of the Code.
It was significant to mention that the Resolution Plan was approved by the Adjudicating Authority on 28.11.2019 and has since been implemented. The contention of the Sr. Counsel appearing for the Appellant that the addendum was unfair and discriminatory and hence ought to be set aside and that the Supreme Court had not delved into the merits of the matter cannot be sustained as notably. The Supreme Court has categorically confirmed in para 159 of the Judgement in Kalparaj Dharamshi & Anr. v. Kotak Investment Advisors Ltd. & Anr., REED 2021 SC 03545, the Orders passed by the Adjudicating Authority dated 28.11.2019 and this Resolution Plan which was approved by the Supreme Court specifically includes the addendum of the Resolution Plan. Therefore, the Appellate Authority considered that the approval of the Resolution Plan including the addendum had attained finality. There were no reasons for the specific addendum to have been added to the Resolution Plan, the reason being the final Report of A&M and the categorical findings of the Adjudicating Authority. It was significant to note that the Appellant was never included in the ‘Creditors List’. So, the question of any sort of discrimination meted out to the Appellant does not arise.
For all the aforenoted reasons, these Appeals were dismissed.