Full Judgment Text
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.36653666 OF 2020
NGAITLANG DHAR ...APPELLANT(S)
VERSUS
PANNA PRAGATI INFRASTRUCTURE
PRIVATE LIMITED & ORS. .... RESPONDENT(S)
WITH
CIVIL APPEAL NOS. 37423743 OF 2020
J U D G M E N T
B.R. GAVAI, J.
Civil Appeal Nos.36653666 of 2020 are filed by
1.
Ngaitlang Dhar, the successful Resolution Applicant (H1
bidder), and Civil Appeal Nos. 37423743 of 2020 are filed
by Amit Pareek, the Resolution Professional.
2. These appeals assail the judgment and order
passed by the National Company Law Appellate Tribunal,
2
th
New Delhi (hereinafter referred to as “the NCLAT”) dated 19
October, 2020, in Company Appeal (AT) (Insolvency) Nos.
515 of 2020 and 516 of 2020, thereby allowing the appeals
of the respondent No.1Panna Pragati Infrastructure Private
Limited (hereinafter referred to as “PPIPL”) and the
respondent No.2Arihant International Limited.
3. Company Appeal (AT) (Insolvency) No.515 of 2020
th
was filed assailing the order dated 18 March, 2020, passed
by the National Company Law Tribunal, Guwahati Bench,
Guwahati (hereinafter referred to as “the NCLT”), in I.A.
No.27 of 2020 in CP (IB) No.13/GB/2019, filed by PPIPL
and another, by which the application seeking direction to
the Resolution Professional (hereinafter referred to as “the
RP”) to take on record and consider its revised offer
th
submitted by email dated 14 February, 2020, came to be
rejected.
Company Appeal (AT) (Insolvency) No.516 of 2020
4.
th
was filed assailing the order dated 18 May, 2020 passed by
the NCLT, in an unnumbered I.A. filed by the RP, vide which
3
the appellantNgaitlang Dhar’s (H1 bidder) Resolution Plan
came to be approved by the NCLT.
th
5. Vide the impugned judgment and order dated 19
October, 2020, the NCLAT has set aside both the orders,
th th
dated 18 March, 2020, and 18 May, 2020, and directed
the Corporate Insolvency Resolution Process (hereinafter
referred to as “CIRP”) to be resumed from the stage of
consideration of the Resolution Plans.
6. The facts in brief giving rise to the present
appeals are as under:
7. An application being CP(IB) No.13/GB/2019
came to be filed under Section 7 of the Insolvency and
Bankruptcy Code, 2016 (hereinafter referred to as “the IBC”)
for initiation of CIRP in respect of Meghalaya Infratech Ltd.
(hereinafter referred to as “the Corporate Debtor”) by the
Allahabad Bank (now known as Indian Bank) (hereinafter
referred to as “the Allahabad Bank”). The NCLT vide order
th
dated 28 August, 2019 admitted the petition and as such,
the CIRP came to be initiated in respect of the Corporate
4
Debtor and Mr. Amit Pareek came to be appointed as the
Interim RP, who was subsequently confirmed as the RP in
the first Committee of Creditors (“hereinafter referred to as
th
“the CoC”) meeting, held on 25 September, 2019.
It is not in dispute that the Allahabad Bank and
8.
the Corporation Bank (now known as Union Bank)
(hereinafter referred to as “the Corporation Bank”) were the
only financial creditors.
9. In accordance with the provisions of the IBC,
Expression of Interest (hereinafter referred to as “EOI”) was
invited from the prospective Resolution Applicants by the
RP.
10. AppellantNgaitlang Dhar, respondent No.1
PPIPL, Mr. Abhishek Agarwal and Mr. Ashish Jaisasaria
submitted their EOI. All the four Resolution Applicants
submitted their Resolution Plans. In the CoC meeting held
th
on 1112 February, 2020, the appellantNgaitlang Dhar
emerged as H1 bidder, whereas Mr. Abhishek Agarwal
emerged as H2 bidder.
5
th th
At the 7 CoC meeting, held on 6 March, 2020,
11.
the CoC, with a 100% voting share, approved the Resolution
Plan of the appellantNgaitlang Dhar (H1 bidder), which
th
was further approved by the NCLT vide order dated 18
May, 2020.
The respondent No.1PPIPL contended that in the
12.
th
proceedings before the CoC held on 1112 February, 2020,
it had sought for one or two days’ time to submit its revised
Resolution Plan, and accordingly, it submitted the same on
th
14 February, 2020. The respondent No.1PPIPL,
accordingly, filed I.A. No. 27 of 2020 in CP(IB)
No.13/GB/2019 before the NCLT, seeking a direction to the
th
RP to take on record its revised Resolution Plan, dated 14
February, 2020. The same came to be rejected by the
th
NCLT, vide order dated 18 March, 2020. The RP thereafter
filed an unnumbered I.A. seeking approval to the Resolution
Plan submitted by the appellantNgaitlang Dhar (H1
bidder). The said unnumbered I.A. was allowed by the NCLT
th
vide order dated 18 May, 2020. Both these orders came to
6
be challenged before the NCLAT by way of aforesaid
Company Appeals by the respondent No.1PPIPL. As stated
th
above, by the impugned judgment and order dated 19
October, 2020, the appeals were allowed. Being aggrieved
thereby, the present appeals are filed before this Court.
We have heard Shri Mukul Rohatgi, learned
13.
Senior Counsel appearing on behalf of the appellant
Ngaitlang Dhar, the successful Resolution Applicant (H1
bidder) and Shri Abhijeet Sinha, learned counsel appearing
on behalf of the respondent No.1PPIPL.
Shri Mukul Rohatgi, learned Senior Counsel
14.
appearing on behalf of Ngaitlang Dhar, the successful
Resolution Applicant (H1 bidder), submitted that the entire
approach adopted by the NCLAT in the impugned judgment
and order was erroneous. He submitted that the NCLAT
ought to have taken into consideration that the CoC after
exercising its ‘commercial wisdom’ has resolved to accept
the Resolution Plan submitted by Ngaitlang Dhar. He
submitted that the RP had given an equal opportunity to all
7
the bidders/resolution applicants. He submitted that
though adequate opportunity was given to all the Resolution
Applicants by adjourning the proceedings in CoC meetings
on number of occasions, the respondent No.1PPIPL failed
to revise its bid within the stipulated period. He submitted
th
that the CoC, in its meeting, held on 1112 February,
2020, had resolved to declare Ngaitlang Dhar as the
successful resolution applicant. He submitted that, not
only that, thereafter the NCLT had also allowed the
application filed by the RP to approve the Resolution Plan of
Ngaitlang Dhar.
th
15. Shri Rohatgi submitted that it is only after 12
th
February, 2020, the respondent No.1PPIPL, on 14
February, 2020, had sent an email to the RP, revising its
offer to Rs.65.65 crore. He submitted that when an initial
offer given by the respondent No.1PPIPL was only of
making an upfront payment of Rs.24 crore, it is clear that
the revised offer of Rs.65.65 crore was only with a mala fide
intention of protracting the proceedings. He submitted that
8
the NCLAT ought not to have interfered with the
‘commercial wisdom’ of the CoC. In this respect, he relies
on various judgments of this Court.
Shri Rohatgi further submits that the Resolution
16.
Plan of Ngaitlang Dhar now stands implemented, inasmuch
as the dues of all the Banks (financial creditors) have been
repaid and now the Corporate Debtor, i.e., Meghalaya
Infratech Ltd. is an ongoing concern.
17. Shri Abhijeet Sinha, learned counsel appearing
on behalf of the respondent No.1PPIPL would submit that
there is a distinction between the decision of the CoC and
the procedure adopted by the RP and the CoC to arrive at
that decision. He submitted that though a final decision of
the CoC cannot be a matter of challenge on the ground that
the ‘commercial wisdom’ of the CoC should not be interfered
with, yet if there is a material irregularity in the procedure
adopted by the RP, an appeal under Section 61(3) of the IBC
would be tenable. He submitted that the RP acted with
undue haste in the present matter. Learned counsel
9
submitted that in the proceedings of the meeting of the CoC,
th
held on 1112 February, 2020, the Director of PPIPL, had
sought one or two days’ time to submit its revised offer. He
submitted that, however, the said time was not granted. He
further submitted that the revised offer was submitted
within two days and it was the duty of the RP to present its
revised offer before the CoC. Having not done that and
having hastily approved the plan of Ngaitlang Dhar, the
NCLAT has rightly interfered with the decision of the CoC.
In this respect, he relies on the judgment of this Court in
the case of
Pratap Technocrats (P) Ltd. and others v.
Monitoring Committee of Reliance Infratel Limited and
1
.
another
18. Shri Sinha further submitted that when the NCLT
itself had extended the period of CIRP by another 90 days
th
beyond 180 days vide order dated 26 February, 2020,
there was no reason for the RP to have hastily accepted the
bid of Ngaitlang Dhar.
1 2021 SCC OnLine SC 569
10
19. Learned counsel appearing on behalf of the
respondents – Banks (the financial creditors) also support
the arguments of the learned counsel appearing on behalf of
Ngaitlang Dhar. They submit that the Banks have received
the entire payment that was owed to them. It is further
th
submitted that the email dated 14 February, 2020 sent by
PPIPL was also endorsed to the Allahabad Bank as well as
the Corporation Bank. It is submitted that both the Banks
had refused to consider the said offer inasmuch as such an
offer was not valid in law.
20. The facts are not in dispute in the present matter.
th
Vide order dated 28 August, 2019, the
21.
application filed by Allahabad Bank under Section 7 of the
IBC for initiation of CIRP in respect of the Corporate Debtor
th
came to be allowed. Vide the said order dated 28 August,
2019, Mr. Amit Pareek came to be appointed as the Interim
RP.
22. The interim RP, in compliance with Section 15 of
the IBC, made public announcement calling for claims from
11
creditors of the Corporate Debtor. Upon receipt of claims
th
from the creditors, the CoC came to be formed on 17
September, 2019. Thereafter, in the first meeting of the
th
CoC, held on 25 September, 2019, the Interim RP came to
be appointed as the RP. Thereafter, the RP invited EOI from
the prospective Resolution Applicants. Four EOIs came to
be received from (a) PPIPL & others; (b) Mr. Ngaitlang Dhar;
(c) Mr. Abhishek Agarwal; and (d) Mr. Ashish Jaisasaria &
others. The provisional list of Resolution Applicants came
to be published and objections to the provisional list were
th
invited by 25 December, 2019. Since no objection in
respect of any of the prospective Resolution Applicants was
received, a final list of prospective Resolution Applicants
was placed before the CoC for evaluation. Thereafter, all the
Resolution Applicants were invited to submit their
th
respective Resolution Plans by 24 January, 2020. In
response to that, four Resolution Plans were received from
the four prospective Resolution Applicants.
12
th th
23. The 5 meeting of the CoC was held on 11
February, 2020. The minutes of the said meeting,
particularly Agenda No.6, would reveal that the RP informed
the CoC that there were numerous anomalies and
deficiencies observed in the Resolution Plan of PPIPL and
the same was intimated to the Resolution Applicant through
th
email dated 30 January, 2020 with a request to
st
rectify/correct the same and submit the same by 1
February, 2020. However, PPIPL had failed to do so within
the stipulated period. It would further reveal that an email
st
dated 1 February, 2020, was received from PPIPL with a
request to grant time for submission of rectified Resolution
rd
Plan by 3 February, 2020. Accordingly, the rectified
rd
Resolution Plan came to be filed by PPIPL on 3 February,
2020. In the said meeting, the CoC evaluated the
Resolution Plans of all the four prospective Resolution
Applicants. Paragraph 5 of the consideration of the
proposed Resolution Plan of PPIPL reads thus:
“5. The CoC requested PRA to improve
their bid amount the PRA refused to do
13
so unless individual score of all
disclosed further for increase of the bid
amount he has to discuss with BOD of
the applicant”
24. It would further reveal that the CoC continued
the second round of negotiation after a lunch break. It will
be relevant to refer to the following excerpt of the minutes of
th
the meeting of the CoC dated 11 February, 2020:
“2. The CoC decided to invite Panna
Pragati Infrastructure Pvt. Ltd. for
further negotiation. The RP informed
that in first round of negotiation the PRA
has not revised their bid amount and
informed the CoC about the brief details
of plan. The PRA also want to know
about the basis of score, the RP & CoC
informed at this mature stage of CIRP
this is not the right time and place to
discuss about the evaluation and also
informed that the evaluation has been
done as per the RFRP, IM & evaluation
matrix which has been circulated to all
the PRA in due time.
3. The CoC & RP informed the PRA
about the anomalies & deficiency in the
rectified Resolution Plan submitted by
them still persist despite of given them
opportunity earlier after the submission
of original resolution plan for the
rectification. The PRA requested to allow
some more time for the rectification and
14
submit revise plan. The casual
approach of PRA noted.
4. The CoC requested to improve the
bid amount to the PRA, the PRA states
that at this stage we will not increase the
bid amount”
th
25. The minutes of the 5 meeting of the CoC would
further reveal that the CoC thereafter invited Ngaitlang Dhar
for negotiation of the bid and requested him to enhance the
bid amount. Ngaitlang Dhar agreed to enhance the bid
amount from Rs.63 crore to Rs.64 crore. Thereafter again,
the representative of PPIPL returned back and requested to
adjourn the meeting for a few days. The said request was
specifically rejected by the CoC informing the representative
of PPIPL that they were bound to follow the IBC timeline and
th
wanted to conclude the matter by next day. The said 5
meeting of the CoC was adjourned to next day and was held
th
on 12 February, 2020. The minutes of the said meeting
would further reveal that the representative of PPIPL had
informed the CoC/RP that the Directors of their Company
th
will not be available for the meeting to be held on 12
15
February, 2020 and the meeting should be deferred by one
or two days. The minutes of the meeting would further
reveal that all the prospective Resolution Applicants present
in the meeting sought clarification from the CoC members
and the RP about the status of Resolution Applicant, who
was absent in the meeting, as to whether it would be
allowed to participate in the further bidding process or not.
The CoC members specifically replied that since they were
at the neck of the timeline (i.e. 180 days were to get over on
th
24 February, 2020), it was decided to exclude the
respondent No.1PPIPL, who was not present in the said
meeting. The proceedings commenced after lunch break,
wherein only two prospective Resolution Applicants, i.e.,
Ngaitlang Dhar and Mr. Abhishek Agarwal were present.
Thereafter, the CoC adopted Swiss Challenge open bidding
method. In the said bidding process, both prospective
Resolution Applicants present increased their offer. In the
said open bidding process between the two prospective
Resolution Applicants present, Ngaitlang Dhar was found to
16
be the highest bidder/prospective Resolution Applicant
having offered the bid of an upfront amount of Rs.64.30
crore plus CIRP costs. The said Resolution Plan of
Ngaitlang Dhar was approved unanimously by Allahabad
Bank having 68.34% voting rights and the Corporation
Bank having 31.66% voting rights.
26. It is thus clear that the respondent No.1PPIPL
was very much aware that the CoC has decided to finalise
th
the proceedings by 12 February, 2020. It is also clear that
though PPIPL was first called upon by the CoC to enhance
the bid amount, it had specifically rejected the same. It
insisted on disclosing the basis of score. In the proceedings
th th
of the 5 meeting of the CoC dated 11 February, 2020,
post lunch, though Ngaitlang Dhar had enhanced his bid
from Rs.63 crore to Rs.64 crore, the representative of PPIPL
subsequently came and requested for adjourning the
meeting for few days. The said request was specifically
rejected by the CoC by informing the representative of PPIPL
that it had to adhere to the IBC timeline and would have to
17
th
conclude the matter by next day. On the next day, i.e., 12
February, 2020, when the adjourned proceedings of the CoC
were held, the respondent No.1PPIPL had sent an email,
stating therein that the Directors of its Company will not be
available for the said meeting and requested for deferring
the meeting by a day or two. On the insistence of all the
prospective Resolution Applicants present, the CoC clarified
that since the timeline was coming to an end, it had decided
to exclude the prospective Resolution Applicants who were
not present in the said meeting. In the said meeting,
Ngaitlang Dhar came to be declared as the highest bidder
after he improved his bid in the open bidding held between
him and Mr. Abhishek Agarwal.
27. It could thus be seen that the RP as well as the
CoC had acted in a totally transparent manner. An equal
opportunity was accorded to all the prospective Resolution
Applicants. However, the respondent No.1PPIPL, without
improving his bid amount, went on insisting for more time,
which request was specifically rejected by the CoC.
18
28. Shri Abhijeet Sinha, learned counsel, fairly
concedes that though the final decision of the CoC would
not be challenged on the ground that the ‘commercial
wisdom’ of the CoC should not be interfered with, it is only
the process of decision making, which can be challenged if
there is any material irregularity in the said proceedings.
29. As already discussed hereinabove, we find that
the procedure adopted by the RP as well as the CoC was
fair, transparent and equitable. The CoC was facing the
th
timeline, which was to end on 24 February, 2020, before
which it had to finalise its decision. In these circumstances,
it cannot be said that the decision of the CoC, to not grant
any further time to PPIPL for submission of its revised bid
th
and to finalise the Resolution Plan on 12 February, 2020
itself, can be said to be falling in the category of the term
‘material irregularity’.
We have extracted the minutes of the proceedings
30.
th
of the 5 meeting of the CoC in extenso. It could be seen
19
that the CoC, after due deliberations, evaluated all the
proposed Resolution Plans submitted by all the prospective
Resolution Applicants and after giving sufficient opportunity
to all the prospective Resolution Applicants, arrived at a
considerate decision of accepting the Resolution Plan of the
th
appellantNgaitlang Dhar in its meeting held on 1112
February, 2020.
31. It is trite law that ‘commercial wisdom’ of the CoC
has been given paramount status without any judicial
intervention, for ensuring completion of the processes
within the timelines prescribed by the IBC. It has been
consistently held that it is not open to the Adjudicating
Authority (the NCLT) or the Appellate Authority (the NCLAT)
to take into consideration any other factor other than the
one specified in Section 30(2) or Section 61(3) of the IBC. It
has been held that the opinion expressed by the CoC after
due deliberations in the meetings through voting, as per
voting shares, is the collective business decision and that
the decision of the CoC’s ‘commercial wisdom’ is non
20
justiciable, except on limited grounds as are available for
challenge under Section 30(2) or Section 61(3) of the IBC.
This position of law has been consistently reiterated in a
catena of judgments of this Court, including:
(i)
K. Sashidhar v. Indian Overseas Bank and
2
Others
(ii) Committee of Creditors of Essar Steel India
Limited Through Authorized Signatory v. Satish
3
Kumar Gupta and Others ,
(iii) Maharashtra Seamless Limited v.
4
Padmanabhan Venkatesh and others ,
(iv) Kalpraj Dharamshi and Another v. Kotak
5
Investment Advisors Limited and Another .
(v) Ghanashyam Mishra and Sons Private Limited
Through the Authorized Signatory v. Edelweiss
Asset Reconstruction Company Limited Through
6
the Director & Ors.
2 (2019) 12 SCC 150
3 (2020) 8 SCC 531
4
(2020) 11 SCC 467
5
(2021) SCC OnLine SC 204
6 (2021) 9 SCC 657
21
32. No doubt that, under Section 61(3)(ii) of the IBC,
an appeal would be tenable if there has been material
irregularity in exercise of the powers by the RP during the
corporate insolvency resolution period. However, as
discussed hereinabove, we do not find any material
irregularity.
33. We may gainfully refer to the following
observations of this Court in the case of
Keshardeo
7
Chamria v. Radha Kissen Chamria and others while
considering the scope of the words ‘material irregularity’, as
are found in Section 115 of the Code of Civil Procedure,
1908:
“Reference may also be made to the ob
servations of Bose, J. in his order of ref
erence in Narayan Sonaji v. Sheshrao
Vithoba [AIR 1948 Nag 258] wherein it
was said that the words “illegally” and
“material irregularity” do not cover either
errors of fact or law. They do not refer to
the decision arrived at but to the manner
in which it is reached. The errors con
templated relate to material defects of
procedure and not to errors of either law
7 (1953) 4 SCR 136
22
or fact after the formalities which the law
prescribes have been complied with.”
34. In the present case, leave apart, there being any
‘material irregularity’, there has been no ‘irregularity’ at all
in the process adopted by the RP as well as the CoC. On
the contrary, if the CoC would have permitted the PPIPL to
participate in the process, despite it assuring the other
three prospective Resolution Applicants in its meeting held
th
on 1112 February, 2020, that the absentee prospective
Resolution Applicant (PPIPL) would be excluded from
participation, it could have been said to be an irregularity in
the procedure followed.
Insofar as the contention of the learned counsel,
35.
Shri Abhijeet Sinha, that the NCLT had already extended
th
the CIRP period by 90 days vide order dated 26 February,
2020 and therefore, there was no necessity to hastily
th
approve the Resolution Plan of Ngaitlang Dhar on 12
February, 2020, is concerned, we find the same to be
without substance. It will be relevant to mention that the
23
th
period of 180 days was to expire on 24 February, 2020,
th
and therefore, in the meeting dated 12 February, 2020
itself, the CoC after resolving to declare Ngaitlang Dhar as
H1 bidder had resolved to authorise the RP to seek an
extension of CIRP period before the NCLT.
36. It will be relevant to refer to paragraph 2 of the
th
order dated 26 February, 2020 passed by the NCLT, which
reads thus:
“2. It is the submission of the RP that
th
the CoC in its 5 meeting held on
11.02.2020 concluded on 12.02.2020
declared one Mr. N. Dhar as highest
bidder and the said decision of the CoC
is under consideration for approval with
the higher authority of the CoC and,
therefore, prayed for further extension of
CIRP period to 90 days with effect from
25.02.2020”
It could thus be seen that the contention in that
37.
regard is also without substance. It is further to be noted
that, as has been consistently held by this Court in catena
of judgments, referred to hereinabove, the dominant
purpose of the IBC is revival of the Corporate Debtor and
24
making it an ongoing concern. In the present case, the said
purpose is already achieved, inasmuch as all the dues of the
financial creditors, i.e., the Allahabad Bank and the
Corporation bank, have already been paid, and the
Corporate Debtor, in respect of which CIRP was initiated, is
now an ongoing concern.
38. We are, therefore, of the considered view that the
NCLAT has grossly erred in interfering with the decision of
the CoC, which was duly approved by the NCLT. The
appeals are, therefore, allowed. The impugned judgment
th
and order passed by the NCLAT, dated 19 October, 2020 is
quashed and set aside. There shall be no order as to costs.
All pending applications shall stand disposed of.
…….…....................., J.
[L. NAGESWARA RAO]
…….…....................., J.
[B.R. GAVAI]
NEW DELHI;
DECEMBER 17, 2021