K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS.

The Judgment of the Court was delivered by A A. M. KHANWILKAR, J.

1Copy pinpoint1. Leave granted in SLP (C) No.29181 of 2018.

2Copy pinpoint2. All appeals were taken up for hearing at the notice stage with the consent of the contesting respondents. B

3Copy pinpoint3. These appeals have arisen from the common judgment and order of the National Company Law Appellate Tribunal (for short “NCLAT”), New Delhi, dated 6th September, 2018, rendered in appeals filed in relation to the insolvency resolution process under the provisions of the Insolvency and Bankruptcy Code, 2016 (for short “I&B Code”) C concerning Kamineni Steel & Power India Pvt. Ltd. (for short “KS&PIPL”), having its registered office at Hyderabad, Telangana and Innoventive Industries Ltd. (for short “IIL”) having its registered office at Pune, Maharashtra.

4Copy pinpoint4. The NCLAT affirmed the order passed by the National D Company Law Tribunal, Mumbai Bench (for short “NCLT Mumbai”) recording rejection of the resolution plan concerning IIL and directing initiation of liquidation process under Chapter III of Part II of the I&B Code. As regards KS&PIPL, the NCLAT reversed the decision of the National Company Law Tribunal, Hyderabad (for short “NCLT Hyderabad”) which had approved its resolution plan and instead remanded the proceedings to NCLT Hyderabad for initiation of liquidation process in terms of Section 33 and 34 of the I&B Code.

5Copy pinpoint5. The NCLAT held that as, in both the cases, the resolution plan did not garner support of not less than 75% of voting share of the financial creditors constituting the Committee of Creditors (for short “CoC”) the same stood rejected and thereby warranted initiation of liquidation process of the concerned corporate debtor, namely, KS&PIPL and IIL.

6Copy pinpoint6. For considering the grounds of challenge in the respective appeals, we deem it appropriate to advert to the relevant facts concerning the respective corporate debtor. G

7Copy pinpoint7. KS&PIPL was incorporated as a private limited company on 20 October, 2008. Its steel division commenced operation on 30th March, th

2013. The company was functional till the Financial Year 2014-15. However, it could not continue beyond this period due to deficient working capital and various other factors including financial crisis, leading to heavy H

p. 862 Copy page pinpoint

A operational losses and consequent erosion of the entire net worth. Attempts were made to revive the company by forming a joint lenders forum by the consortium of banks. As that attempt did not fructify, the company filed an application with BIFR under Section 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985 on 15 th November,

2016. The said proceedings abated due to a notification dated 25th B November, 2016, as to the repeal of the Act. Eventually, the company filed a petition under Section 10 of the I&B Code read with Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, seeking to initiate Corporate Insolvency Resolution Process (CIRP) concerning the said company. That petition was admitted on 10th February, C 2017, by the NCLT Hyderabad and an Interim Resolution Professional (for short “IRP”) came to be appointed with directions to constitute a CoC. The CoC was constituted and the first meeting was held on 8th March, 2017 to confirm the appointment of IRP and authorise the lead bank, namely the Indian Bank to inform the approved valuers that they should proceed with their valuation. The second meeting of CoC was held on 6th April, 2017, for taking on record the predicated expenses and essential costs and factory maintenance costs and to confirm about the operation of the bank account with lead Bankers, Indian Bank by IRP and Chief Financial Officer. In the third meeting of CoC, convened on 12th May, 2017, the corporate debtor made a presentation for a resolution plan, giving three options. In that meeting, it was resolved to appoint SBI Capital Markets Limited to determine the sustainable debt of the corporate debtor to enable the creditors to assess the viability of the resolution plan. In the fourth meeting of CoC, held on 27 th June, 2017, the resolution plan submitted by the corporate debtor was reviewed and a draft Techno Economic Viability report by SBI Capital Markets Limited F was also considered. It is not necessary to dilate on other aspects discussed and resolved in this meeting. As the statutory period of 180 days for completion of CIRP was to expire, an application was filed before the NCLT Hyderabad for extending the time by a further 90 days. Thus, the NCLT Hyderabad, on 27th July, 2017, extended further time by 90 days G starting from 9th August, 2017. The sixth meeting of the CoC was held on 24th August, 2017, when the corporate debtor submitted an expression of interest from AREA Group of Companies, Chandigarh to infuse Rs. 150 Crore in the form of debentures, subject to getting a firm approval from the lenders. The said proposal was circulated during the meeting which concluded with the resolution that the same be placed along with H

K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS. 863 [A. M. KHANWILKAR, J.]

the final report of SBI Capital Markets Limited, which was still awaited. A The seventh meeting of the CoC was held on 26th September, 2017 in which various options were deliberated but the discussion remained inconclusive. In the eighth CoC meeting, held on 16 th October, 2017, it was agreed that the resolution plan submitted by the corporate debtor should provide for monitoring and supervision by the resolution professional, in case the plan was approved by the CoC. The Indian Bank, which had 22.33% of voting power, conveyed its disapproval to the proposed resolution plan. JMFARC Limited, having 12.39% of voting power, had already rejected the resolution plan in the previous meeting held on 26th September, 2017. Both these banks, however, agreed to reconsider the resolution plan if a portion of the sustainable debt was to be increased. The corporate debtor was asked to submit a fresh One Time Settlement (OTS) proposal through email to all the bankers for consideration. Accordingly, the corporate debtor sent an email on 18 th October, 2017, with another OTS scheme proposal as an alternative to the resolution plan already submitted. The corporate debtor offered an D OTS scheme proposal of Rs.525 Crore with a structured repayment period indicated therein. In response, the Indian Bank, through an email sent on 25th October, 2017, called upon the corporate debtor to file an OTS scheme proposal for 600 Crore. After interacting with the bankers, a counter proposal was given by the corporate debtor which was eventually considered in the 9th CoC meeting held on 27th October, 2017. E The proposal submitted by the corporate debtor on 26th October, 2017, was approved by the members of the CoC having only 55.73% voting share namely Indian Bank, JM Financial Asset Reconstruction Co. Ltd., Allahabad Bank and Andhra Bank. The Indian Overseas Bank having voting share of 15.15%, rejected the resolution proposal and cited reasons through its letter dated 27th October, 2017. Three other Banks, namely Oriental Bank of Commerce, Central Bank of India and Bank of Maharashtra, having 29.12% voting share, expressed that they remained open, awaiting in-principle approval from their respective sanctioning authority. Eventually, on 30th October, 2017, Oriental Bank of Commerce, having 10.94% voting share, sent an email conveying their “in-principle approval” to the proposed resolution plan qua revised OTS scheme and that their final approval would be subject to similar approvals from the co-lenders. On the same day, Bank of Maharashtra, having 6.36% voting share, conveyed that they were open to consider the revised resolution plan. The Central Bank of India, having 11.82% voting share, conveyed H

p. 864 Copy page pinpoint

A its disapproval to the revised resolution plan. Resultantly, as on 30th October, 2017, the voting share of consenting Banks expressly approving the proposed resolution plan was only 66.67% and the voting share of dissenting lender Banks was 26.97%. Maharashtra Bank, having 6.36% voting share, had not either approved, rejected or abstained from voting but had conveyed that they remained open to consider the resolution B plan. The fact remains that the proposed resolution plan did not garner approval of not less than 75% of voting share of the financial creditors until the resolution professional (IRP) filed an affidavit before the adjudicating authority (NCLT Hyderabad) on 3rd November, 2017, submitting the outcome of the 9th CoC meeting. The Managing Director C of the corporate debtor (KS&PIPL) appeared before the adjudicating authority (NCLT) on 6th November, 2017, and also filed a memo on 17th November, 2017, inter alia submitting that for the financial creditor who chose not to participate in the voting, the votes and the majority be counted without their vote. In that eventuality, the percentage of financial creditors who chose to participate and who approved of the resolution plan would D work out to 78.63% and therefore, it can be assumed that the resolution plan has been approved by the CoC. The NCLT Hyderabad vide judgment dated 27th November, 2017, eventually, allowed the petition filed by the corporate debtor and approved the resolution plan/revised OTS scheme, as submitted by the resolution professional vide affidavit dated 3rd E November, 2017, and further declared that the moratorium imposed on 10th February, 2017, ceased to have effect from the date of receipt of copy of the order. A further direction came to be issued that the corporate debtor shall reinstate all the employees who were on the rolls of company. Aggrieved by the said decision, three financial creditors who were part of the CoC, namely Indian Overseas Bank, Central Bank of India and F Bank of Maharashtra filed appeals under Section 61 before the NCLAT questioning the authority of NCLT Hyderabad, to approve of the resolution plan, despite the fact that the same did not receive approval of not less than 75% of voting share of financial creditors. The Managing Director of the corporate debtor also filed an independent appeal under Section G 61 of the I&B Code with reference to the observations made by the NCLT Hyderabad regarding the corporate guarantee to be proceeded with. As aforesaid, these appeals were heard together along with appeals concerning another corporate debtor, namely IIL and came to be disposed of by the common impugned judgment dated 6th September, 2018, wherein it has been held that approval to the proposed resolution plan by a vote H

K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS. 865 [A. M. KHANWILKAR, J.]

of not less than 75% of voting share of the financial creditors was A mandatory and it was not open to the adjudicating authority to disregard the mandate of the CoC by adopting a convoluted approach. Against this decision, the Managing Director of the corporate debtor, namely (KS&PIPL) has filed a civil appeal under Section 62 of the I&B Code in this Court, being Civil Appeal No.10673 of 2018. B

8Copy pinpoint8. The second set of appeals pertain to the corporate debtor-IIL, being Civil Appeal No.10719 of 2018 filed by the promoter of the corporate debtor who holds 21.82% shares and was the erstwhile Chairman and Managing Director of the company. Civil Appeal No.10971 of 2018 is filed by the workers’ union of the same corporate debtor, namely, Innoventive Industries Kamgar Sanghathana. The workers’ union has C filed another appeal arising from SLP (C) No.29181 of 2018 against the judgment and order dated 24th September, 2018 passed by the High Court of Judicature at Bombay in Writ Petition (C) No.136 of 2018, filed by them to challenge the judgment passed by the NCLT Mumbai dated 23rd November, 2017/8th December, 2017, and for directing the Union of D India to revive the corporate debtor (IIL) and save it from liquidation by dispensing with the 8% shortfall for touching the criteria of 75% of consent of CoC for the approval of revival as per the provisions of the I&B Code. The High Court rejected the writ petition filed by the workers’ union on the ground that they had an alternative and efficacious remedy against the decision of the Tribunal. In other words, the Special Leave E Petition primarily questions the decision of rejection of the proposed resolution plan in respect of the corporate debtor (IIL).

9Copy pinpoint9. As regards the corporate debtor (IIL), the relevant facts are as follows. The said corporate debtor had suffered losses. As a result, it had proposed to its lender Bankers for Corporate Debt Restructuring F (for short “CDR”). The company was referred to CDR in September, 2013 by 19 banking entities and it invited a consortium, led by Central Bank of India. The lenders’ forum approved the restructuring plan of the company on 24th June, 2014. ICICI Bank filed an Insolvency and Bankruptcy application under the I&B Code against the corporate debtor G (IIL) in December 2016. That was admitted by the NCLT Mumbai, being the adjudicating authority, on 17th January, 2017. An IRP was appointed and a moratorium was declared. The said corporate debtor asserts that despite the pendency of applications, the company had achieved a turnover of Rs.337 Crore upto March 2017, with operational revenues of Rs.125 Crore during the relevant period till September 2017. H

p. 866 Copy page pinpoint

A The total indirect tax paid by the company is approximately Rs.8.27 Crore during the same period. Be that as it may, consequent to the order of the adjudicating authority (NCLT) dated 17th January, 2017, the first CoC meeting was held on 15th February, 2017 wherein the appointment of IRP was confirmed. Eventually, in the sixth CoC meeting held on 19 th June, 2017, it was unanimously resolved to extend the insolvency resolution B period till 14th October, 2017. The IRP then approached 27 parties (16 prospective financial investors and 11 prospective strategic investors) out of which 16 parties (11 financial investors and 6 strategic investors) showed interest in the company. After screening of the proposed resolution applicants, the subject resolution plan was submitted to the C IRP on 3rd September, 2017, which was taken up for consideration by the CoC in its meeting on 4th October, 2017, by e-voting. Financial creditors holding 66.57% voting share voted in favour of approving the proposed resolution plan whereas the dissenting financial creditors, having 33.43% voting share, voted against the proposed resolution plan. Resultantly, the proposed resolution plan was not approved or came to be rejected for want of support of the requisite percent of financial creditors, having voting share of not less than 75%. The IRP then filed an application on 12th October, 2017, before the adjudicating authority (NCLT) praying for initiating liquidating process against IIL. The NCLT Mumbai, after considering the submissions of both sides, by order pronounced in court on 23rd November, 2017 and delivered on 8th December, 2017, directed initiation of liquidation proceeding against the corporate debtor (IIL). The appellant in the leading appeal of the second set of appeals, being the former Chairman and Managing Director of the corporate debtor (IIL) had filed an interim application before the NCLT Mumbai praying that the dissenting financial creditors be directed to disclose on oath reasons/basis for, or the decision making process involved in, voting against the resolution plan and a declaration that the dissenting financial creditors voted with malicious intention of liquidation and hence, their votes ought to be ignored. The workers’ union of the corporate debtor (IIL) had filed an interim application, opposing liquidation of the company. The resolution applicant had also filed an application to allow it to submit a revised resolution plan and to invite a fresh vote thereon albeit after the time earlier envisaged for obtaining shareholders approval. According to the appellants in the second set of appeals, NCLT did not call for the response of the opposite parties on the concerned applications and instead proceeded to pass the impugned order rejecting the applications and H

K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS. 867 [A. M. KHANWILKAR, J.]

directing initiation of liquidation proceeding against the corporate debtor. A The appellants in the leading appeal concerning the corporate debtor (IIL) filed an appeal before the NCLAT against the decision of the NCLT, Mumbai. This appeal was heard along with the appeals concerning another corporate debtor (KS&PIPL) and disposed of together by the NCLAT as common issue was involved in all these appeals. As aforesaid, B by the impugned judgment NCLAT has held that the requirement of approval of resolution plan by vote of not less than 75% of voting share of financial creditors was mandatory and hence dismissed the appeal preferred by the appellant. Aggrieved, the said appellant and the workers’ union of KS&PIPL have filed appeals against the said decision of NCLAT and the High Court respectively. C

10Copy pinpoint10. Mr. C.U. Singh, learned senior counsel appearing for the appellant in the case of corporate debtor KS&PIPL had canvassed two- pronged submissions. The first is on the basis of the unamended provisions as applicable on the date of the resolution passed by the CoC in October,

2017. It is urged that on a fair interpretation of those provisions, it ought D to be held that the same were not mandatory. Even assuming that the same were mandatory, considering the fact that a significant section of the financial creditors had abstained from voting on 27th October, 2017, their votes were required to be ignored for the purpose of computing the required percentage of voting share. In that case, it would work out to be more than 75%. In that, the percentage of votes for approval (55.73%) E of the resolution proposal and the voting share rejecting the proposal was only 15.15%. Taking these votes only, the proportionate percentage of the voting share for approval will obviously be more than 75% (i.e. approximately 78.63%). Thus understood, the NCLT Mumbai ought to have approved the resolution proposal. The second limb of the argument F is that the NCLAT, which had decided the appeals on 6th September, 2018, ought to have taken into account the amendments brought into force w.e.f. 23rd November, 2017 and followed by another amendment brought into force w.e.f. 6th June, 2018 to the provisions of I&B Code and including the amendment to the Regulations of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate G Persons) Regulations, 2016 brought into force from 4th July, 2018. For, the same came into force during the pendency of the appeals. Further, the purport of the said amendments posit that the CoC should be objective in its approach and consider the feasibility and viability of the resolution proposal and must assign reasons for approval or rejection of the proposal, H

p. 868 Copy page pinpoint

A as the case may be. Additionally, the requirement of percentage of votes of the financial creditors stood reduced to 66% of voting share which, in the present case, has been fulfilled on account of the approval given by 55.73% in the meeting convened on 27th October, 2017, and followed by in-principle approval conveyed via email on 30th October, 2017, by Oriental Bank of Commerce, having 10.94% voting power. In effect, this argument proceeds on the assumption that the amendments to the Code brought into force w.e.f. 23rd November, 2017 and in particular on 6th June, 2018, would have retroactive effect, as is clear from the legislative intent behind the said amendments. The said amendments are made applicable from the inception and to pending proceedings also because it is to substitute the original provision as was applicable on the date of the resolution dated 27th October, 2017, and filing of affidavit by IRP before the adjudicating authority. To buttress this argument, reliance has been placed on the exposition in Gottumukkala Venkata Krishamraju vs. Union of India1, Government of India vs. India Tobacco Association2 and Zile Singh vs. State of Haryana3. In support of the argument that the amendment to Section 30(4) applied to pending proceedings, reliance has been placed on the judgment in Mithilesh Kumari & Another Vs. Prem Behari Khare4, Dahiben (Widow of Ranchnodji Jivanji) & Ors. vs. Vasanji Kevalbhai (dead) & Others5. Reliance is also placed on the decision in B.K. Educational Services Private Ltd. vs. Parag E Gupta & Associates6 which had considered the applicability of Section 238-A inserted by way of the same amendment Act in the I&B Code w.e.f. 6th June, 2018. In this decision, the court held that the legislative intent behind the amendment was to apply the Limitation Act from the very beginning to NCLT and NCLAT while deciding the applications filed under Sections 7 and 9 of the I&B Code and the appeals therefrom. F Reliance is also placed on the decision in State Bank of India vs. Ramakrishnan7 which had dealt with amendment by way of substitution to Section-14(3) of the I&B Code concerning surety in a contract of guarantee for a corporate debtor. The court held that the amendment was retrospective. Reliance is also placed on the decision in Rustom & G Hornby (I) Ltd. vs. T.B. Kadom8 in which this court gave retrospective 1 (2018) SCC Online SC 1386-Paragraphs 13-16. 2 (2005) 7 SCC 396 Paragraphs 14-16, 24, 26&28. 3 (2004) 8 SCC 1 Paragraphs 14-16. 4 (1989) 2 SCC 95. Paragraph 24 and also see paragraphs 1, 23 and 25 5 (1995) Supp. 2 SCC 295. Paragraph 13 and also see Paragraphs 12, 14 and 15. 6 (2018) SCC Online SC 1921 Paragraph 45. H 7 (2018) SCC Online SC 963. Paragraph 34. 8 (1976) 3 SCC 71. Paragraph 6.

K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS. 869 [A. M. KHANWILKAR, J.]

construction to Section 2-A of the Industrial Disputes Act, 1947 and also in Bharat Singh vs. Management of New Delhi Tuberculosis Centre, New Delhi9 to the same effect. The thrust of the argument is that the object of the I&B Code is resolution rather than liquidation as also the maximization of value of assets of such persons, to promote entrepreneurship. To buttress this argument, reliance is also placed on the report of the Insolvency Law Committee in March 2018. Paragraph 11.6 therein states that in order to further the stated object of the I&B Code to promote resolution, the voting share for approval of resolution plan may be reduced to 66%. It is submitted that this should have been taken into account by the NCLAT in reference to the amended provisions brought into force during the pendency of the appeal before it. It is also contended that the adjudicating authority (NCLT) as well as the appellate authority (NCLAT), while approving or rejecting the resolution plan, is duty bound to exercise a judicious mind and be alive to the facts and circumstances of the specific case before it and the socio-economic benefit considering the favourable opinion noted by the resolution professional in his affidavit, that there was every possibility of reviving the corporate debtor. Even as per the report submitted by M/s. Atlas Financial Research & Consulting Private Limited regarding a thorough Techno Economic Viability study conducted in respect of the corporate debtor (KS&PIPL), it has been noted that the company was technically feasible and economically viable. The corporate debtor was facing a E financial crisis due to abrupt and unilateral stoppage of operations in the working capital loan account and the proposed resolution plan fulfilled all the eligibility criteria for its approval under the provisions of the I&B Code. Furthermore, the dissenting financial creditors having failed to offer any reason whatsoever for rejecting the resolution proposal, it must follow that they did not do so in good faith but with malicious intent, warranting intervention by the adjudicating authority and the appellate authority.

11Copy pinpoint11. Mr. A.M. Singhvi, learned Senior Counsel appearing for the appellant concerning the corporate debtor (IIL) would submit that the CoC, being the custodian of public interest, is under a statutory duty to exercise its power under Section 30(4) of the I&B Code reasonably and fairly. Section 30(4) posits an obligation upon the CoC to adopt a resolution plan which is ex facie more viable than liquidation. According to him, the amendments to Section 30(4) in particular brought into force w.e.f. 9 (1986) 2 SCC 614, Paragraphs 2, 5-6, 10-14 H

p. 870 Copy page pinpoint

A 23rd November, 2017 are only declaratory/clarificatory of the law and resultantly, retrospective. He submits that giving reasons for the view expressed on the resolution plan, be it for approval or rejection, is the quintessence to fulfill the requirement of a reasonable and fair approach of the CoC. Reasons so given, would demonstrate whether it is a bonafide or malicious act of the financial creditors. That has now been clarified and restated by the amending regulation 39(3) which has come into force w.e.f. 4th July, 2018. Being a clarificatory amendment, the same would take effect retrospectively and is applicable even to pending proceedings. It is then contended that if no reason is assigned or forthcoming, the court is not powerless to strike down the exercise of power by the concerned financial creditor if it was possible to infer from the circumstances emanating from the record that the exercise of such power was wrongly exercised. To buttress this submission reliance was placed upon Mardia Chemicals limited and Others vs. Union of India and Others10 which had read the requirement of fairness and reasonableness into Section 13 of the SARFAESI Act. The court declared that reasons must be given and communicated. This “reading in” of the principle of fairness and reasonableness, was eventually codified in the form of Section 13(3-A) of that Act. Such interpretation was inexorable in respect of provisions as draconian as Section 30(4), resulting in the inevitable consequence of liquidation of the corporate debtor. The provisions of the I&B Code must be so construed as not to be financial creditor centric but to be an inclusive approach where all stakeholders’ interests are balanced and particularly for exploring the possibility of revival of the corporate debtor and maximisation of the value of assets. In the present case, contends learned counsel, the only plea taken by the dissenting financial creditors before the adjudicating authority (NCLT), was that they had taken a commercial decision and it was not open to judicial scrutiny. Even if it is a commercial decision, contends learned counsel, it must fulfill the test of a reasonable and fair approach to be supported by tangible reasons. In the absence of reasons, the adjudicating authority (NCLT) must exercise its jurisdiction to ascertain whether the exercise of power by the CoC is reasonable and in conformity with the purpose of the Code. If the resolution plan is ex facie viable and yet the dissenting financial creditors reject the same, such exercise of power would be subversive of the policy of the Code, requiring intervention by the adjudicating authority (NCLT). Whereas, such a case would imply a H 10 (2004) 4 SCC 311, paragraph 45.

K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS. 871 [A. M. KHANWILKAR, J.]

duty on the CoC to exercise its power to approve the plan. To counter the defence of the dissenting financial creditors regarding a commercial decision, reliance was placed on Padfield and Others vs. Minister of Agriculture, Fisheries and Food11 and Dhampur Sugar Mills Ltd. vs. State of U.P. and Others12. Learned counsel contends that abdication of duty by the CoC to consider the feasibility and viability projected in the proposed resolution plan would be fatal. It would be a case of non application of mind by the CoC, if not a malicious approach in rejection of the proposed resolution plan. The test of limits of judicial review, as expounded in Tata Cellular Vs. Union of India13 ought to be invoked to rein in the unbridled exercise of power by the CoC. The Tribunal could certainly discard the view of the dissenting financial creditors if it was satisfied that such a decision could not be reached by any reasonable and prudent person. It is also possible for the adjudicating authority (NCLT) to intervene if the circumstances suggest that the decision of dissenting financial creditors was the outcome of abuse of power or being irrational and unreasonable. Reliance is also placed on the decision in Union of India and Another vs. Cynamide India Ltd. and Another14 and Shri Sitaram Sugar Company Limited and Another vs. Union of India and Others15. As regards the amendment brought into effect from 23th November, 2017 to Section 30(4) of the I&B Code, it is contended that the same must be construed as only clarificatory and resultantly, be given retrospective effect. Inasmuch as the discretion given to the constituents of CoC, namely the financial creditors under Section 30(4) of the I&B Code is required to be exercised in a just manner and by giving due regard to the feasibility and viability of a plan proposed for revival of the corporate debtor. There is nothing else relevant for discharging the statutory obligation of approving or rejecting the proposed resolution plan. With regard to the second amendment to Section 30(4) of the I&B Code which came into effect from 6th June, 2018, reducing the voting threshold from 75% to 66%, learned counsel contends that even the same operates from the time the section was brought on the statute book. For, the legislature consciously lowered the threshold requirement to 66%. It was to infuse more flexibility in the resolution processes and to maximise the effort for revival of the corporate debtor 11 (1968) 2 WLR 924 12 (2007) 8 SCC 328 13 (1996) 6 SCC 651 Paragraphs-73 and 77. 14 (1987) 2 SCC 720 Paragraph 4 15 (1990) 3 SCC 223 Paragraphs - 47-49, 51-53, 57-58 H

p. 872 Copy page pinpoint

A in the larger public interests. The intention of the Parliament was to cure the mischief that the high threshold was causing; and by reducing it, Parliament intended to encourage revival of the corporate debtor and maximisation of the value of assets and to discourage liquidation resulting in closure of the functioning company on which many stakeholders depended, such as its workers. With regard to the objection to the locus of the appellant being the former Chairman and Managing Director of the corporate debtor, it is contended that the same is raised for the first time, and in any case, cannot be countenanced in view of the express provision contained in Section 61 of the I&B Code and moreso because the appellant had initiated proceedings by filing an application before the adjudicating authority (NCLT) and the appellant, being the shareholder, had reason to insist for revival of the corporate debtor instead of its liquidation. As regards the objection about the eligibility of the appellant as a person acting jointly or in concert with the corporate debtor in terms of Section 29A of the I&B Code, it is contended that even this objection was being taken for the first time. Notably, Section 29A of the I&B D Code came into force only from 23rd November, 2017, and it did not exist when the resolution plan was considered by the CoC. Further, the scope of appeal preferred by the appellant was to call upon the adjudicating authority to interfere with the unreasonable rejection of the resolution plan by the dissenting financial creditors and not to propound an independent plan of the appellant. Thus understood, Section 29A of the I&B Code would have no application and in any case, if the proposed resolution plan is to be taken forward, the appellant has no causal connection with the resolution applicant. Learned counsel submits that the appeal be allowed and the matter be restored to the file of the adjudicating authority (NCLT) for reconsideration of the proposed resolution plan afresh.

12Copy pinpoint12. Mr. Colin Gonsalves, learned Senior Counsel appearing for the workers’ union concerning corporate debtor (IIL) submits that the rejection of the plan would have a direct impact on the workers engaged by the corporate debtor. According to him, the resolution plan manifests that the company is a viable company and all efforts should be made to revive the company and not to shove it into liquidation because of the whims and fancies of the minority financial creditors or, for that matter, in the guise of their commercial wisdom. Reliance is placed on United Bank of India, Calcutta vs. Abhijit Tea Co. Pvt. Ltd. and Others16 H 16 (2000) 7 SCC 357 Paragraph 20.

K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS. 873 [A. M. KHANWILKAR, J.]

and Karan Singh and Others vs. Bhagwan Singh (Dead) By Lrs. A And Others17 and additionally, on the decision of the NCLAT in the case of another corporate debtor (Alok Employees Benefit and Welfare Trust) in Company Appeal (AT) (Insolvency) No.344 of 2018 decided on 29th November, 2018. He had also invited our attention to the chart given in Economic Survey 2017-18 Volume 2, to contend that there will B be hardly any impact if this Court was to remit the case for reconsideration on the basis of the amended provisions by the adjudicating authority (NCLT) and especially because there is ample material on record to indicate that the corporate debtor (IIL) is a viable company and needs to be revived and not liquidated.

13Copy pinpoint13. On the other hand, Mr. Shyam Divan, learned Senior Counsel C and Ms. Pragya Baghel countered the above submissions and supported the conclusion reached by the NCLAT that the requirement specified in Section 30(4) of the I&B Code is mandatory. They submit that the I&B Code has been enacted after the experience of the earlier dispensations. There has been paradigm shift in adopting the new regime regarding the D timelines to be observed by all concerned at every stage as predicated in the Code. Be it for the resolution process or liquidation process. Both these processes are intended to be disposed of speedily and in a time- bound manner. The initial time limit provided to revive the company is 180 days from the date of admission of the petition and extendable by 90 days. The outer limit for resolution process has been specified as 270 E days and if the resolution plan is not approved by the CoC with requisite number of votes of the financial creditors (not less than of 75%), then there is no other option but to order liquidation. That is the inevitable consequence of failure to approve the resolution plan within the specified time. The adjudicating authority (NCLT) would have no other option. F Further, on presentation of the rejected resolution plan, it is not open to the adjudicating authority (NCLT) to enquire into the justness of the reason or the commercial decision taken by the financial creditors to approve or not to approve the proposed resolution plan. There is complete autonomy regarding the commercial decision or wisdom of the financial creditors. That cannot be questioned by the adjudicating authority G (NCLT). Whereas, the judicial review is circumscribed to the grounds specified in the Act itself, which is a self-contained Code. The legislative intent makes it amply clear that the Parliament was conscious about the fact that some business entities will fail and cannot be revived within the 17 (1996) 7 SCC 559 Paragraph 7. H

p. 874 Copy page pinpoint

A specified time but that cannot suppress the need for addressing the serious concern of financial creditors due to increasing financial pressure on them because of non-performing assets of the corporate debtor. The promoters have no divine right to continue to manage such corporate debtor. The I&B Code predicates the necessity of interest in the management of such corporate debtors being handed over to professionals B during the moratorium period so as to make a sincere effort to revive the company within the specified time. Our attention was invited to Bankruptcy Law Reforms Committee Report dated 4th November, 2015 and Insolvency Law Committee Report dated 26th March, 2018, to buttress the argument about the legislative intent behind the enactment of the C I&B Code and the concerned amendment. Reliance has been placed on Innoventive Industries Ltd. (supra), which had adverted to the legislative intent behind the I&B Code.

14Copy pinpoint14. Mr. Divan, appearing for ICICI Bank in the case of corporate debtor (IIL), submits that there was only one resolution plan. Neither D has the resolution applicant challenged the decision of the adjudicating authority (NCLT) nor has it been made party in the appeal. The outstanding amount payable by the corporate debtor (IIL) is around Rs.1435 Crore. He submits that the resolution plan is a complex document unlike a bid or tender document. The professionals associated with the dissenting financial creditors have analysed the same and were of the E considered opinion that it is not a feasible and achievable target - rather it is a speculative proposal. The dissenting financial creditors exercised their commercial wisdom after taking into account all the relevant aspects. It is not open to undertake scrutiny of that decision of the dissenting financial creditors. Neither can the IRP nor the adjudicating authority F (NCLT) be allowed to sit over the same as a court of appeal. The decision of the dissenting financial creditors reckons various aspects including the confidence about the capacity of the resolution applicant to translate the projected plan into reality as per the timelines specified and the feasibility and viability of the proposal and revival of the company in question. He took us through the relevant provisions including amended provisions and contended that the purpose and intent underlying the amendment was to give prospective effect thereto. He submitted that the appeal filed by the former Chairman and Managing Director of the corporate debtor (IIL) was not maintainable also because the said appellant has no locus. He submitted that the appellant was acting in concert with the resolution applicant and for which the appellant must

K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS. 875 [A. M. KHANWILKAR, J.]

be called upon to first deposit 100% of the dues. Our attention is invited to the recent decision in Arcelormittal India Private Limited vs. Satish Kumar Gupta and Others18. He submits that the Court has noticed the necessity of observing timelines by all concerned - be it at the stage of resolution process or liquidation process - in terms of the mandate in the I&B Code. The amendments cannot be construed otherwise so as to render the legislative intent otiose. He submits that, in law, there is a presumption of prospective application of the amended provisions. There is no express provision ordaining retrospective application of the amended provisions. The amended provisions unambiguously predicate that the same would come into force with effect from the stated date. In the present case, the timeline for completion of the resolution process expired on 14th November, 2017, and for which reason the amended provision lowering the voting share to 66% will be of no avail. As regards the amendment to Regulation 39, that has come into force w.e.f. 4th July, 2018, and obviously would have prospective application. In any case, non-disclosure of the reason by the dissenting financial creditors, would not vitiate the concluded cause of action upon exercising the vote to reject the proposed resolution plan. That position cannot be unsettled on the basis of the amended regulation. Learned counsel has placed reliance on the case of Karnataka State Industrial Investment & Development Corpn. Ltd. vs. Cavalet India Ltd. and Others. 19. As regards the concern expressed by the workers union of the corporate debtor (IIL), it is submitted that the workmen would get the highest priority in terms of Section 53 of the I&B Code. Moreover, the fact that the liquidation process has been initiated in respect of the company does not mean that the possibility of sale of the company as a running concern has been completely ruled out. Thus, the interests of the workers engaged by the corporate debtor will be taken care of as per the statutory command. The sum and substance of the argument is that the adjudicating authority (NCLT) was justified in rejecting the applications filed by the appellants and recorded the factum of rejection of the proposed resolution plan with the inevitable direction to initiate process for liquidation of the company under Section 33 of the I&B Code. In that view of the matter, no interference is warranted with the impugned decision of the NCLAT.

15Copy pinpoint15. Ms. Pragya Baghel, appearing for Indian Overseas Bank in the case of corporate debtor (KS&PIPL), having voting share of 15.15% and being one of the dissenting financial creditors, would submit that the 18 (2018) SCC Online 1733, Paragraphs 64, 78, 83 and 88 H 19 (2005) 4 SCC 456 Paragraphs 13 and 19

p. 876 Copy page pinpoint

A appellant was disqualified to appeal and that his appeal before NCLAT was limited to the observation regarding the personal guarantee as noted by the NCLT. The fact remains that the resolution plan put to vote did not garner support of the requisite percentage of financial creditors to the extent of not less than 75% of the voting share. The provisions as couched in the I&B Code do not permit computation of the voting share percentage by excluding the votes of financial creditors who had abstained. Whereas, there is express provision to the contrary, making it amply clear that the votes of the financial creditors who had abstained from voting must be computed along with the votes rejecting the resolution plan, as being dissenting financial creditors. Any other interpretation would result in re-writing Section 30(4) and the regulations framed under the I&B Code, if not doing violence to the legislative intent. She has placed reliance on the decisions of S.L. Srinivasa Jute Twine Mills (P) Ltd. vs. Union of India and Another20 and Rajeev Chaudhary vs. State (NCT) of Delhi21. As regards the argument of retrospective application of the amended provisions, in particular, reducing the voting share from 75% to 66%, learned counsel has placed reliance on the decision of this Court in Hitendra Vishnu Thakur and Others vs. State of Maharashtra and Others22. The appellant and respondents 1-3 & 5-8 in C.A. No.10673 of 2018 and appellant and respondents 2 & 20 in C.A. No.10719 of 2018 E have filed written submissions through their counsels, elaborating the above points.

16Copy pinpoint16. Ms. Prabha Swami, appearing for the resolution applicant (Suyash Outsourcing Pvt. Ltd.), has submitted that the resolution plan was approved on certain conditions and the resolution applicant assures to abide by those conditions. Further, as per the liberty given to the resolution applicant, appropriate affidavit has now been filed to place that assurance on record.

17Copy pinpoint17. Ms. Mahima Singh, learned counsel appearing for the Official Liquidator in the case of corporate debtor (IIL), had sought liberty to place on record certain subsequent developments which may have bearing on the concerned appeals. That affidavit dated 23rd November, 2018, has also been filed and is allowed to be taken on record. 20 (2006) 2 SCC 740, Paragraphs 13-19. 21 (2001) 5 SCC 34 Paragraphs 3 and 4. 22 H (1994) 4 SCC 602 Paragraph 26.

K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS. 877 [A. M. KHANWILKAR, J.]

18Copy pinpoint18. Having heard learned counsel for the parties, the moot question A is about the sequel of the approval of the resolution plan by the CoC of the respective corporate debtor, namely KS&PIPL and IIL, by a vote of less than seventy five percent of voting share of the financial creditors; and about the correctness of the view taken by the NCLAT that the percentage of voting share of the financial creditors specified in Section B 30(4) of the I&B Code is mandatory. Further, is it open to the adjudicating authority/appellate authority to reckon any other factor (other than specified in Sections 30(2) or 61(3) of the I&B Code as the case may be) which, according to the resolution applicant and the stakeholders supporting the resolution plan, may be relevant?

19Copy pinpoint19. This Court in its recent decisions has elaborately adverted to the legislative history and delineated the broad contours of the provisions of the I&B Code. The latest being the case of Arcelormittal (supra) followed by B.K. Educational (supra) and Innoventive Industries Limited vs. ICICI Bank and Another.23 In the present case, however, our focus must be on the dispensation governing the process of approval or rejection of resolution plan by the CoC. The CoC is called upon to consider the resolution plan under Section 30(4) of the I&B Code after it is verified and vetted by the resolution professional as being compliant with all the statutory requirements specified in Section 30(2).

20Copy pinpoint20. The CoC is constituted as per Section 21 of the I&B Code, E which consists of financial creditors. The term ‘financial creditor’ has been defined in Section 5(7) of the I&B Code to mean any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to. Be it noted that the process of insolvency resolution and liquidation concerning corporate debtors has been codified in Part II of the I&B Code, comprising of seven F Chapters. Chapter I predicates that Part II shall apply in matters relating to the insolvency and liquidation of corporate debtor where the minimum amount of default is Rs.1,00,000/-. Section 5 in Chapter I is a dictionary clause specific to Part II of the Code. Chapter II deals with the gamut of procedure to be followed for the corporate insolvency resolution G process. For dealing with the issue on hand, the provisions contained in Chapter II will be significant. From the scheme of the provisions, it is clear that the provisions in Part II of the Code are self-contained code, providing for the procedure for consideration of the resolution plan by the CoC. 23 (2018) 1 SCC 407 H

p. 878 Copy page pinpoint

21Copy pinpoint21. The stage at which the dispute concerning the respective corporate debtors (KS&PIPL and IIL) had reached the adjudicating authority (NCLT) is ascribable to Section 30(4) of the I&B Code, which, at the relevant time in October 2017, read thus: “30(4)-The committee of creditors may approve a resolution plan by a vote of not less than seventy five per cent of voting share of the financial creditors.” If the CoC had approved the resolution plan by requisite percent of voting share, then as per Section 30(6) of the I&B Code, it is imperative for the resolution professional to submit the same to the adjudicating authority (NCLT). On receipt of such a proposal, the adjudicating authority (NCLT) is required to satisfy itself that the resolution plan as approved by CoC meets the requirements specified in Section 30(2). No more and no less. This is explicitly spelt out in Section 31 of the I&B Code, which read thus (as in October 2017): D “31. Approval of resolution plan.-(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section(2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, E guarantors and other stakeholders involved in the resolution plan. (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub- section (1), it may, by an order, reject the resolution plan.

F (3) After the order of approval under sub-section (1),- (a) the moratorium order passed by the Adjudicating Authority under section 14 shall cease to have effect; and (b) the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process G and the resolution plan to the Board to be recorded on its database.” We may also usefully refer to Section 30(2) as applicable at the relevant time. The same read thus:

K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS. 879 [A. M. KHANWILKAR, J.]

“30. Submission of resolution plan.- A (1) xxx xxx xxx (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the repayment of other debts of the corporate debtor; (b) provides for the repayment of the debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under section 53; (c) provides for the management of the affairs of the Corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; D (e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be specified by the Board. xxx xxx xxx” E

22Copy pinpoint22. In Innoventive Industries Limited (supra), the Court, after analysing the historical background in which the Code was enacted, opined that one of the most important objectives of the Code was to bring the insolvency law in India under a single, unified umbrella with the object of speeding up the insolvency process. As regards the process regarding submission of resolution plan and, in particular, in reference to Section 30, the Court observed as follows: “33. Under Section 30, any person who is interested in putting the corporate body back on its feet may submit a resolution plan to the resolution professional, which is prepared on the basis of an information memorandum. This plan must provide for payment of insolvency resolution process costs, management of the affairs of the corporate debtor after approval of the plan, and implementation and supervision of the plan. It is only when such plan is approved by a vote of not less than 75% of H

p. 880 Copy page pinpoint

A the voting share of the financial creditors and the adjudicating authority is satisfied that the plan, as approved, meets the statutory requirements mentioned in Section 30, that it ultimately approves such plan, which is then binding on the corporate debtor as well as its employees, members, creditors, guarantors and other stakeholders. Importantly, and this is a major departure from previous legislation on the subject, the moment the adjudicating authority approves the resolution plan, the moratorium order passed by the authority under Section 14 shall cease to have effect. The scheme of the Code, therefore, is to make an attempt, by divesting the erstwhile management of its powers and vesting it in a professional agency, to continue the business of the corporate body as a going concern until a resolution plan is drawn up, in which event the management is handed over under the plan so that the corporate body is able to pay back its debts and get back on its feet. All this is to be done within a period of D 6 months with a maximum extension of another 90 days or else the chopper comes down and the liquidation process begins.” (emphasis supplied) The Court, however, was not called upon to deal with the specific issue E that is being considered in the present cases namely, the scope of judicial review by the adjudicatory authority in relation to the opinion expressed by the CoC on the proposal for approval of the resolution plan.

23Copy pinpoint23. In Arcelormittal (supra), the Court adverted to the timelines specified in the Code and the consequences thereof in paragraphs 73 F and 74, which read thus: “73. The time limit for completion of the insolvency resolution process is laid down in Section 12. A period of 180 days from the date of admission of the application is given by Section 12(1). This is extendable by a maximum period of 90 days only if the G Committee of Creditors, by a vote of 66%, votes to extend the said period, and only if the Adjudicating Authority is satisfied that such process cannot be completed within 180 days. The authority may then, by order, extend the duration of such process by a maximum period of 90 days (see Sections 12(2) and 12(3)). What is also of importance is the proviso to Section 12(3) which H

K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS. 881 [A. M. KHANWILKAR, J.]

states that any extension of the period Under Section 12 cannot A be granted more than once. This has to be read with the third proviso to Section 30(4), which states that the maximum period of 30 days mentioned in the second proviso is allowable as the only exception to the extension of the aforesaid period not being granted more than once. B

74. What is important to note is that a consequence is provided, in the event that the said period ends either without receipt of a resolution plan or after rejection of a resolution plan under Section 31. This consequence is provided by Section 33, which makes it clear that when either of these two contingencies occurs, the corporate debtor is required to be liquidated in the manner laid down in Chapter III. Section 12, construed in the light of the object sought to be achieved by the Code, and in the light of the consequence provided by Section 33, therefore, makes it clear that the periods previously mentioned are mandatory and cannot be extended.” (emphasis supplied) And again, while dealing with the purport of Sections 30, 33 and 61 in paragraph 76, it is observed thus: E “76. …………………… (viii) Section 30 is an important provision in that a resolution applicant may submit a resolution plan to the Resolution Professional, who is then to examine the said plan to see that it conforms to the requirements of Section 30(2). Once this plan conforms to such requirements, the plan is then to be presented to the Committee of Creditors for its approval under Section 30(3). This can then be approved by the Committee of Creditors by a vote of not less than 66% under Sub-section (4). What is important to note is that the Committee of Creditors shall not approve a resolution plan where the resolution applicant is ineligible under Section 29A, and may require the Resolution Professional to invite a fresh resolution plan where no other resolution plan is available. Once approved by the Committee of Creditors, the resolution plan is to be submitted to the Adjudicating Authority under Section 31 of the Code. It is at this stage that H

p. 882 Copy page pinpoint

A a judicial mind is applied by the Adjudicating Authority to the resolution plan so submitted, who then, after being satisfied that the plan meets (or does not meet) the requirements mentioned in Section 30, may either approve or reject such plan. B (ix) An appeal from an order approving such plan is only on the limited grounds laid down in Section 61(3). However, an appeal from an order rejecting a resolution plan would also lie under Section 61. (x) As has been stated hereinbefore, the liquidation C process gets initiated under Section 33 if, (1) either no resolution plan is submitted within the time specified under Section 12, or a resolution plan has been rejected by the Adjudicating Authority; (2) where the Resolution Professional, before confirmation of the resolution plan, intimates the Adjudicating Authority of the decision of the D Committee of Creditors to liquidate the corporate debtor; or (3) where the resolution plan approved by the Adjudicating Authority is contravened by the concerned corporate debtor. Any person other than the corporate debtor whose interests are prejudicially affected by such E contravention may apply to the Adjudicating Authority, who may then pass a liquidation order on such application.” (emphasis supplied)

24Copy pinpoint24. Notably, the resolution plan concerning both the corporate debtors, namely KS&PIPL and IIL was considered by the concerned F CoC in October 2017, and was approved by less than 75% of voting share of the financial creditors. The inevitable consequences thereof are to treat the proposed resolution plan as disapproved or deemed to be rejected by the dissenting financial creditors. The expression ‘dissenting financial creditors, is defined in Regulation 2(1)(f) of The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for G Corporate Persons) Regulations, 2016, to mean the financial creditors who voted against the resolution plan approved by the Committee. This definition came to be amended subsequently w.e.f. 01.01.2018 to mean the financial creditors who voted against the resolution plan or abstained from voting for the resolution plan, approved by the Committee. H

K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS. 883 [A. M. KHANWILKAR, J.]

25Copy pinpoint25. Admittedly, in the case of the corporate debtor KS&PIPL, A the resolution plan, when it was put to vote in the meeting of CoC held on 27th October, 2017, could garner approval of only 55.73% of voting share of the financial creditors and even if the subsequent approval accorded by email (by 10.94%) is taken into account, it did not fulfill the requisite vote of not less than 75% of voting share of the financial creditors. On the other hand, the resolution plan was expressly rejected by 15.15% in the CoC meeting and later additionally by 11.82% by email. Thus, the resolution plan was expressly rejected by not less than 25% of voting share of the financial creditors. In such a case, the resolution professional was under no obligation to submit the resolution plan under Section 30(6) of the I&B Code to the adjudicating authority. Instead, it was a case to be proceeded by the adjudicating authority under Section 33(1) of the I&B Code. Similarly, in the case of corporate debtor IIL, the resolution plan received approval of only 66.57% of voting share of the financial creditors and 33.43% voted against the resolution plan. This being the indisputable position, NCLAT opined that the resolution plan was deemed to be rejected by the CoC and the concomitant is to initiate liquidation process concerning the two corporate debtors.

26Copy pinpoint26. According to the resolution applicant and the stakeholders supporting the concerned resolution plan in respect of the two corporate debtors, the stipulation in Section 30(4) of the I&B Code as applicable at the relevant time in October 2017 is only directory and not mandatory. E This argument is founded on the expression “may” occurring in Section 30(4) of the I&B Code. This argument does not commend to us. In that, the word “may” is ascribable to the discretion of the CoC - to approve the resolution plan or not to approve the same. What is significant is the second part of the said provision, which stipulates the requisite threshold F of “not less than seventy five percent of voting share of the financial creditors” to treat the resolution plan as duly approved by the CoC. That stipulation is the quintessence and made mandatory for approval of the resolution plan. Any other interpretation would result in rewriting of the provision and doing violence to the legislative intent. G

27Copy pinpoint27. It was then contended that the amendment vide Insolvency and Bankruptcy Code Amendment Act, 2018 (Act No.8 of 2018, dated 18th January, 2018) w.e.f. 23rd November, 2017 was to substitute the amended provision, which means that the amended provision stood incorporated as Section 30(4) from the commencement of I&B Code. H

p. 884 Copy page pinpoint

A This argument will be dealt with a little later while considering the effect of the amended provisions. For the present, we are adverting to the provisions in the I&B Code and the regulations framed there under, as were in force in October 2017, when the CoC of the concerned corporate debtor was called upon to consider the proposed resolution plan.

28Copy pinpoint28. We may now take note of the provisions in the 2016 regulations framed under the I&B Code. Chapter-VI of the regulations deals with general meetings of the committee. Chapter-VII with matters relating to voting by the committee. Chapter-VIII with the conduct of corporate insolvency resolution process and Chapter-X with the resolution plan. As the issue under consideration is about the conduct of meeting of CoC C for considering the proposed insolvency resolution plan, we may usefully refer to the dispensation delineated in Chapter-VI and VII, in particular. Regulation 18 is about the meetings of the committee to be convened by the resolution professional when he considers necessary or upon the requisition given by the members of the committee, representing 33% of the voting rights. Regulation 19 is about the notice period for convening such a meeting and Regulation 20 is about the service of notice by electronic means. Regulation 21 is about the contents of the notice for meeting. Regulation 22 provides for the quorum at the meeting and Regulation 23 recognises participation of the members of committee through video conferencing and other audio visual means, as specified therein. In other words, the members of the committee need not participate during voting propria persona or in person but can do so through video conferencing or other audio or visual means. The conduct of meeting is governed by Regulation 24 and the method and procedure for voting during such meeting is predicated in Regulation 25 and 26. Regulation F 25 is about voting by the members of the committee present in the meeting and Regulation 26 is about the voting by either electronic means or through electronic voting system.

29Copy pinpoint29. Be it noted, these provisions are regarding the conduct of meetings of the committee generally and including about the method of voting during such meetings. The specific provision regarding approval of a resolution plan can be traced to Regulation 39. Regulation 39, as it was in force at the relevant time in October 2017, read thus: “39. Approval of resolution plan.-(1) A resolution applicant shall endeavour to submit a resolution plan prepared in accordance with the Code and these Regulations to the resolution professional,

K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS. 885 [A. M. KHANWILKAR, J.]

thirty days before expiry of the maximum period permitted under section 12 for the completion of the corporate insolvency resolution process. (2) The resolution professional shall present all resolution plans that meet the requirements of the Code and these Regulations to the committee for its consideration. B (3) The committee may approve any resolution plan with such modifications as it deems fit. (4) The resolution professional shall submit the resolution plan approved by the committee to the Adjudicating Authority with the certification that: C

(a) the contents of the resolution plan meet all the requirements of the Code and the Regulations; and (b) the resolution plan has been approved by the committee. (5) The resolution professional shall forthwith send a copy of the order of the Adjudicating Authority approving or rejecting a resolution plan to the participants and the resolution applicant. (6) A provision in a resolution plan which would otherwise require the consent of the members or partners of the corporate debtor, as the case may be, under the terms of the constitutional documents of the corporate debtor, shareholders’ agreement, joint venture agreement or other document of a similar nature, shall take effect notwithstanding that such consent has not been obtained. (7) No proceedings shall be initiated against the interim resolution professional or the resolution professional, as the case may be, for any actions of the corporate debtor, prior to the insolvency commencement date. (8) A person in charge of the management or control of the business and operations of the corporate debtor after a resolution plan is approved by the Adjudicating Authority, may make an application to the Adjudicating Authority for an order seeking the assistance of the local district administration in implementing the terms of a resolution plan.”