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

The Judgment of the Court was delivered by DINESH MAHESHWARI, J. Preliminary and brief outline .......................................... 2* Particulars of the proceedings and the parties ................... 7* C The relevant factual and background aspects .................. 13* Initiation of CIRP ...........................................................14* CoC Meetings and ancillary proceedings ................... 16* D Resolution plan approved by the Adjudicating Authority (NCLT) .............................................................................26* Disapproval of the Appellate Tribunal (NCLAT) ............. 40* Proceedings in this Court .................................................. 59* E The events during pendency of these appeals. ............62* Rival submissions ...........................................................65* Points for determination.................................................... 84* Relevant statutory provisions ............................................ 87* F Objectives and scheme of IBC: crucial role-players: ..... 109* Point A – Valuation: Regulations 27 and 35 ..................... 116* Point B – Publication of Form G: Regulation 36-A ......... 118* Point C1 – Effect of Section 164(2)(b) Companies Act 120* G Point C2 – Effect of Section 88 Trusts Act ................... 121* Point C3 – Effect of Section 166(4) Companies Act ..... 125* Point D1 – Revision of resolution plan after approval by CoC................................................................................. 126* H Ed. Note : Pagination is as per the original Judgment.

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Point D2 – Increase of fees of resolution professional .... 132 A Point E – The matter concerning related party ................ 133 Point F – NCLAT’s findings regarding settlement offer of promoter ........................................................................... 135 Point G – Impact and effect of subsequent events .......... 138 B Summation ........................................................................ 142 Conclusion ........................................................................ 144 Preliminary and brief outline C

1Copy pinpoint1. These civil appeals are essentially directed against the common judgment and order dated 17.02.2022, as passed by the National Company Law Appellate Tribunal, Chennai Bench,1 in a batch of appeals in relation to the Corporate Insolvency Resolution Process2 under the Insolvency and Bankruptcy Code, 2016,3 concerning the corporate debtor, Appu Hotels Limited4, whereby the Appellate Tribunal has reversed the order D dated 15.07.2021, as passed by the National Company Law Tribunal, Chennai5; and while rejecting the resolution plan in question, has remanded the matter to the committee of creditors6 with directions to the resolution professional7 to proceed from the stage of publication of Form ‘G’, and invite the expression of interest8 afresh as per the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate E Persons) Regulations, 20169.

2Copy pinpoint2. In view of multiple issues raised in this batch of matters, where several steps have been taken at different stages and different parties are having different stands and interests, we may draw a brief outline with salient features of the factual and background aspects, in order to F indicate the contours of the forthcoming discussion.

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Regulations. The Appellate Tribunal also directed that the claim of the related party financial/operational creditors be not discriminated from that of the unrelated financial/operational creditors.

3Copy pinpoint3. The aforesaid order of NCLAT dated 17.02.2022 is under challenge before this Court by the resolution applicant as also by the resolution professional on several counts, which could be broadly summarised thus: First, that Regulation 35 of the CIRP Regulations does not mandate sharing of the valuation report to the CoC and instead mandates only sharing of liquidation value. Second, that the non-core assets were not significant in value and the valuation was communicated to and agreed upon by the members of the CoC on 15.12.2020. Third, that non-publication of Form G on the designated website was a mere procedural irregularity which did not prejudice interests of any of the parties. Fourth, that the commercial wisdom of CoC was not justiciable and once the CoC had approved the resolution plan by the requisite majority, there was very limited scope of interference by the Courts. Fifth, that the Appellate Tribunal has overstepped its jurisdiction by declaring the resolution applicant ineligible under Section 88 of the Trusts Act and disqualified under Section 164(2)(b) of the Companies Act. Sixth, that the claims of related party creditors cannot be treated at par with the unrelated creditors. And seventh, that Section 12-A IBC application of the promoter was merely a dilatory tactic and that he was not entitled to file any such application. These and other grounds raised in these appeals have been duly contested by the respondents with their respective stands and positions in these cases. This apart, some of the financial creditors have also moved the applications for impleadment and have placed their respective viewpoints for consideration.

4Copy pinpoint4. During the pendency of these appeals, this Court did not stay the operation of impugned order dated 17.02.2022; and during the course of hearing of these appeals, on 07.03.2022, it was informed by RP that pursuant to the order impugned, another meeting of CoC had been conducted on 03.03.2022. It is noticed that in the said CoC meeting held on 03.03.2022, the settlement proposal of the promoter was voted against by 51.81% of the voting share. After conclusion of initial hearing, while reserving judgment, this Court also took note of the fact that further meeting of CoC was slated for 21.03.2022; and it was provided that the meetings/proceedings of the CoC could go on but the entire process shall remain subject to the final orders to be passed in these appeals. H

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A 4.1. These matters were again taken on board on 20.05.2022 when this Court took note of the submissions made in another application moved by the resolution applicant for directions while pointing out that the fresh process had been initiated by the RP by publication of Form G on 26.04.2022, inviting fresh EOIs. Therein, the resolution applicant sought interim stay over the fresh process initiated by RP or in the alternative, B to stay the operation of the impugned order as regards declaration of his disqualification, and to direct the RP to consider his EOI in the fresh process so initiated. This Court, however, declined to pass any other order with reference to the fact that all the proceedings remain subject to the final orders in these appeals. C 4.2. Yet again, Civil Appeal No. 1682-1683 of 2022 was taken on the board on 17.11.2022 and learned counsel for the parties were heard further, in view of an application moved on behalf of the promoter and erstwhile director of the corporate debtor (IA No. 168602 of 2022), seeking permission to bring on record subsequent events that his proposal D of settlement under Section 12-A of the Code was accepted by CoC on 12.10.2022 by 100% of the voting share, i.e., unanimously; and the same had been placed before the Adjudicating Authority for approval. Having regard to the events aforesaid and looking to the overall circumstances, while keeping the judgment reserved, we requested the Adjudicating Authority to await the decision of this Court in these matters. E Particulars of the proceedings and the parties

5Copy pinpoint5. In view of the issues arising for determination in these appeals, with several parties carrying different roles, interests, and positions, worthwhile it would be to narrate at the outset, in brief, the relevant F particulars of the proceedings leading to these appeals as also the principal parties involved herein.

6Copy pinpoint6. As noticed, the CIRP against the corporate debtor got initiated on 05.05.2020, with the NCLT admitting an application moved under Section 7 of the Code by one of its financial creditors, TFCI. This G application had been registered as IBA No. 1459 of 2019. The application for approval of the resolution plan, moved before NCLT was registered as IA No. 150/CHE/2021 in the said IBA No. 1459 of 2019. This application and several other correlated applications were considered together and were dealt with in the common order dated 15.07.2021 whereby, the National Company Law Tribunal, Chennai rejected the H

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objections and approved the resolution plan approved by the committee A of creditors. 6.1. Four separate appeals were preferred before the National Company Law Appellate Tribunal, Chennai Bench against the aforesaid order dated 15.07.2021, being Company Appeal (AT) (CH) (Insolvency) Nos. 164, 176, 218 and 219 of 2021. The appeals bearing numbers 164 B of 2021 and 219 of 2021 were filed by the promoter and erstwhile director of corporate debtor, respectively in challenge to the approval of resolution plan and rejection of his application for consideration of a settlement proposal. On the other hand, the appeal bearing number 176 of 2021 was filed by one of the creditors of the corporate debtor, whose claim as financial creditor as also operational creditor was declined in the approved resolution plan, for being a related party of the corporate debtor. The other appeal bearing number 218 of 2021 was filed by an NRI shareholder and erstwhile director of the corporate debtor, essentially being aggrieved by denial of any relief to shareholders in the approved resolution plan. As noticed, these four appeals were decided together by the NCLAT in its impugned common judgment and order dated 17.02.2022. 6.2. In the present set of appeals in this Court against the aforesaid judgment and order dated 17.02.2022, one sub-set is of appeals preferred by the resolution applicant which could be noticed as follows: 6.2.1. The resolution applicant has questioned the orders passed in relation to the objections and claim of the promoter and erstwhile director of the corporate debtor (in Appeal Nos.164 of 2021 and 219 of 2021 before NCLAT) by way of Civil Appeal Nos. 1682-1683 of 2022. The resolution applicant has further questioned the order passed in relation to the claim of the related party (in Appeal No. 176 of 2021 before F NCLAT) by way of Civil Appeal No. 1827 of 2022. Yet further, the resolution applicant has questioned the order passed in relation to the claim of the NRI shareholder (in Appeal No. 218 of 2021 before NCLAT) by way of Civil Appeal No. 1810 of 2022. 6.3. Another sub-set is of appeals preferred by the resolution G professional against the aforesaid judgment and order dated 17.02.2022, which are as follows: 6.3.1. The resolution professional has questioned the orders passed in relation to the objections and claim of the promoter and erstwhile director of the corporate debtor (in Appeal Nos.164 of 2021 and 219 of H

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A 2021 before NCLAT) by way of Civil Appeal Nos. 1756 of 2022 and 1807 of 2022 respectively. The resolution professional has further questioned the order passed in relation to the claim of the related party (in Appeal No. 176 of 2021 before NCLAT) by way of Civil Appeal No. 1757 of 2022. Lastly, the resolution professional has questioned the order passed in relation to the claim of the NRI shareholder (in Appeal No. B 218 of 2021 before NCLAT) by way of Civil Appeal No. 1759 of 2022.

7Copy pinpoint7. Now, we may take note of the relevant particulars of the principal parties involved in this litigation. The parties could broadly be divided into three categories with reference to their respective stands vis-à-vis the order of the Appellate Tribunal, the CIRP, and the resolution C plan in question. 7.1 The first category is of the parties who are aggrieved of the order passed by the Appellate Tribunal on several counts and are opposing the rejection of resolution plan and remand of the matter to CoC. They are: D 7.1.1. Mr. M.K. Rajagopalan He is the resolution applicant and had submitted the resolution plan in question, which was approved by a majority of 87.39 per cent. of the voting share of CoC but was rejected by the Appellate Tribunal, as E being in contravention of Section 30(2) of the Code. He is appellant in Civil Appeal Nos. 1682-1683 of 2022, 1827 of 2022 and 1810 of 2022. In all the civil appeals filed by the resolution professional, he is arrayed as one of the respondents. 7.1.2. Mr. Radhakrishnan Dharmarajan F He is the resolution professional, who was appointed by the CoC in the third meeting dated 04.09.2020 and his appointment was confirmed by the NCLT in order dated 02.11.2020. He is appellant in Civil Appeal Nos. 1756 of 2022, 1807 of 2022, 1757 of 2022 and 1759 of 2022. In all the civil appeals filed by the resolution applicant, he is arrayed as proforma respondent No. 2. G 7.2. The second category is of the contesting respondents in this batch of appeals, who are essentially supporting the order passed by the Appellate Tribunal. They could reasonably be introduced as follows:

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7.2.1. Dr. Periasamy Palani Gounder13 A He is the promoter and erstwhile director of the corporate debtor, Appu Hotels Limited. He is also the Chairman of Dharani Finance Limited, the related party. He is respondent No. 1 in Civil Appeal Nos. 1682-1683 of 2022, 1756 of 2022 and 1807 of 2022. 7.2.2. Dharani Finance Limited B

The claim of this company, in its capacity as an operational creditor as also a financial creditor of the corporate debtor, was rejected by NCLT for being a related party. However, NCLAT directed the CoC to not discriminate it from unrelated financial/operational creditors. This company is respondent No. 1 in Civil Appeal Nos. 1757 of 2022 and C 1827 of 2022. 7.2.3. Dr. V. Janakiraman He is an NRI shareholder and erstwhile director of the corporate debtor who had, along with other shareholders, invested money in the D corporate debtor. He is aggrieved of denial of the claim of shareholders in the resolution plan in question and has raised a few other questions too alongwith the aforesaid promoter and director of the corporate debtor. He is respondent No. 1 in Civil Appeal Nos. 1810 of 2022 and 1759 of 2022. E

8Copy pinpoint8. Apart from the above-mentioned parties, who are directly impleaded in these appeals, there are other stakeholders, standing in their capacity as financial creditors and having their own role in CIRP in question. They include: 8.1. State Bank of India14 F This financial creditor of the corporate debtor with nearly 26.41% voting share in CoC, though had earlier voted in favour of the resolution plan in question but now, looking to the order of NCLAT relating to eligibility deficiency of the successful resolution applicant as also the deficiency in process, is essentially supporting the rejection of resolution plan in question and remand of matter to CoC for consideration afresh. G

13 Hereinafter also referred to as ‘the promoter’. 14 ‘SBI’, for short. H

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A 8.2. Edelweiss Asset Reconstruction Company Limited along with IDBI Debentures Trusteeship Limited and Allium Finance Private Limited15 These financial creditors, with about 21.13% voting share in CoC, too had voted in favour of the resolution plan in question. They have raised questions on the order passed by NCLAT on various grounds. This apart, they have underscored certain other areas of concern including the amount deposited by the resolution applicant, and have also suggested that CIRP must be allowed to go on while leaving the promoter a right to better the resolution plan by way of a Swiss Challenge Process only after depositing the matching amount in an escrow account prior to voting on his settlement offer. 8.3. Tourism Finance Corporation of India Limited This financial institution with 5.62% of the voting share in CoC got initiated the CIRP in question with admission of its application under D Section 7 of the Code by the NCLT on 05.05.2020 (IBA No. 1459 of 2019). The relevant factual and background aspects

9Copy pinpoint9. Having taken note of the relevant particulars of the proceedings as also the principal parties involved, we may now take note of the relevant factual and background aspects, in brief, as infra.

10Copy pinpoint10. The corporate debtor, Appu Hotels Limited, is a limited company with corporate identification number U92490TN1983PLC009942 and registered office at PGP House, No.57, Sterling Road, Nungambakkam, Chennai - 600 034. The promoter group of the corporate debtor consists of around one hundred non-resident investors living in the United States of America, who are said to have invested over twenty-two million US dollars in foreign exchange in the corporate debtor. The corporate debtor had availed project loans to construct ‘Le Meridian, Coimbatore’, from a consortium of bankers led by Indian Bank. It appears that the business did not materialise as per the estimated projections. The promoters and directors brought in nearly Rs. 100 crore as unsecured loans over and above the cash flow to keep the corporate debtor’s asset as standard. It further appears that though the hotel was making operational profit, but the profit was insufficient to 15 H ‘Edelweiss & associates’, for short and collectively.

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service the loan repayment to the optimum requirement and the corporate debtor defaulted in payment of overdues. Initiation of CIRP

11Copy pinpoint11. The default on the part of corporate debtor in payment of overdues led to the application under Section 7 of the Code for initiation of CIRP by one of its financial creditors, TFCI (who holds about 5% of the total loan amount) before the NCLT, in Application No. IBA/1459/

2019. It appears that a few propositions of One Time Settlement 16 were mooted on behalf of the corporate debtor but without any effective result, for the corporate debtor having not been able to make payment against the dues of the financial creditor. The NCLT observed that there being the existence of a financial debt and there being a default on the part of the corporate debtor, the application moved by the financial creditor was bound to be admitted and as a consequence, triggering the corporate insolvency resolution process. Accordingly, the NCLT, by its order dated 05.05.2020, admitted this application and appointed one Mr. Mukesh Kumar Gupta as interim resolution professional17 with other necessary directions in the following terms: - “12. Heard the Counsel for both the parties and perused the documents placed on record. It Is a fact borne on record that the Corporate Debtor is unable to repay the dues to the Financial Creditor and as such on the garb of OTS settlement the Corporate E Debtor wanted to gain time to settle of the dues to the Financial Creditor. Further, a perusal of the record of proceedings dated 04.02.2020, also shows that the Corporate Debtor was putting in efforts to settle of the dues of the Financial Creditor and upon such representation being made, the Corporate Debtor was granted time to settle the matter and the matter was finally posted to 02.03.2020 for reporting settlement or to proceed with the matter. Thus, when the matter was taken up for enquiry on 02.03.2020, it has been brought to the notice of this Tribunal by the Counsel for the Financial Creditor that the Corporate Debtor has not paid the dues of the Financial Creditor and also the Learned Counsel for the Financial Creditor submitted that even in the affidavit filed by the Corporate Debtor, the outstanding debt has been admitted which Is owed to the Financial Creditor. 16 ‘OTS’, for short. 17 ‘IRP’ for short. H

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A 13. Thus, we are satisfied that there is a debt and default on the part of the Corporate Debtor and the Corporate Debtor is unable to repay its dues to the Financial Creditor. It has also been consistently held by the Hon’ble Supreme Court both in Innoventive Industries Ltd. -Vs- ICICI Bank and another (2018) 1 SCC 407 as well as Mobilox Innovations Pvt. Ltd .. B -Vs- Kirusa Software Pvt. Ltd.(2018) 1 SCC 353 after going through the Scheme of l&B Code, 2016 in depth in relation to an Application under Section 7 filed by a Financial Creditor as compared to the one filed under Section 9 by an Operational Creditor, in relation to a Section 7 Application where there is an C existence of a ‘financial debt’ and when there is a default, this Tribunal is bound to admit the Application and as a consequence trigger the Corporate Insolvency Resolution Process (CIRP) and in relation to a Section 7 Application defence of set off or counter claim put forth by the Corporate Debtor cannot be considered as a dispute In relation to the Financial debt and default In relation to D It. In the present case, it is clear that there is a default on the part of the Corporate Debtor.

14. Thus taking into consideration the facts and circumstances of the case as well as the position of Law, we are of the view that this Application as flied by the Applicant - Financial Creditor is E required to be admitted under Section 7 (5) of the I&B Code, 2016.

15. The Financial Creditor has proposed the name of one MUKESH KUMAR GUPTA having Registration Number [IBBI/IPA-001/IP-P00207/2017-18/10407] (Email id :- F guptam11@ gmail.com) (Mob:- +91-9810798961) as Interim Resolution Professional (IRP) and a written communication in the format prescribed under Form 2 of the Insolvency and Bankruptcy Board of India (Application to Adjudicating Authority) Rules, 2016 has been filed by the proposed IRP who is appointed G as the IRP to take forward the process of Corporate Insolvency Resolution of the Corporate Debtor. The IRP appointed shall take in this regard such other and further steps as are required under the Statute, more specifically in terms of Section 15,17,18 of the Code and file his report within 20 days before this Bench. The

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powers of the Board of Directors of the Corporate Debtor shall stand superseded as a consequence of the initiation of the CIR Process in relation to the Corporate Debtor in terms of the provisions of I&B Code, 2016. *** *** ***

19. Based on the above terms, the Petition stands admitted in terms of Section 7 of the Code and the Moratorium shall come into effect as of this date. A copy of the order shall be communicated to the Petitioner as well as to the Respondent above named by the Registry. In addition, a copy of the order shall also be forwarded to IBBI for its records. Further, the IRP above named be also furnished with copy of this order forthwith by the Registry, who will also communicate the initiation of the CIRP in relation to the Corporate Debtor to the Registrar of Companies concerned.” CoC Meetings and ancillary proceedings D

12Copy pinpoint12. CIRP in relation to the corporate debtor having thus been initiated, various steps were taken in terms of the requirements of the Code and the CIRP Regulations, including the meetings of CoC which ultimately led to the approval of the resolution plan in question. Some of those steps carry their own relevance in these appeals in view of the issues raised by the parties. We may briefly take note of the relevant steps/proceedings in their feasible chronology as follows: 12.1. Pursuant to the initiation of CIRP, IRP issued a public announcement in Form A on 08.05.2020 inviting claims from various stakeholders in the corporate debtor. Further, for conducting the first meeting of the committee of creditors on 22.06.2020, IRP issued a notice on 18.06.2020. The said meeting was attended by all the members of the CoC including the promoter and erstwhile director of the corporate debtor. 12.2. In the second CoC meeting conducted on 06.08.2020, the proposal of IRP in relation to information memorandum and to seek EOI by publication of Form G was approved. Two sets of valuators were engaged as registered valuators by IRP for all the three categories of assets, being Mr. Vikas Agarwal, Mr. Anil Kumar Saxena and Mr. Anubhav Aggarwal (one set); and Future Value Advisors India (P) Ltd, H

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A a registered valuer entity registered with the Insolvency and Bankruptcy Board of India18. Their fees were also approved by the CoC. 12.3. On or about 17.08.2020, the IRP published Form G under Regulation 36A of the CIRP Regulations, inviting expression of interest from prospective resolution applicants to submit resolution plans. B 12.4. Thereafter, in the third CoC meeting held on 04.09.2020, a resolution was adopted to appoint Mr. Radhakrishnan Dharmarajan as the resolution professional. It was in the same meeting that the list of fifteen EOIs received from the prospective resolution applicants and placed by IRP, was approved by CoC. It was further informed to CoC in C the said meeting by IRP that the valuation was in process and the valuers may visit the premises of corporate debtor. On 26.09.2020, the IRP published the final list of prospective resolution applicants. It may be observed in this regard that pursuant to publication of provisional list and upon preliminary scrutiny, thirteen of the EOIs received were initially found eligible, of which, one had withdrawn and the other namely, Sri D Balaji Vidyapeeth (of which the successful resolution applicant was the managing trustee), was declared ineligible since a charitable trust cannot run a profit-making entity. Hence, the final list of eleven prospective resolution applicants was submitted before the CoC on 26.09.2020. Finally, three resolution plans were received, from Mr. Madhav Dhir, Mr. M.K. E Rajagopalan (the resolution applicant – appellant herein) and Kotak Special Solutions. 12.5. In the fourth CoC meeting held on 12.10.2020, IRP apprised the members about the valuers visiting the properties of the corporate debtor and the valuation being in process. F 12.6. On 27.10.2020, the appellant Mr. M.K. Rajagopalan submitted his resolution plan alongwith a demand draft in the sum of Rs. 2 crore. On 02.11.2020, the Tribunal approved the appointment of Mr. Radhakrishnan Dharmarajan as the resolution professional. 12.7. In the fifth CoC meeting held on 12.11.2020, in the first item G on the agenda, the members took note of the appointment of Mr. Radhakrishnan Dharmarajan as the resolution professional. Thereafter, on the second item, the CoC approved that the resolution professional shall file an application before NCLT to seek extension of time period

18 H ‘IBBI’, for short.

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from 05.05.2020 to 31.10.2020 under Section 12(2) of the Code due to A Covid-19 and lockdown. In the third agenda item as regards updates from RP and to decide on the resolution plan deadline extensions/possible reissuance of Form G, various views were expressed by various stakeholders which culminated in the following observations and resolution: - B “Since there were mixed views of CoC the process and way forward, RP declared that it is the CoC who needs to decide on the commercial viability of the Resolution Process to its best advantage, be it re issuance of the Form G and or extension of the timelines and he will act as per the directions of the CoC. C CoC members further discussed on the Form G, receipt of Resolution Plans and any potential requests from any of the RA’s about extension of time. With the consensus of CoC members, it was decided that no extension of timeline for submission of Resolution Plan D should be done and the RP was directed to expedite the valuation process and check the feasibility and viability of the Resolution Plans already submitted and present the eligible Resolution Plans before the CoC for consideration.” 12.8. In the sixth CoC meeting held on 16.12.2020, the RP apprised the CoC members about three resolution plans having been received out of which, the plan received from Kotak Special Solutions did not meet the criteria laid down under the Code. The RP also informed that there had been a revision in the claims and composition of financial creditors and as it was mandatory to give the revised details to the two resolution applicants, the formal presentation and the resolution applicants could be called after they revise the plans. In this meeting, the RP also apprised the CoC members about filing of time exclusion application, which was heard on 15.12.2020 and order was reserved. 12.8.1. In the said sixth meeting, the RP also informed that he had provided the CoC members with the fair value and liquidation value to all those who had submitted the confidential undertaking and that that due to significant difference in the value of land and building submitted by the valuers appointed by IRP, he shall have to appoint third valuer in accordance with Regulation 35 of the CIRP Regulations. It was also noted that valuation of non-core assets was not done earlier but, the H

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A third valuer appointed by RP had submitted the value of non-core assets and the same had been shared with CoC members who had submitted their undertaking. The RP emphasized that their value was not very significant, and it would not affect the liquidation value much. The relevant part of the minutes of this sixth CoC meeting could be reproduced as under: - B “The RP apprised the CoC members that based on the resolution passed in 5th CoC meeting an exclusion application along with an urgent application was filed before the NCLT Chennai on 19.11.2020. The application was listed for hearing 15.12.2020 and the Order has been reserved. C The RP further apprised that he has provided the CoC members with the fair value and liquidation value to all those who have submitted the confidential undertaking. RP further apprised, that due to significant difference in the value of land and building submitted by the valuers appointed by IRP, the RP has to appoint third valuer in accordance with provisions of Regulation 35 of CIRP Regulations 2016. After it was noted that valuation of non-core assets was not done, the third valuer appointed by RP has submitted the value of non- core assets and the same has been shared with CoC members who have submitted their undertaking. The RP emphasized that their value is not very significant, and it will not affect the liquidation value much. However, second valuation for the non-core assets will be needed in order to reach a final value. RP apprised the CoC members that the valuers appointed by IRP are based in F Delhi and they are asking much higher price for carrying the valuation of non-core assets. Therefore, the RP will hire a local valuer keeping the cost in mind.” The RP agreed to try and convene the next CoC meeting before Christmas eve, subject to getting the revised resolution plans. G 12.9. In the interregnum, the Tribunal, by its order dated 23.12.2020, allowed the application moved by RP for exclusion of the period between 05.05.2020 and 31.10.2020 – 179 days – while calculating the time for completion of CIRP of the corporate debtor; and excluded the said period from the period of CIRP in terms of Section 12(2) of IBC because of pandemic conditions, in the following words: - H

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“6. Heard the submission made by the Learned Counsel for the A Applicant and perused the records placed on file. In the facts of the present case, it is to be noted that the CIRP in relation to the Corporate Debtor was initiated only on 05.05.2020 i.e. during the period of lockdown and as such the Applicant has sought to exclude the period from 05.05.2020 till 31.10.2020. The Applicant placed on record the G.O. Ms. No. 482, Revenue and Disaster Management (DM-IV) Department, Government of Tamil Nadu dated 12.09.2020 and G.O. Ms. No. 447, Revenue and Disaster Management (DM-IV) Department, Government of Tamil Nadu dated 30.08.2020 in order to substantiate the during such time, where the exclusion is sought for, the lockdown was in existence in the Government of Tamil Nadu.

7. Further, it is pertinent to note here that due to Covid-19 pandemic coupled with attendant lockdown imposed by the Central/ State Government, the Regulator viz. IBBI has introduced an Amendment in the IBBI (Insolvency Resolution Process for D Corporate Persons) Regulations, 2016, so as to exclude the period of lockdown from the CIRP timeline. Regulation 40C of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 states as follows: 40C. Special provision relating to time-line. E Notwithstanding the time-lines contained in these regulations, but subject to the provisions in the Code, the period of lockdown imposed by the Central Government in the wake of Covid-19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process.

8. The Learned Counsel for the Applicant submitted that he sought to exclude the period from 05.05.2020 till 31.10.2020, a total of 179 days from the period of CIRP. Thus, as to the facts of the present case, in view of Regulation 40C of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 the period from 05.05.2020 till 31.10.2020 is excluded from the period of CIRP in terms of Section 12(2) of IBC, 2016. The Applicant shall make every endeavour to complete the CIRP in relation to H

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34. In the circumstances stated above, we are of the considered opinion that the decision taken by the Adjudicating Authority needs no interference, and both the Appeals deserves to be dismissed.”

E 12.10. In the seventh CoC meeting held on 29.12.2020, the RP briefly discussed the resolution plan submitted by Mr. M.K. Rajagopalan, resolution applicant herein, as the other successful prospective resolution applicant, Mr. Madhav Dhir, could not submit his resolution plan even after being granted extension once, whose request for further extension was denied by CoC and it was decided to continue with the resolution plan received from Mr. M.K. Rajagopalan. After discussing on the resolution plan so submitted, the resolution applicant was asked to submit the revised resolution plan after incorporating the changes suggested by the CoC members and he promised to do so by 30.12.2020. Further, the RP apprised the CoC that the third valuer as appointed had visited the premises and conducted valuation of the non-core assets and promised to submit the draft valuation by 30.12.2020.

19 There had been other observations occurring in this judgment and order dated 05.05.2021, which have been relied upon by NCLT while approving the resolution plan in question and have formed a part of contentions in these appeals, as shall be noticed later. H

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12.11. In the eighth CoC meeting held on 04.01.2021, the revised resolution plan of the resolution applicant was presented and discussed with CoC members. After long deliberation on various aspects of the plan, it was decided that the plan could be put to vote through CoC meeting on 22.01.2021. 12.12. On 21.01.2021, just a day before the resolution plan was to be put to voting, the promoter and erstwhile director of the corporate debtor - Dr. Periasamy Palani Gounder - submitted another OTS proposal with reference to Section 12-A of the Code to the CoC. A so-called “Term Sheet” dated 22.01.2021 issued by Deutsche Bank was relied up as a proof of funding. C 12.13. However, the CoC stuck to the agenda before it and the resolution plan submitted by the resolution applicant - Mr. M.K. Rajagopalan - was put to vote in the ninth CoC meeting held on 22.01.2021. Though, the said plan was approved with 87.39% of the total voting share of financial creditors present and voting in the meeting, the RP was required to send the resolution plan back to the resolution applicant as there was dissent by some of the financial creditors and in terms of Section 30 (2) of the Code, the amount to be paid to dissenting financial creditors shall not be less than the amount paid to such creditors in accordance with Section 53 in the event of liquidation of the corporate debtor. Therefore, resolution applicant was asked to further revise the resolution plan. The relevant resolution on Agenda Item No. A.1. in the ninth CoC meeting, having its relevance to the present matter is reproduced as under: - “Agenda Item No. A.1 – To discuss and put to vote the Resolution Plan submitted by Mr. M.K. Rajagopalan. F The Resolution Professional apprised the CoC members that as decided in the last CoC meeting the revised Resolution Plan submitted by Mr. M.K. Rajagopalan will be put to physical voting for approval of the CoC members. The Resolution Professional then asked each member of CoC present in the meeting whether G the revised Resolution Plan have their approval or not and the result of physical voice voting is as follows:

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The revised Resolution Plan was approved with 87.39% of total voting share of Financial Creditors present and voted in the meeting. Since there was dissent by some of the financial creditors, the Resolution Professional will send back the Resolution Plan to the Resolution Applicant for further revision, as Section 30 (2) of IBC 2016, provides that the amount paid to dissenting financial creditors shall not be less than the amount paid to such creditors in accordance with Section 53 in the event of liquidation of the Corporate Debtor. Representative from Bank of India Tokyo emphasized that they have voted in favour considering the fact that they will be getting their full amount. Resolution Professional assured them and other CoC members who have voted in favour of the Resolution Plan that there will not be any changes in the amount provided for assenting financial creditors. RP further apprised that the RA has given an undertaking that RA will comply with Section 30(2) of IBC and there will not be any change in the amount provided in the Resolution Plan for assenting creditors.” 12.14. On 25.01.2021, the resolution applicant submitted the revised resolution plan incorporating the changes. He also submitted a bank guarantee to the tune of Rs. 25 crore to the resolution professional on 01.02.2021. Thereafter, on 03.02.2021, the resolution professional H

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furnished Form H Compliance Certificate, containing the details of the A compliance of the resolution plan submitted by the resolution applicant. 12.15. Though, in the chronology of events, after the aforesaid proceedings of CoC and submission of Form H by the RP, the proceedings before the Adjudicating Authority are to be noticed but, there remains one significant feature of this case that in the ninth meeting dated B 22.01.2021, even while approving the resolution plan, the CoC asked the resolution applicant to further revise the resolution plan, particularly in relation to the dissenting financial creditors. The resolution applicant indeed revised the resolution plan but, such a revised plan was not placed in CoC before presenting the matter to the Adjudicating Authority for approval. This aspect has formed a part of contentions in these appeals and, in this regard, it has been one of the contentions on the part of the resolution applicant that there had not been any material change in the plan and in any case, in the later meeting of CoC, there had been a deemed post facto approval of the revised resolution plan incorporating the changes earlier suggested by CoC. In view of the issues involved, apt it would be that before adverting to the decision of the Adjudicating Authority, we refer to the tenth meeting of CoC, which was held on 15.06.2021, and where the RP’s updates on the latest developments were taken note of by CoC. The relevant part of the minutes of the tenth CoC meeting dated 15.06.2021 read as under: - E “Agenda Item No. A 1- Update of Resolution professional on the latest developments. • The Resolution Professional welcomed the CoC members and others to the meeting • RP informed that post approval of the Resolution plan in the F nineth CoC meeting held on 22.01.2021, the plan was put up for revision to the RA to provide for liquidation value where relevant based on voting and the revised Resolution plan was received on 25/01/2021 and it was filed with the NCLT on 04.02.2021 G • RP confirmed that the CD has been kept on a going concern basis from that date, however there are challenges from the advent of severe Covid wave from the beginning of April 2021, which has dented the business and cash flows of the CD. H

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A • Cash monitoring is ongoing at Chennai, Coimbatore hotels and Kumbakonam Resort. • RP updated that the current occupancy at the Coimbatore hotel dropped to 4% which is all time low. The turnover for the FY 2021 is about 25 crores with a negative GOP of-20%” B 12.16. Before proceeding further, another ancillary aspect may also be usefully referred to, which has also formed a part of contentions in these appeals. It relates to another settlement proposal of the promoter. It is noticed that while the proceedings before the Adjudicating Authority were pending, the promoter, again, on 08.03.2021, submitted a settlement C proposal to TFCI and sought consequent withdrawal of CIRP under Section 12-A of the Code; and also submitted a ‘letter of support’ dated 14.07.2021 issued by one Saveetha Institute of Medical and Technical Sciences addressed to the CoC to demonstrate its ability and bonafide in support of its withdrawal proposal. However, the said support was subsequently withdrawn by Mr. Veerayan, the President of the said D Saveetha Institute of Medical and Technical Sciences.

13Copy pinpoint13. Having taken note of the basic background aspects in relation to the initiation of CIRP and CoC meetings as also the ancillary matters, we may now examine the decision of the Adjudicating Authority leading to the approval of the resolution plan in question in necessary details. E Resolution plan approved by the Adjudicating Authority (NCLT)

14Copy pinpoint14. As noticed, upon approval of the resolution plan of the resolution applicant – Mr. M.K. Rajagopalan - by CoC with 87.39% majority of the voting share, the application bearing IA No. 150 of 2021 was filed by the resolution professional under Section 30(6) of IBC before the Adjudicating Authority (NCLT) for approval of the resolution plan. 14.1. During the proceedings before the Adjudicating Authority, several objections were raised by the related party, the promoter, an unsuccessful potential resolution applicant and by some of the unsecured financial creditors. 14.2. One of the objectors to the resolution plan was the suspended director/promoter of the resolution plan - Dr. Periasamy Palani Gounder - who filed MA No.13 of 2021 alleging procedural irregularities in the conduct of CIRP; non-compliance of Regulation 35(1)(a) of the CIRP H

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Regulations, in carrying out valuation of non-core assets of corporate A debtor alongwith several other procedural errors; and for consideration of his proposal under Section 12-A of the Code with the option to modify the same on the request of the members of CoC. 14.3. Two applications were filed by Dharani Finance Limited seeking that resolution professional be directed to admit its claim of B Rs.1,94,14,024, as operational creditor in application bearing MA No.18 of 2021; and of Rs. Rs.4,81,62,175/- as financial creditor in application bearing MA No.48 of 2021. In both the applications, the common relief sought for was not to be treated as a related party of the corporate debtor and not to be discriminated in the resolution plan. C 15.The Adjudicating Authority dismissed the applications and allowed the resolution plan as approved by CoC. The observations and findings of the Adjudicating Authority in its order dated 15.07.2021 had been as follows: 15.1. As regards the questions surrounding the valuation of assets and valuation reports, the Adjudicating Authority referred to the minutes of second, third, sixth and seventh CoC meetings, taking note of the appointment of valuers and the proceedings conducting by them. The Adjudicating Authority further extracted Regulations 27 and 35 of the CIRP Regulations and thereafter, recorded its satisfaction that RP had arrived at a fair value and a liquidation value based on average of the three valuers in accordance with the requirements of Regulations. The Adjudicating Authority also referred to the order passed by NCLAT on 05.05.2021 in Company Appeal (AT) (Ins) Nos. 19 and 20 of 2021 and observed that the Appellate Tribunal had rendered finding that resolution plan amount had been arrived at after following the prescribed procedure. F Thus, the Adjudicating Authority found no error committed by IRP or RP in appointing registered valuers and further found that there was no error in regard to the valuation submitted by those registered valuers. Accordingly, the objections in relation to valuation were overruled. 15.1.1. The relevant observations and findings of the Adjudicating G Authority in regard to the questions pertaining to valuation and the valuation reports, after extensive extraction of the relevant minutes of the meetings of CoC had been as under: - “(I) VALUATION REPORT:- *** *** *** H

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A 80. In the present case, it is seen from the minutes extracted supra from the 6th CoC meeting that RP further apprised the CoC members, that due to significant difference in the value of land and building submitted by the valuers appointed by IRP, the RP had to appoint third valuer in accordance with provisions of Regulation 35 of CIRP Regulations, 2016. Accordingly, the third valuer has submitted his report before the RP and accordingly the fair value and the Liquidation value in relation to the Corporate Debtor was arrived at by the Resolution Professional.

81. Thus, it is clear that the RP has arrived at a Fair Value and the Liquidation Value based on the average of all the three valuers and the same has been done in accordance with Regulation 35 of the IBBI (IRPCP) Regulations 2016. Further, the valuation certificate dated September 2019 relied on by the promoter / suspended Director of the Corporate Debtor would be of no relevance as the same was not done in accordance with the D Regulations framed under the IBC, 2016. Also, the RP who is in charge of the affairs of the Company Debtor once the CIRP has been triggered in relation to the Corporate Debtor, he has to act as per the provisions of the Regulations and cannot act according to the whims and fancies of the promoters I erstwhile directors of the Corporate Debtor. The valuation certificate dated September E 2019 relied on by the promoter I suspended Director of the Corporate Debtor was done during pre-Covid period and the same cannot be a yardstick for the valuers who have been appointed pursuant to the Regulations framed under the provisions of IBC,

2016. Also, the stance of the Learned Senior Counsel for the F promoter I suspended Director of the Corporate Debtor that the CIRP was triggered during the peak of Covid would be of no relevance since at that point of time, there was no statutory bar for this Adjudicating Authority to initiate CIRP in relation to a Company. However, it is seen that the Application for initiation of CIRP was filed by the Financial Creditor as early as in the year G 2019 itself and during that point of time there was no cases of Covid in India and the matter was heard in detail and the orders were reserved during March 2020. While this being the fact, the contention of the Learned Senior Counsel that only because of Covid they were not able to settle the creditors of the Corporate H Debtor, does not hold much water. Eventhough, the valuation as

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arrived at by the valuers may not be acceptable to the erstwhile promoters / Directors of the Corporate Debtor, it cannot give them a right to challenge the same before this Adjudicating Authority on ostensible grounds.

82. Further, it is also seen that as against the order of exclusion of CIRP, passed by this Tribunal in IA/1001/IB/2020, the erstwhile promoter or Corporate Debtor has filed an appeal before the Hon’ble NCLAT and the Appellate Tribunal vide its order dated 05.05.2021 in Company Appeal (AT)(Ins) No. 19 & 20 of 2021 while dealing with the valuation of the Corporate Debtor in para 14 and 15 has held as follows; C

14. In response to the above, the Counsel for the Respondents contended that the entire CIRP was conducted as per the procedure prescribed by the I&B Code. The Appellant who is holding some equity shares in 3rd Respondent/Corporate Debtor has come before this Appellate Tribunal by filing the present Appeal only to distract and delay the Insolvency D Resolution Process and to bring about a halt to the approval of the Resolution Plan which the Committee of Creditors has approved with a majority of 87.34% which is pending for approval before the Adjudicating Authority.

15Copy pinpoint15. The Appellant’s contention about the valuation of the E Corporate Debtor of 1600 crores is unsupported by any evidence. The fact remains that the Resolution Plan amount has arrived after following the procedure prescribed under the Code and the Rules and Regulations made thereunder (emphasis supplied) F

83. Thus, the Hon’ble NCLAT also has rendered a finding that the Resolution Plan amount has been arrived at after following the procedure prescribed under the Code and the Rules and Regulations made thereunder. G

84. Hence for reasoning stated supra, this Adjudicating Authority finds that there was no error committed by the IRP / RP in so far as appointing the registered valuers in relation to the Corporate Debtor, nor there was any error on the valuation being submitted by those Registered valuers and as a consequence thereof, the objections as raised by all the objectors in relation to the valuation H

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A of the Corporate Debtor are overruled. Accordingly, MA/13/CHE/ 2021 stands dismissed.” 15.2. As regards the question of non-consideration of the proposal given under Section 12-A IBC by the promoter, the Adjudicating Authority referred to the proposition made by another erstwhile promoter of the corporate debtor which was considered by CoC in its ninth meeting and it was found that even the original applicant of CIRP, i.e., TFIC was kept in dark about such a proposal. It was also noticed that even the proposal with the term sheet from Deutsche Bank came with a disclaimer. The Adjudicating Authority formed the opinion that such a proposal had only been of dilatory tactics and was mooted only at the eleventh hour to stall the resolution plan. Thus, the allegations of promoter about non- consideration of Section 12-A application were found meritless and were rejected. The Adjudicating Authority observed and held in this regard as under: - “(II) ON NON-CONSIDERATION OF SEC.12A D APPLICATION: -

85. The Learned Senior Counsel Mr. P.S. Raman, appearing on behalf of the erstwhile Promoter I Director of the Corporate Debtor contended that the Resolution Professional and the CoC has not considered the proposal as given under Section 12A of IBC, 2016. E In this regard, it is pertinent to refer to certain communications that exchanged between the parties in relation to the same. In the 9th CoC meeting wherein the Resolution Plan was about to be put for vote, the erstwhile promoter of the Corporate Debtor Mr. Senni Malai, requested the RP to consider an application filed under F section 12A of IBC, 2016. The record of the minutes as found in the 9th CoC meeting is extracted hereunder; “ ....... As the Resolution Plan agenda was about to be put up for voting, Mr. Senni Malai, MD of the CD and Mr. Kaliannan representing the CD, requested the RP about a Sec 12 A, G Application for withdrawal request letter, prepared by them and circulated to the CoC about two hours before this meeting. RP Informed them, that discussions on that can’t be part of this agenda as that has not come from the Applicant and it was not part of the agenda for this meeting. However, the Corporate Debtor’s representative insisted that this be discussed. RP said H he would seek the opinion of the Applicant, being TFCI in this

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

86. A perusal of the aforesaid minutes would show that the promoter of the Corporate Debtor has proposed for a 12A settlement only at the 9th CoC meeting, when the Resolution Plan of the Resolution Applicant was about to be put to vote. Further, it is also seen that the Petitioning Creditor viz. Toursim Finance Corporation of India (TFCI) was also kept in dark about the 12A proposal by the promoters and also flagged an issue stating that the letter has been addressed to the CoC and not to them. However, it is seen that the said agenda of proposal to be made under Section 12A was not considered by the CoC and that they proceeded to vote for the Resolution Plan.

87. It is also seen that the Term Sheet relied on by the Learned F Senior Counsel for the promoter in order to substantiate that they have the source to settle the entire dues of the CoC, it is seen that the said Term Sheet dated 22.01.2021 issued by Deutsche Bank would start of with a disclaimer as follows; “Please note that the terms set out in this Term Sheet are G indicative only and do not constitute an offer to finance the Facility. The terms and conditions of the term sheet remain subject to the diligence, internal approvals, credit committee approval, successful syndication, KYC and satisfactory documentation.” H

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A 88. Thus, it is seen that the proposal as projected by the Learned Senior Counsel for the promoters to be made under Section 12A, seems to be only an eye wash and a dilatory tactics to delay the process of CIRP in relation to the Corporate Debtor and that the fact that the proposal has been mooted only during the eleventh hour is to stall the Resolution Plan as moved by the Resolution B Applicant. Hence, for the. aforesaid reasons, the allegations of the promoters that their Section 12AApplication was not considered by the RP and the CoC do not hold any merits and stands overruled.” 15.3. As regards the alleged procedural irregularities, the C Adjudicating Authority found the objections to be of no substance where the objectors had failed to establish any prejudice caused to them while also observing that a statutory provision regulating a matter of practice and procedure would generally be read as directory and not mandatory. The Adjudicating Authority observed that the objections in relation to the procedural irregularities were not so grave as to defeat the resolution plan. It was also observed that some of the objectors were, in fact, getting 100% of the claimed amount in the resolution plan and it raised a suspicion if the objections by them were rather motivated. 15.3.1. The Adjudicating Authority, in relation to the question of procedural irregularities, observed and held as under: - “(II) PROCEDURAL IRREGULARITIES: -

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

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avoidance transactions which entitle the Liquidator to file an A Application, would be rendered as nugatory.

90. It is significant to note here that, a statutory provision regulating a matter of practice or procedure will generally be read as directory and not mandatory. Thus, even though the objectors to the Resolution Plan have alleged many procedural irregularities in relation to the conduct of the proceedings in relation to the CoC; however those objectors have miserably failed to establish as to what prejudice has been caused to them in respect of the same. Further, a person who has been inducted as a member of the CoC in its 6th meeting cannot be allowed to question the actions taken by the CoC in the past meetings. However, in relation to the objections raised by the Applicants in IA/181/CHE/2021 and IA/ 183/CHE/2021, this Tribunal is unable to comprehend their objections in relation to the plan, especially when they are getting 100% of their claim amount to be paid by the Resolution Applicant. Hence, this raises a suspicion as to whether that these Applications D as filed by the objectors are motivated.

91. Thus, the objections as raised by the objectors in relation to the procedural irregularities in relation to the conduct of the Corporate Insolvency Resolution Process, are not so grave in order to defeat the Resolution Plan as filed by the Resolution E Professional. Hence, for the said reasons, the objections as raised by the objectors in respect of the same are overruled. Accordingly, IA/181/CHE/2021, IA/183/CHE/2021, IA/192/CHE/2021, IA/172/ CHE/2021 and IA/291/CHE/2021 stand dismissed.” 15.4. Moving on to the questions concerning the related party - F Dharani Finance Limited - and the applications moved by it, the Adjudicating Authority took note of the submissions on its behalf with reference to Section 21(2) of the Code that it could not have been categorised as related party but rejected this contention while observing as under: - G “93. A bare perusal of the said provision shows that, even though the Applicants viz. M/s. Dharani Finance Limited are regulated by a financial service regulator, they have miserably failed to establish that the debts due to them have become due solely on account of conversion or substitution of debt into equity shares or instruments convertible into equity shares. Further the phrase H

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A “completion of such transactions as may be prescribed” would also be of no avail, since the transactions as such have not been prescribed by the Board. In any case, this Tribunal is of the considered view that the Applicants in MA/18/CHE/2021 and MA/ 48/CHE/2021 are related party in respect of the Corporate Debtor and that the decision of the IRP / RP in categorizing the Applicant B viz. M/s. Dharani Finance Limited as “Related Party” of Corporate Debtor is free from all legal infirmities and does not warrant any interference by this Adjudicating Authority. Accordingly, MA/18/ CHE/2021 and MA/48/CHE/2021 stands dismissed.” 15.4.1. The Adjudicating Authority also examined the question of C discrimination in the resolution plan in respect of distribution of amount to the financial creditor-related party compared with the financial creditor- unrelated party. The Adjudicating Authority referred to the principles stated by this Court in Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and D Ors.: (2020) 8 SCC 531 and rejected those contentions while observing that in the scheme of the Code, there was no provision which mandatorily requires payment to the related party in parity with the unrelated party. In this regard, the Adjudicating Authority, inter alia, observed as under:- “(IV) DISCRIMINATION IN THE RESOLUTION E PLAN:-

94. Another rival contention put forth by the Learned Senior Counsel for the objectors was that there was is a discrimination in respect of the distribution of amount to the Financial Creditor - Related Party compared with the Financial Creditor – unrelated F Party. It was contended that no amount is paid by the Resolution Applicant, to the Related Party of the Corporate Debtor, be it Financial Creditor or Operational Creditor. In this regard, it is to be noted here that the way in which the amount has to be distributed and paid, purely falls within the domain of the Resolution Applicant and further the CoC in its commercial wisdom has accepted the G same. Further, there is no provision in the IBC, 2016 which mandates that the Related party should be paid in parity with the unrelated party.…

95. It must be noted here that so long as the provisions of the Code and the Regulations have been met, it is the commercial H

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wisdom of the requisite majority of the CoC which is to negotiate A and accept a resolution plan, which may involve differential payment to different classes of creditors, together with negotiating with a prospective resolution applicant for better or different terms which may also involve differences in distribution of amounts between different classes of creditors… B

96. Thus, the contentions of the Learned Senior Counsel for the objectors that differential treatment are being made to them since they are related party in respect of the Corporate Debtor do not hold any merit in view of the discussions made supra and also the decisions referred in support of the same. Hence the objections raised by the objectors in relation to the said issues are overruled.” C

15.5. The Adjudicating Authority also took note of the question relating to the pending avoidance application and recorded its satisfaction that the provision had duly been made in the resolution plan as to the fate of the avoidance application and hence, the objections in that regard were required to be eschewed. D

15.6. Apart from the above, the Adjudicating Authority also dealt with the objections raised by one of the other prospective resolution applicants but those aspects need not be dilated for the present purpose.

16Copy pinpoint16. After recording its findings on the issues raised by the parties, the Adjudicating Authority proceeded to approve the resolution plan while recording its satisfaction as regards all the mandatory compliances by the plan in the following manner: - “(V) APPROVAL OF RESOLUTION PLAN

103. Thus, after overruling all the objections raised in relation to the Resolution Plan, this Adjudicating Authority in so far as the approval of the Resolution Plan is concerned, section 30(6) of the IBC, 2016 cast certain duties upon this Adjudicating Authority to examine the Resolution Plan as to whether the Plan falls within the contours of the said Section. Hence, a comparison of the mandatory compliance as required under IBC, 2016 vis-a-vis the compliance as made in the Resolution Plan is being tabulated hereunder.

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17Copy pinpoint17. The Adjudicating Authority, thereafter, referred to the decisions of this Court in the cases of Essar Steel (supra); K. Sashidhar v. Indian Overseas Bank: (2019) 12 SCC 150; Jaypee Kensington Boulevard Apartments Welfare Association and Ors. v. NBCC (India) Limited and Ors.: (2022) 1 SCC 401 and Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh and Ors.: (2020) 11 SCC 467 as regards the principles that the Adjudicating Authority would not be sitting in appeal over the commercial wisdom of CoC and also observed that there was no requirement that the bid of the resolution applicant has to match the liquidation value of the corporate debtor. The Adjudicating Authority also left the questions of various reliefs/concessions sought for by the resolution applicant to be taken up in the appropriate forum or before the appropriate authority in accordance with law. 17.1. With the above-mentioned observations and findings, the Adjudicating Authority concluded on the matter with approval of the resolution plan and with further directions in the following terms: - D “113. Thus the Resolution Plan is hereby approved and is binding on the Corporate Debtor and other stakeholders involved so that revival of the Debtor Company shall come into force with immediate effect and the “Moratorium” imposed under section 14 of IBC, 2016 shall not have any effect henceforth. The E Resolution Professional shall submit the records collected during the commencement of the Proceedings to the Insolvency & Bankruptcy Board of India for their record and also return to the Resolution Applicant or New Promoters. Certified copy of this Order be issued on demand to the concerned parties, upon due compliance. Liberty is hereby granted for moving any F Miscellaneous Application, if required, in connection with implementation of this Resolution Plan. That in respect of stepping by the New Promoters/Resolution Applicant into the shoes of the erstwhile Company and taking over the business, the provisions of Companies Act, 2013 shall be applicable and because of this reason a copy of this Order is to be submitted in the Office of the Registrar of Companies, Chennai.

114. The Resolution Professional is further directed to handover all records, premises / documents to Resolution Applicant to finalise the further line of action required for starting of the operation as contemplated under the Resolution Plan. The Resolution Applicant

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shall have access to all the records premises / documents through A Resolution Professional to finalise the further line of action required for starting of the operation. Accordingly, the Application IA/150/ CHE/2021 stands allowed. All other connected Applications, as arrayed in the cause title, stands dismissed.” Disapproval of the Appellate Tribunal (NCLAT) B

18Copy pinpoint18. Being aggrieved of the order dated 15.07.2021 so passed by the Adjudicating Authority, approving the resolution plan of the resolution applicant and declaring it to be binding on the corporate debtor and other stakeholders, four appeals were preferred before the Appellate Tribunal, respectively by the promoter Dr. Periasamy Palani Gounder, the related party Dharani Finance Limited and the NRI shareholder Dr. V. Janakiraman, the details whereof have been noticed hereinbefore in the particulars of proceedings and parties.

19Copy pinpoint19. After considering the said appeals together, the Appellate Tribunal (NCLAT) proceeded to allow the same by its impugned judgment and order dated 17.02.2022. The Appellate Tribunal reversed the order of the Adjudicating Authority and while rejecting the resolution plan in question, remanded the matter to the CoC with directions to the resolution professional, inter alia, to proceed from the stage of publication of Form ‘G’, and to invite the EOI afresh as per the CIRP Regulations. Having regard to the questions raised in these appeals, it shall be apposite to take note of the observations, findings, and conclusions of the Appellate Authority as relevant for the present matter in necessary details20. 19.1. As regards the issue of valuation, the Appellate Tribunal, after discussing the requirements of Sections 30(2) and 61(3) of the Code and taking note of the minutes of the second CoC meeting as to the appointment of valuators and the other legal issues concerning the valuation of assets, held that the valuation process had been in violation of the Regulation 27 and 35 of the CIRP Regulations for the reasons that the appraisal of a property situated in Tamil Nadu by Delhi-based valuers was a point of contention during the second CoC meeting; the non-core assets were not valuated by the registered valuers; the valuation report was never circulated either to the promoters or to the other members of the CoC; and physical verification of the assets of the 20 It may be indicated that the emphasis in bold/italics/underlining in the extractions from the judgment of the Appellate Tribunal are as in the copy thereof placed on record before us. H

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A corporate debtor was not carried out by the two valuers appointed by CoC. 19.1.1 The observations of the NCLAT as to the issue of valuation could be reproduced as under: - “76……Whether the approved Resolution Plan contravenes B Section 30 (2) and Sec 61(3) of the Insolvency and Bankr uptcy Code 2016? *** *** ***

80. It is pertinent to mention that the Approval of the Resolution C Plan by the COC is directly attributable to the fact that the COC was not properly apprised of the actual value of the Corporate Debtor’s assets. The choices of the valuers by the IRP have been questionable since the 2nd COC meeting. The concern stems from the fact that the valuers were based in Delhi and had little knowledge of the prevailing real estate market conditions in Tamil D Nadu. The circumstances were further separated by the fact that valuers lacked adequate experience with the hospitality industry. In this regard, it is pertinent to note the minutes of the 2nd COC meeting, which reads as follows; “At this juncture, the COC members have raised concerns E regarding the appointment of the valuers as the appointed valuers are Delhi-based and are not privy to the area/ properties of Tamil Nadu and might also a struggle to visit the collective sites of the corporate debtor located at Tamil Nadu given that travel restrains in the current period—— F the competency of the process valuation might decrease. The COC members also requested the chairman to circulate the profiles in a comparative chart. The members had difficulty being faced evaluating the profile/experience of the appointed valuers with respect to the hospitality industry.” G

81. It is further evident from the minutes of the COC meetings that the two valuers appointed by the IRP differs significantly and therefore warranted the appointment of a third valuer. Furthermore, the RP has also admitted in the 6th COC meeting that only the ‘Core Assets’ of the Corporate Debtor were valued, and the ‘Non- H Core Assets’ has not been appropriately valued. Therefore, the

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3rd Valuer was also supposed to value the Non-Core Assets. Still, A the RP, as evident from the minutes of the 6th meeting of the Committee of Creditors, made it clear that another valuer needs to be appointed to value the Company’s non-core assets, which was not done. Therefore, the Valuation of the non-core assets is not in compliance with Regulation 35 (1) (a) of the Insolvency B and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

82. It is pertinent to point out that due to lockdown, quarantine and travel restrictions, the appointed valuers could not conduct the Valuation and their agents at or near Chennai who are not registered valuers and lacked the expertise to conduct the exercise on their behalf. Therefore, further physical verification of the assets by the registered valuers is indispensable, and the Respondent has taken the same note before furnishing the Valuation to the COC. Moreover, the details of the purported “Associates” of the ‘Registered Valuers’ have not been disclosed, and the COC has neither considered nor approved the said Associate Valuers. Conveniently, the valuation reports have not been disclosed to date, and only the Valuation is sought to be accepted as gospel truth. Therefore, the Valuation furnished to the COC is in utter violation of Regulation 35 (1) (a) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution E Process for Corporate Persons) Regulations, 2016 and contrary to Rule 8 of the Companies (Registered Valuers and Valuation) Rules, 2017.

83. Further, it is necessary to mention that many members of the COC raised concerns relating to the Valuation. Even in the 7th F meeting of the COC, concerns were raised as to the fact that the Resolution Plan values the Corporate Debtor at a rate that is significantly lower than the already paltry Valuation arrived at by the IRP. Moreover, the RP himself admitted the aforesaid fact in the aforesaid meeting. G *** ******

86. Based on the above discussion, it is apparent that the two valuers appointed by IRP did not physically verify the corporate debtor’s assets despite that Regulation 35 (1) (a) of the CIRP Regulations mandates explicitly that the estimator fair value and H

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A liquidation value shall be computed after physical verification of the assets of the Corporate Debtor. It is further revealed that the valuation report was never circulated either to the Appellant or to other members of the COC. Mere production of naked values without the detailed adjunct report would materially handicap the commercial wisdom of the Committee of Creditors. B

87. Further, Regulation 27 Regulation 35 mandates that two registered valuers value the Corporate Debtor’s assets. It is an admitted fact that the two registered valuers appointed by the Resolution Professional did not value the non-core assets of the Corporate Debtor. However, in view of the detailed valuation C report, no member of the COC of the Appellant herein has any idea as to what was categorised as a ‘Non-Core Assets’ by the Resolution Professional or what its value could be. These are the blatant statutory violations and irregularities committed in violation of the corporate debt assets.” D 19.2. The Appellate Tribunal also held that compliance with statutory requirements regulating a matter of practice and procedure were mandatory in character and the Tribunal being a creature of a statute cannot dilute the statutory compliances in the following words: - “88. However, the learned Adjudicating Authority/NCLT’s E observation that ‘A statutory provision regulating a matter of practice or procedure will generally be read as a directory and not mandatory is erroneous. Compliance with statutory requirements in regulating a matter of practice and procedure are mandatory.’ The Tribunal is a creature of statute, and by interpretation, it cannot dilute the statutory compliances.” 19.3. After noticing non-compliance of Regulation 36-A(2)(iii) of the CIRP Regulations that mandates publication of Form-G at the earliest and not later than 75th day from the insolvency commencement date, the Appellate Tribunal held that the publication of Form G on the designated website was essential and failure to advertise as mandated had a direct impact on the maximization of asset value, more so when the entire CIRP was conducted during lockdown at the time of Covid-19 pandemic when most of the people avoided reading the newspaper under the apprehension of infection. The relevant parts of the order of the Appellate Tribunal in this regard read as under: - H

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“89. ……… A Non-Publication of Form-G As Per Regulation 36A(2) (iii) of the IBBI Regulations for Corporate Persons, 2016

90. As per Regulation 36A(2)(iii), the RP shall publish ‘Form-G’ on the Corporate Debtors and IBBI websites. This would ensure adequate publicity to all prospective Resolution Applicants. This B was admittedly not done by the RP. The IRP published the Form- G only in a newspaper.

91. In fact, in the 5th CoC Meeting dated 12.11.2020, while discussing whether ‘Form G’ should be re-published, the present RP points out that it was not published on the IBBI website, which C may lead to litigation in the future. However, no steps were taken to re-publish ‘Form-G’ and invite fresh bids despite this. This was done despite the exclusion of the period between 05.05.2020 and 31.10.2020 from the period of CIRP by the Ld. Tribunal.

92. A plea regarding non-compliance of Regulation 36A of IBC D has explicitly been taken by the Appellant in its Affidavit objecting to the Plan before the Ld. Tribunal. The impugned order itself records that the plea of non-compliance of regulation 36A was raised.

93. Non-publication of ‘Form-G’ violates Circular No. IP (CIRP)/ E 006/2018 dated 23.02.2018 issued by the IBBI, which provides the designated website for publication of ‘Form-G’, i.e. invite.rp@ibbi.gov.in. Failure to advertise as mandated to ensure that more Resolution Applicants could come forward directly impacts the maximization of asset value. F

94. Despite violations above about the publication of ‘Form-G’, the Learned Tribunal has approved the Resolution Plan. On pages 142-144 of Vol. of Appeal, sets out a list of provisions that have been complied with. Regulation 36A does not even find a mention in this. G *** *** ***

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A limited to matters “other than” the enquiry into the autonomy or commercial wisdom of the Committee of Creditors.

98. It is pertinent to mention that an appeal against the approval of the Resolution Plan shall lie under Section 61 (3) of the IBC on the ground, namely, there has been a material irregularity in exercise of the powers by Resolution Professional during the Corporate Insolvency Resolution period.

99. Further, it is necessary to mention that Regulation 36 A of CIRP Regulations mandates publication of Form-G at the earliest, not later than the 75th day from the insolvency commencement date, from interested and eligible prospective resolution applicants to submit Resolution Plans.

100. Non-compliance with the above regulatory provision is admitted. It is also important to point out that this entire CIRP was conducted during lockdown when the world faced Covid19 D Pandemic. At that time, most people avoided reading the newspaper under the apprehension of Covid infection. So the publication of ‘Form-G’ for inviting Expression of Interest was essential. It is also important to point out that the Government of India also brought some amendments in the Code considering the impact of the Pandemic. Relevant Regulation about inviting ‘EOI’ E is given below for ready reference;” 19.4. Further, the Appellate Tribunal declared the resolution applicant ineligible to submit a resolution plan in terms of Section 29- A(e) of the Code on account of being disqualified as a director under Section 164(2)(b) of the Companies Act as also because of operation of F Section 88 of the Trusts Act. 19.4.1. As regards the ineligibility in terms of the Trusts Act, it was held that the case of resolution applicant was unambiguously falling within the scope of Section 88 of the Trusts Act, rendering the resolution plan in question as illegal because the trust ‘Sri Balaji Vidyapeeth’ was G already declared ineligible, of which, the resolution applicant was the managing trustee that precluded him from acting as its alter ego during the execution of the resolution plan and obtaining any financial advantage or benefit as being barred under Section 88. 19.4.2. The relevant observations and findings of the Appellate H Tribunal in regard to this aspect read as under: -

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“101. Resolution Applicants ineligibility u/s 29A(e) of the A Code………. *** *** ***

105. The CoC was merely informed that one of the PRA21 charitable trusts was not authorised to take up this activity. However, the rejected Trust was none other than the 2nd B Respondent’s Trust, namely ‘Balaji Vidyapeeth’, which was never disclosed to the COC and has been deliberately suppressed. The IRP/ Resolution Professional should have informed the CoC that the 2nd Respondent had presented the Resolution Plan by competing with the said Trust. He has used the very same ‘’Trust’ C to support his credentials and creditworthiness in the Resolution Plan. The relevant portions of the Resolution Plan are extracted hereunder for ready reference: “3.5. Sri Balaji Vidyapeeth: Mr M.K. Rajagopalan is the founder and managing trustee of Sri Balaji Vidyapeeth... 3.10. Financial Snapshot” The entities under the leadership of Mr. M.K. Rajagopalan have been growing rapidly while ensuring quality of service to nation and public at large... These entities have achieved turnover of Rs.417.94 Crores in FY 2016-2017; Rs.500.03 Crores in FY 2017-2018; Rs. 679.23 Crores in FY 2018-2019 and Rs.860.59 Crores (estimated) for FY 2019-2020. F The above growth is ample testimony of the credentials of the RA as a competent business leader and his capability to manage and turn around various diverse businesses.”

106. Therefore, it is incorrect to say that the 2nd Respondent has not gained any advantage from the charitable Trust. The case on G hand squarely falls within the ambit of Section 88 of the Indian Trusts Act, and as such, the Resolution Plan is illegal. Since the said ‘Sri Balaji Vidyapeeth’ has already been declared as ineligible, the 2nd Respondent cannot act as its alter ego in implementing 21 Prospective Resolution Applicant. H

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A the Resolution Plan and attain any financial advantage or gain is barred by Section 88 of the Indian Trusts Act. The said provision is extracted hereunder for ready reference.22 *** *** ***

108. It is illogical and fallacious to claim that the Resolution Plan B can be tested in terms of the provisions of IBC, 2016 and not under Section 88 of the Indian Trusts Act. Therefore, it is submitted that even as per the provisions of IBC, a Resolution Plan shall be by the provisions of all other statutes, and the Resolution Plan mustn’t contravene the law of the land. In this regard, it is pertinent C to note Sections 30 and 61 of the Code, which reads as follows: “Section 30. Submission of Resolution Plan. – (2) The Resolution professional shall examine each resolution plan received by him to confirm that each resolution plan – … D (e) does not contravene any of the provisions of the law for the time being in force. …. Section 61. Appeals and Appellate Authority. – E (3) An appeal against an order approving a resolution plan under section 31 may be filed on the following grounds, namely: — (i) the approved resolution plan is in contravention of the provisions of any law for the time being in force;.” F

109. The argument of the 2nd Respondent that the Trust had submitted their EOIs independently and both of them were aware that the other was submitting their EOIs is purely mischievous. Admittedly, the 2nd Respondent is the Managing Director of the said Trust, and the fact remains that two EOIs were submitted by G 22 "Section 88. Advantage gained by fiduciary. Where a trustee, executor, partner, agent, director of a company, legal adviser, or other person bound in a fiduciary character to protect the interests of another person, by availing himself of his character, gains for himself any pecuniary advantage, or where any person so bound enters into any dealings under circumstances in which his own interests are, or may be, adverse to those of such other person and thereby gains for himself a pecuniary advantage, he must hold for the H benefit of such other person the advantage so gained.”

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the 2nd Respondent, one for himself and the other on behalf of the Trust.

110. However, the said facts have been suppressed from the CoC, and the CoC did not have an occasion to consider that the 2nd Respondent had submitted two EOIs. Therefore, it is also false to claim that the 2nd Respondent had complied with the provisions of the RFRP and the IBC. The 2nd Respondent suppressed material facts and gave false declarations about his ineligibility and the conflict of interest.

111. The argument of IInd Respondent that a conflict of interest would arise in case the Trust were allowed to submit a Resolution C Plan is incorrect and misleading. The purported Explanation of conflict of interest’ stated in the RFRP would not absolve the duty cast upon the IInd Respondent under Section 88 of the Indian Trusts Act. Further, it is incorrect to state that a conflict of interest could arise only between two Resolution Applicants. Such an interpretation is contrary to the explicit provisions of Section 88 of the Indian Trusts Act. Therefore, it is incorrect to say that the 2nd Respondent has not gained any advantage from the charitable Trust.

112. The case on hand squarely falls within the ambit of Section 88 of the Indian Trusts Act, and as such, the Resolution Plan is illegal. Since the said ‘Sri Balaji Vidyapeeth’ has already been declared as ineligible, the 2nd Respondent cannot act as its alter ego in implementing the Resolution Plan and attain any financial advantage or gain is barred by Section 88 of the Indian Trusts Act. F 19.4.3. As to the question of disqualification under Section 164(2)(b), the Appellate Tribunal observed that Mr. M.K. Rajagopalan was the director of International Aviation Academy Private Limited, and as seen from the audited financial statements of the said company, from 2010-2011 to 2017-2018, a sum of Rs. 12,03,000/- was collected by the G said company as ‘share application money pending allotment’. The Appellate Tribunal further noticed that the said sum was not refunded and as such, was to be treated as ‘deposit’ in terms of Explanation (a) to Rule 2(1)(c)(vii) of the Companies (Acceptance of Deposits) Rules, 2014 as a consequence of which, in terms of Section 164(2)(b) of the Companies Act, the resolution applicant stood disqualified from acting H

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