NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI

Company Appeal (AT) (Insolvency) No. 219 of 2019

IN THE MATTER OF:

Committee of Creditors of Amtek Auto Ltd.
through Corporation Bank …..Appellant

Vs.
Mr. Dinkar T.Venkatasubramanian & Ors. ……Respondents

Present:
For Appellant: Mr. Raju Ramachandran, Sr. Advocate with
Ms. Misha, Mr. Siddhant Kant, Ms. Charu
Bansal, Mr. Ishwar, Mr. Soumabho Ghose,
Mr. Raza Abbas, Advocates
Mr. A.S. Chandhiok, Mr. K. Datta, Ms. Prachi
Johri, Ms. Shweta Kakkar, Ms. Priya for
Liberty House Group Pte Ltd.

For Respondents: Mr. Amit Singh Chadha, Sr. Advocate with

Mr. Gyanendra Kumar, Ms. Shikha Tandon,
Ms. Pallavi, Ms. Srishti Govil, Mr.
Shivanshu Bhardwaj, Advocates for DVI
Mr. Sumant Batra, Ms. Srishti Kapoor,
Advocates for RP
Mr. Sumesh Dhawan, Ms. Vatsala Kak,
Advocates for shareholders
For Intervenor:
Mr. Rajiv Nayar, Sr. Advocate, Mr. Abhishek
Swaroop, Ms. Manjira Dasgupta, Mr. Naman
Singh Bagga, Advocates
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With
Company Appeal (AT) (Insolvency)No. 442 of 2019

IN THE MATTER OF:

Liberty House Group Pte Ltd. …..Appellant

Vs.
Mr. Dinkar T.Venkatasubramanian & Ors. ……Respondents

Present:
For Appellant: Mr. A.S. Chandhiok, Sr. Advocate with Mr.
K.Datta, Ms. Prachi Johri, Ms. Shweta
Kakkar, Ms. Priya, Mr. Siddharth, Advocates
for Liberty House Group Pte Ltd.
For Respondents: Mr. Raju Ramachandran, Sr. Advocate with
Ms. Misha, Mr. Siddhant Kant, Ms. Charu
Bansal, Advocates for R-2
Mr. Sumesh Dhawan, Advocate for
shareholders
Mr. Ishwar, Mr. Sumant Batra, Ms. Srishti
Kapoor, Mr. Akshit Kapoor, Advocates for
RP
Mr. Amit Singh Chadha, Sr. Advocate with
Mr. Gyanendra Kumar, Ms. Shikha Tandon,
Ms. Pallavi, Ms. Srishti Govil, Mr. Shivanshu
Bhardwaj, Advocates for DVI

With

Company Appeal (AT) (Insolvency)No. 443 of 2019

IN THE MATTER OF:

Liberty House Group Pte Ltd. …..Appellant

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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Vs.
The Committee of Creditors of
Amtek Auto Ltd. & Anr. ……Respondents

Present:
For Appellant: Mr. Soumabho Ghose, Mr. Raza Abbas,
Advocates.
Mr. A.S. Chandhiok, Mr. K. Datta, Ms. Prachi
Johri, Ms. Shweta Kakkar, Ms. Priya for
Liberty House Group Pte Ltd.

For Respondents: Mr. Raju Ramachandran, Sr. Advocate with

Ms. Misha, Mr. Siddhant Kant, Ms. Charu
Bansal, Mr. Ishwar, Advocates for R-1
Mr. Sumant Batra, Ms. Srishti Kapoor,
Advocates for RP
Mr. Sumesh Dhawan, Ms. Vatsala Kak,
Advocates for shareholders

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

Pursuant to an application under Section 7 of the Insolvency and

Bankruptcy Code, 2016 (“I&B Code” for short), the ‘Corporate

Insolvency Resolution Process’ was initiated against ‘Amtek Auto

Limited’- (‘Corporate Debtor’) on 24th July, 2017.

2. Subsequently, the ‘Resolution Professional’ published

advertisement inviting prospective ‘Resolution Applicants’ to submit a

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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‘Resolution Plan’ by 31st August, 2017. On receipt of ‘Resolution Plans’

followed by improved ‘Resolution Plan’/ revised ‘Resolution Plan’, the

‘Resolution Plan’ filed by one ‘M/s. Liberty House Group Pte Ltd.’ and

another ‘Deccan Value Investors LP’ were considered by the ‘Committee

of Creditors’.

3. On 6th March, 2018, ‘Deccan Value Investors LP’ withdrew its

‘Resolution Plan’, so the revised plan of ‘‘M/s. Liberty House Group Pte

Ltd.’ was considered by the ‘Committee of Creditors’ which approved the

plan on 2nd April, 2018 with majority voting shares of 94.20%.

4. Thereafter, the ‘Resolution Professional’ filed application under

Section 31 before the Adjudicating Authority (National Company Law

Tribunal), Chandigarh Bench, Chandigarh on 16th April, 2018 and the

Adjudicating Authority by order dated 25th July, 2018 approved the

‘Resolution Plan’ of ‘M/s. Liberty House Group Pte Ltd.’.

5. When the question of implementation of the approved ‘Resolution

Plan’ of ‘M/s. Liberty House Group Pte Ltd.’ was taken up by the

‘Resolution Professional’, it has noticed that in spite of e-mail sent on

5th September, 2018 and detailed e-mail sent on 12th September, 2018,

no favourable response was received from ‘M/s. Liberty House Group

Pte Ltd.’. Even the Performance Guarantee and the escrow account and

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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other terms and conditions which were approved pursuant to the

‘Resolution Plan’ were not acted upon.

6. The ‘Successful Resolution Applicant’- ‘Liberty House Group’

through its counsel sent a Letter of Intent on 14th September, 2018 to

the ‘Committee of Creditors’ seeking to delete material conditions under

the Process Note including the furnishing of Performance Guarantee,

which was rejected by the ‘Committee of Creditors’. It is alleged that in

spite of repeated reminders given by the ‘Resolution Professional’, ‘M/s.

Liberty House Group Pte Ltd.’ failed to furnish the performance

guarantee in terms of the Process Note and also failed to open escrow

account with 15% of the upfront amount of Rs. 528.75 crores.

7. ‘M/s. Liberty House Group Pte Ltd.’ on 24th September, 2018 sent

a letter assuring that an escrow account would be set up but finally on

one or other ground ‘M/s. Liberty House Group Pte Ltd.’ refused to give

effect to the ‘Resolution Plan’. In the meantime, ‘M/s. Liberty House

Group Pte Ltd.’ filed a suit for injunction on 26th November, 2018 before

the Hon’ble Delhi High Court seeking encashment of the Bid Bond

Guarantee. The ‘Committee of Creditors’ invoked the Bid Bond

Guarantee of Rs.50 Crores but the Barclays Bank on 27th November,

2018 rejected the invocation of Bid Bond Guarantee of Rs.50 Crores on

the ground that the invocation was not as per the prescribed format.

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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8. In the meantime, one or other order was passed by the Hon’ble

Delhi High Court in a suit filed by ‘M/s. Liberty House Group Pte Ltd.’.

9. At this stage, the ‘Committee of Creditors’/ ‘Financial Creditors’

filed an application under Section 60(5) read with Section 74(3) of the

‘I&B Code’ before the Adjudicating Authority with prayer to declare that

‘Resolution Applicant’- ‘M/s. Liberty House Group Pte Ltd.’ and its

Promoters upon whom the ‘Resolution Plan’ is binding under Section 31

of the ‘I&B Code’, have knowingly contravened the terms of the

‘Resolution Plan’ having failed to implement the same. Further prayer

was made to reinstate the ‘Committee of Creditors’ and the ‘Resolution

Professional’ to ensure that the ‘Corporate Debtor’ remain as a going

concern. Further prayer was made to grant 90 days to the ‘Resolution

Professional’ to make another attempt for a fresh process rather than

forcing the ‘Corporate Debtor’ into liquidation on account of fraud

committed by ‘M/s. Liberty House Group Pte Ltd.’. Prayer was also

made to debar ‘M/s. Liberty House Group Pte Ltd.’ from applying for a

fresh ‘Resolution Plan’ and further direction to the Insolvency and

Bankruptcy Board of India to take steps for initiation of proceeding

under Section 74(3) of the ‘I&B Code’ for trial and punishment under

the said provisions.

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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10. The Adjudicating Authority (National Company Law Tribunal),

Chandigarh Bench, by impugned order dated 13th February, 2019,

noticed the principle laid down by this Appellate Tribunal in “Quinn

Logistics India Pvt. Ltd. vs. Mack Soft Tech Pvt. Ltd.─ SCC OnLine

NCLAT 243” and the order passed by the Hon’ble Supreme Court in

“Arcelormittal India Private Limited v. Satish Kumar Gupta and

Ors.─ (2018) SCC OnLine SC 1733”.

11. The Adjudicating Authority held that in view of the principle laid

down by the Hon’ble Supreme Court in “Arcelormittal India Private

Limited” (Supra), certain period can be excluded from the total period

of 270 days but there is no scope of granting extension beyond 270

days under any circumstances.

12. The Adjudicating Authority further held that there were only two

‘Resolution Plans’ one submitted by ‘M/s. Liberty House Group Pte

Ltd.’, and other by ‘Deccan Value Investors LP’ which backtracked

because there was some better amount of bid offered by ‘M/s. Liberty

House Group Pte Ltd.’, whose ‘Resolution Plan’ was approved. Since the

approved ‘Resolution Plan’ cannot be implemented because of the

default in making payment as per the terms of the ‘Resolution Plan’, the

period when the ‘Resolution Plan’ was submitted by ‘Deccan Value

Investors LP’ till the disposal of the application can only be reconsidered

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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by the ‘Committee of Creditors’ by reconstituting it and not by initiating

fresh process, which would defeat the fresh binding timelines provided

under the ‘I&B Code’ to complete the process’. The Adjudicating

Authority observed that no matter if the ‘Corporate Debtor’ ultimately

has to face liquidation, but the permission to restart the process to

publish re-advertisement and invite fresh plans etc. would defeat the

very mandate of Section 12 of the ‘I&B Code’.

13. The Adjudicating Authority noticed the submissions made on

behalf of ‘M/s. Liberty House Group Pte Ltd.’. According to whom, it

discovered blatant discrepancies in the condition of machineries,

valuations and representations made in the Information Memorandum

and Valuation Reports, from which the ‘M/s. Liberty House Group Pte

Ltd.’, became aware that the information contained in the Information

Memorandum was incorrect, false and reflecting inflated values and

information.

14. However, the application filed by ‘Successful Resolution

Applicant’ namely— ‘M/s. Liberty House Group Pte Ltd.’ for declaration

that the ‘Corporate Insolvency Resolution Process’ in respect of ‘Amtech

Auto Limited’ commencing on 24th April, 2017 and culminating into

order of approval of ‘Resolution Plan’ on 25th July, 2018 is vitiated by

misrepresentation/fraud/mistake of fact has also been disallowed by

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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the Adjudicating Authority by common impugned order dated 13th

February, 2019.

However, certain observation has been made with regard to the

manner in which Information Memorandum was prepared based on

which the ‘Resolution Plan’ filed by the ‘Successful Resolution

Applicant’.

15. The contentions raised by learned counsel for ‘M/s. Liberty House

Group Pte Ltd.’, learned counsel for the ‘Financial Creditors’ and the

learned counsel for the ‘Resolution Professional’ at the time of hearing

application being CA No. 567/2018 were disposed of in which the right

has been kept open to the ‘M/s. Liberty House Group Pte Ltd.’ to

defend any action. The prayer made by ‘M/s. Liberty House Group Pte

Ltd.’ to lay down the guidelines for compliance by the ‘Resolution

Professionals’ in such cases has not been answered by the Adjudicating

Authority and the ‘Financial Creditors’ have been given liberty to file a

complaint before the Insolvency and Bankruptcy Board of India or the

Central Government, claiming that the ‘M/s. Liberty House Group Pte

Ltd.’ intentionally and wilfully contravened the terms of the plan.

16. Similar plea has been taken by ‘M/s. Liberty House Group Pte

Ltd.’ before this Appellate Tribunal in its appeal (Company Appeal (AT)

(Insolvency) No. 442 of 2019) wherein it is alleged that on knowing the

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

 10

aforesaid fact ‘M/s. Liberty House Group Pte Ltd.’ immediately wrote a

letter on 6th November, 2018 stating that in view of the developments

regarding discovery of serious irregularities in the information shared

with the Appellant during the bidding process it was necessary that a

meeting be held with the ‘Committee of Creditors’, to find a way to

discuss and agree to a suitable ‘Resolution Plan’ where the true

valuation of ‘Corporate Debtor’ is reflected.

17. The stand of ‘M/s. Liberty House Group Pte Ltd.’ is that the

‘Resolution Professional’ under Section 25(2)(g) read with Section 29 of

the ‘I&B Code’ was required to prepare an Information Memorandum

with the relevant information, including the liquidation value of the

‘Corporate Debtor’ as per Regulation 36 of the un-amended ‘Corporate

Insolvency Resolution Process Regulations’. Reference has also been

made to the paragraph 5.3.2 of the ‘Bankruptcy Law Reforms

Committee Report 2015’, which requires the ‘Resolution Professional’ to

provide most updated information about the entity as accurately as is

reasonably possible to this range of solution providers.

18. It was submitted that what has been discovered by the

‘Resolution Applicant’ that the financial statements of the ‘Corporate

Debtor’ for the quarter and half year ending September 2017 was

unaudited and standalone. It was discovered that the investment of the

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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‘Corporate Debtor’ was overvalued in the Liquidation Reports, as a

result, the ‘Resolution Applicant’ (‘M/s. Liberty House Group Pte Ltd.’)

in good faith acted upon by relying on such information set out in the

Liquidation Reports. Subsequently having come to know of the

discrepancies, ‘M/s. Liberty House Group Pte Ltd.’ wanted to have a

meeting with the ‘Committee of Creditors’ to file fresh plan.

19. The Adjudicating Authority taking into consideration all the

aforesaid facts and submissions made by the parties, rejected the

prayer made by the ‘Committee of Creditors’/ ‘Financial Creditors’ and

disposed of their CA No. 567 of 2018.

20. Learned counsel for the ‘Committee of Creditors’ made similar

prayer for exclusion of the period for the purpose of counting total

period of 270 days of ‘Corporate Insolvency Resolution Process’.

21. It is informed that on account of an informal feedback received by

the ‘Resolution Professional’, various prospective investors have shown

interest in participating in the ‘Corporate Insolvency Resolution Process’

of the ‘Corporate Debtor’, in the event an opportunity is granted by this

Appellate Tribunal.

22. It is also informed by the ‘Committee of Creditors’ that the

following entities who have expressed an informal interest for

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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participating the ‘Corporate Insolvency Resolution Process’ of the

‘Corporate Debtor’:

S.No. Organisation Relevant

Contact
Person
1. SSG Capital Management Lath Ranjan
(Singapore) Pte. Ltd.
2. Cerebrus UK Indranil Ghosh
3. AION Aditya Gupta
4. Kotak Prudhvi Raj
5. Gateway Fund Rahul Goswami
6. Laurel Investments Ltd. Transaction
(Mauritius) Group- IQEQ
7. Amtek Auto Limited- Promoter Arvind Dham

23. Similar plea has been taken by the ‘Resolution Professional’ who

has referred Section 74(3) of the ‘I&B Code’ and also Section 213(b) of

the Companies Act, 2013 for taking action against the ‘Successful

Resolution Applicants’/ ‘Corporate Debtor’ and its members.

24. Learned counsel for ‘M/s. Liberty House Group Pte Ltd.’ has

taken plea as noticed above that they discovered inflated valuation of

plant and machinery in the Information Memorandum and Liquidation

valuation reports. The following plea has been taken.

a) In August 2018, the ‘Resolution Professional appointed two

liquidation valuers [as per Regulation 27 of the CIRP Regulations],

namely RBSA and BDO, who valued the ‘Corporate Debtor’ as

follows:

i. Average Liquidation Value of Rs. 4,129 crores.

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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ii. Liquidation Value of Fixed Assets (PPE) 1636 crores,

[average of Rs. 1,746 crores (RBSA) and Rs. 1,506 (BDO)]

b) Out of Fixed Assets/PPE, plant and machinery (P&M) installed

across 21 plants was valued at Rs. 1,128 crores (average of RBSA,

BDO):

i. RBSA P&M liquidation value: Rs. 1,284 crores

ii. BDO P&M liquidation value: Rs. 973 crores

‘M/s. Liberty House Group Pte Ltd.’ relied on aforesaid

valuation in good faith at the time of preparing its ‘Resolution

Plan’, because of the following:

i. Limited time available to LHG making physical

verification of individual machines at 21 plants not

practical (only 1 visit allowed prior to submission of first

‘Resolution Plan’)

ii. Liquidation Value was considered for the purpose of

assessing a valuation floor by ‘Committee of Creditors’

and ‘Resolution Professional’ and actively used for

negotiation with resolution applicants.

iii. Regulation 27 and 35 of the CIRP Regulations the valuers

have to conduct the exercise of valuation as per

‘internationally accepted valuation standards’.

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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d) Post approval of ‘Resolution Plan’, ‘M/s. Liberty House Group Pte

Ltd.’s authorised representative started attending operational

reviews/site visits such as on 6th August 2018, 29th August 2018

and 18th September 2018. This is when it was discovered that

ground condition did not reflect the values as per the Valuation

Reports.

e) Thus, ‘M/s. Liberty House Group Pte Ltd.’ conducted independent

verification after being granted access to plants as an observer on

the ‘Monitoring Committee’, by procuring quotations of new

machines from vendors.

f) As time is the essence, ‘M/s. Liberty House Group Pte Ltd.’

shortlisted nine (9) key plants of Amtek, whose liquidation value of

plant and machinery constitute about sixty percent (60%) of the

total liquidation value of plant and machinery of Amtek as per the

RBSA report. Accordingly, ‘M/s. Liberty House Group Pte Ltd.’

reached out to the same machinery suppliers and sought

quotations for the specific machines as stated in liquidation value

reports. In an ideal situation, the new quotations from the

machinery suppliers, after discounting for age of the equipment,

should have been significantly higher than the Liquidation Value

attributed to the specific machines. However, to ‘M/s. Liberty

House Group Pte Ltd.’ surprise, the quotes for same new

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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machines were in fact lower than the Liquidation Value.

g) The liquidation value of the plant and machinery of Amtek, on the

basis of the quotations provided by the machinery suppliers was

in the range of Rs.400-500 Crores, being an amount significantly

lower than the liquidation value of Rs. 1,284 Crores attributed to

the plant and machinery in the RBSA Valuation Report.

25. Discrepancies in projected capacity of the plants has been shown

as under:

“The ‘Resolution Professional’ had as part of the VDR, shared

projections for the business of the ‘Corporate Debtor’ wherein inter

alia, the projected capacity of the plants of the ‘Corporate Debtor’

was implicit with respect to revenue generation from sales as

projected in the VDR. However, pursuant to discussions in the

Monitoring Committee/ review meetings, to ‘M/s. Liberty House

Group Pte Ltd.’ surprise it discovered that the projected capacity as

disclosed in VDR was an impossibility, and the actual estimations

of the capacity of the plants based on H1 for FY 2019 was far

lower. The details of the projected capacity of the plants as

disclosed in VDR and the actual estimations (based on H1 for FY

2019) as disclosed in the ‘Monitoring Committee’ meetings is set

out below:

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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FY 2019
Consolidated (Rs. VDR Reality Gap
Crore)
Sales 2,447 1,250 -49%
EBITDA 299 90 -70%

FY 2019
Unit wise VDR Reality Gap
(Rs. Crore)
Unit2 361 234 -35%
Bhopal 178 93 -48%
Ace 1&2 168 88 -47%
Vision 270 137 -49%
Sanswari 147 93 -37%
Atal 212 122 -42%
Ranjangaon 123 44 -64%
Hosur 183 89 -51%

FY 2019
Unit wise VDR Reality Gap
(Rs. Crore)
Chennai 51 0 -100%
Nalagarh 12 6 -47%
Gear Div 12 10 -22%
Ace3 123 66 -46%
Ace 4 & 5 133 63 -53%
Unit3 533 345 -35%
Metal 170 0 -100%
Division
Interunit sale -228 -140 -38%
Total 2,447 1,250 -49%

On further review and assessment, ‘M/s. Liberty House Group Pte

Ltd.’ found that several of the plants were already running at near full

capacity and therefore it was impossible to meet the projected

sales with the existing capacities.”

26. Learned counsel for ‘M/s. Liberty House Group Pte Ltd.’

highlighted the irregularities in relation to information about the extent

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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of inter dependency of the group companies and process irregularities,

as noted below:

Irregularity in relation to information about the extent of inter

dependency of the group companies

“a. Amtek forms a part of the Group Companies whose

business is inter-linked and inter-connected in as much as the

‘Corporate Debtor’ depends on the Group Companies for

supplies of raw materials. During the bidding process, ‘M/s.

Liberty House Group Pte Ltd.’ given to understand (through a

presentation entitled “Amtek Auto Limited - Interlinkages and

Dependencies on Group Companies” shared by the Resolution

Professional in the VDR) that the ‘Corporate Debtor’s’

dependency on Group Companies for its business is to the

tune of forty-three percent (43%). Accordingly, ‘M/s. Liberty

House Group Pte Ltd.’ factored a dependency of forty-three

percent (43%) of the ‘Corporate Debtor’ on the Group

Companies, while formulating the ‘Resolution Plan’.

b. Pursuant to attending ‘Monitoring Committee’ meetings,

‘M/s. Liberty House Group Pte Ltd.’ was surprised to learn that

the actual dependency of the ‘Corporate Debtor’ on supplies

from the Group Companies (for H1 of FY 2019) is to the extent

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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of sixty-six percent (66%) i.e. nearly 50% higher than as implied

by the data shared with us in the VDR.

c. This changes the entire dynamics of the business for the

‘Corporate Debtor’, as the supplies from the Group Companies

to the ‘Corporate Debtor’ are customised to suit the contracts

of the ‘Corporate Debtor’ with the end customer and as such

the supplies cannot be immediately (or within any reasonable

period of time) procured by the ‘Corporate Debtor’ from any

other supplier in case the Group Companies are unable to

supply to the ‘Corporate Debtor’ because of their own

status/financial position.

Process Irregularities

Further, when the ‘Resolution Plan’ was filed by the

‘Resolution Professional’ on 16 th April 2018, the Letter of

Intent was not even signed by ‘M/s. Liberty House Group Pte

Ltd.’ and escrow terms and conditions were still under

negotiations. Resolution Professional did not highlight this

before the Adjudicating Authority while the 25 th July Order

was being Passed.”

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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27. Learned counsel for ‘M/s. Liberty House Group Pte Ltd.’

submitted that it undertook all efforts to implement the ‘Resolution

Plan’, including filing an application to ‘Competition Commission of

India’. To address the above serious issues and strive to arrive at a

solution ‘M/s. Liberty House Group Pte Ltd.’ also held meetings with the

‘Committee of Creditors’ on 24th October 2018 and 31st October 2018.

‘M/s. Liberty House Group Pte Ltd.’ did not receive any response to

their letter dated 6th November 2018. Thus, ‘M/s. Liberty House Group

Pte Ltd.’ once again addressed a letter to the ‘Resolution Professional’

on 14th November, 2018 but no final solution could be given.

28. ‘Deccan Value Investors LP’, the other ‘Resolution Applicant’

appeared as an intervenor. It was submitted by learned counsel that

new eligibility criteria were published by the ‘Resolution Professional’/

‘Committee of Creditors’ when its matter was considered pursuant to an

interim order passed by this Appellate Tribunal on 28th March, 2019.

29. It was submitted that on the ground of violation of this Appellate

Tribunal’s order dated 29th May, 2019, the ‘Resolution Professional’

published an entirely ‘new eligibility criteria’ for the ‘prospective

resolution applicants’, which in essence was culmination of design to

disqualify and exclude ‘Deccan Value Investors LP’.

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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30. However, we are not going into the aforesaid issues as we find

that ‘Deccan Value Investors LP’ has already withdrawn its ‘Resolution

Plan’ and subsequently filed the revised application after interim order

was passed by this Appellate Tribunal, but its revised plan has not been

approved by the ‘Committee of Creditors’.

31. ‘M/s. Liberty House Group Pte Ltd.’ has preferred the other

appeals (Company Appeal (AT) (Insolvency) Nos. 442 & 443 of 2019) and

challenged the same very impugned order dated 13th February, 2019.

The plea taken by ‘M/s. Liberty House Group Pte Ltd.’ has already been

noticed in the preceding paragraph. The two appeals have been filed in

view of the common order passed in two Company Applications which

were disposed of by common impugned order dated 19th February,

2018.

32. One of the question arises for consideration in these appeals is

whether a case has been made out to exclude any period for the

purpose of counting 270 days of the ‘Corporate Insolvency Resolution

Process’. In absence of any extraordinary situation and the fact that

more than 270 days have already been passed, we find no ground to

exclude any period. Further, once a plan is approved by the

Adjudicating Authority under Section 31, if it is not implemented, that

cannot be a ground to exclude any period.

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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33. If a plan is approved under Section 31 within 180 days or much

before completion of 270 days, one may request the Adjudicating

Authority to allow the ‘Committee of Creditors’ to consider the other

‘Resolution Plans’, if the ‘Resolution Applicant’ is not ineligible and such

plans were not rejected on merit but were not approved because best of

the plan was approved by the ‘Committee of Creditors’. However, we are

not inclined to decide such issue in view of the provisions of Section

33(3) and mandate under Section 12 of the ‘I&B Code’.

34. Section 33 deals with ‘Initiation of liquidation’. The Adjudicating

Authority, before the expiry of the ‘Insolvency Resolution Process’ period

or the maximum period permitted for completion of the ‘Corporate

Insolvency Resolution Process’ under Section 12, it does not receive a

‘Resolution Plan’ under sub-section (6) of Section 30 or reject the

‘Resolution Plan’ under Section 31 for the non-compliance of the

requirements specified therein, it is empowered to pass order of

liquidation under sub-section (1) of Section 33.

35. Where the ‘Resolution Professional’, at any time during the

‘Corporate Insolvency Resolution Process’ but before confirmation of

‘Resolution Plan’, intimates the Adjudicating Authority of the decision of

the ‘Committee of Creditors’ approved by not less than sixty-six percent

of the voting share to liquidate the ‘Corporate Debtor’, the Adjudicating

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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Authority is bound to pass order of liquidation in terms of Section 33(2)

of the ‘I&B Code’.

36. Under Section 33(3), if the ‘Resolution Plan’ is 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 contravention, may make an

application to the Adjudicating Authority for a ‘liquidation’ order as

referred to in Section 33, which reads as follows:

“33. Initiation of liquidation. ─ (1) Where the

Adjudicating Authority,─

(a) before the expiry of the insolvency resolution

process period or the maximum period permitted

for completion of the corporate insolvency

resolution process under section 12 or the fast

track corporate insolvency resolution process

under section 56, as the case may be, does not

receive a resolution plan under sub-section (6) of

section 30; or

(b) rejects the resolution plan under section 31

for the non-compliance of the requirements

specified therein,

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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it shall─

(i) pass an order requiring the corporate

debtor to be liquidated in the manner as

laid down in this Chapter;

(ii) issue a public announcement stating that

the corporate debtor is in liquidation; and

(iii) require such order to be sent to the

authority with which the corporate debtor

is registered.

(2) Where the resolution professional, at any time

during the corporate insolvency resolution process

but before confirmation of resolution plan, intimates

the Adjudicating Authority of the decision of the

committee of creditors 1[approved by not less than

sixty-six per cent. of the voting share] to liquidate

the corporate debtor, the Adjudicating Authority

shall pass a liquidation order as referred to in sub-

clauses (i), (ii) and (iii) of clause (b) of sub-section

(1).

(3) Where the resolution plan approved by the

Adjudicating Authority is contravened by the

concerned corporate debtor, any person other than

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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the corporate debtor, whose interests are

prejudicially affected by such contravention, may

make an application to the Adjudicating Authority

for a liquidation order as referred to in sub-clauses

(i), (ii), (iii) of clause (b) sub-section (1).

(4) On receipt of an application under sub-section

(3), if the Adjudicating Authority determines that

the corporate debtor has contravened the

provisions of the resolution plan, it shall pass a

liquidation order as referred to in sub-clauses (i), (ii)

and (iii) of clause (b) of sub-section (1).

(5) Subject to section 52, when a liquidation order

has been passed, no suit or other legal proceeding

shall be instituted by or against the corporate

debtor:

Provided that a suit or other legal

proceeding may be instituted by the liquidator, on

behalf of the corporate debtor, with the prior

approval of the Adjudicating Authority.

(6) The provisions of sub-section (5) shall not apply

to legal proceedings in relation to such transactions

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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as may be notified by the Central Government in

consultation with any financial sector regulator.

(7) The order for liquidation under this section shall

be deemed to be a notice of discharge to the

officers, employees and workmen of the corporate

debtor, except when the business of the corporate

debtor is continued during the liquidation process

by the liquidator.”

37. In appropriate case, on receipt of an application under sub-

section (3), if the Adjudicating Authority determines that the ‘Corporate

Debtor’ has contravened the provisions of the ‘Resolution Plan’, it

requires to pass order of liquidation as provided under sub-clauses (i),

(ii) and (iii) of clause (b) of sub-section (1) as laid down under Section

30(4).

38. In the present case, it is argued that none of the persons’

interests are prejudicially affected because of contravention, made any

application to the Adjudicating Authority for liquidation order under

sub-section (3) of Section 33, therefore, according to the counsel for the

‘Committee of Creditors’ and the ‘Resolution Professional’, no order

could have been passed under Section 33(3) of the ‘I&B Code’.

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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39. We have already observed that in case where the ‘Resolution

Plan’ earlier approved within a reasonable period of 180 days or much

before completion of 270 days, one may request the Adjudicating

Authority to allow the ‘Resolution Professional’/ ‘Committee of

Creditors’ to consider the pending ‘Resolution Plan (s)’ or to call for

fresh ‘Resolution Plan’/ ‘Revised Resolution Plan’, in absence of any

application under Section 33(3) filed by any person whose interest is

prejudicially affected by contravention of the plan by the ‘Corporate

Debtor’.

However, as we have noted that more than 270 days have been

completed much earlier and no case is made out to exclude any period,

we hold that the Adjudicating Authority has no other option but to pass

order of liquidation.

40. It is made clear that once order of liquidation is passed, the

liquidator is required to follow the procedure laid down under the ‘I&B

Code’, including Sections 35, 36, 37, 38, 39 and 40 etc. as also the

procedure laid down under Section 230 of the Companies Act, 2013 as

held by this Appellant Tribunal in “Y. Shivram Prasad Vs. S. Dhanapal

& Ors.─ Company Appeal (AT) (Insolvency) No. 224 of 2018”.

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

 27

41. ‘M/s. Liberty House Group Pte Ltd.’ has shown certain grounds

for non-compliance of the plan, which cannot be deliberated by this

Appellate Tribunal to decide whether the grounds shown by ‘M/s.

Liberty House Group Pte Ltd.’ is genuine or it attracts punishment

prescribed under Section 74(3) of the ‘I&B Code’, which reads as

follows:

“74. Punishment for contravention of

moratorium or the resolution

plan.─…………(3) Where the corporate debtor,

any of its officers or creditors or any person on

whom the approved resolution plan is binding

under section 31, knowingly and wilfully

contravenes any of the terms of such resolution

plan or abets such contravention, such corporate

debtor, officer, creditor or person shall be

punishable with imprisonment of not less than

one year, but may extend to five years, or with

fine which shall not be less than one lakh rupees,

but may extend to one crore rupees, or with both.”

42. The ‘I&B Code’ is silent on the issue as to whether the

Adjudicating Authority has any jurisdiction to pass any order referring

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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the matter to the Central Government or the Insolvency and

Bankruptcy Board of India for action under Section 74(3) of the ‘I&B

Code’ or under any of the provisions ‘for punishment’ as prescribed

under Chapter VII of Part II of the ‘I&B Code’.

43. Section 236 of the ‘I&B Code’ deals with “Trial of offences by

Special Court”, as quoted below:

“236. Trial of offences by Special Court. ─ (1)

Notwithstanding anything in the Code of Criminal

Procedure, 1973(2 of 1974), offences under of this

Code shall be tried by the Special Court established

under Chapter XXVIII of the Companies Act, 2013

(18 of 2013).

(2) No Court shall take cognizance of any offence

punishable under this Act, save on a complaint

made by the Board or the Central Government or

any person authorised by the Central Government in

this behalf.

(3) The provisions of the Code of Criminal Procedure,

1973 shall apply to the proceedings before a Special

Court and for the purposes of the said provisions,

the Special Court shall be deemed to be a Court of

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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Session and the person conducting a prosecution

before a Special Court shall be deemed to be a

Public Prosecutor.

(4) Notwithstanding anything contained in the Code

of Criminal Procedure, 1973, in case of a complaint

under sub-section (2), the presence of the person

authorised by the Central Government or the Board

before the Court trying the offences shall not be

necessary unless the Court requires his personal

attendance at the trial.”

44. From sub-section (2) of Section 236, it is clear that no Special

Court can take cognizance of any offence punishable under the ‘I&B

Code’, including punishment prescribed under Section 74(3) of Chapter

VII of Part II, save on a compliant made by the Insolvency and

Bankruptcy Board of India or the Central Government or any person

authorised by the Central Government in this behalf.

45. Normally, the Insolvency and Bankruptcy Board of India or the

Central Government are not made a party respondent to any of the

‘Corporate Insolvency Resolution Process’. Therefore, they cannot have

any idea as to whether any offence has been committed by any

‘Corporate Debtor’ or its members, including ‘Successful Resolution

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

 30

Applicant’ (‘Corporate Debtor’) under Section 74(3) or any of the

provisions of Chapter VII of Part II of the ‘I&B Code’.

46. In this background, we are of the view that it is the Adjudicating

Authority who is required to refer such matter to the Insolvency and

Bankruptcy Board of India or the Central Government to take up the

matter to the Special Court if on investigation, if any case of offence

under Chapter VII, including Section 74(3) is made out.

47. There is no procedure laid down under the ‘I&B Code’, but the

Adjudicating Authority, which is the National Company Law Tribunal is

required to follow the procedure as mandated under Section 424 of the

Companies Act, 2013 and quoted below:

“424. Procedure before Tribunal and Appellate

Tribunal. ─(1) The Tribunal and the Appellate

Tribunal shall not, while disposing of any proceeding

before it or, as the case may be, an appeal before it,

be bound by the procedure laid down in the Code of

Civil Procedure, 1908, but shall be guided by the

principles of natural justice, and, subject to the other

provisions of this Act and of any rules made

thereunder, the Tribunal and the Appellate Tribunal

shall have power to regulate their own procedure.

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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(2) The Tribunal and the Appellate Tribunal shall

have, for the purposes of discharging their functions

under this Act, the same powers as are vested in a

civil court under the Code of Civil Procedure, 1908

while trying a suit in respect of the following

matters, namely:—

(a) summoning and enforcing the

attendance of any person and examining

him on oath;

(b) requiring the discovery and production of

documents;

(c) receiving evidence on affidavits;

(d) subject to the provisions of sections 123

and 124 of the Indian Evidence Act, 1872,

requisitioning any public record or document

or a copy of such record or document from

any office;

(e) issuing commissions for the examination

of witnesses or documents;

(f) dismissing a representation for default or

deciding it ex parte;

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

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(g) setting aside any order of dismissal of

any representation for default or any order

passed by it ex parte; and

(h) any other matter which may be

prescribed.

(3) Any order made by the Tribunal or the Appellate

Tribunal may be enforced by that Tribunal in the

same manner as if it were a decree made by a court

in a suit pending therein, and it shall be lawful for

the Tribunal or the Appellate Tribunal to send for

execution of its orders to the court within the local

limits of whose jurisdiction, —

(a) in the case of an order against a company,

the registered office of the company is situate;

or

(b) in the case of an order against any other

person, the person concerned voluntarily

resides or carries on business or personally

works for gain.

(4) All proceedings before the Tribunal or the

Appellate Tribunal shall be deemed to be

judicial proceedings within the meaning of

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

 33

sections 193 and 228, and for the purposes of

section 196 of the Indian Penal Code, and the

Tribunal and the Appellate Tribunal shall be

deemed to be civil court for the purposes of

section 195 and Chapter XXVI of the Code of

Criminal Procedure, 1973.”

48. As in terms of Section 424 of the Companies Act, 2013, the

Adjudicating Authority/ National Company Law Tribunal is required to

be follow the principles of natural justice and the provision of the ‘I&B

Code’/ ‘Companies Act, 2013’, therefore, without giving any opportunity

of hearing, the Adjudicating Authority/ National Company Law Tribunal

cannot refer the matter to the Central Government or the Insolvency

and Bankruptcy Board of India for instituting a case against the alleged

defaulter.

49. Section 213 of the Companies Act, 2013 may not be directly

applicable to the proceeding under the ‘I&B Code’. However, it relates to

“Investigation into company’s affairs in other cases”. As per clause (b) of

sub-section 213, on an application made to it (Adjudicating Authority/

Tribunal) by any other person (say, the ‘Resolution Professional’ or the

‘Committee of Creditors’) or otherwise (suo moto), if the Tribunal

(Adjudicating Authority) is satisfied that there are circumstances

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

 34

suggesting that the business of the company is being conducted with

intent to defraud its creditors, members or any other person or

otherwise for a fraudulent or unlawful purpose, or misfeasance or other

misconduct towards the company (‘Corporate Debtor’ through

‘Successful Resolution Applicant’), after giving a reasonable opportunity

of being heard to the parties concerned, that the affairs of the company

ought to be investigated by an inspector or inspectors appointed by the

Central Government and where such order is passed, the Central

Government shall appoint one or more competent persons as inspectors

to investigate into the affairs of the company, which is quoted below:

“213. Investigation into company’s affairs in

other cases.─ The Tribunal may,—

(a) on an application made by—

(i) not less than one hundred members or

members holding not less than one-tenth of

the total voting power, in the case of a

company having a share capital; or

(ii) not less than one-fifth of the persons on

the company’s register of members, in the

case of a company having no share capital,

and supported by such evidence as may be

necessary for the purpose of showing that

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

 35

the applicants have good reasons for seeking

an order for conducting an investigation into

the affairs of the company; or

(b) on an application made to it by any other person

or otherwise, if it is satisfied that there are

circumstances suggesting that—

(i) the business of the company is being

conducted with intent to defraud its

creditors, members or any other person or

otherwise for a fraudulent or unlawful

purpose, or in a manner oppressive to any of

its members or that the company was

formed for any fraudulent or unlawful

purpose;

(ii) persons concerned in the formation of

the company or the management of its

affairs have in connection therewith been

guilty of fraud, misfeasance or other

misconduct towards the company or towards

any of its members; or

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

 36

(iii) the members of the company have not

been given all the information with respect to

its affairs which they might reasonably

expect, including information relating to the

calculation of the commission payable to a

managing or other director, or the manager,

of the company, order, after giving a

reasonable opportunity of being heard to the

parties concerned, that the affairs of the

company ought to be investigated by an

inspector or inspectors appointed by the

Central Government and where such an

order is passed, the Central Government

shall appoint one or more competent persons

as inspectors to investigate into the affairs of

the company in respect of such matters and

to report thereupon to it in such manner as

the Central Government may direct:

Provided that if after investigation it is proved that—

(i) the business of the company is being

conducted with intent to defraud its

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

 37

creditors, members or any other persons or

otherwise for a fraudulent or unlawful

purpose, or that the company was formed

for any fraudulent or unlawful purpose; or

(ii) any person concerned in the formation of

the company or the management of its

affairs have in connection therewith been

guilty of fraud, then, every officer of the

company who is in default and the person

or persons concerned in the formation of the

company or the management of its affairs

shall be punishable for fraud in the manner

as provided in section 447.”

50. We have notice that Section 213 of the ‘Companies Act, 2013’ has

not been adopted under the ‘I&B Code’ but such order can be passed by

the Tribunal on an application by any person against any Company

(‘Corporate Debtor’), if the fraud has been committed as mentioned in

clauses (i) or (ii) or (iii) of Section 213 (b). Therefore, we are of the

opinion that before referring any matter to the Insolvency and

Bankruptcy Board of India or the Central Government, the Adjudicating

Authority/ Tribunal is required to provide reasonable opportunity of

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

 38

hearing to the parties concerned/alleged offenders of provisions of

Chapter VII of Part II and if satisfied may request the Central

Government to investigate the matter by an Inspector or Inspectors and

then to decide on such opinion whether to refer and lodge any case

before the Special Judge for trial under Section 236 of the ‘I&B Code’ for

alleged offence under Section 74(3) or any other provision under

Chapter VII of Part II of the ‘I&B Code’ and for punishment under

Section 447 of the Companies Act, 2013.

51. In view of such observations, we are not inclined to give any

direction as was sought for by the ‘Committee of Creditors’ nor inclined

to exclude any period calling for fresh ‘Resolution Plan’. More than 270

days having passed, the Adjudicating Authority will pass appropriate

order of liquidation, which will be in accordance with law.

52. Further, in view of provisions of law, as discussed above, the

impugned order dated 13th February, 2019 so far it relates to grant of

liberty to the ‘Resolution Professional’ and the ‘Committee of Creditors’

to move before the Insolvency and Bankruptcy Board of India or the

Central Government is set aside. However, liberty is given to the

‘Resolution Professional’ or the ‘Committee of Creditors’ or any creditor

to move an application under Section 213 of the Companies Act, 2013

read with Section 74(3) of the ‘I&B Code’ before the Adjudicating

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019

 39

Authority/ National Company Law Tribunal to decide as to whether the

matter is required to be referred to the Insolvency and Bankruptcy

Board of India or the Central Government for taking any action under

Section 74(3) and Section 213 read with Section 447 of the Companies

Act, 2013. In such case, the Adjudicating Authority will decide the same

after notice to the ‘Successful Resolution Applicant’/ ‘Corporate Debtor’

after following the procedure of Section 213 of the Companies Act, 2013

as discussed in the preceding paragraph.

All the appeals are disposed of with aforesaid observations and

directions. No cost.

(Justice S.J. Mukhopadhaya)

Chairperson

(Kanthi Narahari)
Member(Technical)
NEW DELHI
16th August, 2019

P.S

Company Appeal (AT) (Insolvency) Nos.219, 442 & 443 of 2019