Resolution plan and addendum submitted by an ARC without RBI’s approval was to be rejected

Case Details: Viceroy Hotels Ltd. v. Asset Reconstruction Co. (P.) Ltd - [2021] 130 taxmann.com 516 (NCLT-Hyd.)

Judiciary and Counsel Details

• • Madan Bhalchander Gosavi, Judicial Member & Veera Brahma Rao Arekapudi, Technical Member
  • A. Chandra Shaker, Adv., S. Ravi, Sr. Adv., Shabeer Ahmed, Adv., L. Ravichander, Sr. Adv., G. Venugopal & Yogesh Jagia, Advs. for the Appearing Parties.

Facts of the Case

In the instant case, the application was filed under section 30(6) and section 31 of the Insolvency & Bankruptcy Code, 2016 seeking approval of the Resolution Plan submitted by M/s CFM Asset Reconstruction Private Limited (CFM) as approved by the Committee of Creditors (CoC) in respect of Viceroy Hotels Limited.

CIRP of the Corporate Debtor was initiated by this Bench by an order and the Applicant herein was appointed as Interim Resolution Professional (IRP). The Committee of Creditors (CoC) in its 1st meeting had confirmed the Applicant as Resolution Professional (RP). The Applicant in compliance with the provisions of the Code and Rules framed thereunder conducted the CIRP of the Corporate Debtor.

CoC had submitted relevant provisions of the SARFAESI ACT wherein Asset Reconstruction Companies (ARC) came into existence. Section 2(1)(ba) defines “asset reconstruction company” which means a company registered with Reserve Bank under section 3 for the purposes of carrying on the business of asset reconstruction or securitisation, or both. He also mentioned proviso to section 15(4) which states an ARC shall not be liable to restore the management if it acquires a controlling equity stake in the borrower company upon conversion.

The Learned Counsel appearing for Unsuccessful Resolution Applicant submits that out of five resolution applicants only CFM and Unison Hotels were left in the fray. He also submitted that CFM originally submitted its plan jointly with Delta Tri Pvt. Ltd. but subsequently, Delta Tri Pvt. Ltd. was dropped being ineligible under section 29A of the Code and CFM submitted the plan alone, which was approved by the CoC.

NCLT Held

NCLT held that the successful resolution applicant had tried to circumvent the provisions of the Code, by purportedly including M/s. Tolaram Inc., Singapore as a co-applicant when there was no such mention in the original resolution plan submitted by the Resolution Professional. It was only mentioned that M/s. Tolaram Inc. was an investor in M/s. CFM only. They were never co-applicants as per the resolution plan. Despite that, in the instant case, there was no change in the attitude and the acts of the Resolution Professional and we are not hesitant in recommending to the IBBI to investigate the entire process and the acts of the Resolution Professional in the matter.

Accordingly, NCLT rejected the resolution plan submitted by M/s CFM Asset Reconstruction (P.) Ltd. for the Corporate Debtor/Viceroy Hotels Limited. The NCLT held that since IA was dismissed, IA No. which was filed as an addendum to the Resolution Plan also stands dismissed. Consequentially, IA filed by unsuccessful Resolution Applicant becomes infructuous and stands disposed of.

List of Cases Referred to

• • T. Cajee v. U. Jormanik Siem [1961] 1 SCR 750 (para 26)
  • S.A.L. Narayan Row v. Ishwarlal Bhagwandas [1965] 57 ITR 149 (SC) (para 26)
  • Canara Bank v. Chandramoulishvar Spg. Mills (P.) Ltd. [2018] 98 taxmann.com 44 (NCL-AT) (para 27)
  • UV Asset Reconstruction Co. Ltd. v. Union of India [WP (C) No. 9537 of 2020, dated 18-3-2021] (para 29)
  • Manish Kumar v. Union of India [2021] 123 taxmann.com 343 (SC) (para 47).