Appeal to Supreme Court
Supreme Court admitted the Civil Appeal No. 1808/2020 on 06.03.2020.
This Court while admitting the Civil Appeal No. 1808/2020 filed by Kalyani Transco, and other appeals filed by the other parties, had vide order dated 06.03.2020, recorded the statement of learned Senior Advocate Dr. A.M. Singhvi appearing for the CoC as under: –
“UPON hearing the counsel the court made the following O R D E R:
The appeals are admitted.
Dr. A.M. Singhvi, learned senior counsel appearing for the Committee of Creditors states that in case he receives money, he will return the said amount within two months, if the appeal succeeds.
List all the matters together on 15.04.2020.”
JSW, the Resolution Applicant , on 20.03.2020 filed an IA before supreme court seeking clarification of the order dated 06.03.2020 to the extent that JSW was not obligated to implement the Resolution Plan during pendency of the SLPs filed by the CoC, Kalyani Transco, Sanjay Singal and others against the Judgment dated 17.02.2020 passed by NCLAT. The said I.A. was resisted by the CoC by filing a detailed reply contending inter alia that JSW was attempting to seek a stay on the implementation of the plan under the garb of clarification of the order dated 06.03.2020. The CoC in the said reply made some serious allegations of misuse of process of court against JSW and sought direction against JSW to implement the plan as per its statutory obligations under the IBC.
During the hearing on June 10,2020, on JSW’s Application seeking clarification, Supreme Court observed that there is no stay against the implementation of the Resolution Plan.
SBI brought to the notice of the Supreme Court, by an IA, that the implementation of the Resolution Plan would not be prejudicial to any of the stakeholders of the Corporate Debtor and non –implementation of the plan would not be in the interest of all stakeholders given the size and business of the Corporate Debtor.
The issue involved in other connected Appeals was about the jurisdiction of the E.D. to attach the properties of the Corporate Debtor, which was undergoing Corporate Insolvency Resolution Process, particularly in the light of Section 32A of the Insolvency and Bankruptcy Code, 2016 (IBC). The Supreme Court without
Expressing any opinion on the interpretation of Section 32A (2) of IBC or on the powers of the E.D. to attach the property of the Corporate Debtor which is undergoing the Corporate Insolvency Resolution Process, or on any other legal issue involved in the other connected Appeals which are pending for consideration before this Court, directed the Appellant-E.D to handover and the Respondent successful Resolution Applicant JSW is directed to take over the control of the properties of Corporate Debtor-Bhushan Power and Steel Ltd provisionally attached vide the order dated 10.10.2019 passed by the E.D.
Preliminary Objections against the appeal:
An Appeal under Section 62 could be filed only by a “person aggrieved” against an order passed by the NCLAT, and that too on a question of law arising out of such order. SRA-JSW has already implemented the Resolution Plan successfully by making payments to the Financial Creditors on 26.03.2021 and by making payments to the Operational Creditors in March 2022. They also submitted that the Appellant Kalyani Transco and other Operational Creditors could no longer be said to be the “person aggrieved,” once they have now accepted their payments under the said Resolution Plan As regards the Appeals filed by the Appellant State of Odisha, it was sought to be submitted by them that the State of Odisha did not file its claim with respect to Entry tax dues before the Resolution Professional, did not approach the NCLT and had filed its Appeal against the Plan Approval Order before the NCLAT. Similarly, the State of Odisha had failed to raise its claim with regard to the Electricity dues before the Resolution Professional, did not file any proceeding before NCLT and NCLAT, and for the first time has filed the present Appeal before this Court, which may not be entertained.
On the above preliminary objection, the supreme court observed the rulings in Glas Trust Company LLC Vs. Byju Raveendran and Others (2024 SCC On Line SC 3032): The use of the phrase “any person aggrieved” indicates that there is no rigid locus requirement to institute an appeal challenging an order of the National Company Law Tribunal, before the National Company Law Appellate Tribunal or an order of the National Company Law Appellate Tribunal, before this court. Any person who is aggrieved by the order may institute an appeal, and nothing in the provision restricts the phrase to only the applicant creditor and the corporate debtor. As noted above, once the corporate insolvency resolution process is initiated, the proceedings are no longer restricted to the individual applicant creditor and the corporate debtor but rather become collective proceedings (in rem), where all creditors, such as the appellant, are necessary stakeholders…..”
Accordingly, the Appellants who are the operational creditors, and the erstwhile Promoters, being important stakeholders, and whose Company Appeals have been dismissed by the NCLAT vide the impugned judgment, would certainly be the persons aggrieved entitled to file Appeals before this Court under Section 62 of the IBC. Moreover, they have also raised number of questions of law in the instant appeals, which although will be considered in the later part of this judgment, nonetheless, they being the persons aggrieved, the Appeals at their instance are certainly maintainable.
Appellants’ Submissions against order of NCLAT in Company Appeal No.957 of 2019 filed by JSW
The Appellants submitted that the Company Appeal No.957 of 2019 filed by JSW before the NCLAT challenging some of the conditions imposed by the NCLT in the order dated 05.09.2019 while approving the Resolution Plan of JSW, was not maintainable, as none of the grounds mentioned in Section 61(3) of IBC existed Because the Resolution Plan of JSW was approved, JSW could not be said to be the ‘person aggrieved’ for filing the Appeal under Section 61, and if it was against the order of NCLT approving the Plan, the grounds specified in sub-section (3) must exist.
On Appellants’ Submissions, the Supreme Court observed that as deducible from the bare reading of sub-section (3) of Section 61, and as held by the Supreme Court in K. Sashidhar Vs. Indian Overseas Bank Others (2019) 12 SCC 150 and many other cases, an Appeal against an order approving Resolution Plan under Section 31 could be filed only on the grounds mentioned therein namely (i) if the approved plan is in contravention with the provisions of any law for the time being in force; (ii) there has been material irregularity in exercise of the powers by the Resolution Professional during the corporate insolvency resolution period; (iii) the debts owed to operational creditors of the Corporate Debtor have not been provided for in the Resolution Plan in the manner specified by the Board; (iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or (v) the Resolution Plan does not comply with any other criteria specified by the Board.
In the Appeal being the Company Appeal No. 957 of 2019 filed by the JSW under Section 61 before the NCLAT, none of the grounds stated in the sub-section (3) of Section 61 were raised, as did not exist. When the Resolution Plan of JSW was approved by the Resolution Professional, it was binding to all the stakeholders including the SRA/JSW as per Section 31(1), and the respondent JSW could not have filed the Appeal before the NCLAT, when none of the grounds stated in subsection (3) existed. Interestingly, the NCLAT vide the impugned judgment dated 17.02.2020, not only entertained but also allowed the said Appeal of JSW which was not legally maintainable, modified the conditions which were not suitable to JSW, and dismissed all the other Appeals filed by the Operational Creditors, the Ex- Promoters and the State of Odisha.
Further, it is also pertinent to note that the NCLAT also gave certain directions in Para 147 of the impugned judgment, with regard to an issue, which was neither the subject matter before the NCLT in the Application filed by the Resolution Professional seeking approval of the plan, nor the subject matter of the Company Appeal filed by the JSW before the NCLAT.
The Supreme Court observed that it ‘fail to understand as to how the directions such as declassifying the Corporate Debtor company as a promoter of any other company or entity etc., could have been given by the NCLAT in the Appeal filed by the JSW under Section 61, which was filed challenging only the conditions imposed by the NCLT while approving the Resolution plan of JSW under Section 31
Supreme Court also stunned by the observations made and findings recorded by the NCLAT in the paragraphs 51 to 57 of the impugned judgment, whereby the NCLAT has virtually justified the non-disclosure and suppression of the material fact in the Resolution Plan made by the JSW, with regard to the Joint Venture agreement dated 05.03.2008. The said Joint Venture Agreement was entered into by the JSW, BPSL and Jai Balaji on 05.03.2008 pursuant to an order of Government of India, in the matter of joint allocation of Rohne Coking Coal block. These facts suppressed by JSW in its Resolution Plan, had surfaced during the course of the investigation in the PMLA proceedings initiated against the Corporate Debtor and others. Based on the said material, an issue was raised before the NCLAT whether JSW was a ‘related party’ to BPSL, and therefore, ineligible under Section 29A. However, the NCLAT in its impugned judgment had sought to justify the suppression of facts made by JSW.
Mandatory requirement under section 29A
However, we certainly deem it appropriate to highlight the statutory requirement of proper disclosure to be made by the Resolution Applicant with regard to its eligibility under Section 29A of the IBC. As per Section 29A, a person shall not be eligible to submit a Resolution Plan, if such person or any other person acting jointly or in concert with such person, falls under any of the clauses contained in the said Section 29A. Further, Section 30(1) read with Regulation 39(1) of the Regulations, 2016 requires that a Resolution Applicant has to submit a Resolution Plan along with an affidavit stating that he is eligible under Section 29A to submit the Resolution Plan. As per Regulation 39(4), when the Resolution Plan as approved by the CoC, is submitted by the Resolution Professional, it has to be submitted by him along with a compliance certificate in Form No. H of the Schedule. The prescribed Form ‘H’, pertaining to the compliance certificate, contained in the Schedule, specifically requires the Resolution Professional to certify that the Resolution Plan complies with all the provisions of the IBC and the CIRP Regulations 2016, and that it does not contravene any of the provisions of law, for the time being in force. The Resolution Professional also has to certify that the Resolution Applicant has submitted an affidavit in compliance with Section 30(1) of the Code, confirming its eligibility under Section 29A to submit the plan and that the contents of the said affidavit are in order.
In the instant case, as transpiring from the record, the Resolution Professional had not submitted the Compliance Certificate in the prescribed Form ‘H’ of the Schedule, while submitting the Company Application being No. 254 of 2019 before the NCLT seeking approval of the Resolution Plan under Section 31(1) read with Section 30(6) of the IBC. In the said Company Application, the Resolution Professional had only reproduced the Clauses of the Resolution Plan, without submitting the Compliance Certificate as prescribed in Form ‘H.’ In the said Application, what has been stated by the Resolution Professional with regard to the compliance of the mandatory requirements under the Code, was in the form of a Table,
Thus, as evinced from the record, there was neither a certificate given nor any statement made by the Resolution Professional in the said Application, to the effect that the contents of the Affidavit filed by the Resolution Applicant with regard to its eligibility to file the Resolution Plan, were in order. In the afore-stated Table, against the column of requirement that “the disqualification under Section 29A of the Code should not apply,” the Resolution Professional has merely referred to Annexure 12 of the Approved Resolution Plan of JSW. As elicited, the said Annexure 12 of the Approved Resolution Plan which allegedly pertained to the mandatory disclosures only disclosed the identity of the Resolution Applicant and the connected persons. The said Annexure 12 nowhere had stated about the eligibility/ineligibility of the Resolution applicant as required under Section 29A.
There was nothing on record to show as to whether such affidavit was verified by the Resolution Professional as he was obliged to do so in terms of Form No. H to the Schedule annexed to the CIRP Regulations, 2016.
Since, the eligibility/ineligibility of the Resolution Applicant to submit the Resolution Plan goes to the root of the matter, it was incumbent on the part of the Resolution Professional to verify and certify that the contents of the mandatory affidavit, filed by the Resolution Applicant-JSW in respect of Section 29A were in order. The same having not been stated in the Application filed by the Resolution Applicant before the NCLT, it has raised serious doubt in the mind of the Court with regard to the very eligibility of the JSW to submit the Resolution Plan. Our said doubt is further fortified by the observations made and justification given by the NCLAT for the non-disclosure and suppression made in the Resolution Plan by JSW, with regard to the Joint Venture Agreement dated 05.03.2008 entered into by and between the JSW, BPSL and Jai Balaji as discussed hereinabove.
Powers of NCLAT to review the decision of statutory authority under the PMLA: -
The question is whether the NCLAT had any powers of Judicial Review over the decision taken by the Statutory Authority under the PMLA?
Neither the NCLT nor the NCLAT is vested with the powers of judicial review over the decision taken by the Government or Statutory Authority in relation to a matter which is in the realm of Public Law.
As held by a Three-judge Bench in case of Embassy Property Developments Private Limited vs. State of Karnataka & Ors. (2020) 13 SCC 308, the Section 60(5) speaks about any question of law or fact, arising out of or in relation to insolvency resolution, but a decision taken by the Government or a statutory authority in relation to a matter which is in the realm of Public Law, cannot be brought within the fold of the phrase “arising out of or in relation to the insolvency resolution” appearing in Section 60(5)(C) IBC. It has been further held therein that in the light of the statutory scheme as culled out from the various provisions of the IBC, it is clear that wherever the Corporate Debtor has to exercise a right that falls outside the purview of the IBC, especially in the realm of the public law, they cannot take a bypass and go before NCLT for the enforcement of such a right.
In view of the settled proposition of law, when the NCLT could not exercise the powers of judicial review falling outside the purview of the IBC, or falling within the purview of public law, the NCLAT also, being an Appellate Authority under Section 61 over the orders passed by the NCLT, could not exercise any power or jurisdiction beyond Section 61 of IBC.
As held by the Supreme Court earlier, a person aggrieved by an order of the Adjudicating Authority can prefer an Appeal to the NCLAT under Section 61(1), and that an Appeal against the order approving a Resolution Plan under Section 31 could be filed only on the grounds mentioned in clauses (i) to (v) of sub-section (3) of Section 61. Hence, for filing an Appeal under Section 61, there has to be an order passed by the NCLT so far as sub-section (1) is concerned, and if the Appeal is filed against the order of NCLT approving the Resolution Plan under Section 31, it could be filed only on the grounds mentioned in sub-section (3) of Section 61.
The PMLA being a Public Law, the NCLAT did not have any power or jurisdiction to review the decision of the Statutory Authority under the PMLA. Apart from the fact that the said issue was pending before this Court in respect of the same PAO dated 10.10.2019 and therefore the NCLAT should not have decided the said issue, it was beyond the jurisdiction of the NCLAT to decide the said issue in the Company Appeal filed by JSW under Section 61 of IBC.
In that view of the matter, it is held that the observations made and the findings recorded by the NCLAT in the impugned judgment with regard to the PAO dated 10.10.2019 passed by the Directorate of Enforcement under the PMLA, being without any authority of law and without jurisdiction, were coram non judice.