The U.P. Glass Manufacturers Syndicate Vs. Girish Sriram Juneja, IRP of Hindustan National Glass & Industries Limited - “Statutory compliances does not fall under the commercial wisdom of the CoC. Hence, the statutory compliances as mandated by proviso to Section 31(4), have to be ensured before the Resolution Plan is approved by CoC.”

NCLT kolkata (21.09.2022) in The U.P. Glass Manufacturers Syndicate  Vs. Girish Sriram Juneja, IRP of Hindustan National  Glass & Industries Limited   [IVN. P. (IB) No. 16/KB/2022 in  C.P. (IB) No. 369/KB/2020 ] held that;

• “Statutory compliances does not fall under the  commercial wisdom of the CoC. Hence, the statutory compliances as  mandated by proviso to Section 31(4), have to be ensured before the  Resolution Plan is approved by CoC.” 

Excerpts of the order; 

# 1. Preamble 

1.1. The Court convened through hybrid mode. 

1.2. The Inv. Petition has been filed by the U.P. Glass Manufacturers Syndicate  against the submission of the Resolution Plans by Nirma Chemical Works  Private Limited (“Respondent No. 3”) and AGI Greenpac Limited  (“Respondent No. 4”). 

1.3. Vide order dated 21 October 2021, this Adjudicating Authority admitted  Hindusthan National Glass & Industries Limited (“Corporate Debtor”) into  Corporate Insolvency Resolution Process (“CIRP”).  

# 2. Submissions of the learned Senior Counsel appearing for the Applicant 

2.1. The Applicant is a Non-Government Company incorporated on 20 February  1951 and is an Industry association representing the interest of Small-Scale  and Medium-Scale Players in the glass industry based out of Uttar Pradesh.  The members of the Applicant are Small and Medium Enterprises. 2.2. The Applicant has filed the instant Intervention Petition on the basis of the  news article published in the ‘Economic Times” and other articles, wherein  it had been published that the Respondent No. 3 had filed a Resolution Plan  in the CIRP of the Corporate Debtor. 

2.3. The learned Counsel submitted that the acquisition of the Corporate Debtor  by the Respondent No. 3 or Respondent No. 4 are likely to attract section 5  of the Competition Act, 2022 in particular section 5(a)(i)(A) or section  5(b)(i)(A) of the Competition Act, 2002. 

2.4. Since the Respondent No. 3 is the largest producer of Soda Ash in the country  and has a market share of approximately 38% and the Corporate Debtor is  the largest glass manufacturer in India with an estimated market value of 40%  as per the reports by IHS Market, Hence, if the Resolution plan submitted by  the Respondent No. 3 is approved, it would result in an adverse effect on  competition in the market. 

2.5. The learned Counsel further submitted that the Resolution Plans submitted  by Respondent Nos. 4 and 5 would also result in a combination within the meaning of section 5 of the Competition Act, 2002. The Respondent No. 4 is  the second largest player with approximately 17% of the market share in glass  manufacturing.  

2.6. The learned Counsel led us through section 19(1)(a) and section 53B of the  Competition Act, 2022 as given below: 

• “Section 19: Inquiry into certain agreements and dominant position of  enterprise 

• (1) The Commission may inquire into any alleged contravention of the  provisions contained in sub-section (1) of section 3 or sub-section (1) of  section 4 either on its own motion or on-- 

• (a) receipt of any information, in such manner and], accompanied by such  fee as may be determined by regulations, from any person, consumer or  their association or trade association.” 

• “Section 53B: Appeal to Appellate Tribunal 

• (1) The Central Government or the State Government or a local authority  or enterprise or any person, aggrieved by any direction, decision or order  referred to in clause (a) of section 53A may prefer an appeal to the  Appellate Tribunal.” 

2.7. The learned Counsel emphasised on the term “any person” in section 53B of  Competition Act, 2002 and submitted that any infringement or violation of  the provisions of section 5 of the Competition Act, 2002 may be reported to  the Competition Commission of India by any person which would include  the Applicant as well and since the CIRP of the Corporate Debtor is pending  before this Adjudicating Authority, the Applicant has approached this  Adjudicating Authority for necessary compliance of section 5 of the  Competition Act, 2002 read with section 31(4) of the Insolvency and  Bankruptcy Code, 2016 (“Code”). 

2.8. By virtue of section 63 and section 238 of the Code, this Adjudicating  Authority has exclusive jurisdiction in the matters connected to the CIRP  including the functioning of the Resolution Professional and the Committee  of Creditors of the Corporate Debtor. The learned Counsel submitted that the  proceedings under the Code are proceedings in rem and placed reliance on  Swiss Ribbons v. Union of India1and that proceedings under the  Competition Act, 2002 are also proceedings in rem as held in Samir Agarwal  v. CCI2. 

2.9. The member of the Applicant are MSME Glass manufacturers whose  interests would be materially affected if the Resolution Plans submitted by  the Respondents Nos. 3, 4 and 5 are allowed. 

2.10. The learned Counsel submitted that the net book value of the assets of the  Corporate Debtor and the Respondent No. 3 and the net book value of the  assets of the Corporate Debtor and Respondent No. 4 attract section 5 of the  Competition Act, 2002 which has not been denied by the Respondents. 

2.11. It is submitted that the Respondent No. 3 has not filed any application with  the Competition Commission of India as alleged by the Respondent No. 3. 2.12. Section 30(2)(e) of the Code read with regulations 38 and 39 of the  Insolvency and Bankruptcy Board of India (Insolvency Resolution Process  for Corporate Persons) Regulations, 2016 (“CIRP Regulations”) provides  that the Resolution Professional should examine the Resolution Plans that are  submitted before him and confirm that no Resolution Plan should contravene  with any provisions of the law. 

2.13. Hence, no Resolution Plan which constitutes a combination under section 5  of the Competition Act, 2002 can be entertained or considered unless the  approval of the Competition Commission of India is obtained, which is  mandatory. The learned Counsel placed reliance on the judgment of the  Hon’ble NCLAT in Bank of Maharashtra v. Videocon Industries3(paras 55  and 56) wherein the Hon’ble NCLAT has held that prior approval of the  Competition Commission of India is required to be obtained as per section  31(4) of the Code. 

2.14. The learned Counsel further relied on Arcelormittal India Private Limited v.  Abhijit Guhathakurta4and Makalu Trading Limited v. Rajiv Chakraborty5 wherein a notice of combination was sent to the Competition Commission of  India after the Resolution Plan was approved by the Committee of Creditors,  Vishal Vijay Kalantriv v. Shailen Shah6 wherein no approval of the  Competition Commission of India was sought since the proposed  combination was below the threshold limit requiring approval of the  Competition Commission of India.  

2.15. The Learned Counsel therefore prayed for direction upon Respondents Nos.  3, 4 and 5 to withdraw their Resolution Plan and that Resolution Plans that  attract the combination under the Competition Act, 2002 shall not be  entertained by the Resolution Professional and the Committee of Creditors. 

# 3. Submission of the learned Counsel for Respondent No. 2 

3.1. The learned Counsel for the Committee of Creditors raised two defences: 

3.1.1. The locus standi of the Applicant  

The present Application has been filed in public interest and as  representative of the Small-Scale and Medium-Scale Glass Manufacturers,  the Applicant is neither a Financial Creditor nor an Operational Creditor and is not related to the Corporate Debtor hence it has no right to object to  the method and manner in which the Resolution Plans are being considered  by the Committee of Creditors. Th e applicant has no locus to prefer the present application under Section  30(2) and Section 30(3) of the Code as the applicant is not the Resolution  Professional or a member of the Committee of Creditors. Section 30(2) of  the Code provides of examination of the resolution plan and Section 30(3)  of the Code requires the Resolution Professional to present the Resolution  Plans for approval after the Resolution Professional has examined the plan  in terms of Section 30(2) of the Code. None of these provisions provide  locus to the applicant - being a syndicate and an outsider to the CIRP to  raise file an application seeking a direction to the Resolution Professional  to withdraw the Resolution Plans or a direction not to consider the  Resolution Plans of the prospective Resolution Applicants. 4. It is humbly submitted that the Applicant has no locus to prefer a Public  Interest Litigation under Section 60(5) of the IBC. The Adjudicating  Authority has no jurisdiction to entertain the present application which has  been admittedly filed in Public Interest. 

3.1.2. Prior permission of the Competition Commission of India Section 31(4) of the Code requires a Resolution Applicant to obtain approval  of the Competition Commission of India "prior to the approval of such  resolution plan by the Committee of Creditors." The Hon'ble NCLAT, in ArcelorMittal India (supra.) observed that obtaining the approval from the Competition Commission of India under the  Competition Act, 2002 prior to the approval of such 'Resolution Plan' by the Committee of Creditors. is directory and not mandatory. It is always open to  the Committee of Creditors, which looks into viability, feasibility and  commercial aspect of a 'Resolution Plan' to approve the 'Resolution Plan'  subject to such approval by Competition Commission of India. which may  be obtained prior to approval of the plan by the Adjudicating Authority under  section 31 of the Code 

3.2. At this stage, the Committee of Creditors is at the stage of deliberations and  discussions with the prospective Resolution Applicants and the Resolution  Applicant will approach the Competition Commission of India, if so required. 

# 4. Submission of the learned Counsel for Respondent No. 3 

4.1. The learned Counsel submitted that the Intervention Petition is non maintainable and deserves to be dismissed in liminie in view of the judgment  of Arcelor-Mittal India (supra.) (paragraph 84) and that the Applicant is an  alien to the CIRP process. Such objections are to prevent the consideration  of the Resolution Plans and to frustrate the entire CIRP of the Corporate  Debtor. 

4.2. The Respondent No. 3 has applied for pre consultation for green channel from  the Competition Commission of India and that the approval of either 

Resolution Plan of the Respondent No. 3 or Respondent No. 4 by the  Adjudicating Authority is subject to the approval of the Competition  Commission of India. 

4.3. This Adjudicating Authority cannot adjudicate whether there is a  combination under section 5 of the Competition act 2002 or not and it is  solely within the domain the Competition Commission of India. 

5. Submission of the learned Counsel for Respondent No. 5 

5.1. The learned Counsel submitted that the Applicant has no locus standi,  secondly the Intervention Petition is based on surmises and conjectures and  should not be entertained. The Applicant has admitted that it is not privy to  what has transpired in the meetings of the Committee of Creditors and the  allegations upon Respondent No. 5 are based on mere apprehensions.  5.2. The learned Counsel also relied on Arcelormittal India (supra.) and  submitted that it is always open to the Committee of Creditors to look into  the viability, feasibility and commercial aspect of the Resolution Plan and  that the approval of the Competition Commission of India may be obtained  after the approval of the Resolution Plan by the Committee of Creditors and  prior to the approval of the Resolution Plan by the Adjudicating Authority. 6. Analysis and Findings 

6.1. We have heard the learned Counsel appearing on behalf of the Applicant and  the Respondents and perused the records. 

6.2. We seek to place reliance on Bank of Maharashtra and Ors. v. Videocon  Industries Ltd. and Ors. MANU/NL/0010/2022, wherein the Hon’ble  NCLAT had observed that

• “Statutory compliances does not fall under the  commercial wisdom of the CoC. Hence, the statutory compliances as  mandated by proviso to Section 31(4), have to be ensured before the  Resolution Plan is approved by CoC.” 

6.3. We would like to refer to our decision in Aksa Investments Private Limited  v. Ram Ratan Modi & Ors (I.A No. 131/KB/2022 in CP(IB)  No.184/KB/2018)7, where we have held that; 

• “After considering the plea of the applicant and respective contentions of  parties, appearing in this IA, we are of the view, in view of the law laid down  by Hon'ble Supreme Court in Arcelormittal India Private Limited vs. Satish Kumar Gupta and Ors. [(2019) 2 SCC 1], it not a stage for us to look into  the alleged irregularities/ violations in the resolution plan. It is the settled  law that resolution professional is merely a facilitator. Resolution plan  prepared by him is not binding upon the CoC. 

• It is only the CoC which has to take the final call to approve the resolution  plan or reject it. The approval of the 'Resolution Plan' is in the domain of the  'Committee of Creditors' and not that of 'Resolution Professional, and CoC  

• in the present case is yet to take a call on resolution plan/s before it. Feasibility and viability of a resolution plan has to be seen by CoC in terms  of Regulation 39 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016)  is reproduced hereinafter: 

• 39(3)(a)(b)(c) - The committee shall- evaluate the resolution plans received  under sub-regulation (2) as per evaluation matrix; record its deliberations  on the feasibility and viability of each resolution plan; and vote on all such  resolution plans simultaneously. 

• We, without expressing any opinion on any of the rival contentions (Relating  to alleged infirmities of the Resolution Plan) of the parties before us in this  IA, therefore, hold that this application is not maintainable as the contentions  raised in it and reliefs prayed for cannot be entertained or granted at this  stage.” 

6.4. Hence, it is clear that before approval of the Resolution Plan, all the  compliances have to be met by the Resolution Applicants. At this stage the  Resolution Plans are under consideration of the Committee of Creditors and  no decision has been arrived at with respect to the approval of the Resolution  Plans submitted by the Respondent Nos. 3, 4 and 5 respectively.  

6.5. We find that the Applicant is not affected merely by the submission of the  Resolution Plans by the Respondent Nos. 3, 4 and 5 respectively.  

6.6. It is also important to decide whether the Applicant has locus standi to present  the present Intervention Petition or not, as the Applicant is not a creditor or a related party of the Corporate Debtor. Hence, at this stage it is an outsider to  the CIRP of the Corporate Debtor and we find that he has no locus to have  filed the present I.A. 

# 7. Inv. P. (IB) 16/KB/2022 is, therefore, rejected with the above observations.  

# 8. List the main Company Petition on 31.10.2022. 

# 9. The Registry shall e-mail copy of this order to the Counsel on record for the  Applicant and for the Resolution Professional, and the Resolution  Professional, for information and for taking necessary steps. 

# 10. Certified Copy of this order may be issued, if applied for, upon compliance  of all requisite formalities.  

 

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