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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