THE KARAD URBAN COOPERATIVE BANK LTD.versusSWWAPNIL BHINGARDEVAY & ORS.

                          [2020] 13 S.C.R. 465                           465


      THE KARAD URBAN COOPERATIVE BANK LTD.                              A
                                 V.
             SWWAPNIL BHINGARDEVAY & ORS.
                   (Civil Appeal No. 2955 of 2020)
                       SEPTEMBER 04, 2020                                B
           [S. A. BOBDE, CJI, A. S. BOPANNA AND
                V. RAMASUBRAMANIAN, JJ.]
       Insolvency and Bankruptcy Code, 2016: Appellant financial
creditor filed s.7 application before NCLT against corporate debtor
                                                                         C
– Committee of Creditors (CoC) resolved to approve the Resolution
Plan submitted by one M/s Sai Agro – On the basis of approval of
Resolution Plan, Resolution Professional moved an application
before NCLT – At this stage, the Director/Promoter of corporate
debtor also came up with an application seeking permission to file
Resolution Plan – NCLT rejected the application of corporate debtor      D
and approved Resolution Plan submitted by M/s Sai Agro – Thus,
M/s Sai Agro became Successful Resolution Applicant (SRA) –
Director/Promoter of corporate debtor filed appeal before NCLAT
against the approval of the Resolution Plan of SRA – NCLAT allowed
the appeal and remanded the matter back to NCLT with direction to
                                                                         E
send back the Resolution Plan to the CoC – Order of NCLT was
challenged on the ground inter alia that the Resolution Plan suffered
from issues of viability and feasibility and that the Resolution Plan
did not take note of important fact that the ethanol plant and
machinery shown as part of the assets of the corporate debtor,
actually belonged to another company by name, Sarvadnya                  F
Industries Private Ltd. (SIPL) and that a bank by name, Janata
Sahkari Bank Ltd. had taken possession of the same under the
SARFAESI Act – Financial creditor and Resolution Professional both
filed separate appeals respectively – Held: It is not the case of
corporate debtor or its promoter/Director or anyone else that some
                                                                         G
of the factors which were crucial for taking a decision regarding
viability and feasibility were not placed before the CoC or the
Resolution Professional – The only basis for the corporate debtor
to raise the issue of viability and feasibility was that the ownership
and possession of the ethanol plant and machinery was the subject
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466            SUPREME COURT REPORTS                     [2020] 13 S.C.R.


A     matter of another dispute and that the Resolution Plan did not take
      care of the contingency where the said plant and machinery may
      not eventually be available to SRA – However, records very clearly
      show that SRA, Resolution Professional and financial creditor were
      fully aware of the said issue – The order passed by the NCLAT
      showed that the possession of the ethanol plant and machinery was
B
      restored to SIPL, in the appeal to which SRA was also a party – SRA
      also appeared to have offered to Janata Sahkari Bank to purchase
      the said plant and machinery – In the appeal before the NCLAT out
      of which these appeals arose, SIPL which claimed ownership of the
      ethanol plant and machinery, was also a party – In any case, the
C     Resolution Professional took a specific plea in his grounds of appeal
      before this Court, that SRA was itself into the ethanol manufacturing
      business and that they had sufficient ethanol production capacity
      required to fulfil their Resolution Plan – Therefore, the fact that
      there was an issue with regard to the ethanol plant and machinery,
      had been taken note of by Resolution Professional, CoC and SRA –
D
      Since all these three parties took note of the said fact and took a
      conscious decision to go ahead with the Resolution Plan, it cannot
      be stated that the question of viability and feasibility was not
      examined in the proper perspective – Therefore, the main ground
      on which NCLAT interfered with the decision of the NCLT to approve
E     the Resolution Plan, was wholly untenable, misconceived and
      unjustified.
            Allowing the appeals, the Court
            HELD: 1.1 If all the factors that need to be taken into
      account for determining whether or not the corporate debtor can
F     be kept running as a going concern have been placed before the
      Committee of Creditors and the CoC has taken a conscious
      decision to approve the resolution plan, then the adjudicating
      authority will have to switch over to the hands off mode. It is not
      the case of the corporate debtor or its promoter/Director or
G     anyone else that some of the factors which are crucial for taking
      a decision regarding the viability and feasibility, were not placed
      before the CoC or the Resolution Professional. The only basis
      for the corporate debtor to raise the issue of viability and


H
     THE KARAD URBAN COOPERATIVE BANK LTD. v.                        467
          SWWAPNIL BHINGARDEVAY & ORS.

feasibility is that the ownership and possession of the ethanol      A
plant and machinery is the subject matter of another dispute and
that the resolution plan does not take care of the contingency
where the said plant and machinery may not eventually be available
to the Successful Resolution Applicant. [Para 13][477-C-E]
       1.2 The records very clearly show that the Successful         B
Resolution Applicant, the Resolution Professional and the
financial creditor were fully aware of the said issue. The order
passed by the NCLAT passed on 16.12.2019 shows that the
possession of the ethanol plant and machinery was restored to
Sarvadnya Industries Pvt. Ltd., in the appeal to which the
Successful Resolution Applicant was also a party. The Successful     C
Resolution Applicant also appears to have offered to Janata
Sahkari Bank to purchase the said plant and machinery. In the
appeal before the NCLAT out of which the present Civil Appeals
arise, Sarvadnya Industries Pvt. Ltd. which claims ownership of
the ethanol plant and machinery, were also a party. In any case,     D
the Resolution Professional has taken a specific plea in his
grounds of appeal before this Court, that the Successful
Resolution Applicant is itself into the ethanol manufacturing
business and that they have sufficient ethanol production capacity
required to fulfil their Resolution Plan. Therefore, the fact that
there was an issue with regard to the ethanol plant and machinery,   E
had been taken note of by the Resolution Professional, the
Committee of Creditors and the Successful Resolution Applicant.
Once all these three parties have taken note of the said fact and
taken a conscious decision to go ahead with the Resolution Plan,
it cannot be stated that the question of viability and feasibility   F
was not examined in the proper perspective. [Paras 14-17][477-
F-H; 478-A-B, E-F]
      2.1 The second ground on which NCLAT interfered with
the decision of the NCLT is the alleged breach of confidentiality.
The contention of the Promoter/Director of the corporate debtor      G
is that the liquidation value mentioned in the Resolution Plan
submitted by the SRA exactly tallied with the liquidation value
obtained by the Resolution Professional and that the whole


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468            SUPREME COURT REPORTS                    [2020] 13 S.C.R.


A     sequence of events would show clearly that there was an attempt
      to cover up. According to the Director/Promoter of the corporate
      debtor, the self-declaration signed by the Resolution Applicant,
      and which forms part of the Resolution Plan, bears the date 9th
      February 2019. This document mentions the liquidation value as
      Rs. 13.53 crores. It was the same value as obtained by the
B
      Resolution Professional. It is the contention of the Director/
      Promoter of the corporate debtor that the Resolution Professional
      wrote an email on 07.02.2019 itself (2 days before the submission
      of the Resolution Plan by the SRA), asking for clarification as to
      how the liquidation value matched. This, according to the Director
C     of the corporate debtor, was proof enough to show that there was
      not merely a leakage of information, but also an attempt to cover-
      up. This contention cannot be accepted. The Resolution Plan
      actually runs to 31 pages. Pages 30 and 31 contain Annexure A,
      which provides the business plan. Page 29 contains a self-
      declaration certificate signed by the partners of the SRA. Just
D
      below the signatures of the partners at page 29, the date “09th
      February 2019” is type-written. But the cover page of the entire
      document contains the date “7th February 2019” as the date of
      submission of the Resolution Plan. The last date for submission
      of the resolution plan was 08.02.2019. [Paras 27-30][480-F-H;
E     481-A-D]
            2.2 Nowhere in the Memorandum of Appeal filed by the
      Promoter/Director of the corporate debtor before the NCLAT,
      has he claimed that the Resolution Plan was submitted by the
      SRA after the last date. We have perused the Memorandum of
F     Appeal filed by the Promoter/Director of the corporate debtor
      before the NCLAT. It was not his case at all that the Resolution
      Plan was submitted by the SRA after the last date, but the same
      was predated by the Resolution Professional acting in collusion.
      [Para 31][481-E]
G           2.3 It appears from the impugned order of NCLAT that
      only in the course of hearing of the appeal, the date “09th February
      2019” type-written at the bottom of the self-declaration (page 29
      of the Resolution Plan) was sought to be taken advantage of.
      Since this was not raised as one of the grounds in the
      Memorandum of Appeal but raised in the course of arguments,
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     THE KARAD URBAN COOPERATIVE BANK LTD. v.                           469
          SWWAPNIL BHINGARDEVAY & ORS.

the Resolution Professional could do no more than to file the           A
print-out of the email correspondence between him and the SRA
dated 07.02.2019. In the first email dated 07.02.2019, the
Resolution Professional had sought a clarification from the SRA
as to how they discovered the liquidation value and the source
for the same. In response to this mail, the SRA sent a reply email
                                                                        B
contending that they undertook a due diligence to know the
current market value and liquidation value and that what was
quoted by them in the Resolution Plan, was something that an
independent agency provided to them. Unfortunately, NCLAT
rejected the print-out of the email correspondence dated
07.02.2019 on the sole ground that the same was not supported           C
by affidavit and that it was filed after the conclusion of the oral
arguments. But NCLAT failed to take note of the fact that the
Resolution Professional did not have any alternative except to
respond in the manner that he did, to a point raised only in the
course of arguments, but not raised in the Memorandum of Appeal.
                                                                        D
If the Promoter/Director of the corporate debtor had raised the
issue of collusion or the submission of the Resolution Plan after
the expiry of the last date, even in the Memorandum of Appeal, a
duty would have been cast upon the Resolution Professional to
respond in an appropriate manner. But that was not the case.
[Paras 32, 33, 34][481-F-H; 482-A-C]                                    E
       2.4 The fact that there was an email correspondence
between the Resolution Professional and the SRA on 07.02.2019,
touching upon one of the contents of the Resolution Plan, would
show (i) that the SRA had submitted the Resolution Plan before
the last date and (ii) that the Resolution Professional had obviously   F
scrutinised it, as otherwise he could not have found out the
liquidation value mentioned therein matching the confidential
information that he had. The liquidation value mentioned in the
Resolution Plan of the SRA is Rs. 13.53 crores. But the actual
total pay-out as per the Resolution Plan is Rs. 29.74 crores. This
meant that the workers and employees of the corporate debtor            G
were to be paid 100% of their dues; that all statutory dues would
be cleared 100% and that the financial creditors who constituted


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470           SUPREME COURT REPORTS                     [2020] 13 S.C.R.


A     the CoC were to be paid 60% of their dues. It offends common
      sense to think that a resolution applicant who had the benefit of
      leakage of information relating to liquidation value would quote a
      figure of Rs. 29.74 crores as the total pay-out, as against a
      liquidation value of Rs. 13.53 crores. The question of breach of
      confidentiality and leakage of confidential information can easily
B
      be tested on the touchstone of the benefit that accrued to the
      party who got the information. In the case on hand, no benefit
      accrued to the SRA. [Paras 35-38][482-D-H]
            2.5 It is obvious from the material on record that the
      Promoter/Director of the Corporate Debtor has tried to take
C     advantage of two small mistakes on the part of the SRA, one of
      which was a typographical error mentioning the date “09th
      February 2019” at the bottom of the self-declaration and the other,
      which happened as a matter of coincidence. The NCLAT appears
      to have made a mountain out of a molehill and has recorded a
D     finding even beyond the pleadings in the Memorandum of Appeal.
      Hence, the second ground on which the NCLAT was convinced
      to pass the impugned order, is legally and factually untenable.
      [Para 39][483-A-B]
             3. The next ground on which NCLAT proceeded, related
E     to the ethanol plant and machinery. SRA admittedly did not make
      his Resolution Plan on the strength of the ethanol plant and
      machinery in question. The threat looming large over the
      availability of the ethanol plant and machinery has admittedly been
      taken note of by the SRA and the CoC. The Resolution Plan does
      not give an indication anywhere that without this plant and
F     machinery the whole resolution plan will fail. In paragraph 8.04
      of the Resolution Plan, the SRA has undertaken to continue the
      operations in the normal course of business. It is a commercial
      decision that they have taken. The corporate debtor cannot cry
      wolf over the said decision. Therefore, the third ground on which
G     NCLAT chose to interfere, is also bound to be rejected. [Para
      40][483-C-E]
            4.1 The last ground revolves around the advertisement
      issued by the Resolution Professional on 30.03.2018. NCLAT
      holds that the advertisement was not in conformity with
H     Regulation 36A of The Insolvency and Bankruptcy Board of India
     THE KARAD URBAN COOPERATIVE BANK LTD. v.                         471
          SWWAPNIL BHINGARDEVAY & ORS.

(Insolvency Resolution Process for Corporate Persons)                 A
Regulations, 2016 and as per Form G of the Schedule. Regulation
36A was inserted only with effect from 06.02.2018 under
Notification No. IBBI/2017-18/GN/REG024 dated 06.02.2018. It
underwent a change under Notification No. IBBI/2018-19/GN/
REG031 dated 03.07.2018, with effect from 04.07.2018.
                                                                      B
Regulation 36A, as it stood during the period from 06.02.2018 to
04.07.2018, did not mandate the publication of the invitation of
Resolution Plans, either in Form G or otherwise, in newspapers.
It is only the amended Regulation 36A, which came into effect
from 04.07.2018, that requires the publication of Form G in
newspapers. Therefore, the publication in newspapers made by          C
the Resolution Professional, in the case on hand, on 30.03.2018,
was something that was statutorily not required of him and hence
the Promoter/Director of the corporate debtor cannot take
advantage of the amendment that came later, to attack the
advertisement. The unamended and amended Regulation 36A
                                                                      D
are provided in a tabular column for easy comparison and
appreciation. The second meeting of the Committee of Creditors
was held on 27.03.2018. The advertisement was approved in the
said meeting. It was the unamended Regulation 36A that was in
force at that time. This has not been appreciated by NCLAT.
Therefore, the NCLAT was wrong in its approach even in this           E
regard. [Paras 41, 45, 46][483-E-F; 484-E-H; 487-C-D]
       Committee of Creditors of Essar Steel India Limited v.
       Satish Kumar Gupta and others (2019) SCC Online
       SC 1478; K. Sashidhar v. Indian Overseas Bank (2019)
       12 SCC 150; [2010] 3 SCR 845 – relied on                       F
                         Case Law Reference
[2010] 3 SCR 845             relied on                Para 10
       CIVIL APPELLATE JURISDICTION : Civil appeal nos. 2955
of 2020
       From the Judgment and Order dated 02.06.2020 of the National   G
Company Law Appellate Tribunal, New Delhi in Company Appeal(AT)
(Ins) No. 943 of 2019.
       With
       Civil Appeal o. 2902 of 2020.
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472            SUPREME COURT REPORTS                          [2020] 13 S.C.R.


A            Siddhartha Dave, Jayant Bhushan, Sr. Advs., Dr. Ravindra
      Sadanand Chingale, Shikhil Suri, Shiv Kumar Suri, Ms. Shilpa Saini, Ms.
      Nikita Thapar, Ms. Vinishma Kaul, Ms. Madhu Suri, Ranjit Balasaheb
      Raut, Bhushan V. Mahadik, Akshat Kumar, Advs. for the appearing
      parties.
B            The Judgment of the Court was delivered by
             V. RAMASUBRAMANIAN, J.
             1. Challenging an order passed by the National Company Law
      Appellate Tribunal (hereinafter referred to as ‘NCLAT’) (i) setting aside
      the approval granted by the National Company Law Tribunal (hereinafter
C     referred to as ‘NCLT’) to a Resolution Plan and (ii) remanding the matter
      back to the NCLT with a direction to have the Resolution Plan re-
      submitted before the Committee of Creditors, the financial creditor and
      the Resolution Professional have come up with these appeals.
            2. We have heard learned counsel appearing on both sides.
D            3. The Karad Urban Cooperative Bank Ltd., which is the financial
      creditor, filed an application on 04.09.2017 under Section 7 of the IBC
      before the NCLT against M/s. Khandoba Prasanna Sakhar Karkhana
      Limited, which is the corporate debtor. NCLT admitted the application
      on 01.01.2018 and an Interim Resolution Professional was appointed.
E     The first meeting of the Committee of Creditors (hereinafter referred to
      as ‘CoC’) took place on 02.03.2018. As per the decision taken therein,
      one Mr. Jitendra Palande was appointed by the NCLT, by an order dated
      06.03.2018, as Resolution Professional.
              4. Pursuant to the second meeting of the Committee of Creditors
F     held on 27.03.2018, the Resolution Professional issued an advertisement
      on 30.03.2018 inviting Expression of Interest. In the meantime, a Director/
      Promoter of the corporate debtor moved the High Court of Judicature at
      Bombay by way of a writ petition in Writ Petition No.4746 of 2018,
      challenging the orders of the NCLT dated 01.01.2018 and 06.03.2018.
      Initially, the High Court granted stay of further proceedings before the
G     NCLT on 18.04.2018. However, the writ petition was eventually
      dismissed on 23.08.2018.
            5. Several meetings of the Committee of Creditors were held
      thereafter and eventually the Committee of Creditors, in its 8th Meeting
      held on 09.02.2019 resolved to approve the Resolution Plan submitted
H     by one M/s. Sai Agro (India) Chemicals. On the basis of the approval of
  THE KARAD URBAN COOPERATIVE BANK LTD. v. SWWAPNIL                        473
     BHINGARDEVAY & ORS. [V. RAMASUBRAMANIAN, J.]

the Resolution Plan by the Committee of Creditors, the Resolution          A
Professional moved an application on 15.02.2019 before the NCLT,
Mumbai. At this stage, the Director/Promoter of the corporate debtor
also came up with an application seeking permission to file a resolution
plan. But by a common order dated 01.08.2019, NCLT, Mumbai Bench,
rejected the application filed by the Director/Promoter of the corporate
                                                                           B
debtor and approved the Resolution Plan submitted by M/s. Sai Agro
(India) Chemicals. Thus, M/s. Sai Agro (India) Chemicals, have become
the Successful Resolution Applicant (hereinafter referred to as the
‘SRA’).
      6. The Director/Promoter of the corporate debtor (who
unsuccessfully approached the High Court of Bombay at the earliest         C
point of time), filed an appeal before the NCLAT in Company Appeal
(AT) (Ins) No.943 of 2019, as against the order of the NCLT dated
01.08.2019, granting approval of the Resolution Plan of the SRA.
      7. By an order dated 02.06.2020, NCLAT allowed the appeal and
remanded the matter back to the adjudicating authority, with a direction   D
to send back the Resolution Plan to the Committee of Creditors. The
operative portion of the order of NCLAT dated 02.06.2020 reads as
follows:-
      “The Appeal is allowed. For the above reasons, we set aside the
      Impugned Order and remit the matter back to the Adjudicating         E
      Authority with a direction to send back the Resolution Plan to the
      Committee of Creditors to resubmit the Plan taking into
      consideration observations made above and after satisfying the
      parameters as laid down by the Hon’ble Supreme Court in the
      Judgment in the matter of “Essar Steel” referred (supra) and IBC.    F
      The Adjudicating Authority may give specific time period to the
      Resolution Professional to place matter before Committee of
      Creditors for resubmitting the Resolution Plan taking into
      consideration observations made above and after satisfying the
      parameters laid down by the Hon’ble Supreme Court and IBC.
      Further incidental Orders may also be passed.                        G
      On resubmission of the Resolution Plan, the Adjudicating Authority
      will deal with the same in accordance with law.
      The Appeal is disposed accordingly. No costs.”
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474                 SUPREME COURT REPORTS                         [2020] 13 S.C.R.


A            8. It is against the aforesaid order of remand passed by NCLAT
      that the financial creditor has come up with one appeal and the Resolution
      Professional has come up with another appeal.
            9. It is seen from the order of the NCLAT that the Appellate
      Tribunal was convinced to interfere with the order of NCLT granting
B     approval of the Resolution Plan, on four grounds. They are:-
             (i)      That the Resolution Plan suffers from issues of viability
                      and feasibility;
             (ii)     That in as much as the liquidation value mentioned by the
                      Successful Resolution Applicant in its Resolution Plan tallied
C                     exactly with the liquidation value obtained by the Resolution
                      Professional, there appears to have been a breach of
                      confidentiality, violating Regulation 35(2);
             (iii)    That the Resolution Plan does not take note of one important
                      fact namely, that the ethanol plant and machinery shown as
D                     part of the assets of the corporate debtor, actually belonged
                      to another company by name, Sarvadnya Industries Private
                      Limited, and that a bank by name, Janata Sahkari Bank
                      Limited, Pune had taken possession of the same under the
                      SARFAESI Act; and
E            (iv)     That even the advertisement issued by the Resolution
                      Professional on 30.03.2018 inviting Expression of Interest,
                      was vitiated in as much as the invitation contained therein
                      was for outright sale of the Company as a going concern,
                      and was in violation of Regulation 36A.
F            10. The order of the NCLAT is assailed by the appellants on the
      ground, inter alia, (i) that the question of viability and feasibility, is to be
      left to the commercial wisdom of the CoC and the same cannot be
      lightly interfered with by the Tribunal, in view of the law laid down by
      this court in Essar Steel India Ltd.1 and K. Sashidhar;2 (ii) that a
      mere suspicion that there was breach of confidentiality cannot take the
G
      place of proof; (iii) that once the Successful Resolution Applicant has
      taken note of the issue relating to the ethanol plant and machinery and
      submitted a resolution plan, the Director/Promoter of the corporate debtor
      1
        Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta and
      others, (2019) SCC OnLine SC 1478
      2
H       K. Sashidhar vs. Indian Overseas Bank, (2019) 12 SCC 150
  THE KARAD URBAN COOPERATIVE BANK LTD. v. SWWAPNIL                            475
     BHINGARDEVAY & ORS. [V. RAMASUBRAMANIAN, J.]

cannot make an issue out of it, and (iv) that the advertisement issued         A
was actually in tune with the regulations, including Regulation 36A.
       11. Supporting the order of the NCLAT, it is contended by Mr.
Jayant Bhushan, learned Senior Counsel, (i) that the Resolution Plan
proceeds on the basis as though the ethanol plant, owned by a third
party, is part and parcel of the assets of the corporate debtor and hence,     B
the examination of the viability and feasibility on the basis of such wrong
notion stands vitiated; (ii) that the very self-declaration accompanying
the Resolution Plan bears the date 09.02.2019, but the email exchanged
between the Resolution Professional and the Successful Resolution
Applicant, on the question of leakage of information relating to the
liquidation value is dated 07.02.2019, showing thereby that there was          C
collusion between the Resolution Professional and the Successful
Resolution Applicant; (iii) that the issue relating to legal possession of
the ethanol plant and machinery had already been left open by NCLAT
in a collateral proceeding between its legal owner namely, Sarvadnya
Industries Pvt. Ltd. and its banker, Janata Sahkari Bank Ltd. and hence,       D
this machinery could not have formed part of the assets of the corporate
debtor to enable the Successful Resolution Applicant to take over the
corporate debtor as a going concern and run it; and (iv) that the very
fact that the Successful Resolution Applicant was the only person who
submitted a bid in response to the advertisement and the fact that the
Resolution Plan was approved within 2-3 hours in the 8th meeting of the        E
CoC in a hasty manner, would show that the Resolution Plan was tainted,
and that therefore, NCLAT was justified in setting aside the approval
granted by the NCLT to the Resolution Plan.
       12. We have carefully considered the rival submissions. On the
first question regarding the viability and feasibility of a resolution plan,   F
the law is now well-settled. In K. Sashidhar (supra), it was held as
follows:
      (i)    “There is an intrinsic assumption that financial creditors
             are fully informed about the viability of the corporate debtor
             and feasibility of the proposed resolution plan…The opinion       G
             on the subject matter expressed by them after due
             deliberations in the CoC meetings through voting, as per
             voting shares, is a collective business decision. The
             legislature, consciously, has not provided any ground to
             challenge the “commercial wisdom” of the individual               H
476          SUPREME COURT REPORTS                        [2020] 13 S.C.R.


A              financial creditors or their collective decision before the
               adjudicating authority. That is made nonjusticiable.”
               (paragraph 52)
      (ii)     “The provisions investing jurisdiction and authority in NCLT
               or NCLAT as noticed earlier, have not made the commercial
B              decision exercised by CoC of not approving the resolution
               plan or rejecting the same, justiciable. This position is
               reinforced from the limited grounds specified for instituting
               an appeal that too against an order “approving a resolution
               plan” under Section 31.” (paragraph 57)
C     (iii)    “Further, the jurisdiction bestowed upon the appellate
               authority (NCLAT) is also expressly circumscribed. It can
               examine the challenge only in relation to the grounds
               specified in Section 61(3) of the I&B Code, which is limited
               to matters “other than” enquiry into the autonomy or
               commercial wisdom of the dissenting financial creditors.”
D              (paragraph 58)
      (iv)     “At best, the adjudicating authority (NCLT) may cause an
               enquiry into the “approved” resolution plan on limited
               grounds referred to in Section 30(2) read with Section 31(1)
               of the I&B Code. It cannot make any other inquiry nor is
E              competent to issue any direction in relation to the exercise
               of commercial wisdom of the financial creditors — be it
               for approving, rejecting or abstaining, as the case may be.
               Even the inquiry before the appellate authority (NCLAT) is
               limited to the grounds under Section 61(3) of the I&B Code.
F              It does not postulate jurisdiction to undertake scrutiny of
               the justness of the opinion expressed by financial creditors
               at the time of voting.” (paragraph 64)
      Thereafter, in Essar Steel India Ltd. (supra), this Court held:
      (i)      “Thus, it is clear that the limited judicial review available,
G              which can in no circumstance trespass upon a business
               decision of the majority of the Committee of Creditors, has
               to be within the four corners of Section 30(2) of the Code,
               insofar as the Adjudicating Authority is concerned, and
               Section 32 read with Section 61(3) of the Code, insofar as
               the Appellate Tribunal is concerned.” (paragraph 48)
H
  THE KARAD URBAN COOPERATIVE BANK LTD. v. SWWAPNIL                            477
     BHINGARDEVAY & ORS. [V. RAMASUBRAMANIAN, J.]

      (iv)   “Thus, while the Adjudicating Authority cannot interfere on       A
             merits with the commercial decision taken by the Committee
             of Creditors, the limited judicial review available is to see
             that the Committee of Creditors has taken into account the
             fact that the corporate debtor needs to keep going as a
             going concern during the insolvency resolution process; that
                                                                               B
             it needs to maximise the value of its assets; and that the
             interests of all stakeholders including operational creditors
             has been taken care of.” (paragraph 54)
       13. The principles laid down in the aforesaid decisions, make one
thing very clear. If all the factors that need to be taken into account for
determining whether or not the corporate debtor can be kept running as         C
a going concern have been placed before the Committee of Creditors
and the CoC has taken a conscious decision to approve the resolution
plan, then the adjudicating authority will have to switch over to the hands
off mode. It is not the case of the corporate debtor or its promoter/
Director or anyone else that some of the factors which are crucial for         D
taking a decision regarding the viability and feasibility, were not placed
before the CoC or the Resolution Professional. The only basis for the
corporate debtor to raise the issue of viability and feasibility is that the
ownership and possession of the ethanol plant and machinery is the subject
matter of another dispute and that the resolution plan does not take care
of the contingency where the said plant and machinery may not eventually       E
be available to the Successful Resolution Applicant.
       14. But the aforesaid argument, coming as it does from the
Promoter/Director of the corporate debtor is like the wolf shedding tears
for the lamb getting drenched in rain. The records very clearly show
that the Successful Resolution Applicant, the Resolution Professional          F
and the financial creditor were fully aware of the said issue. The order
passed by the NCLAT in Company Appeal (AT) (Insolvency) No.897
of 2019 on 16.12.2019 shows that the possession of the ethanol plant
and machinery was restored to Sarvadnya Industries Pvt. Ltd., in the
appeal to which the Successful Resolution Applicant was also a party.          G
The Successful Resolution Applicant also appears to have offered to
Janata Sahkari Bank to purchase the said plant and machinery. In the
appeal before the NCLAT out of which the present Civil Appeals arise,
Sarvadnya Industries Pvt. Ltd. which claims ownership of the ethanol
plant and machinery, were also a party.
                                                                               H
478             SUPREME COURT REPORTS                           [2020] 13 S.C.R.


A             15. In any case, the Resolution Professional has taken a specific
      plea in his grounds of appeal before this Court, that the Successful
      Resolution Applicant is itself into the ethanol manufacturing business
      and that they have sufficient ethanol production capacity required to
      fulfil their Resolution Plan. In paragraph 4.P of -the Civil Appeal filed by
      the Resolution Professional, he has stated as follows:
B
            “Further, the said Ethanol Plant was functional only between April
            2016 and August 2016. That Respondent No. 3/SRA is itself into
            the ethanol manufacturing business and has sufficient ethanol
            production capacity required to fulfil its resolution plan. Additionally,
            there is a provision for capital expenditure in the approved plan of
C           SRA which includes the cost of a new ethanol facility, if required.
            Additionally, Janata Bank Pune, which holds symbolic possession
            of the ethanol plant, had approached Respondent No. 3/ Successful
            Resolution Applicant for the sale of the said ethanol plant to the
            said SRA. That further the Respondent No. 3/ successful
D           resolution applicant was planning to expand and integrate other
            facilities with the distillery plant of the Corporate Debtor which
            was functional since 2007;”
            16. Therefore, the fact that there was an issue with regard to the
      ethanol plant and machinery, had been taken note of by the Resolution
E     Professional, the Committee of Creditors and the Successful Resolution
      Applicant. Once all these three parties have taken note of the said fact
      and taken a conscious decision to go ahead with the Resolution Plan, it
      cannot be stated that the question of viability and feasibility was not
      examined in the proper perspective.

F           17. Therefore, the first ground and actually the main ground on
      which NCLAT interfered with the decision of the NCLT to approve the
      Resolution Plan, is wholly untenable, misconceived and unjustified.
             18. In fact, our discussion could have ended here without going
      into the other grounds, for one simple reason. Though the Director/
G     Promoter of the corporate debtor, who was the appellant before the
      NCLAT, raised other grounds apart from viability and feasibility, NCLAT
      issued limited notice in the appeal, on 12.09.2019, only with regard to
      viability and feasibility. Even in the impugned order dated 02.06.2020, it
      is made clear in the last sentence of paragraph 1 that “this appeal on
      12.09.2019 was admitted to limited extent of examining viability
H     and feasibility of the Plan”.
  THE KARAD URBAN COOPERATIVE BANK LTD. v. SWWAPNIL                            479
     BHINGARDEVAY & ORS. [V. RAMASUBRAMANIAN, J.]

       19. It is true that in the last paragraph of the impugned order,        A
namely paragraph 14, the Appellate Tribunal holds that the CIRP suffered
from material irregularities and the Resolution Plan approved suffers
from feasibility and viability. But then the operative portion of the
impugned order does not take the findings on other issues to their logical
end. For instance, the Tribunal holds that the advertisement inviting
                                                                               B
Expression of Interest itself was defective and that there was breach of
confidentiality in as much as the liquidation value appears to have been
leaked out. These findings should have taken the Appellate Tribunal to
the point of setting aside the entire process and directing the Resolution
Professional to start the process all over again from the stage of issue of
a fresh advertisement. The NCLAT did not do so. In the operative portion,      C
NCLAT merely remanded the matter back to the Adjudicating Authority
with a direction to send back the Resolution Plan to the Committee of
Creditors to resubmit the plan after taking into consideration the law
laid down by this Court.
       20. In other words, the reliefs that would normally flow in the light   D
of the findings with regard to breach of confidentiality and defective
Invitation to Offer, were not granted by NCLAT. The Director/Promoter
of the corporate debtor has not come up with any appeal against the
failure of NCLAT to grant appropriate reliefs, connectable to the aforesaid
findings. The Director/Promoter of the corporate debtor is obviously
happy with the limited relief, if at all it is one, granted to him for the     E
resubmission of the Resolution Plan.
       21. It must be pointed out at this stage that the order of the NCLT,
Mumbai Bench dated 01.08.2019 became the subject matter of a single
appeal before NCLAT. But it was actually a common order passed in
three applications namely, MA Nos.1509/2019, 2104/2019 and 662/2019.           F
The details of these applications are as follows:
      (i)    MA No.1509/2019 was filed by an operational creditor, by
             name Sarvadnya Industries Pvt. Ltd. (whose ethanol plant
             and machinery also became a matter of dispute). Their claim
             was that they had a rental agreement with the corporate           G
             debtor with regard to the plant and machinery and that there
             was default in payment of the rent.
      (ii)   MA No.2104/2019 was filed by the Director/Promoter of
             the corporate debtor seeking to submit a resolution plan.
                                                                               H
480             SUPREME COURT REPORTS                          [2020] 13 S.C.R.


A                   But it was obviously filed after 270 days and also after the
                    approval of the Resolution Plan by the CoC.
            (iii)   The third application, MA No.662/2019, was by the
                    Resolution Professional for the approval of the Resolution
                    Plan which was accepted by the CoC.
B            22. By its common order dated 01.08.2019, the NCLT dismissed
      MA Nos.1509 and 2104 of 2019, filed respectively by the operational
      creditor (lessor of the ethanol plant) and the Promoter/Director of the
      corporate debtor. But the application filed by the Resolution Professional
      was allowed.
C            23. But the Director/Promoter of the corporate debtor filed only
      one appeal and the Memorandum of Appeal suggests that the Director/
      Promoter of the corporate debtor prayed for two reliefs, namely (i) to
      set aside the approval of the Resolution Plan, and (ii) to consider his own
      resolution plan.
D           24. By the order impugned in the present Civil Appeals, the NCLAT
      granted only a limited relief, as can be seen from the operative portion of
      the order of NCLAT which we have extracted earlier.
             25. Therefore, in the light of the above facts, the consideration of
      all other issues, such as breach of confidentiality and defective Invitation
E     to Offer would only be academic, as NCLAT did not grant any relief to
      the Promoter/Director of the corporate debtor, which could logically flow
      out of those other grounds.
             26. But be that as it may, we will still deal with the other three
      grounds also, as the same would put things in the right perspective and
F     clear any air of suspicion.
             27. The second ground on which NCLAT interfered with the
      decision of the NCLT is the alleged breach of confidentiality. The
      contention of the Promoter/Director of the corporate debtor is that the
      liquidation value mentioned in the Resolution Plan submitted by the SRA
G     exactly tallied with the liquidation value obtained by the Resolution
      Professional and that the whole sequence of events would show clearly
      that there was an attempt to cover up.
             28. According to the Director/Promoter of the corporate debtor,
      the self-declaration signed by the Resolution Applicant, and which forms
H     part of the Resolution Plan, bears the date 9th February 2019. This
  THE KARAD URBAN COOPERATIVE BANK LTD. v. SWWAPNIL                           481
     BHINGARDEVAY & ORS. [V. RAMASUBRAMANIAN, J.]

document mentions the liquidation value as Rs. 13.53 crores. It was the       A
same value as obtained by the Resolution Professional. It is the contention
of the Director/ Promoter of the corporate debtor that the Resolution
Professional wrote an email on 07.02.2019 itself (2 days before the
submission of the Resolution Plan by the SRA), asking for clarification
as to how the liquidation value matched. This, according to the Director
                                                                              B
of the corporate debtor, was proof enough to show that there was not
merely a leakage of information, but also an attempt to cover-up.
      29. But we are unable to accept the above contention. The
Resolution Plan actually runs to 31 pages. Pages 30 and 31 contain
Annexure A, which provides the business plan. Page 29 contains a self-
declaration certificate signed by the partners of the SRA. Just below the     C
signatures of the partners at page 29, the date “09th February 2019” is
type-written.
      30. But the cover page of the entire document contains the date
“7th February 2019” as the date of submission of the Resolution Plan.
The last date for submission of the resolution plan was 08.02.2019.           D

       31. Nowhere in the Memorandum of Appeal filed by the Promoter/
Director of the corporate debtor before the NCLAT, has he claimed that
the Resolution Plan was submitted by the SRA after the last date. We
have perused the Memorandum of Appeal filed by the Promoter/Director
of the corporate debtor before the NCLAT. It was not his case at all that     E
the Resolution Plan was submitted by the SRA after the last date, but
the same was predated by the Resolution Professional acting in collusion.
        32. It appears from the impugned order of NCLAT that only in
the course of hearing of the appeal, the date “09th February 2019” type-
written at the bottom of the self-declaration (page 29 of the Resolution      F
Plan) was sought to be taken advantage of. Since this was not raised as
one of the grounds in the Memorandum of Appeal but raised in the
course of arguments, the Resolution Professional could do no more than
to file the print-out of the email correspondence between him and the
SRA dated 07.02.2019. In the first email dated 07.02.2019, the Resolution     G
Professional had sought a clarification from the SRA as to how they
discovered the liquidation value and the source for the same. In response
to this mail, the SRA sent a reply email contending that they undertook a
due diligence to know the current market value and liquidation value and
that what was quoted by them in the Resolution Plan, was something
that an independent agency provided to them.                                  H
482             SUPREME COURT REPORTS                          [2020] 13 S.C.R.


A            33. Unfortunately, NCLAT rejected the print-out of the email
      correspondence dated 07.02.2019 on the sole ground that the same was
      not supported by affidavit and that it was filed after the conclusion of the
      oral arguments.
             34. But NCLAT failed to take note of the fact that the Resolution
B     Professional did not have any alternative except to respond in the manner
      that he did, to a point raised only in the course of arguments, but not
      raised in the Memorandum of Appeal. If the Promoter/Director of the
      corporate debtor had raised the issue of collusion or the submission of
      the Resolution Plan after the expiry of the last date, even in the
      Memorandum of Appeal, a duty would have been cast upon the Resolution
C     Professional to respond in an appropriate manner. But that was not the
      case. Therefore, we do not approve the manner in which NCLAT rejected
      the contents of the email correspondence.
            35. The fact that there was an email correspondence between
      the Resolution Professional and the SRA on 07.02.2019, touching upon
D     one of the contents of the Resolution Plan, would show (i) that the SRA
      had submitted the Resolution Plan before the last date and (ii) that the
      Resolution Professional had obviously scrutinised it, as otherwise he could
      not have found out the liquidation value mentioned therein matching the
      confidential information that he had.
E           36. In any case, the proof of the pudding is in the eating. The
      liquidation value mentioned in the Resolution Plan of the SRA is Rs.
      13.53 crores. But the actual total pay-out as per the Resolution Plan is
      Rs. 29.74 crores.
            37. This meant that the workers and employees of the corporate
F     debtor were to be paid 100% of their dues; that all statutory dues would
      be cleared 100% and that the financial creditors who constituted the
      CoC were to be paid 60% of their dues.
            38. It offends common sense to think that a resolution applicant
      who had the benefit of leakage of information relating to liquidation value
G     would quote a figure of Rs. 29.74 crores as the total pay-out, as against
      a liquidation value of Rs. 13.53 crores. The question of breach of
      confidentiality and leakage of confidential information can easily be tested
      on the touchstone of the benefit that accrued to the party who got the
      information. In the case on hand, no benefit accrued to the SRA.
H
  THE KARAD URBAN COOPERATIVE BANK LTD. v. SWWAPNIL                          483
     BHINGARDEVAY & ORS. [V. RAMASUBRAMANIAN, J.]

       39. It is obvious from the material on record that the Promoter/      A
Director of the Corporate Debtor has tried to take advantage of two
small mistakes on the part of the SRA, one of which was a typographical
error mentioning the date “09th February 2019” at the bottom of the
self-declaration and the other, which happened as a matter of coincidence.
The NCLAT appears to have made a mountain out of a molehill and has
                                                                             B
recorded a finding even beyond the pleadings in the Memorandum of
Appeal. Hence, the second ground on which the NCLAT was convinced
to pass the impugned order, is legally and factually untenable.
       40. The third ground on which NCLAT proceeded, related to the
ethanol plant and machinery. We have already dealt with this issue in
detail, while dealing with the first issue. As stated therein, the SRA       C
admittedly did not make his Resolution Plan on the strength of the ethanol
plant and machinery in question. The threat looming large over the
availability of the ethanol plant and machinery has admittedly been taken
note of by the SRA and the CoC. The Resolution Plan does not give an
indication anywhere that without this plant and machinery the whole          D
resolution plan will fail. In paragraph 8.04 of the Resolution Plan, the
SRA has undertaken to continue the operations in the normal course of
business. It is a commercial decision that they have taken. The corporate
debtor cannot cry wolf over the said decision. Therefore, the third ground
on which NCLAT chose to interfere, is also bound to be rejected.
                                                                             E
       41. The last ground revolves around the advertisement issued by
the Resolution Professional on 30.03.2018. NCLAT holds that the
advertisement was not in conformity with Regulation 36A of The
Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016 and as per Form G
of the Schedule.                                                             F

      42. But the conclusions reached by NCLAT in this regard cannot
hold water for two reasons. If NCLAT was convinced that the very
process of inviting Expression of Interest was vitiated, NCLAT should
have issued a direction to start the process afresh all over again by
issuing a fresh advertisement. NCLAT did not do this and the person          G
who raised this point is not on appeal.
       43. In any case, it does not lie in the mouth of the Promoter/
Director of the corporate debtor to raise any issue in this regard. It is
seen from the Minutes of the 2nd Meeting of the Committee of Creditors
                                                                             H
484            SUPREME COURT REPORTS                         [2020] 13 S.C.R.


A     that the Promoter/Director of the corporate debtor attended the meeting
      held on 27.03.2018. In Item No. 3 of the Agenda for the said meeting,
      the draft of the Invitation for Expression of Interest was approved. The
      Promoter/Director did not raise any objections either on 27.03.2018 in
      the meeting in which the draft was approved or at any time thereafter,
      until the approval of the Resolution Plan.
B
             44. The Promoter/Director of the corporate debtor who was the
      appellant before NCLAT attended the 3rd meeting of the CoC on
      15.09.2018, the 4th meeting of the CoC held on 12.10.2018 and the 5th
      meeting of the CoC held on 26.11.2018. He did not raise any whisper
      about the contents of the advertisement. Even when the very same
C     Promoter/Director of the corporate debtor went before the High Court
      of Judicature at Bombay by way of a writ petition challenging the orders
      of NCLT dated 01.01.2018 and 06.03.2018, his focus was on his own
      application under Section 10 of the Insolvency and Bankruptcy Code.
      His grievance before the High Court was that his own application under
D     Section 10 was dumped by the NCLT and the application of the financial
      creditor was admitted thereafter. In fact the conduct of the Promoter/
      Director of the corporate debtor came to adverse notice before the
      Bombay High Court.
             45. Regulation 36A was inserted only with effect from 06.02.2018
E     under Notification No. IBBI/2017-18/GN/REG024 dated 06.02.2018. It
      underwent a change under Notification No. IBBI/2018-19/GN/REG031
      dated 03.07.2018, with effect from 04.07.2018. Regulation 36A, as it
      stood during the period from 06.02.2018 to 04.07.2018, did not mandate
      the publication of the invitation of Resolution Plans, either in Form G or
      otherwise, in newspapers. It is only the amended Regulation 36A, which
F     came into effect from 04.07.2018, that requires the publication of Form
      G in newspapers. Therefore, the publication in newspapers made by the
      Resolution Professional, in the case on hand, on 30.03.2018, was
      something that was statutorily not required of him and hence the Promoter/
      Director of the corporate debtor cannot take advantage of the amendment
G     that came later, to attack the advertisement. The unamended and amended
      Regulation 36A are provided in a tabular column for easy comparison
      and appreciation.



H
THE KARAD URBAN COOPERATIVE BANK LTD. v. SWWAPNIL   485
   BHINGARDEVAY & ORS. [V. RAMASUBRAMANIAN, J.]

                                                    A




                                                    B




                                                    C




                                                    D




                                                    E




                                                    F




                                                    G




                                                    H
486   SUPREME COURT REPORTS   [2020] 13 S.C.R.


A




B




C




D




E




F




G




H
   THE KARAD URBAN COOPERATIVE BANK LTD. v. SWWAPNIL                      487
      BHINGARDEVAY & ORS. [V. RAMASUBRAMANIAN, J.]

                                                                          A




                                                                          B




                                                                          C


        46. The second meeting of the Committee of Creditors was held
on 27.03.2018. The advertisement was approved in the said meeting. It
was the unamended Regulation 36A that was in force at that time. This
has not been appreciated by NCLAT. Therefore, the NCLAT was wrong         D
in its approach even in this regard.
       47. Therefore, in fine, the impugned order of NCLAT is flawed
and hence, liable to be set aside. Accordingly, the Civil Appeals are
allowed, the impugned order of the NCLAT is set aside and the order of
the National Company Law Tribunal, Mumbai Bench dated 01.08.2019          E
is restored. There will be no order as to costs.

Devika Gujral                                           Appeals allowed


                                                                          F




                                                                          G




                                                                          H