Once a Prospective Resolution Applicant fails to succeed, he cannot turn volta face to challenge the extension of time granted to file Resolution Plan, as violative of regulations, as he acquiesced into the alleged violation of regulations and allowed a right to be created in favor of the Successful Resolution Applicant in the meantime – NCLT, Kolkata Bench

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Once a Prospective Resolution Applicant fails to succeed, he cannot turn volta face to challenge the extension of time granted to file Resolution Plan, as violative of regulations, as he acquiesced into the alleged violation of regulations and allowed a right to be created in favor of the Successful Resolution Applicant in the meantime. However, no violations were noted –by the Division Bench of Smt. Bidisha Banerjee and Shri Balraj Joshi, NCLT, Kolkata Bench

I. Case Reference:

  • Case Citation: (2023) ibclaw.in 395 NCLT
  • Case Name: Annapoorani Textiles Pvt. Ltd. Vs. Anup Kumar Singh, RP of ER Textiles Ltd.
  • Corporate Debtor: M/s ER Textiles Ltd.
  • Application/Appeal No.:P.(IB) No. 4/KB/2023 In I.A. (IB) No. 1539/KB/2022 In C.P. (I.B.) NO.482/KB/2019
  • Judgment Date: 26-Jul-2023
  • Court/Bench: NCLT Kolkata Bench
  • Member (Judicial): Bidisha Banerjee
  • Member (Technical): Shri Balraj Joshi

The Division Bench of Smt. Bidisha Banerjee, Hon’ble Member (Judicial) and Shri Balraj Joshi, Hon’ble Member (Technical), of the National Company Law Tribunal, Kolkata, while holding the applicant guilty of acquiescence, held that having participated without demur in the process after the extension of time to submit the resolution plans was allowed, the applicant has in fact, acquiesced and he is not permitted to challenge the process after he fails to succeed. The bench has significantly interpreted the “Doctrine of Acquiescence” and explained its differences with “delay” and “laches” in this context.

II. Factual Matrix:

  1. In the instant case, the Applicant (Annapoorani Textiles Private Limited) is one of the Prospective Resolution Applicants (“PRA”) who had submitted its Resolution Plan for reviving the Corporate Debtor. The Order dated January 14, 2022, was passed by this NCLT Kolkata Bench for initiation of the CIRP under Section 7 of I&B Code, 2016 filed by Stressed Assets Stabilization Fund (Financial Creditor) against M/s. E.R. Textiles Ltd. (Corporate Debtor) and Mr. Anup Kumar Singh was appointed as Interim Resolution Professional (“IRP”). The first meeting of COC was held on 11/02/2022 and the Resolution Professional (“RP”) was appointed with 90.48% of votes in favor of the motion by the Members of COC.
  2. The first “Form G” was published by the RP on March 30, 2022, and the last date for the submission of EOI was on April 14, 2022, and to that date, the RP had received four EOIs from the interested Resolution Applicants, such as (a) Bommidala Enterprises Pvt. Ltd., (b) GN Murthy, (c) Annapoorani Textiles Pvt. Ltd. and (d) Vajram Estates Pvt. Ltd.
  3. To encourage competition and ensure maximum value for the stakeholders of the Corporate Debtor, the RP in concurrence with the COC extends the last date for the submission of EOI till April 25, 2022 and to that date, the RP received five EOIs from the following Prospective Resolution Applicants, such as (a) Bommidala Enterprises Pvt. Ltd., (b) GN Murthy, (c) Annapoorani Textiles Pvt. Ltd. And (d) Vajram Estates Pvt. Ltd. And (e) Mohan Reddy Bhumi Reddy Gari (New Entrant)
  4. In terms of the requirement of Regulation 36A (10) of the Regulation, the RP issued a provisional List of Eligible Prospective Resolution Applicants on May 05, 2022.
  5. In the 5th COC meeting, the RP placed all the Resolution Plans received from the shortlisted Resolution Applicants till the cut-off date being August 03, 2022.
  6. In the 7th COC meeting held on September 21, 2022, the COC members decided to call the Resolution Applicants in the subsequent meeting for negotiation.
  7. Subsequently, the 8th COC meeting was convened on September 23, 2022, to further discuss and negotiate on the Resolution Plans submitted by Resolution Applicants and COC asked them to submit their final revised Plan by September 26, 2022 by 7:00 PM being the Cut-off date.
  8. On September 26, 2022, the RP received the Final revised Resolution Plan from Bommidala Enterprises Pvt. Ltd. and Vajram Estates Pvt. Ltd. within 7:00 PM. The Applicant herein, however, submitted its Resolution Plan at 7:09 PM, i.e., beyond the cut-off time.
  9. At the 9th COC meeting on September 30, 2022, the COC members decided that the Plans should be put up for voting and eventually, the Resolution Plan of Vajram Estates Pvt. Ltd., was approved by the COC members with 100% votes and the same was submitted before this Adjudicating Authority for its concurrence.

III. The allegation made by the Applicant herein against RP:

The Applicant alleges that the RP has violated the following legal provisions:

  1. Regulation 36B (5) of the IBBI (CIRP) Regulation, 2016:
  2. Violation of Sub-Regulation 6 of Regulation 36B of the IBBI (CIRP) Regulation, 2016:
  3. Violation of Regulation 36 (2) of the IBBI (CIRP) Regulation, 2016 –
  4. Violation of Timeline:

IV. Defence by RP:

Per Contra, vociferously opposing the contentions of the Applicant, Learned Senior Counsel, Mr. Joy Saha appearing for the RP would advance the following arguments:

  1. Having participated on all the occasions without demur the applicant is estopped by his conduct.
  2. The applicant is also guilty of acquiescence and waiver and hence he does not deserve any relief.

V. The contention of the Successful Resolution Applicant (SRA):

The gist of arguments advanced by the Learned Senior Counsel, Mr. Ratnanko Banerji appearing for the Successful Resolution Applicant, would be the following:

  1. That the applicant having participated in the process he is complaining about and thus having acquiesced, is not permitted to challenge the process after he fails to succeed. He is guilty of acquiescence.
  2. If he was so aggrieved, he ought to have approached this Tribunal within a reasonable time. There is a considerable delay in approaching this Tribunal since SRA’s plan has been approved already.
  3. SRA’s plan has been approved with 100% voting.
  4. Regulation 36 (B) (5) is in no way violated.

VI. The decision passed by the Division Bench:

  1. The NCLT Kolkata Division Bench of Bidisha Banerjee and Shri Balraj Joshi have laid down that as discussed supra, there is nothing on record to suggest or establish violation of the provisions. As such, none of the decisions cited by the applicant lends support to his contentions. On the contrary, having participated without demur in the process after the extension of time to submit the resolution plans was allowed, the Applicant has in fact, acquiesced. He is not permitted to challenge the process after he fails to succeed. Significantly, explaining the true import of “acquiescence” and its differences with “delay” and “laches”, the Hon’ble Supreme Court of India has held in the case of The Chairman, State Bank of India v. M.J. James, reported in MANU/SC/1069/2021: (2022) 2 SCC 301 that “both limitation and laches destroy the remedy but not the right.” And “acquiescence implies active assent and is based upon the Rule of estoppel in pais. As a form of estoppel, it bars a party afterwards from complaining of the violation of the right. Even indirect acquiescence implies almost active consent, which is not to be inferred by mere silence or inaction which is involved in laches. Acquiescence in this manner is quite distinct from delay. Acquiescence virtually destroys the right of the person”. “Nevertheless, this acquiescence being in the nature of estoppel bars the Respondent from claiming violation of the right of fair representation.” Further, we would rely upon the judgment of the Apex Court in the case of Prabhakar v. Joint Director Sericulture Department, reported in MANU/SC/1041/2015: (2015) 15 SCC 1, and the judgment passed in the case of State of U.P. v. Sudhir Kumar Singh, reported in MANU/SC/0773/2020: [2020] 13 SCR 571,
  2. The Bench holds that:

“Irrefutably and indubitably, Applicant has participated in the process till August 30, 2022, the last date of submission of plans and has thereby subjected itself to the process after extensions. Once he failed to succeed, he cannot turn volta face to challenge the extensions granted as he acquiesced into the alleged wrongful act/ violation of regulations/ timelines in granting such extensions and allowed a right to be created in favor of the Successful Resolution Applicant (SRA) in the meantime.”  

  1. Hence, this Petition, is rejected and hereby dismissed.

 

Bose, R. K. [LRA-NCLT-KB]

 

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