# M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI GOUNDER & ANR

- **Citation:** 2023 INSC 486
- **Court:** Supreme Court of India
- **Decided:** 2023-05-03
- **Case number:** Civil Appeal Nos. 1682-1683 of 2022
- **Bench:** Dinesh Maheshwari, Vikram Nath
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-k-rajagopalan-v-dr-periasamy-palani-gounder-anr-37896
- **Pages:** 134

## Headnote

Insolvency and Bankruptcy Code, 2016 - ss. 12A, 29-A(e),
30(2)(e) & 30(6) - Insolvency and Bankruptcy Board of India
(Insolvency Resolution Process for Corporate Persons) Regulations,
2016 - Regulation 36-A(2)(iii) - Disapproval of resolution plan by
the Appellate Tribunal (NCLAT) for want of presentation of final
resolution plan before CoC - Held: Is unexceptionable and calls
for no interference - When the modified resolution plan, even if
carrying minor modification /revision was not finally approved by
CoC, its presentation to the Adjudicating Authority amounts to a
material irregularity and this defect cannot be cured - There is no
and there cannot be any concept of post facto approval of any
resolution plan by CoC which had not been placed before it prior
to the filing before the Adjudicating Authority - Requirement of
CIRP Regulations, particularly of placing the resolution plan in its
final form before the CoC, has to be scrupulously complied with -
This is so for the specific reason concerning law that if the process
as adopted in the present matter is approved, the very scheme of the
Code and CIRP regulations would be left open-ended and would
be capable of inviting arbitrariness at any level - The irregularity
in the process of approval by CoC and filing before Adjudicating
Authority are not the matters of such formal nature that deviation in
that regard could be ignored or condoned - When commercial
wisdom of CoC is assigned primacy, it presupposes a considered
decision on the resolution plan in its final form - The principles
underlying the decisions of this Court respecting the commercial
wisdom of CoC cannot be over-expanded to brush aside a significant
shortcoming in the decision making of CoC when it had not duly
taken note of the operation of any provision of law for the time
being in force - On facts, disapproval of the resolution plan in
question by the Appellate Tribunal (NCLAT) in the impugned order
is not to be interfered with but, not for all the reasons which weighed
[2023] 9 S.C.R. 783 : 2023 INSC 486
783
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with the Appellate Tribunal - The reasons and findings of the
Appellate Tribunal in relation to the valuation process and alleged
non-compliance of some of the procedural provisions as also the
observations against increase of fees of resolution professional are
not approved - Similarly, the Appellate Tribunal was not right in
holding the resolution applicant ineligible to submit a resolution
plan with reference to s.164(2)(b) of the Companies Act, 2013 -
The disapproval by the Appellate Tribunal, with reference to the
settlement offer of promoter in terms of s.12-A of the Code, and its
purported non-consideration is also not approved and such findings
of the Appellate Tribunal are required to be set aside - Similarly,
the Appellate Tribunal erred in applying the principles of nondiscrimination in relation to the related party - However, even while
respecting the commercial wisdom of CoC, in the present case, the
resolution plan in question could not have been approved by the
Adjudicating Authority for two major reasons: one, for the
ineligibility of the resolution applicant; and second, for not placing
of the revised resolution plan in the CoC before seeking approval
from the Adjudicating Authority - So far the subsequent events
concerning invitation of fresh Expression of interest (EOIs) and
approval of the fresh settlement proposal of the promoter by the
CoC are concerned, all the relevant aspects are kept open for
consideration of the Adjudicating Authority.
Committee of Creditors of Essar Steel India Limited
through Authorised Signatory v. Satish Kumar Gupta
and Ors. (2020) 8 SCC 531 : [2019] 16 SCR 275;
Jaypee Kensington Boulevard Apartments Welfare
Association and Ors. v. NBCC (India) Limited and Ors.
(2022) 1 SCC 401; Swiss Ribbons (P) Ltd. and Anr. v.
Union of India and Ors. (2019) 4 SCC 17 : [2019] 3
SCR 535 - relied on.
K. Sashidhar

## Text

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M. K. RAJAGOPALAN
v.
DR. PERIASAMY PALANI GOUNDER & ANR.
(Civil Appeal Nos. 1682-1683 of 2022)
MAY 03, 2023
[DINESH MAHESHWARI AND VIKRAM NATH, JJ.]
Insolvency and Bankruptcy Code, 2016 - ss. 12A, 29-A(e),
30(2)(e) & 30(6) - Insolvency and Bankruptcy Board of India
(Insolvency Resolution Process for Corporate Persons) Regulations,
2016 - Regulation 36-A(2)(iii) - Disapproval of resolution plan by
the Appellate Tribunal (NCLAT) for want of presentation of final
resolution plan before CoC - Held: Is unexceptionable and calls
for no interference - When the modified resolution plan, even if
carrying minor modification /revision was not finally approved by
CoC, its presentation to the Adjudicating Authority amounts to a
material irregularity and this defect cannot be cured - There is no
and there cannot be any concept of post facto approval of any
resolution plan by CoC which had not been placed before it prior
to the filing before the Adjudicating Authority - Requirement of
CIRP Regulations, particularly of placing the resolution plan in its
final form before the CoC, has to be scrupulously complied with -
This is so for the specific reason concerning law that if the process
as adopted in the present matter is approved, the very scheme of the
Code and CIRP regulations would be left open-ended and would
be capable of inviting arbitrariness at any level - The irregularity
in the process of approval by CoC and filing before Adjudicating
Authority are not the matters of such formal nature that deviation in
that regard could be ignored or condoned - When commercial
wisdom of CoC is assigned primacy, it presupposes a considered
decision on the resolution plan in its final form - The principles
underlying the decisions of this Court respecting the commercial
wisdom of CoC cannot be over-expanded to brush aside a significant
shortcoming in the decision making of CoC when it had not duly
taken note of the operation of any provision of law for the time
being in force - On facts, disapproval of the resolution plan in
question by the Appellate Tribunal (NCLAT) in the impugned order
is not to be interfered with but, not for all the reasons which weighed
[2023] 9 S.C.R. 783 : 2023 INSC 486
783
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SUPREME COURT REPORTS
[2023] 9 S.C.R.
with the Appellate Tribunal - The reasons and findings of the
Appellate Tribunal in relation to the valuation process and alleged
non-compliance of some of the procedural provisions as also the
observations against increase of fees of resolution professional are
not approved - Similarly, the Appellate Tribunal was not right in
holding the resolution applicant ineligible to submit a resolution
plan with reference to s.164(2)(b) of the Companies Act, 2013 -
The disapproval by the Appellate Tribunal, with reference to the
settlement offer of promoter in terms of s.12-A of the Code, and its
purported non-consideration is also not approved and such findings
of the Appellate Tribunal are required to be set aside - Similarly,
the Appellate Tribunal erred in applying the principles of nondiscrimination in relation to the related party - However, even while
respecting the commercial wisdom of CoC, in the present case, the
resolution plan in question could not have been approved by the
Adjudicating Authority for two major reasons: one, for the
ineligibility of the resolution applicant; and second, for not placing
of the revised resolution plan in the CoC before seeking approval
from the Adjudicating Authority - So far the subsequent events
concerning invitation of fresh Expression of interest (EOIs) and
approval of the fresh settlement proposal of the promoter by the
CoC are concerned, all the relevant aspects are kept open for
consideration of the Adjudicating Authority.
Committee of Creditors of Essar Steel India Limited
through Authorised Signatory v. Satish Kumar Gupta
and Ors. (2020) 8 SCC 531 : [2019] 16 SCR 275;
Jaypee Kensington Boulevard Apartments Welfare
Association and Ors. v. NBCC (India) Limited and Ors.
(2022) 1 SCC 401; Swiss Ribbons (P) Ltd. and Anr. v.
Union of India and Ors. (2019) 4 SCC 17 : [2019] 3
SCR 535 - relied on.
K. Sashidhar v. Indian Overseas Bank (2019) 12 SCC
150 : [2019] 3 SCR 845; Maharashtra Seamless Ltd. v.
Padmanabhan Venkatesh and Ors. (2020) 11 SCC 467
: [2020] 2 SCR 1157; Phoenix ARC (P) Ltd v. Spade
Financial Services Ltd. and Ors. (2021) 3 SCC 475; C.
Raja John v. R. Raghavendran and Ors. Comp. Appl.
(AT)(CH)(Ins) No. 207 of 2021; Kalpraj Dharamshi
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and Anr. v. Kotak Investment Advisors Limited and Anr.
(2021) 10 SCC 401; EBIX Singapore Pvt. Ltd. v.
Committee of Creditors of Educomp Solutions Ltd. and
Anr. (2022) 2 SCC 401; Pratap Technocrats (P) Ltd.
and Ors. v. Monitoring Committee of Reliance Infratel
Ltd and Anr. 2021 SCC OnLine SC 569; Facor Alloys
Ltd. v. Bhuvan Madan and Ors. Civil Appeal No. 5129
of 2021; Venus Recruiters Private Limited v. Union of
India and Ors. 2020 SCC Online Del. 1479; Vallal RCK
v. Siva Industries and Holdings Ltd. and Ors. 2022 SCC
OnLine SC 717 and Brilliant Alloys (P) Ltd. v. S.
Rajagopal and Ors. (2022) 2 SCC 544 - referred to.
Case Law Reference
[2019] 16 SCR 275
relied on
Para 15.4.1
[2019] 3 SCR 845
referred to
Para 17
[2020] 2 SCR 1157
referred to
Para 17
(2021) 3 SCC 475
referred to
Para 19.7
(2021) 10 SCC 401
referred to
Para 28.5
(2022) 1 SCC 401
relied on
Para 17
(2022) 2 SCC 401
referred to
Para 29
[2019] 3 SCR 535
relied on
Para 31.1
(2022) 2 SCC 544
referred to
Para 35.1
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.16821683 of 2022.
From the Judgment and Order dated 17.02.2022 of the National
Company Law Appellate Tribunal, Chennai Bench in Company Appeal
(AT) (CH) (Insolvency) No.164 and 219 of 2021.
With
Civil Appeal Nos.1756, 1759, 1757, 1807, 1810 And 1827 of 2022.
Dr. Abhishek Manu Singhvi, Jaideep Gupta, Sr. Advs., Devashish
Bharuka, Justine George, Ms. Sarvshree, Abhijeeet Singh, Advs. for the
Appellant.
Tushar Mehta, SG, K. V. Vishwanathan, Vijay Narayan, Sr. Advs.,
Sanjay Kapur, Ms. Megha Karnwal, Arjun Bhatia, Ms. Akshata Joshi,
M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI
GOUNDER & ANR.
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Ms. Shubra Kapur, Ms. Aastha Gumbr, Goutham Shivshankar, T.
Ravichandran, K. V. Mohan, K. V. Balakrishnan, Ms. Niveditha, Ms.
Samyuktha J., Rahul Kumar Sharma, Shreeyash U. Lalit, Ms. Raveena
Lalit, Abhinav Agarwal, Mrs. Pragya Baghel, Ms. Haripriya
Padmanabhan, V. Syamohan, Ms. Astu Khandelwal, Martin G. George,
Dheeraj Nair, Advs. for the Respondents.
The Judgment of the Court was delivered by
DINESH MAHESHWARI, J.
Preliminary and brief outline ..........................................2*
Particulars of the proceedings and the parties ................... 7*
The relevant factual and background aspects .................. 13*
Initiation of CIRP ...........................................................14*
CoC Meetings and ancillary proceedings ...................16*
Resolution plan approved by the Adjudicating Authority
(NCLT).............................................................................26*
Disapproval of the Appellate Tribunal (NCLAT) ............. 40*
Proceedings in this Court.................................................. 59*
The events during pendency of these appeals.............62*
Rival submissions ...........................................................65*
Points for determination.................................................... 84*
Relevant statutory provisions............................................ 87*
Objectives and scheme of IBC: crucial role-players: ..... 109*
Point A - Valuation: Regulations 27 and 35.....................116*
Point B - Publication of Form G: Regulation 36-A .........118*
Point C1 - Effect of Section 164(2)(b) Companies Act 120*
Point C2 - Effect of Section 88 Trusts Act ................... 121*
Point C3 - Effect of Section 166(4) Companies Act ..... 125*
Point D1 - Revision of resolution plan after approval by
CoC................................................................................. 126*
Ed. Note : Pagination is as per the original Judgment.
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Point D2 - Increase of fees of resolution professional .... 132
Point E - The matter concerning related party ................ 133
Point F - NCLAT's findings regarding settlement offer of
promoter ........................................................................... 135
Point G - Impact and effect of subsequent events .......... 138
Summation ........................................................................ 142
Conclusion ........................................................................ 144
Preliminary and brief outline
1. These civil appeals are essentially directed against the common
judgment and order dated 17.02.2022, as passed by the National Company
Law Appellate Tribunal, Chennai Bench,1 in a batch of appeals in relation
to the Corporate Insolvency Resolution Process2 under the Insolvency
and Bankruptcy Code, 2016,3 concerning the corporate debtor, Appu
Hotels Limited4, whereby the Appellate Tribunal has reversed the order
dated 15.07.2021, as passed by the National Company Law Tribunal,
Chennai5; and while rejecting the resolution plan in question, has remanded
the matter to the committee of creditors6 with directions to the resolution
professional7 to proceed from the stage of publication of Form 'G', and
invite the expression of interest8 afresh as per the Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons) Regulations, 20169.
2. In view of multiple issues raised in this batch of matters, where
several steps have been taken at different stages and different parties
are having different stands and interests, we may draw a brief outline
with salient features of the factual and background aspects, in order to
indicate the contours of the forthcoming discussion.
1 Hereinafter also referred to as 'NCLAT' / 'the Appellate Tribunal'.
2 'CIRP', for short.
3 Hereinafter also referred to as 'IBC' / 'the Code'.
4 Hereinafter also referred to as 'the corporate debtor'.
5 Hereinafter also referred to as 'NCLT'/ 'the Tribunal' / 'the Adjudicating Authority'.
6 'CoC', for short.
7 'RP', for short.
8 'EOI', for short.
9 Hereinafter also referred to as 'the CIRP Regulations'.
M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI
GOUNDER & ANR. [DINESH MAHESHWARI, J.]
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2.1. CIRP against the corporate debtor got initiated on 05.05.2020,
with the NCLT admitting an application moved under Section 7 of the
Code by one of its financial creditors, Tourism Finance Corporation of
India Limited10. In the course of proceedings, after various rounds of
CoC meetings, ultimately, the resolution plan in question was approved
with 87.39 per cent. majority of voting share on 22.01.2021. However,
the CoC recommended certain changes to be made in the resolution
plan. After incorporating the changes as suggested by CoC, an application
was moved before the Adjudicating Authority (NCLT) under Section
30(6) of IBC for approval of the resolution plan. During the proceedings
before NCLT, several objections were raised by various financial
creditors, other resolution applicants and by the promoter and erstwhile
director of corporate debtor against the resolution plan. The promoter
also stated his grievance about want of consideration of his settlement
proposal in terms of Section 12-A of the Code. However, the NCLT
dismissed all the objections and approved the resolution plan declaring it
binding on the corporate debtor and other stakeholders by the common
order dated 15.07.2021.
2.2. Challenging approval of the resolution plan, several appeals
were preferred before the Appellate Tribunal (NCLAT), which were
decided in the impugned common judgment and order dated 17.02.2022.
The Appellate Tribunal, while upholding several of the objections against
the process of consideration of the resolution plan as also the eligibility
of the successful resolution applicant, allowed all the appeals; set aside
the aforesaid order dated 15.07.2021; rejected the resolution plan so
approved by the NCLT; declared the resolution applicant ineligible in
terms of Section 88 of the Indian Trusts Act, 188211 and disqualified in
terms of Section 164(2)(b) of the Companies Act, 201312; and issued
directions to the resolution professional to proceed with CIRP from the
stage of publication of Form 'G' while inviting EOI afresh as per the
CIRP Regulations. The Appellate Tribunal also issued directions to the
resolution professional to place the settlement proposal of promoter and
erstwhile director of the corporate debtor for consideration before the
CoC; and if such a proposal was approved with 90 per cent. voting
share of CoC, to initiate the proceeding for withdrawal of CIRP under
Section 12-A of the Code read with Regulation 30-A of the CIRP
10 'TFCI', for short.
11 Hereinafter also referred to as 'the Trusts Act'.
12 Hereinafter also referred to as 'the Companies Act'.
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Regulations. The Appellate Tribunal also directed that the claim of the
related party financial/operational creditors be not discriminated from
that of the unrelated financial/operational creditors.
3. The aforesaid order of NCLAT dated 17.02.2022 is under
challenge before this Court by the resolution applicant as also by the
resolution professional on several counts, which could be broadly
summarised thus: First, that Regulation 35 of the CIRP Regulations does
not mandate sharing of the valuation report to the CoC and instead
mandates only sharing of liquidation value. Second, that the non-core
assets were not significant in value and the valuation was communicated
to and agreed upon by the members of the CoC on 15.12.2020. Third,
that non-publication of Form G on the designated website was a mere
procedural irregularity which did not prejudice interests of any of the
parties. Fourth, that the commercial wisdom of CoC was not justiciable
and once the CoC had approved the resolution plan by the requisite
majority, there was very limited scope of interference by the Courts.
Fifth, that the Appellate Tribunal has overstepped its jurisdiction by
declaring the resolution applicant ineligible under Section 88 of the Trusts
Act and disqualified under Section 164(2)(b) of the Companies Act.
Sixth, that the claims of related party creditors cannot be treated at par
with the unrelated creditors. And seventh, that Section 12-A IBC
application of the promoter was merely a dilatory tactic and that he was
not entitled to file any such application. These and other grounds raised
in these appeals have been duly contested by the respondents with their
respective stands and positions in these cases. This apart, some of the
financial creditors have also moved the applications for impleadment
and have placed their respective viewpoints for consideration.
4. During the pendency of these appeals, this Court did not stay
the operation of impugned order dated 17.02.2022; and during the course
of hearing of these appeals, on 07.03.2022, it was informed by RP that
pursuant to the order impugned, another meeting of CoC had been
conducted on 03.03.2022. It is noticed that in the said CoC meeting held
on 03.03.2022, the settlement proposal of the promoter was voted against
by 51.81% of the voting share. After conclusion of initial hearing, while
reserving judgment, this Court also took note of the fact that further
meeting of CoC was slated for 21.03.2022; and it was provided that the
meetings/proceedings of the CoC could go on but the entire process
shall remain subject to the final orders to be passed in these appeals.
M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI
GOUNDER & ANR. [DINESH MAHESHWARI, J.]
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4.1. These matters were again taken on board on 20.05.2022 when
this Court took note of the submissions made in another application moved
by the resolution applicant for directions while pointing out that the fresh
process had been initiated by the RP by publication of Form G on
26.04.2022, inviting fresh EOIs. Therein, the resolution applicant sought
interim stay over the fresh process initiated by RP or in the alternative,
to stay the operation of the impugned order as regards declaration of his
disqualification, and to direct the RP to consider his EOI in the fresh
process so initiated. This Court, however, declined to pass any other
order with reference to the fact that all the proceedings remain subject
to the final orders in these appeals.
4.2. Yet again, Civil Appeal No. 1682-1683 of 2022 was taken on
the board on 17.11.2022 and learned counsel for the parties were heard
further, in view of an application moved on behalf of the promoter and
erstwhile director of the corporate debtor (IA No. 168602 of 2022),
seeking permission to bring on record subsequent events that his proposal
of settlement under Section 12-A of the Code was accepted by CoC on
12.10.2022 by 100% of the voting share, i.e., unanimously; and the same
had been placed before the Adjudicating Authority for approval. Having
regard to the events aforesaid and looking to the overall circumstances,
while keeping the judgment reserved, we requested the Adjudicating
Authority to await the decision of this Court in these matters.
Particulars of the proceedings and the parties
5. In view of the issues arising for determination in these appeals,
with several parties carrying different roles, interests, and positions,
worthwhile it would be to narrate at the outset, in brief, the relevant
particulars of the proceedings leading to these appeals as also the principal
parties involved herein.
6. As noticed, the CIRP against the corporate debtor got initiated
on 05.05.2020, with the NCLT admitting an application moved under
Section 7 of the Code by one of its financial creditors, TFCI. This
application had been registered as IBA No. 1459 of 2019. The application
for approval of the resolution plan, moved before NCLT was registered
as IA No. 150/CHE/2021 in the said IBA No. 1459 of 2019. This
application and several other correlated applications were considered
together and were dealt with in the common order dated 15.07.2021
whereby, the National Company Law Tribunal, Chennai rejected the
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objections and approved the resolution plan approved by the committee
of creditors.
6.1. Four separate appeals were preferred before the National
Company Law Appellate Tribunal, Chennai Bench against the aforesaid
order dated 15.07.2021, being Company Appeal (AT) (CH) (Insolvency)
Nos. 164, 176, 218 and 219 of 2021. The appeals bearing numbers 164
of 2021 and 219 of 2021 were filed by the promoter and erstwhile director
of corporate debtor, respectively in challenge to the approval of resolution
plan and rejection of his application for consideration of a settlement
proposal. On the other hand, the appeal bearing number 176 of 2021
was filed by one of the creditors of the corporate debtor, whose claim as
financial creditor as also operational creditor was declined in the approved
resolution plan, for being a related party of the corporate debtor. The
other appeal bearing number 218 of 2021 was filed by an NRI shareholder
and erstwhile director of the corporate debtor, essentially being aggrieved
by denial of any relief to shareholders in the approved resolution plan.
As noticed, these four appeals were decided together by the NCLAT in
its impugned common judgment and order dated 17.02.2022.
6.2. In the present set of appeals in this Court against the aforesaid
judgment and order dated 17.02.2022, one sub-set is of appeals preferred
by the resolution applicant which could be noticed as follows:
6.2.1. The resolution applicant has questioned the orders passed
in relation to the objections and claim of the promoter and erstwhile
director of the corporate debtor (in Appeal Nos.164 of 2021 and 219 of
2021 before NCLAT) by way of Civil Appeal Nos. 1682-1683 of 2022.
The resolution applicant has further questioned the order passed in relation
to the claim of the related party (in Appeal No. 176 of 2021 before
NCLAT) by way of Civil Appeal No. 1827 of 2022. Yet further, the
resolution applicant has questioned the order passed in relation to the
claim of the NRI shareholder (in Appeal No. 218 of 2021 before NCLAT)
by way of Civil Appeal No. 1810 of 2022.
6.3. Another sub-set is of appeals preferred by the resolution
professional against the aforesaid judgment and order dated 17.02.2022,
which are as follows:
6.3.1. The resolution professional has questioned the orders passed
in relation to the objections and claim of the promoter and erstwhile
director of the corporate debtor (in Appeal Nos.164 of 2021 and 219 of
M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI
GOUNDER & ANR. [DINESH MAHESHWARI, J.]
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2021 before NCLAT) by way of Civil Appeal Nos. 1756 of 2022 and
1807 of 2022 respectively. The resolution professional has further
questioned the order passed in relation to the claim of the related party
(in Appeal No. 176 of 2021 before NCLAT) by way of Civil Appeal No.
1757 of 2022. Lastly, the resolution professional has questioned the order
passed in relation to the claim of the NRI shareholder (in Appeal No.
218 of 2021 before NCLAT) by way of Civil Appeal No. 1759 of 2022.
7. Now, we may take note of the relevant particulars of the
principal parties involved in this litigation. The parties could broadly be
divided into three categories with reference to their respective stands
vis-à-vis the order of the Appellate Tribunal, the CIRP, and the resolution
plan in question.
7.1 The first category is of the parties who are aggrieved of the
order passed by the Appellate Tribunal on several counts and are opposing
the rejection of resolution plan and remand of the matter to CoC. They
are:
7.1.1. Mr. M.K. Rajagopalan
He is the resolution applicant and had submitted the resolution
plan in question, which was approved by a majority of 87.39 per cent. of
the voting share of CoC but was rejected by the Appellate Tribunal, as
being in contravention of Section 30(2) of the Code. He is appellant in
Civil Appeal Nos. 1682-1683 of 2022, 1827 of 2022 and 1810 of 2022. In
all the civil appeals filed by the resolution professional, he is arrayed as
one of the respondents.
7.1.2. Mr. Radhakrishnan Dharmarajan
 He is the resolution professional, who was appointed by the CoC
in the third meeting dated 04.09.2020 and his appointment was confirmed
by the NCLT in order dated 02.11.2020. He is appellant in Civil Appeal
Nos. 1756 of 2022, 1807 of 2022, 1757 of 2022 and 1759 of 2022. In all
the civil appeals filed by the resolution applicant, he is arrayed as proforma
respondent No. 2.
7.2. The second category is of the contesting respondents in this
batch of appeals, who are essentially supporting the order passed by the
Appellate Tribunal. They could reasonably be introduced as follows:
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7.2.1. Dr. Periasamy Palani Gounder13
 He is the promoter and erstwhile director of the corporate debtor,
Appu Hotels Limited. He is also the Chairman of Dharani Finance
Limited, the related party. He is respondent No. 1 in Civil Appeal Nos.
1682-1683 of 2022, 1756 of 2022 and 1807 of 2022.
7.2.2. Dharani Finance Limited
 The claim of this company, in its capacity as an operational creditor
as also a financial creditor of the corporate debtor, was rejected by
NCLT for being a related party. However, NCLAT directed the CoC to
not discriminate it from unrelated financial/operational creditors. This
company is respondent No. 1 in Civil Appeal Nos. 1757 of 2022 and
1827 of 2022.
7.2.3. Dr. V. Janakiraman
 He is an NRI shareholder and erstwhile director of the corporate
debtor who had, along with other shareholders, invested money in the
corporate debtor. He is aggrieved of denial of the claim of shareholders
in the resolution plan in question and has raised a few other questions
too alongwith the aforesaid promoter and director of the corporate debtor.
He is respondent No. 1 in Civil Appeal Nos. 1810 of 2022 and 1759 of
2022.
8. Apart from the above-mentioned parties, who are directly
impleaded in these appeals, there are other stakeholders, standing in
their capacity as financial creditors and having their own role in CIRP in
question. They include:
8.1. State Bank of India14
This financial creditor of the corporate debtor with nearly 26.41%
voting share in CoC, though had earlier voted in favour of the resolution
plan in question but now, looking to the order of NCLAT relating to
eligibility deficiency of the successful resolution applicant as also the
deficiency in process, is essentially supporting the rejection of resolution
plan in question and remand of matter to CoC for consideration afresh.
13 Hereinafter also referred to as 'the promoter'.
14 'SBI', for short.
M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI
GOUNDER & ANR. [DINESH MAHESHWARI, J.]
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8.2. Edelweiss Asset Reconstruction Company Limited along
with IDBI Debentures Trusteeship Limited and Allium Finance Private
Limited15
These financial creditors, with about 21.13% voting share in CoC,
too had voted in favour of the resolution plan in question. They have
raised questions on the order passed by NCLAT on various grounds.
This apart, they have underscored certain other areas of concern including
the amount deposited by the resolution applicant, and have also suggested
that CIRP must be allowed to go on while leaving the promoter a right to
better the resolution plan by way of a Swiss Challenge Process only
after depositing the matching amount in an escrow account prior to voting
on his settlement offer.
8.3. Tourism Finance Corporation of India Limited
This financial institution with 5.62% of the voting share in CoC
got initiated the CIRP in question with admission of its application under
Section 7 of the Code by the NCLT on 05.05.2020 (IBA No. 1459 of
2019).
The relevant factual and background aspects
9. Having taken note of the relevant particulars of the proceedings
as also the principal parties involved, we may now take note of the
relevant factual and background aspects, in brief, as infra.
10. The corporate debtor, Appu Hotels Limited, is a
limited company with corporate identification number
U92490TN1983PLC009942 and registered office at PGP House, No.57,
Sterling Road, Nungambakkam, Chennai - 600 034. The promoter group
of the corporate debtor consists of around one hundred non-resident
investors living in the United States of America, who are said to have
invested over twenty-two million US dollars in foreign exchange in the
corporate debtor. The corporate debtor had availed project loans to
construct 'Le Meridian, Coimbatore', from a consortium of bankers led
by Indian Bank. It appears that the business did not materialise as per
the estimated projections. The promoters and directors brought in nearly
Rs. 100 crore as unsecured loans over and above the cash flow to keep
the corporate debtor's asset as standard. It further appears that though
the hotel was making operational profit, but the profit was insufficient to
15 'Edelweiss & associates', for short and collectively.
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service the loan repayment to the optimum requirement and the corporate
debtor defaulted in payment of overdues.
Initiation of CIRP
11. The default on the part of corporate debtor in payment of
overdues led to the application under Section 7 of the Code for initiation
of CIRP by one of its financial creditors, TFCI (who holds about 5% of
the total loan amount) before the NCLT, in Application No. IBA/1459/
2019. It appears that a few propositions of One Time Settlement 16 were
mooted on behalf of the corporate debtor but without any effective result,
for the corporate debtor having not been able to make payment against
the dues of the financial creditor. The NCLT observed that there being
the existence of a financial debt and there being a default on the part of
the corporate debtor, the application moved by the financial creditor was
bound to be admitted and as a consequence, triggering the corporate
insolvency resolution process. Accordingly, the NCLT, by its order dated
05.05.2020, admitted this application and appointed one Mr. Mukesh
Kumar Gupta as interim resolution professional17 with other necessary
directions in the following terms: -
"12. Heard the Counsel for both the parties and perused the
documents placed on record. It Is a fact borne on record that the
Corporate Debtor is unable to repay the dues to the Financial
Creditor and as such on the garb of OTS settlement the Corporate
Debtor wanted to gain time to settle of the dues to the Financial
Creditor. Further, a perusal of the record of proceedings dated
04.02.2020, also shows that the Corporate Debtor was putting in
efforts to settle of the dues of the Financial Creditor and upon
such representation being made, the Corporate Debtor was granted
time to settle the matter and the matter was finally posted to
02.03.2020 for reporting settlement or to proceed with the matter.
Thus, when the matter was taken up for enquiry on 02.03.2020, it
has been brought to the notice of this Tribunal by the Counsel for
the Financial Creditor that the Corporate Debtor has not paid the
dues of the Financial Creditor and also the Learned Counsel for
the Financial Creditor submitted that even in the affidavit filed by
the Corporate Debtor, the outstanding debt has been admitted
which Is owed to the Financial Creditor.
16 'OTS', for short.
17 'IRP' for short.
M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI
GOUNDER & ANR. [DINESH MAHESHWARI, J.]
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13. Thus, we are satisfied that there is a debt and default on the
part of the Corporate Debtor and the Corporate Debtor is unable
to repay its dues to the Financial Creditor. It has also been
consistently held by the Hon'ble Supreme Court both in
Innoventive Industries Ltd. -Vs- ICICI Bank and another
(2018) 1 SCC 407 as well as Mobilox Innovations Pvt. Ltd ..
-Vs- Kirusa Software Pvt. Ltd.(2018) 1 SCC 353 after going
through the Scheme of l&B Code, 2016 in depth in relation to an
Application under Section 7 filed by a Financial Creditor as
compared to the one filed under Section 9 by an Operational
Creditor, in relation to a Section 7 Application where there is an
existence of a 'financial debt' and when there is a default, this
Tribunal is bound to admit the Application and as a consequence
trigger the Corporate Insolvency Resolution Process (CIRP) and
in relation to a Section 7 Application defence of set off or counter
claim put forth by the Corporate Debtor cannot be considered as
a dispute In relation to the Financial debt and default In relation to
It. In the present case, it is clear that there is a default on the part
of the Corporate Debtor.
14. Thus taking into consideration the facts and circumstances of
the case as well as the position of Law, we are of the view that
this Application as flied by the Applicant - Financial Creditor is
required to be admitted under Section 7 (5) of the I&B Code,
2016.
15. The Financial Creditor has proposed the name of one
MUKESH KUMAR GUPTA having Registration Number
[IBBI/IPA-001/IP-P00207/2017-18/10407] (Email id :-
guptam11@ gmail.com) (Mob:- +91-9810798961) as Interim
Resolution Professional (IRP) and a written communication in
the format prescribed under Form 2 of the Insolvency and
Bankruptcy Board of India (Application to Adjudicating Authority)
Rules, 2016 has been filed by the proposed IRP who is appointed
as the IRP to take forward the process of Corporate Insolvency
Resolution of the Corporate Debtor. The IRP appointed shall take
in this regard such other and further steps as are required under
the Statute, more specifically in terms of Section 15,17,18 of the
Code and file his report within 20 days before this Bench. The
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powers of the Board of Directors of the Corporate Debtor shall
stand superseded as a consequence of the initiation of the CIR
Process in relation to the Corporate Debtor in terms of the
provisions of I&B Code, 2016.
 ***
***
***
19. Based on the above terms, the Petition stands admitted in
terms of Section 7 of the Code and the Moratorium shall come
into effect as of this date. A copy of the order shall be
communicated to the Petitioner as well as to the Respondent above
named by the Registry. In addition, a copy of the order shall also
be forwarded to IBBI for its records. Further, the IRP above
named be also furnished with copy of this order forthwith by the
Registry, who will also communicate the initiation of the CIRP in
relation to the Corporate Debtor to the Registrar of Companies
concerned."
CoC Meetings and ancillary proceedings
12. CIRP in relation to the corporate debtor having thus been
initiated, various steps were taken in terms of the requirements of the
Code and the CIRP Regulations, including the meetings of CoC which
ultimately led to the approval of the resolution plan in question. Some of
those steps carry their own relevance in these appeals in view of the
issues raised by the parties. We may briefly take note of the relevant
steps/proceedings in their feasible chronology as follows:
12.1. Pursuant to the initiation of CIRP, IRP issued a public
announcement in Form A on 08.05.2020 inviting claims from various
stakeholders in the corporate debtor. Further, for conducting the first
meeting of the committee of creditors on 22.06.2020, IRP issued a notice
on 18.06.2020. The said meeting was attended by all the members of
the CoC including the promoter and erstwhile director of the corporate
debtor.
12.2. In the second CoC meeting conducted on 06.08.2020, the
proposal of IRP in relation to information memorandum and to seek EOI
by publication of Form G was approved. Two sets of valuators were
engaged as registered valuators by IRP for all the three categories of
assets, being Mr. Vikas Agarwal, Mr. Anil Kumar Saxena and Mr.
Anubhav Aggarwal (one set); and Future Value Advisors India (P) Ltd,
M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI
GOUNDER & ANR. [DINESH MAHESHWARI, J.]
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a registered valuer entity registered with the Insolvency and Bankruptcy
Board of India18. Their fees were also approved by the CoC.
12.3. On or about 17.08.2020, the IRP published Form G under
Regulation 36A of the CIRP Regulations, inviting expression of interest
from prospective resolution applicants to submit resolution plans.
12.4. Thereafter, in the third CoC meeting held on 04.09.2020, a
resolution was adopted to appoint Mr. Radhakrishnan Dharmarajan as
the resolution professional. It was in the same meeting that the list of
fifteen EOIs received from the prospective resolution applicants and
placed by IRP, was approved by CoC. It was further informed to CoC in
the said meeting by IRP that the valuation was in process and the valuers
may visit the premises of corporate debtor. On 26.09.2020, the IRP
published the final list of prospective resolution applicants. It may be
observed in this regard that pursuant to publication of provisional list and
upon preliminary scrutiny, thirteen of the EOIs received were initially
found eligible, of which, one had withdrawn and the other namely, Sri
Balaji Vidyapeeth (of which the successful resolution applicant was the
managing trustee), was declared ineligible since a charitable trust cannot
run a profit-making entity. Hence, the final list of eleven prospective
resolution applicants was submitted before the CoC on 26.09.2020. Finally,
three resolution plans were received, from Mr. Madhav Dhir, Mr. M.K.
Rajagopalan (the resolution applicant - appellant herein) and Kotak
Special Solutions.
12.5. In the fourth CoC meeting held on 12.10.2020, IRP apprised
the members about the valuers visiting the properties of the corporate
debtor and the valuation being in process.
12.6. On 27.10.2020, the appellant Mr. M.K. Rajagopalan submitted
his resolution plan alongwith a demand draft in the sum of Rs. 2 crore.
On 02.11.2020, the Tribunal approved the appointment of Mr.
Radhakrishnan Dharmarajan as the resolution professional.
12.7. In the fifth CoC meeting held on 12.11.2020, in the first item
on the agenda, the members took note of the appointment of Mr.
Radhakrishnan Dharmarajan as the resolution professional. Thereafter,
on the second item, the CoC approved that the resolution professional
shall file an application before NCLT to seek extension of time period
18 'IBBI', for short.
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from 05.05.2020 to 31.10.2020 under Section 12(2) of the Code due to
Covid-19 and lockdown. In the third agenda item as regards updates
from RP and to decide on the resolution plan deadline extensions/possible
reissuance of Form G, various views were expressed by various
stakeholders which culminated in the following observations and
resolution: -
"Since there were mixed views of CoC the process and
way forward, RP declared that it is the CoC who needs to decide
on the commercial viability of the Resolution Process to its best
advantage, be it re issuance of the Form G and or extension of the
timelines and he will act as per the directions of the CoC.
CoC members further discussed on the Form G, receipt of
Resolution Plans and any potential requests from any of the RA's
about extension of time.
With the consensus of CoC members, it was decided that
no extension of timeline for submission of Resolution Plan
should be done and the RP was directed to expedite the
valuation process and check the feasibility and viability of
the Resolution Plans already submitted and present the
eligible Resolution Plans before the CoC for consideration."
12.8. In the sixth CoC meeting held on 16.12.2020, the RP apprised
the CoC members about three resolution plans having been received out
of which, the plan received from Kotak Special Solutions did not meet
the criteria laid down under the Code. The RP also informed that there
had been a revision in the claims and composition of financial creditors
and as it was mandatory to give the revised details to the two resolution
applicants, the formal presentation and the resolution applicants could
be called after they revise the plans. In this meeting, the RP also apprised
the CoC members about filing of time exclusion application, which was
heard on 15.12.2020 and order was reserved.
12.8.1. In the said sixth meeting, the RP also informed that he had
provided the CoC members with the fair value and liquidation value to
all those who had submitted the confidential undertaking and that that
due to significant difference in the value of land and building submitted
by the valuers appointed by IRP, he shall have to appoint third valuer in
accordance with Regulation 35 of the CIRP Regulations. It was also
noted that valuation of non-core assets was not done earlier but, the
M. K. RAJAGOPALAN v. DR. PERIASAMY PALANI
GOUNDER & ANR. [DINESH MAHESHWARI, J.]
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third valuer appointed by RP had submitted the value of non-core assets
and the same had been shared with CoC members who had submitted
their undertaking. The RP emphasized that their value was not very
significant, and it would not affect the liquidation value much. The relevant
part of the minutes of this sixth CoC meeting could be reproduced as
under: -
"The RP apprised the CoC members that based on the resolution
passed in 5th CoC meeting an exclusion application along with an
urgent application was filed before the NCLT Chennai on
19.11.2020.