DECCAN VALUE INVESTORS L.P. & ANR.versusDINKAR VENKATASUBRAMANIAN & ANR.

         [2024] 3 S.C.R. 1044 : 2024 INSC 321

          Deccan Value Investors L.P. & Anr.
                         v.
          Dinkar Venkatasubramanian & Anr.
               (Civil Appeal No. 2801 of 2020)
                         06 March 2024
       [Sanjiv Khanna and Dipankar Datta, JJ.]

                    Issue for Consideration
Whether the judgment dated 07.02.2020 passed by the National
Company Law Appellate Tribunal which upholds the order dated
27.09.2019 passed by the National Company Law Tribunal is
legally flawed and unsustainable; Whether the reasons or grounds
taken by the successful resolution applicants in the instant case
qualify and can be treated as a fraud on the part of the resolution
professional.

                           Headnotes
Insolvency and Bankruptcy Code, 2016 – s. 62 – On facts
and to justify withdrawal, it was submitted that in the instant
case, the successful resolution applicants were prevented,
and were handicapped because of lack of information or
rather fraud on the part of the resolution professional –
Propriety:
Held: The Supreme Court in Ebix Singapore Private Limited,
has inter alia held that the resolution applicant cannot withdraw
or modify the resolution plan, after the same is approved by the
Committee of Creditors – It is immaterial that post approval by
the Committee of Creditors, there is consideration under Section
31(1) of the Code by the adjudicating authority for final approval
– The judgment in Ebix Singapore Private Limited elaborates
and sets out several reasons why the resolution applicant
cannot be permitted to withdraw or modify the resolution plan
after approval by the Committee of Creditors, and before an
order under Section 31(1) of the Code is passed – These
reasons include delay, consequences of the delay and the
uncertainty and complexities that would arise in the Corporate
Insolvency Resolution Process, which are unacceptable and not
contemplated in law – Even the terms of the resolution plan,
will not permit withdrawal or modification in the absence of a
[2024] 3 S.C.R.                                                            1045

                    Deccan Value Investors L.P. & Anr. v.
                     Dinkar Venkatasubramanian & Anr.

     statutory provision, that allow withdrawal or amendment in the
     resolution plan after approval by the Committee of Creditors
     – The reasons or grounds taken by the successful resolution
     applicants in the instant case do not qualify and cannot be
     treated as a fraud on the part of the resolution professional –
     This is not a case where misinformation or wrong information
     was given to the resolution applicants – The impugned judgment
     dated 07.02.2020 passed by the NCLAT, upholding the order
     passed by the NCLT, dated 27.09.2019 is set aside – The
     resolution plan, as submitted by the successful resolution
     applicants is approved. [Paras 4, 5, 8, 17]
     Insolvency and Bankruptcy Code, 2016 – Resolution Plan –
     Preparation of:
     Held: Resolution plans are not prepared and submitted by lay
     persons – They are submitted after the financial statements and
     data are examined by domain and financial experts, who scan,
     appraise evaluate the material as available for its usefulness,
     with caution and scepticism – Inadequacies and paltriness of
     data are accounted and chronicled for valuations and the risk
     involved – It is rather strange to argue that the superspecialists
     and financial experts were gullible and misunderstood the details,
     figures or data – The assumption is that the resolution applicant
     would submit the revival/resolution plan specifying the monetary
     amount and other obligations, after in-depth analysis of the fiscal
     and commercial viability of the corporate debtor – Pointing out the
     ambiguities or lack of specific details or data, post acceptance
     of the resolution plan by the Committee of Creditors, should
     be rejected, except in an egregious case were data and facts
     are fudged or concealed – Absence or ambiguity of details and
     particulars should put the parties to caution, and it is for them to
     ascertain details, and exercise discretion to submit or not submit
     resolution plan. [Para 15]

                              Case Law Cited
           Ebix Singapore Private Limited v. Committee of Creditors
           of Educomp Solutions Limited and Another [2021] 14
           SCR 321 : (2022) 2 SCC 401 – relied on.

                                List of Acts
     Insolvency and Bankruptcy Code, 2016.
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                                  List of Keywords
      Resolution Plan; Withdrawal or modification of resolution
      plan; Misinformation or wrong information; Financial experts;
      Inadequacies and paltriness of data; Revival/resolution plan;
      Principle of “clean slate”; Fiscal and commercial viability.

                                 Case Arising From
      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2801 of 2020
      From the Judgment and Order dated 07.02.2020 of the National
      Company Law Appellate Tribunal, New Delhi in Company Appeal
      (AT) (Insolvency) No. 1281 of 2019
      With
      Civil Appeal Nos. 2642 and 2432 of 2020
                              Appearances for Parties
      Dr. A.M. Singhvi, Guru Krishna Kumar, Shyam Divan, Sr. Advs.,
      Mahesh Agarwal, Rishi Agrawala, Rohan Dakshni, Ms. Nikita Mishra,
      Himanshu Satija, Ms. Geetika Sharma, Nidhi Ram Sharma, Ms.
      Aakansha Kaul, E. C. Agrawala, S. S. Shroff, Ms. Misha, Anoop
      Rawat, Siddhant Kant, Saurav Panda, Nikhil Mathur, Prithviraj
      Oberoi, Ms. Anannya Ghosh, Brian Henry Moses, Rohan Talwar,
      Ms. Nidhi Ram Shrama, Ms. Nidhi Ram Sharma, Advs. for the
      appearing parties.
                       Judgment / Order of the Supreme Court

                                       Order
1.    This order would decide the cross-appeals under Section 62 of
      the Insolvency and Bankruptcy Code, 20161 filed by the successful
      resolution applicants – Deccan Value Investors L.P. and DVI PE
      (Mauritius) Ltd.; the Committee of Creditors of Metalyst Forgings
      Limited; and Dinkar Venkatasubramanian - the Resolution Professional
      of Metalyst Forgings Limited.
2.    The company in question, the corporate debtor, is Metalyst Forgings
      Ltd.



1    “the Code” for short
[2024] 3 S.C.R.                                                         1047

                          Deccan Value Investors L.P. & Anr. v.
                           Dinkar Venkatasubramanian & Anr.

3.     In our opinion, the impugned judgment dated 07.02.2020 passed
       by the National Company Law Appellate Tribunal2, New Delhi,
       which upholds the order dated 27.09.2019 passed by the National
       Company Law Tribunal3, Mumbai Bench, Mumbai, is legally flawed
       and unsustainable in view of the judgment of this Court in “Ebix
       Singapore Private Limited v. Committee of Creditors of Educomp
       Solutions Limited and Another”4.
4.     This Court in Ebix Singapore Private Limited (supra), has inter alia
       held that the resolution applicant cannot withdraw or modify the
       resolution plan, after the same is approved by the Committee of
       Creditors. It is immaterial that post approval by the Committee of
       Creditors, there is consideration under Section 31(1) of the Code
       by the adjudicating authority for final approval.
5.     The judgment in Ebix Singapore Private Limited (supra) elaborates
       and sets out several reasons why the resolution applicant cannot be
       permitted to withdraw or modify the resolution plan after approval by
       the Committee of Creditors, and before an order under Section 31(1)
       of the Code is passed. These reasons include delay, consequences
       of the delay and the uncertainty and complexities that would arise in
       the Corporate Insolvency Resolution Process, which are unacceptable
       and not contemplated in law. Even the terms of the resolution plan,
       will not permit withdrawal or modification in the absence of a statutory
       provision, that allow withdrawal or amendment in the resolution plan
       after approval by the Committee of Creditors. The resolution plan
       approved by the Committee of Creditors is a creature of the Code
       and not a pure contract between two consenting parties.
6.     During the course of arguments, our attention was drawn to the proviso
       to Section 31(1) of the Code, which postulates that the adjudicating
       authority, before passing an order for approval of the resolution
       plan, must satisfy itself that the resolution plan has provisions for
       its effective implementation. Ebix Singapore Private Limited (supra)
       did examine this provision but rejected the argument on several
       grounds, including absence of legislative mandate to direct unwilling
       Committee of Creditors to re-negotiate or agree to withdrawal of the


2    “NCLAT” for short
3    “NCLT” or “adjudicating authority”, for short
4    [2021] 14 SCR 321 : (2022) 2 SCC 401
1048                                                        [2024] 3 S.C.R.

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     resolution plan at the behest of the resolution applicant. The effect
     of approval by the adjudicating authority under Section 31(1) of the
     Code makes the resolution plan binding on all stakeholders, even
     those who are not members of the Committee of Creditors. The
     scrutiny by the adjudicating authority for grant of approval in terms
     of Section 31(1), read with other provisions of the Code, is limited
     and restricted. It does not allow or permit the resolution applicant
     to unilaterally amend/modify, or withdraw the resolution plan post
     approval by the Committee of Creditors.
7.   On facts and to justify the withdrawal, it was submitted that in the
     present case, the successful resolution applicants were prevented,
     and were handicapped because of lack of information or rather
     fraud on the part of the resolution professional. Four aspects were
     highlighted: -
          (a)   It was concealed that 70 per cent of the revenue
                of the corporate debtor came from trading, and not
                from manufacturing.
          (b)   The Mott Macdonald Report dated 30.09.2016 is
                factually incorrect and flawed.
          (c)   Misleading and false statement was made with regard
                to the uninstalled imported components of 12,500
                M.T. Press, which were stored in the land of a sister
                concern – Clover Forging and Machining Pvt. Ltd.
          (d)   The successful resolution applicants were misled in
                view of the non-reliability of financial data. There was
                ongoing financial/forensic audit.
8.   The aforesaid reasons or grounds taken by the successful resolution
     applicants do not qualify and cannot be treated as a fraud on the part
     of the resolution professional. This is not a case where misinformation
     or wrong information was given to the resolution applicants.
9.   We have been taken through the information memorandum, as well
     as, the data in the virtual data room, access to which was granted
     to the prospective resolution applicant(s), before they had submitted
     their resolution plan(s).
10. We have also been taken through the documents, which would show
    the manufacturing output, as well as the capacity of realisation of the
[2024] 3 S.C.R.                                                      1049

                    Deccan Value Investors L.P. & Anr. v.
                     Dinkar Venkatasubramanian & Anr.

     four units of the corporate debtor. The excise returns, as well as the
     VAT returns etc., were available in the virtual data room.
11. The Mott Macdonald Report was submitted by the said consultants in
    September, 2016 at the behest of the erstwhile promoters/directors of
    the corporate debtor. The report itself is hedged with conditions and
    disclaimers. Value and worth of the report, the data and projections
    were for the prospective resolution applicants to evaluate.
12. On the aspect of 12,500 M.T. Press, it was clearly stated and noted
    that the said Press after import, was stored in the shed belonging
    to Clover Forging and Machining Pvt. Ltd.
13. Submission regarding the non-availability of Floor Space Index (FSI)
    at the plant in Aurangabad, was made with reference to the statement
    made by an employee of the corporate debtor. We are not inclined
    to accept this version of the successful resolution applicant. The
    corporate debtor has four units, three units in Maharashtra and one
    unit in Himachal Pradesh. False projection was not made.
14. The resolution plan submitted by the successful resolution applicants
    refers to the transaction audits being undertaken and acknowledges
    appropriation of the proceeds, if any available, to the resolution
    professional on the recoveries being made for prior period. The
    principle of “clean slate” is well established and known.
15. Resolution plans are not prepared and submitted by lay persons.
    They are submitted after the financial statements and data are
    examined by domain and financial experts, who scan, appraise
    evaluate the material as available for its usefulness, with caution and
    scepticism. Inadequacies and paltriness of data are accounted and
    chronicled for valuations and the risk involved. It is rather strange
    to argue that the superspecialists and financial experts were gullible
    and misunderstood the details, figures or data. The assumption is
    that the resolution applicant would submit the revival/resolution plan
    specifying the monetary amount and other obligations, after in-depth
    analysis of the fiscal and commercial viability of the corporate debtor.
    Pointing out the ambiguities or lack of specific details or data, post
    acceptance of the resolution plan by the Committee of Creditors,
    should be rejected, except in an egregious case were data and
    facts are fudged or concealed. Absence or ambiguity of details and
    particulars should put the parties to caution, and it is for them to
1050                                                     [2024] 3 S.C.R.

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     ascertain details, and exercise discretion to submit or not submit
     resolution plan.
16. Records of corporate debtor, who are in financial distress, may
    suffer from data asymmetry, debatable or even wrong data. Thus,
    the provision for transactional audit etc, but this takes time and is
    not necessary before information memorandum or virtual data room
    is set up. Financial experts being aware, do tread with caution.
    Information memorandum is not to be tested applying “the true picture
    of risk” obligation, albeit as observed by the NCLAT the resolution
    professional’s obligation to provide information has to be understood
    on “best effort” basis.
17. In view of the aforesaid position, we set aside the impugned judgment
    dated 07.02.2020 passed by the NCLAT, upholding the order passed
    by the NCLT, dated 27.09.2019. In other words, we accept the present
    appeals and it is held that the resolution plan, as submitted by the
    successful resolution applicants – Deccan Value Investors L.P. and
    DVI PE (Mauritius) Ltd., is approved.
18. To cut short the delay, parties are directed to appear before the NCLT
    on 09.04.2024, when further proceedings will take place.
19. Recording the aforesaid, the appeals are allowed in the above terms.
20. Pending application(s), if any, shall stand disposed of.

     Headnotes prepared by: Ankit Gyan                  Result of the case:
                                                          Appeals allowed.