2019 (3) TMI 1706 - Tri - Insolvency and Bankruptcy

Approval of ArcelorMittal's Resolution Plan with Conditions

Standard Chartered Bank, State bank of India & Others Versus Essar Steel India Ltd.

The Resolution Plan submitted by ArcelorMittal India Pvt. Ltd. was conditionally approved, subject to the suggested equitable distribution of funds among ... Approval of a Resolution Plan - Section 31 of the Insolvency and Bankruptcy Code - Application dismissed default for want of prosecution - HELD THAT:- Section 30(2)(e) of I & B Code stipulates that the resolution plan should not contravene any provisions of law for the time being in force. Therefore, the law of the land must be given due respect and weightage while implementing such resolution plan which include the constitutional law as declared by the Honourable Supreme Court, which has binding effect under Article 141 of the Constitution of India and all the authorities - civil and judicial - shall act in aid of the decision of the Honourable Supreme Court under Article 144 of the Constitution of India. A careful perusal of the resolution plan submitted by H-l Resolution Applicant also speaks about the severability clause stating that if such concession/exemption, which are not approved or confirmed by this Adjudicating Authority, are not be treated to make redundant the plan and the plan can be enforced and implemented. Moreover, the provisions of Section 31(4) provide that a resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under Sub-section (1) or within such period as provided for in such law, whichever is later. The statute has already taken care of all the interests of the resolution applicant by providing on year's time for seeking necessary approval required under any law for the time being in force for implementation the resolution plan. Therefore, our this order for approving the resolution plan cannot purport nor can be construed to have given any exemption in law or statutory concession, because, in our humble view, it lies in the domain of an appropriate Government and competent Authority. Application approved. Issues Involved:1. Approval of the Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code (IBC).2. Treatment of claims by financial creditors, operational creditors, and other stakeholders.3. Requests for statutory reliefs and concessions.4. Compliance with Section 30(2) of the IBC and Regulation 38 of the CIRP Regulations.5. Objections by various creditors and stakeholders regarding the distribution of the resolution amount.6. Judicial review of the Committee of Creditors (CoC) decisions.Detailed Analysis:1. Approval of the Resolution Plan:The Resolution Professional (RP) submitted the Resolution Plan under Section 30(6) of the IBC, seeking approval from the Adjudicating Authority. The plan was approved by the CoC with a 92.24% majority vote. The Adjudicating Authority's role is to ensure that the plan complies with Section 30(2) of the IBC and does not contravene any laws. The plan is binding on all stakeholders once approved.2. Treatment of Claims:Financial Creditors:The plan proposes an upfront payment of Rs. 42,000 crores to secured financial creditors and Rs. 17.4 crores to unsecured financial creditors. Additionally, Rs. 3.05 crores is proposed for unsecured financial creditors with claims less than Rs. 10 lakhs.Operational Creditors:The plan includes a provision of Rs. 196 crores for trade creditors and government creditors, and Rs. 18 crores for workmen and employees. However, operational creditors with claims above Rs. 1 crore are to receive a token amount of Rs. 1, which was deemed inequitable and discriminatory.Other Creditors:No payments were proposed for other creditors.3. Requests for Statutory Reliefs and Concessions:The Resolution Applicant sought several statutory reliefs and concessions, including exemptions from stamp duty, taxes, fees, and other charges. The Adjudicating Authority clarified that such requests fall within the domain of the appropriate government and statutory authorities and cannot be granted as a matter of right.4. Compliance with Section 30(2) and Regulation 38:The RP confirmed that the Resolution Plan met the requirements of Section 30(2) and Regulation 38 of the CIRP Regulations. The plan provided for the payment of insolvency resolution process costs, repayment to operational creditors, and management and supervision of the corporate debtor post-approval.5. Objections by Creditors and Stakeholders:Various creditors, including Standard Chartered Bank, objected to the plan's distribution method, arguing it was discriminatory. The Adjudicating Authority suggested a more equitable distribution method, proposing that 85% of the Rs. 42,000 crores be distributed among financial creditors and 15% among operational creditors and other stakeholders. This would ensure a fairer treatment of all creditors.6. Judicial Review of CoC Decisions:The Adjudicating Authority emphasized its limited scope in reviewing the commercial decisions of the CoC, as established by the Supreme Court in the K. Sashidhar case. The Authority can only ensure that the plan complies with the IBC and cannot substitute its judgment for the CoC's commercial wisdom.Conclusion:The Resolution Plan submitted by ArcelorMittal India Pvt. Ltd. was conditionally approved, subject to the suggested equitable distribution of funds among creditors. The plan's approval is binding on all stakeholders, and the moratorium order ceases to have effect. The RP is directed to forward all records to the Board for recording in its database. All interim applications related to the CIRP are disposed of as infructuous.