2018 (9) TMI 1959 - AT - Insolvency and Bankruptcy

Operational Creditor Appeal on Resolution Plan Approval Dismissed: Code Compliance Confirmed

The appellant, an Operational Creditor, challenged the approval of a Resolution Plan under the Insolvency and Bankruptcy Code, 2016, which was submitted ... Approval of Resolution Plan - impugned order was passed without notice and hearing the appellant (Operational Creditor) - violation of Section 30(2) of the I&B Code - HELD THAT:- Such submission cannot be accepted as there is no requirement to issue notice to the ‘Operational Creditor(s)’ or any other ‘creditors’ for approving a ‘Resolution Plan’ under Section 31 of the I&B Code, having already approved by the ‘Committee of Creditors’ by majority voting share and in absence of any violation of Section 30(2) of the I&B Code. It was next contended that under the provisions of ‘Gujarat Electricity Regulatory Commission (Electricity Supply Code and related matters) Regulations, 2015’, no electrical connection can be restored in favour of the ‘Corporate Debtor’ till the total amount due to the Electricity Company (appellant herein) is paid - HELD THAT:- Such submission cannot be accepted in view of the provisions of Section 31 of the I&B Code, where it was made clear that the ‘Resolution Plan’ is binding on the ‘Corporate Debtors’, ‘Financial Creditors’, ‘Operational Creditors’ and all other ‘stakeholders’ including ‘guarantors’. The provision of Section 31 being binding on the appellant - ‘Operational Creditor’, in view of Section 238 of the I&B Code, the provisions of ‘Gujarat Electricity Regulatory Commission (Electricity Supply Code and related matters) Regulations, 2015’, cannot override the same. As per the approved ‘Resolution Plan’ a sum of ₹ 80.80 Lakhs is payable to the appellant (Operational Creditor). The said amount having paid by the successful ‘Resolution Applicant’, the appellant in its turn is required to restore the electricity connection of the ‘Corporate Debtor’ - there are no merits in the present appeal - appeal dismissed. Issues:- Approval of Resolution Plan under the Insolvency and Bankruptcy Code, 2016- Requirement of notice to Operational Creditors for approving Resolution Plan- Conflict between Gujarat Electricity Regulatory Commission Regulations and I&B Code- Payment to Operational Creditor for restoration of electricity connection1. Approval of Resolution Plan under the Insolvency and Bankruptcy Code, 2016:The appellant, an Operational Creditor, challenged the approval of a Resolution Plan by the Adjudicating Authority in a corporate insolvency resolution process. The Resolution Plan submitted by a third party was approved, leading to the appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016. The Committee of Creditors had already approved the plan, and the Adjudicating Authority found it to meet the requirements of the Code. The Resolution Plan was deemed binding on the Corporate Debtor, Financial Creditors, Operational Creditors, and all stakeholders, in accordance with the provisions of Section 31 of the Code. The appellant's appeal was dismissed as the Resolution Plan was found to be valid and binding.2. Requirement of notice to Operational Creditors for approving Resolution Plan:The appellant contended that the impugned order was passed without notice or hearing to the Operational Creditor, which was refuted based on the Code's provisions. It was clarified that there is no mandatory requirement to issue notice to Operational Creditors or other creditors for approving a Resolution Plan under Section 31 of the I&B Code. The approval by the Committee of Creditors and absence of violation of Section 30(2) of the Code were considered sufficient for approving the Resolution Plan without individual notice to creditors.3. Conflict between Gujarat Electricity Regulatory Commission Regulations and I&B Code:The appellant argued that under the Gujarat Electricity Regulatory Commission Regulations, no electrical connection could be restored to the Corporate Debtor until the due amount was paid to the Electricity Company. However, the Adjudicating Authority highlighted the supremacy of the I&B Code, specifically Section 31, which mandates that a Resolution Plan approved by the Authority is binding on all stakeholders, overriding any conflicting regulations. The provisions of the I&B Code were deemed to prevail over the state regulations in this context.4. Payment to Operational Creditor for restoration of electricity connection:As per the approved Resolution Plan, a specific amount was payable to the Operational Creditor for the restoration of the electricity connection to the Corporate Debtor. Once the successful Resolution Applicant paid the required sum, the Operational Creditor was obligated to restore the connection. The Tribunal found no merit in the appeal challenging this aspect of the Resolution Plan and subsequently dismissed the appeal without costs.