Tribunal upholds Revised Resolution Plan approval by CoC, dismisses challenge. Plan compliant with IBC.

The Tribunal rejected the Applicants' challenge to the Revised Resolution Plan, finding it validly approved by the CoC with a 75.4% majority vote. The Tribunal held that the plan complied with the IBC and related regulations, dismissing the Applicants' objections of preferential treatment and lack of proper discussion. The Application was dismissed as the Tribunal found no illegality, discrimination, or violation of the IBC, and no demonstrated prejudice to the Applicants.

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Issues Involved:
1. Validity of the Revised Resolution Plan.
2. Alleged preferential treatment within the same class of Financial Creditors.
3. Compliance with the Insolvency and Bankruptcy Code (IBC) and related regulations.
4. Voting shares and their impact on the Resolution Plan.
5. Objections raised by dissenting Financial Creditors.
6. Adherence to procedural requirements and timelines.

Detailed Analysis:

1. Validity of the Revised Resolution Plan:
The Revised Resolution Plan submitted by Linen Art Pvt. Ltd. was contested by the Applicants (State Bank of India and another) on grounds that it was not discussed or approved in earlier meetings of the Committee of Creditors (CoC). The Applicants argued that the plan reduced their payment entitlements without proper basis or discussion, thereby violating the principles of the IBC.

2. Alleged Preferential Treatment within the Same Class of Financial Creditors:
The Applicants contended that the Revised Resolution Plan provided preferential treatment to Canara Bank by allocating additional payments due to its first charge on a term loan. They argued that this preferential treatment was against the scheme of the IBC and the Regulations, which mandate equal treatment within the same class of Financial Creditors.

3. Compliance with the IBC and Related Regulations:
The Resolution Professional (RP) acknowledged the objections raised by the Applicants but did not reject the plan due to time constraints and the potential adverse impact on the livelihood of employees. The RP stated that the Revised Resolution Plan complied with Section 30(2) and Regulations 38 and 39 of the IBC, and left the final decision to the CoC.

4. Voting Shares and Their Impact on the Resolution Plan:
The Applicants argued that any change in the financial debt owed to a Financial Creditor should directly affect their voting share. They claimed that their voting shares remained unchanged despite the reduction in their payment entitlements. The RP and Canara Bank countered that the voting shares were correctly determined based on the financial debt owed and that the allocation of funds was a commercial decision by the Resolution Applicant.

5. Objections Raised by Dissenting Financial Creditors:
The Applicants raised objections during the 13th CoC meeting, arguing against the preferential treatment given to Canara Bank. The RP recorded these objections but allowed the plan to be put to vote, emphasizing that the CoC should decide on the distribution of proceeds. The Revised Resolution Plan was ultimately approved with a 75.4% majority vote.

6. Adherence to Procedural Requirements and Timelines:
The Tribunal noted that the Applicants were aware of the changes in the Revised Resolution Plan and had the opportunity to raise objections. The RP certified that the plan complied with the extant provisions of the IBC and related rules. The Tribunal held that the approval of the plan with a 75.4% majority vote met the legal requirement of a minimum 66% voting power.

Conclusion:
The Tribunal rejected the Application (IA No. 412 of 2019) filed by the Applicants, stating that there was no illegality, discrimination, or violation of the IBC or related rules. The Tribunal found that the Revised Resolution Plan was validly approved by the CoC with the requisite majority and that the Applicants had not demonstrated any prejudice caused by the plan. The objections raised by the Applicants were deemed baseless, and the Application was dismissed with no order as to costs.

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