2019 (12) TMI 1490 - AT - Insolvency and Bankruptcy

Appeal Decisions on Creditor Classification, Distribution, and Claims in Insolvency Case

The appeal by 'Tourism Finance Corporation of India Limited' challenging its classification as an 'Unsecured Financial Creditor' was dismissed as the ... Seeking approval of the ‘Resolution Plan’ - Tourism Finance Corporation of India Limited - Categorized as ‘Unsecured Financial Creditor’ - correct or not - Section 30(6) r/w Section 31 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The question as to whether the ‘Tourism Finance Corporation of India Limited’ is a ‘Secured Creditor’ or ‘Unsecured Creditor’ is a question of fact normally determined by the ‘Resolution Professional’ or the ‘Committee of Creditors’ or in appropriate cases it has also been discussed by the ‘Committee of Creditors’ - The Adjudicating Authority (National Company Law Tribunal) or this Appellate Tribunal (National Company Law Appellate Tribunal) has no jurisdiction to decide the same in an appeal preferred under Section 61(3) of the ‘I&B Code’. As the case of the Appellant- ‘Tourism Finance Corporation of India Limited’ was not covered by any of the grounds mentioned in Section 61(3) and this Appellate Tribunal cannot decide the question of fact relating to whether it is a ‘Secured Creditor’ or ‘Unsecured Creditor’, the impugned order need not be interfered with. Amount of interest to be included as on Insolvency Commencement Date, is reduced without any explanation - HELD THAT:- The ‘Committee of Creditors’ has made the distribution in terms of Section 30(4), this Appellate Tribunal has no jurisdiction to question the distribution so made - Admittedly, the Appellant- ‘Virag Enterprise’ has been provided the amount more than the liquidation value, therefore, it cannot allege that the plan is violative of Section 30(2)(b) of the ‘I&B Code’. If the Appellant does not accept the amount within the time frame, as proposed, in such case, it will not be entitled to receive any amount as the Appellant is not a ‘Secured Creditor’, it may not receive 10% - This Appellate Tribunal cannot sit in an appeal over such decision of the ‘Committee of Creditors’ which approved the plan with more than 77.79% of the voting shares looking into the viability, feasibility and other factors prescribed by the Insolvency and Bankruptcy Board of India - Appeal dismissed. Demand towards Value Added Tax/ Central Sales Tax due from the ‘Corporate Debtor’ by Demand Notice in Form 305 under the ‘Gujarat Value Added Tax, 2003, and Demand Notice in Form 8(B) under the Central Sales Tax Act, 1956 - HELD THAT:- In view of Statement of Objects and Reasons of the ‘I&B Code’ read with Section 53 of the ‘I&B Code’, the Government cannot claim first charge over the property of the ‘Corporate Debtor’. Section 48 cannot prevail over Section 53. Therefore, the Appellant- ‘State Tax Officer- (1)’ do not come within the meaning of ‘Secured Creditor’ as defined under Section 3(30) read with Section 3(31) of the ‘I&B Code’ - Further, as ‘Sales Tax Department’ filed its claim at belated stage after the plan had been approved by the ‘Committee of Creditors’, the ‘Resolution Professional’ had no jurisdiction to entertain the same and rightly not entertained - There are no merit in this appeal preferred by ‘State Tax Officer (1)’. It is accordingly dismissed. Payment of provident fund amount - HELD THAT:- As no provisions of the ‘Employees Provident Funds and Miscellaneous Provision Act, 1952’ is in conflict with any of the provisions of the ‘I&B Code’ and, on the other hand, in terms of Section 36 (4) (iii), the ‘provident fund’ and the ‘gratuity fund’ are not the assets of the ‘Corporate Debtor’, there being specific provisions, the application of Section 238 of the ‘I&B Code’ does not arise - the ‘Successful Resolution Applicant’- 2nd Respondent (‘Kushal Limited’) is directed to release full provident fund and interest thereof in terms of the provisions of the ‘Employees Provident Funds and Miscellaneous Provision Act, 1952’ immediately, as it does not include as an asset of the ‘Corporate Debtor’. The impugned order dated 27th February, 2019 approving the ‘Resolution Plan’ stands modified - appeal preferred by ‘Regional Provident Fund Commissioner’ is allowed. Application disposed off. Issues Involved:1. Classification of 'Tourism Finance Corporation of India Limited' as 'Unsecured Financial Creditor'.2. Distribution and delayed payment to 'Virag Enterprise'.3. Claim of 'Sales Tax Officer (1), Kadi, Dist. Mehsana, Gujarat' as a 'Secured Creditor'.4. Payment of provident fund by 'Regional Provident Fund Commissioner-I, Ahmedabad'.Issue-wise Detailed Analysis:1. Classification of 'Tourism Finance Corporation of India Limited' as 'Unsecured Financial Creditor':The appellant, 'Tourism Finance Corporation of India Limited', contended that its claim was wrongly categorized as 'Unsecured Financial Creditor' instead of 'Secured Financial Creditor' in the 'Resolution Plan' submitted by 'Kushal Limited'. The appellant argued that it was entitled to a higher percentage of the admitted claim as a 'Secured Financial Creditor'. The 'Resolution Professional' and 'Committee of Creditors' discussed the classification and requested the appellant to substantiate its claim as a 'Secured Creditor', which the appellant failed to do. The tribunal determined that the classification was a factual matter to be decided by the 'Resolution Professional' or 'Committee of Creditors' and not by the tribunal under Section 61(3) of the 'I&B Code'. Consequently, the appeal was dismissed.2. Distribution and delayed payment to 'Virag Enterprise':The appellant, 'Virag Enterprise', claimed that its proof of claim was reduced without explanation by the 'Resolution Professional'. The 'Resolution Plan' provided for cash payment of 10% of the outstanding amount in installments and an option to purchase shares. The appellant argued that this arrangement was against Section 30(2) of the 'I&B Code' as the amount was not paid within 30 days. However, the tribunal found that the 'Committee of Creditors' had made the distribution in terms of Section 30(4) and the appellant was provided more than the liquidation value. The tribunal held that it had no jurisdiction to question the distribution made by the 'Committee of Creditors' and dismissed the appeal.3. Claim of 'Sales Tax Officer (1), Kadi, Dist. Mehsana, Gujarat' as a 'Secured Creditor':The appellant, 'Sales Tax Officer (1)', claimed dues towards Value Added Tax/Central Sales Tax and argued that it was a 'Secured Creditor' under Section 48 of the 'Gujarat Value Added Tax, 2003'. The tribunal noted that the appellant approached the 'Resolution Professional' after the approval of the 'Resolution Plan' and that the claim was made at a belated stage. The tribunal held that the appellant's claim did not fall within the meaning of 'Secured Creditor' as defined under the 'I&B Code' and that Section 48 of the 'Gujarat Value Added Tax Act, 2003' could not prevail over Section 53 of the 'I&B Code'. The appeal was dismissed.4. Payment of provident fund by 'Regional Provident Fund Commissioner-I, Ahmedabad':The appellant, 'Regional Provident Fund Commissioner', argued that the 'Resolution Plan' allowed only a part of the provident fund amount, which was against Section 36(4)(iii) of the 'I&B Code'. The tribunal held that the provident fund and gratuity fund are not assets of the 'Corporate Debtor' and directed the 'Successful Resolution Applicant' to release the full provident fund and interest in terms of the 'Employees Provident Funds and Miscellaneous Provision Act, 1952'. The impugned order was modified to this extent, and the appeal was allowed.Conclusion:- The appeals by 'Tourism Finance Corporation of India Limited', 'Virag Enterprise', and 'Sales Tax Officer (1)' were dismissed.- The appeal by 'Regional Provident Fund Commissioner' was allowed with directions to release the full provident fund amount.