Tribunal Upholds Company's Resolution Plan, Emphasizes CoC's Commercial Wisdom

The Tribunal found the Company Petition maintainable and rejected an application based on pendency of a winding-up petition. The Resolution Plan by Dalmia Cement was approved by 100% vote share of the CoC, exceeding the liquidation value. Stakeholders raised objections, but the Tribunal upheld the plan, emphasizing CoC's commercial wisdom. Compliance with legal provisions was stressed, with directions for RP conduct. The Tribunal suggested policy changes for shareholder approval in CIRP cases. Modifications to the Resolution Plan were proposed, with a deadline for acceptance to avoid liquidation proceedings.

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Issues Involved:
1. Maintainability of the Company Petition No. 66/2017.
2. Approval of the Resolution Plan under Section 30(6) of IBC.
3. Objections raised by various stakeholders against the Resolution Plan.
4. Compliance with legal provisions and regulations.
5. Conduct of the Resolution Professional (RP).
6. Suggestions for policy changes regarding shareholder approval.

Issue-wise Detailed Analysis:

1. Maintainability of the Company Petition No. 66/2017:
The Tribunal determined that the Company Petition No. 66/2017 is maintainable as no liquidation order was passed, only a Provisional Liquidator was appointed. The Tribunal referenced the Hon’ble Bombay High Court's order in Jotun India Private Limited v PSL Limited, stating that the pendency of a winding-up petition cannot be a ground to reject any claim/application made under IBC. Consequently, MA No. 105/2018 filed by Primo Pick N Pack Private Limited was rejected.

2. Approval of the Resolution Plan under Section 30(6) of IBC:
The Resolution Plan submitted by Dalmia Cement (Bharat) Limited was approved by 100% vote share of the Committee of Creditors (CoC) in the 11th CoC meeting. The Tribunal emphasized the importance of the CoC's commercial wisdom, referencing the Hon’ble Supreme Court's decision in K Sashidhar v. Indian Overseas Bank, which states that the Adjudicating Authority should not interfere with the CoC's commercial decisions if the plan is approved by the requisite majority. The Resolution Plan provided for a total payment of Rs. 401.62 crores, which was higher than the liquidation value of Rs. 231.10 crores.

3. Objections Raised by Various Stakeholders Against the Resolution Plan:
Several stakeholders, including Mr. Lalchand Maloo, Mr. Santosh Vasantrao Walokar, Mr. Sunil Kumar Maloo, and Gajanan Industries Limited, raised objections against the Resolution Plan. Key objections included:
- The undervaluation of the Corporate Debtor's assets.
- The plan's proposal to revive only the cement unit while closing the paper and solvent extraction units, leading to retrenchment of employees.
- Allegations of non-compliance with SEBI regulations and other legal provisions.
- Claims of material irregularities in the CIRP process.
The Tribunal addressed these objections by stating that the CoC's commercial wisdom should not be interfered with and directed the RP and Resolution Applicant to comply with applicable laws, including the Industrial Disputes Act, 1947.

4. Compliance with Legal Provisions and Regulations:
The Tribunal scrutinized the compliance of the Resolution Plan with various legal provisions and regulations. It directed the Resolution Applicant to comply with the Industrial Disputes Act, 1947, and other applicable laws. The Tribunal also clarified that only crystallized liabilities of the Corporate Debtor would be extinguished upon approval of the Resolution Plan, and contingent liabilities would continue to exist.

5. Conduct of the Resolution Professional (RP):
Allegations were made against the RP regarding inefficiency and failure to preserve the Corporate Debtor's assets. The Tribunal stated that the conduct of the RP could only be challenged by the CoC and not by erstwhile promoters/directors. The Tribunal found no application by the CoC questioning the RP's conduct and thus deemed the allegations against the RP as not maintainable.

6. Suggestions for Policy Changes Regarding Shareholder Approval:
The Tribunal suggested that the Government of India consider making shareholder approval mandatory for significant haircuts in CIRP cases. It proposed that approval of shareholders of Financial Creditors and Resolution Applicants be obtained in cases where the haircut exceeds a certain percentage, to ensure transparency, corporate democracy, and protection of shareholders' rights.

Order:
The Tribunal proposed modifications to the Resolution Plan and directed the RP to seek acceptance from the Resolution Applicant regarding these modifications. The acceptance report was to be filed by 12.07.2019, failing which liquidation proceedings would commence. The Tribunal also directed the Registry to communicate the order to the Resolution Professional, Resolution Applicant, and the Secretary, Ministry of Corporate Affairs, Government of India.

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