2019 (1) TMI 841 - AT - Insolvency and Bankruptcy

Tribunal Upholds Application of Amended Bankruptcy Code, Emphasizes Creditor Approval

The Tribunal upheld the Adjudicating Authority's decision to apply the amended provision of Section 30(4) of the Insolvency and Bankruptcy Code to a ... Corporate Insolvency Resolution Process - Held that:- From bare perusal of amended sub-section (4) of Section 30 particularly proviso therein, it will be apparent that though amended subsection (4) of Section 30 came into force from 6th June, 2018, it is applicable to all ‘Resolution Plans’ which were not approved by the ‘Committee of Creditors’ or by the Adjudicating Authority. In the present case, as we find that the ‘Resolution Plan’ has not been approved by the Adjudicating Authority and with the assent of more than 72% of the voting shares, the ‘Committee of Creditors’ wanted to approve the plan, and in absence of any allegation that the sole ‘Resolution Applicant’ is ineligible under Section 29A of the ‘I&B Code’, we hold that the Adjudicating Authority rightly asked the ‘Resolution Professional’ to place the matter before the ‘Committee of Creditors’ in terms of amended subsection (4) of Section 30 for its consideration in accordance with the said provision. We affirm the impugned order dated 11th June, 2018. We exclude the period of pendency of this appeal i.e. from 9th July, 2018 till the date of this judgment, apart from the exclusion of period already allowed by the Adjudicating Authority for the purpose of counting the period of 270 days. The ‘Committee of Creditors’ are directed to consider the ‘Resolution Plan’ in question, whereinafter the ‘Resolution Professional’ will place the matter before the Adjudicating Authority for order under Section 31 of the ‘I&B Code’ on an early date. Issues:1. Interpretation of amended subsection (4) of Section 30 of the Insolvency and Bankruptcy Code, 2016.2. Applicability of the amended provision to pending resolution plans.3. Approval process for resolution plans by the Committee of Creditors.4. Consideration of resolution plans under the Insolvency and Bankruptcy Code.5. Exclusion of appeal period for counting the resolution process timeline.Issue 1: Interpretation of amended subsection (4) of Section 30:The Appellant, a Financial Creditor, challenged the application of the amended subsection (4) of Section 30 of the Insolvency and Bankruptcy Code, 2016, to a resolution plan submitted before the effective date of the amendment. The Appellant argued that as the resolution plan was rejected by 30% of Financial Creditors before the amendment, it should not be approved. However, the Respondent contended that the amended provision should apply to all pending cases where no liquidation order has been issued. The Tribunal examined the language of the amended provision and concluded that it applies to all resolution plans not yet approved by the Committee of Creditors or the Adjudicating Authority.Issue 2: Applicability of the amended provision to pending resolution plans:The Tribunal clarified that the amended subsection (4) of Section 30, which came into force on 6th June 2018, is applicable to resolution plans that were not approved by the Committee of Creditors or the Adjudicating Authority. In this case, since the Resolution Plan had not been approved despite receiving over 72% assenting voting shares, the Tribunal upheld the Adjudicating Authority's decision to apply the amended provision and direct the Resolution Professional to present the plan to the Committee of Creditors for reconsideration.Issue 3: Approval process for resolution plans by the Committee of Creditors:The Tribunal highlighted the importance of the Committee of Creditors' approval in the resolution process under the Insolvency and Bankruptcy Code. It emphasized that in cases where the Resolution Plan has not been approved, and there are no allegations of ineligibility of the Resolution Applicant under Section 29A of the Code, the Adjudicating Authority can direct the Resolution Professional to resubmit the plan for consideration in line with the amended provision of Section 30(4).Issue 4: Consideration of resolution plans under the Insolvency and Bankruptcy Code:The Tribunal affirmed the order of the Adjudicating Authority dated 11th June 2018, directing the Resolution Professional to present the Resolution Plan to the Committee of Creditors for proper consideration under the amended subsection (4) of Section 30. It concluded that the Resolution Plan should be reviewed in accordance with the amended provision and the statutory requirements to ensure a fair and transparent resolution process.Issue 5: Exclusion of appeal period for counting the resolution process timeline:While dismissing the appeal, the Tribunal excluded the period of pendency of the appeal from the calculation of the 270-day timeline for the resolution process. It directed the Committee of Creditors to reconsider the Resolution Plan promptly, and for the Resolution Professional to seek an order from the Adjudicating Authority under Section 31 of the Insolvency and Bankruptcy Code without delay. Additionally, the Tribunal provided directions for the exclusion of the appeal period to ensure the timely completion of the resolution process.This comprehensive analysis of the judgment addresses the interpretation of the amended provision, its application to pending cases, the approval process by the Committee of Creditors, the consideration of Resolution Plans, and the exclusion of the appeal period for the resolution process timeline.