Tribunal orders revision of Resolution Plan due to non-compliance with Insolvency Code

The Tribunal found the Resolution Plan submitted by 'M/s. Maharashtra Seamless Ltd.' non-compliant with the Insolvency and Bankruptcy Code, particularly in the treatment of Operational Creditors and the discrepancy in the liquidation value. The Tribunal directed the company to increase the upfront payment to align with the liquidation value and take possession of the Corporate Debtor's assets until modifications were made. Failure to amend the plan within 30 days would result in setting aside the approval, with further orders from the Adjudicating Authority. The appeals were disposed of without costs.

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Issues Involved:
1. Approval of the Resolution Plan.
2. Objections regarding the Resolution Plan's compliance with the Insolvency and Bankruptcy Code (I&B Code).
3. Valuation and liquidation value concerns.
4. Treatment of Operational Creditors.
5. Implementation of the Resolution Plan and possession of the Corporate Debtor's assets.

Detailed Analysis:

1. Approval of the Resolution Plan:
The appeals were filed against the order approving the Resolution Plan submitted by 'M/s. Maharashtra Seamless Ltd.' by the Adjudicating Authority (National Company Law Tribunal), Hyderabad Bench. The Resolution Plan was approved by the Committee of Creditors (CoC) with a majority of 87.10% voting shares. Despite the approval, objections from various parties delayed the final approval by the Adjudicating Authority.

2. Objections regarding the Resolution Plan's compliance with the Insolvency and Bankruptcy Code (I&B Code):
The Resolution Professional argued that the Resolution Plan met all requirements of the I&B Code and Corporate Insolvency Resolution Process Regulations, 2016. However, objections were raised that the plan was below the liquidation value and did not maximize the value of the Corporate Debtor's assets. Additionally, it was argued that the plan did not balance the interests of all stakeholders.

3. Valuation and liquidation value concerns:
The liquidation value of the Corporate Debtor was a contentious issue. The Resolution Professional presented a liquidation value of Rs. 597.54 Crores, but the upfront amount proposed in the Resolution Plan was Rs. 477 Crores. The CoC accepted the average liquidation value calculated from different valuers, but the plan's upfront payment was still below this value. The Tribunal found this discrepancy against Section 30(2)(b) of the I&B Code.

4. Treatment of Operational Creditors:
The Tribunal noted that the Operational Creditors were discriminated against in the Resolution Plan, receiving less favorable treatment compared to Financial Creditors. The Hon’ble Supreme Court's decision in "Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors." emphasized that Operational Creditors should receive roughly the same treatment as Financial Creditors, and any deviation from this principle would render the plan non-compliant with the I&B Code.

5. Implementation of the Resolution Plan and possession of the Corporate Debtor's assets:
The Tribunal directed 'M/s. Maharashtra Seamless Ltd.' to increase the upfront payment to Rs. 597.54 Crores to align with the liquidation value. The Tribunal also addressed the issue of possession of the Corporate Debtor's assets, directing the Resolution Professional to take over the assets to ensure their integrity until the plan was modified. The Adjudicating Authority was instructed to facilitate this process with the help of local authorities if necessary.

Conclusion:
The Tribunal concluded that the Resolution Plan could not be upheld in its current form due to its non-compliance with the I&B Code, particularly in the treatment of Operational Creditors and the discrepancy in the liquidation value. The Tribunal provided 'M/s. Maharashtra Seamless Ltd.' an opportunity to modify the plan by increasing the upfront payment. If the modifications were not made within 30 days, the approval of the Resolution Plan would be set aside, and the Adjudicating Authority would pass appropriate orders. The appeals were disposed of with these directions, ensuring no costs were imposed.

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