2019 (10) TMI 52 - AT - Insolvency and Bankruptcy

Appellate Tribunal approves modified Resolution Plan, directs equitable payments to all creditors

M/s. Maruti Ferrous Private Limited Versus Sunil Ispat And Power Limited and Ors.

M/s. Maruti Ferrous Private Limited Versus Sunil Ispat And Power Limited and Ors. - TMI Issues Involved:1. Approval of the Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code, 2016.2. Treatment of statutory dues and discrimination between Financial Creditors and Operational Creditors.3. Modification of the Resolution Plan to ensure equitable treatment of creditors.Detailed Analysis:1. Approval of the Resolution Plan:The Appellant, 'M/s. Maruti Ferrous Private Limited' (Successful Resolution Applicant), submitted a 'Resolution Plan' for 'Sunil Ispat & Power Limited' (Corporate Debtor), which was approved by the 'Committee of Creditors' with 100% voting shares. The Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, approved the plan under Section 31 of the Insolvency and Bankruptcy Code, 2016, with specific observations regarding the statutory dues.2. Treatment of Statutory Dues and Discrimination Between Creditors:The Adjudicating Authority noted that the Resolution Professional (RP) had verified operational creditors’ claims worth Rs. 19,82,08,779, including government dues and taxes, and suggested they may be waived or written off. However, the Authority held that such jurisdiction is not conferred under the I&B Code, and the government dues/taxes shall remain subsisting. The Appellant's grievance was that Financial Creditors were provided with 9% of their dues, whereas Operational Creditors, particularly those entitled under statutory provisions, were ordered to be paid 100%.The Appellant cited the case of 'Binani Industries Limited vs. Bank of Baroda & Anr.' where it was held that the 'Resolution Plan' cannot discriminate between those who are similarly situated. Additionally, in 'Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors.,' the Supreme Court emphasized that operational creditors must be given roughly the same treatment as financial creditors, and a resolution plan cannot pass muster unless a minimum payment is made to operational creditors, being not less than the liquidation value.3. Modification of the Resolution Plan:To ensure equitable treatment of creditors, the Appellant was asked to propose a modified 'Resolution Plan.' The modified plan proposed the following distribution without changing other factors related to viability and feasibility:- Insolvency Resolution Process Cost: Rs. 4,500,000 (100% of the claim).- Payment to Financial Creditors: 9% of their dues, totaling Rs. 305,000,000.- Payment to Operational Creditors/Statutory Liabilities: 9% of their dues, totaling Rs. 17,845,960.The modified distribution ensured that both Financial Creditors (HUDCO, Asset Reconstruction Company (India) Ltd., Syndicate Bank, Bank of Baroda, and Central Bank of India) and Operational Creditors (Commercial Taxes Department, Government of Chhattisgarh, Central Excise Duty, Government of Chhattisgarh, and Income Tax Department DCIT C Circle 3(1), Government of India) received the same treatment, i.e., 9% of their dues.Conclusion:The Appellate Tribunal accepted the proposed modified portion of the 'Resolution Plan' and substituted it in place of the original one. The Appellant was directed to make the payment within one month from the date of the order. The orders passed by the Adjudicating Authority dated 8th & 11th February, 2019, were upheld with the aforementioned modifications. The appeals were allowed with the specified observations and directions.