2020 (1) TMI 277 - AT - Insolvency and Bankruptcy

Appeal dismissed due to plan rejection. Compliance with I&B Code upheld. Vested right issue clarified.

The appeal was dismissed as not maintainable. The appellant's resolution plan was rejected by the Committee of Creditors due to its failure to maximize ... Approval of Resolution Plan - requirement on the part of ‘Resolution Applicants’ to obtain approval of the Competition Commission of India prior to approval by the ‘Committee of Creditors’ - compliance with the mandatory requirement under the proviso to Section 31(4) of the Insolvency and Bankruptcy Code, 2016. HELD THAT:- The proviso to sub-section (4) of Section 31 of the ‘I&B Code’ which relates to obtaining the approval from the ‘Competition Commission of India’ under the Competition Act, 2002 prior to the approval of such ‘Resolution Plan’ by the ‘Committee of Creditors’, is directory and not mandatory. It is always open to the ‘Committee of Creditors’, which looks into viability, feasibility and commercial aspect of a ‘Resolution Plan’ to approve the ‘Resolution Plan’ subject to such approval by Commission, which may be obtained prior to approval of the plan by the Adjudicating Authority under Section 31 of the ‘I&B Code’. In present matter already approval of the Competition Commission of India has been taken to the ‘Resolution Plan’. The Appellant has no vested fundamental right to challenge the plan approved by the ‘Committee of Creditors’ - appeal dismissed being not maintainable. Issues Involved:1. Whether the approval of the resolution plan by the Committee of Creditors (CoC) contravenes the mandatory requirement under Section 31(4) of the Insolvency and Bankruptcy Code, 2016 (I&B Code) for obtaining approval from the Competition Commission of India (CCI).2. Whether the Committee of Creditors properly evaluated and rejected the appellant's resolution plan.3. Whether procedural irregularities vitiated the approval of the resolution plan by the Committee of Creditors.4. Whether the appellant, as an unsuccessful resolution applicant, has the right to challenge the resolution plan approved by the Committee of Creditors.Detailed Analysis:1. Contravention of Section 31(4) of the I&B Code:The appellant argued that the approval of the resolution plan by the Committee of Creditors without obtaining prior approval from the Competition Commission of India contravenes Section 31(4) of the I&B Code. However, it was noted that the Competition Commission of India subsequently approved the plan. The judgment clarified that the requirement under Section 31(4) is directory and not mandatory. The Committee of Creditors can approve a resolution plan subject to the approval of the Competition Commission of India, which can be obtained before the adjudicating authority's final approval.2. Evaluation and Rejection of the Appellant's Resolution Plan:The appellant contended that their resolution plan was superior and better served the objectives of the I&B Code. However, it was found that the Committee of Creditors, by a majority vote of 73.14%, approved the resolution plan submitted by the third respondent. The appellant's plan received only 17.67% of the total voting share. The reasons for rejection included the failure to maximize the value of the company's assets and the uncertainty in realizing amounts from receivables due to proposed contract cancellations. The judgment emphasized that the Committee of Creditors is responsible for evaluating the feasibility, viability, and commercial aspects of resolution plans.3. Procedural Irregularities:The appellant alleged procedural irregularities in the approval process. However, the Committee of Creditors' actions were found to be in compliance with the procedural requirements. The appellant was called for negotiations multiple times, and their resolution plan was duly considered and rejected in the Committee of Creditors' meeting held on January 10, 2019. The reasons for rejection were recorded, and the judgment did not find any procedural lapses that would render the approval illegal.4. Right to Challenge the Resolution Plan:The appellant, as an unsuccessful resolution applicant, claimed the right to challenge the approved resolution plan. The judgment referred to the Supreme Court's decision in 'Arcelormittal India Private Limited v. Satish Kumar Gupta & Ors.' (2019), which established that a resolution applicant has no vested right to have its resolution plan considered or approved. The judgment concluded that the appellant has no fundamental right to challenge the decision of the Committee of Creditors, which had duly approved the resolution plan of the third respondent.Conclusion:The appeal was dismissed as not maintainable. The appellant's resolution plan was rejected by the Committee of Creditors due to its failure to maximize asset value and uncertainty in realization. The approval of the third respondent's resolution plan was found to be in compliance with the I&B Code and procedural requirements. The appellant had no vested right to challenge the approved resolution plan, and the requirement for CCI approval was deemed directory, not mandatory. The appeal lacked merit and was dismissed with no costs.