2020 (9) TMI 600 - AT - Insolvency and Bankruptcy

Appeal against Resolution Plan's Approval Dismissed

The appeal challenging the Resolution Plan's approval was dismissed by the tribunal. The plan, valued at Rs. 143 Crores for assets worth Rs. 490 Crores, ... Valuation of assets of the Corporate Debtor - Section 31(1) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The appeal does not raise any question for determination with reference to grounds of appeal qua approval of a Resolution Plan as contemplated under Section 61(3) (i) to (v) of the I&B Code. It is not the Appellants’ case that the Resolution Plan is in conflict with any extant law or that there has been any material irregularity at the hands of Resolution Professional during the conduct of Corporate Insolvency Resolution Process. The record, on the contrary, portrays a very dismal and distressing picture of the Appellants, being in ex-management of the Corporate Debtor, who have been playing truant and holding back while their cooperation was sought by the Resolution Professional in carrying forward the Corporate Insolvency Resolution Process. It is not in controversy that at one stage the Adjudicating Authority had to issue bailable warrants against the Appellants for thwarting the Corporate Insolvency Resolution Process in not extending cooperation to the Resolution Professional who had to file application before the Adjudicating Authority praying for adopting of legally permissible coercive methods to compel obedience by the Appellants. The Adjudicating Authority, on consideration of the application of the Resolution Professional under Section 31(1) of the I&B Code, found the Resolution Plan compliant with all statutory and regulatory parameters and providing for all stakeholders besides, not being in conflict with any extant law. Approval of Resolution Plan is a business decision taken by the Committee of Creditors with requisite majority based on their commercial wisdom and the same is non-justiciable. The fair value being ascertained at ₹ 157.12 Crore and the liquidation value being ascertained at ₹ 125.92 Crore, respectively, Respondent No. 2 offered ₹ 143.50 Crore which in the opinion of Committee of Creditors was the best plan providing for satisfaction of claims of all the stakeholders and being viable and feasible, all aspects of the matter having been taken into consideration by the Committee of Creditors based on their commercial wisdom, which is not justiciable either before the Adjudicating Authority or before this Appellate Tribunal. The Code does not provide that the value given by the Resolution Applicant should match the fair value or the liquidation value. The appeal is not maintainable and the Appellants have no case on merit - Appeal dismissed - decided against appellant. Issues Involved:1. Valuation of assets of the Corporate Debtor.2. Approval of the Resolution Plan by the Committee of Creditors.3. Compliance with statutory and regulatory requirements.4. Maintainability of the appeal.5. Constitution of the Bench and quorum.6. Conduct of the ex-management during the Corporate Insolvency Resolution Process (CIRP).Issue-wise Detailed Analysis:1. Valuation of Assets of the Corporate Debtor:The primary objection raised by the appellants was the undervaluation of the Corporate Debtor's assets. The appellants contended that the Resolution Plan offered Rs. 143 Crores, whereas the actual value of the properties was Rs. 490 Crores. The properties included Hotel Orient Taj in Agra and plots in Mauja Basai Mustakil and Greater Noida. The appellants argued that the fair value was Rs. 157 Crores, and the liquidation value was Rs. 125 Crores, making the Resolution Plan Rs. 50 Crores less than the fair value. However, the tribunal noted that the Committee of Creditors (CoC) approved the plan based on commercial wisdom, and there was no requirement for the bid to match the liquidation value. The tribunal referenced the case of 'Maharashtra Seamless Limited vs. Padmanabhan Venkatesh & Ors.' to support this.2. Approval of the Resolution Plan by the Committee of Creditors:The Resolution Plan submitted by Respondent No. 2 was approved by the CoC with 100% voting share. The tribunal emphasized that the CoC's decision, based on commercial wisdom, is paramount and non-justiciable. The CoC found the plan compliant with all statutory and regulatory parameters, providing for all stakeholders. The tribunal cited 'K. Shashidhar Vs. Indian Overseas Bank and Ors.' to highlight that the CoC's commercial wisdom is beyond judicial intervention.3. Compliance with Statutory and Regulatory Requirements:The tribunal found that the Resolution Plan was compliant with all statutory and regulatory requirements. The plan provided for the interests of all stakeholders, including Financial Creditors, Operational Creditors, Workmen, Employees, and even Other Creditors who had not submitted their claims. The tribunal noted that the Adjudicating Authority approved the plan after ensuring it met the requirements of Section 30(2) of the Insolvency and Bankruptcy Code (I&B Code).4. Maintainability of the Appeal:The tribunal held that the appeal did not raise any question for determination under Section 61(3) (i) to (v) of the I&B Code. The appellants failed to demonstrate any material irregularity or contravention of law in the Resolution Plan. The tribunal emphasized that the appeal could not disturb the commercial wisdom of the CoC or establish any lapse by the Adjudicating Authority.5. Constitution of the Bench and Quorum:The appellants objected to the impugned order being passed by a single member quorum. The tribunal clarified that a Special Bench was reconstituted by the Hon'ble President, NCLT, during the COVID-19 outbreak for virtual hearings. The tribunal dismissed the objection, noting that the matter was heard by a reconstituted Special Bench, ensuring justice accessibility and adherence to prescribed timelines.6. Conduct of the Ex-management during CIRP:The tribunal criticized the appellants, the ex-management of the Corporate Debtor, for their non-cooperation during the CIRP. The appellants were accused of obstructing the process and failing to provide necessary documents and information. The tribunal noted that the Adjudicating Authority had to issue bailable warrants against the appellants to ensure their cooperation. The tribunal concluded that the appellants' conduct portrayed a dismal picture, further justifying the dismissal of the appeal.Conclusion:The tribunal dismissed the appeal, finding it not maintainable and without merit. The Resolution Plan was approved based on the CoC's commercial wisdom, and all statutory and regulatory compliances were met. The appellants' objections regarding valuation and procedural issues were rejected, and their conduct during the CIRP was criticized.