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, ... Judicial review of commercial wisdom of Committee of Creditors - scope of interference under Section 31(1) and Section 61(3) of the I&B Code - valuation-fair value and liquidation value as non-mandatory benchmarks for bids - compliance of a resolution plan with statutory and regulatory parameters - constitution and quorum of the Adjudicating Authority BenchScope of interference under Section 31(1) and Section 61(3) of the I&B Code - judicial review of commercial wisdom of Committee of Creditors - compliance of a resolution plan with statutory and regulatory parameters - Whether the appeal is maintainable where appellants challenge approval of a resolution plan without alleging any breach of statutory grounds under Section 61(3) or material irregularity by the Resolution Professional. - HELD THAT: - The Tribunal held that the appeal did not raise any determinable question under the limited grounds of Section 61(3) and that no case was made out of conflict with law or material irregularity in the conduct of the CIRP. The record showed the Committee of Creditors had approved the resolution plan with requisite majority after evaluation, the plan complied with statutory and regulatory parameters, and the Adjudicating Authority found the plan to meet requirements of Section 30(2) and related provisions. Judicial intervention to reassess the commercial wisdom of the CoC is impermissible except on the narrow statutory grounds; absent such grounds the appeal is not maintainable. [Paras 8]Appeal not maintainable and liable to be dismissed at threshold for failing to invoke the limited statutory grounds for interference with approval of the resolution plan.Valuation-fair value and liquidation value as non-mandatory benchmarks for bids - judicial review of commercial wisdom of Committee of Creditors - Whether a resolution applicant's offer must correspond to the fair value or liquidation value determined during CIRP, and whether discrepancy in valuation justifies setting aside approval. - HELD THAT: - The Tribunal applied the principle that neither the Code nor the Regulations mandate that a resolution applicant's bid must match the fair value or liquidation value. Relying on binding precedents cited in the judgment, the court emphasised that valuation processes assist the CoC but do not fetter its commercial judgment. The Committee of Creditors had considered fair value and liquidation value but, in its commercial wisdom, approved the plan offering the best feasible and viable outcome for stakeholders. The Tribunal reiterated that the Adjudicating Authority and appellate forum cannot substitute judicial or equitable assessment for the commercial decision of the CoC absent statutory non-compliance or material irregularity. [Paras 10]Discrepancy between the bid and the assessed fair or liquidation value does not, by itself, justify interference with approval of the resolution plan.Constitution and quorum of the Adjudicating Authority Bench - Whether the impugned order was vitiated for want of proper constitution or quorum of the Bench that heard and passed the order. - HELD THAT: - The Tribunal recorded that during the COVID-19 period a Special Bench had been reconstituted by the President of the NCLT to hear matters virtually. The Special Bench heard the matter and pronounced the impugned order. In these circumstances, the objection to bench constitution and urgency was repelled, having regard to the statutory timelines and the need to ensure access to justice during the pandemic. [Paras 9]Objection to constitution of the Bench and to urgency is rejected; the impugned order is not vitiated on this ground.Final Conclusion: The appeal is dismissed as not maintainable and having no merit: the Committee of Creditors' approval of the resolution plan was a non-justiciable commercial decision within the limited scope of statutory review, the bid need not match fair or liquidation value, and the Bench that heard the matter was validly constituted. 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.