Resolution Plan Compliant with Priority Payment for Financial Creditors; Applicant Entitled to Rs. 18.54 Crores

The Adjudicating Authority concluded that the Resolution Plan complied with the priority payment provisions for dissenting Financial Creditors. The Applicant was entitled to receive Rs. 18.54 Crores upfront within three months. The Adjudicating Authority admitted the application, instructing the CoC/Resolution Applicant to pay the amount to the Applicant in accordance with the provisions of the Insolvency and Bankruptcy Code. The application was disposed of with these directives.

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Issues Involved:
1. Compliance with Section 30(2)(b)(ii) of the Insolvency and Bankruptcy Code, 2016 and Regulation 38(ii)(b) of the CIRP Regulations.
2. Entitlement of dissenting Financial Creditors to priority payment.
3. Application of amendments to the Insolvency and Bankruptcy Code and CIRP Regulations to ongoing proceedings.
4. Validity of the Resolution Plan in light of the amendments and Supreme Court judgment.

Detailed Analysis:

Compliance with Section 30(2)(b)(ii) of the Insolvency and Bankruptcy Code, 2016 and Regulation 38(ii)(b) of the CIRP Regulations:
The Applicant, IDBI Bank, holding a 29.50% voting share, filed the application seeking orders for compliance with Section 30(2)(b)(ii) of the Code and Regulation 38(ii)(b) of the CIRP Regulations. These provisions mandate that dissenting Financial Creditors be paid in priority. The Applicant dissented in the 11th CoC meeting on 29th September 2019, where the Resolution Plan was approved with a 69.30% voting share. The CoC was reconstituted to update the claims of Financial Creditors, and the Resolution Professional filed I.A. No. 607 of 2019 for approval of the Resolution Plan.

Entitlement of Dissenting Financial Creditors to Priority Payment:
The Applicant argued that the amendments to Section 30(2) and Regulation 38, which stipulate priority payments to dissenting Financial Creditors, apply to ongoing proceedings. The Supreme Court upheld the constitutional validity of these amendments in its judgment dated 15.11.2019. Consequently, the Adjudicating Authority directed the CoC to relook the Resolution Plan to ensure compliance with the Supreme Court's directions. The CoC reconsidered the Resolution Plan on 03.12.2019, and it was approved by 70.50% voting share, with the Applicant dissenting.

Application of Amendments to the Insolvency and Bankruptcy Code and CIRP Regulations to Ongoing Proceedings:
The amendments to Section 30(2) of the Code and Regulation 38 of the CIRP Regulations, which came into force on 16th August 2019, were argued to apply to ongoing proceedings. The Resolution Professional stated that the Resolution Plan submitted on 12th April 2019 was amended following the inclusion of a new Financial Creditor and was approved by the CoC on 19th September 2019. The amendments to the Code and Regulations were considered in the 12th CoC meeting on 3rd December 2019, and the Resolution Plan was found compliant with the amended provisions.

Validity of the Resolution Plan in Light of the Amendments and Supreme Court Judgment:
The Adjudicating Authority observed that the Resolution Plan did not initially provide for priority payment to dissenting Financial Creditors. However, upon re-examination, it was found that the amount provided to each Financial Creditor under the Resolution Plan exceeded the amount available in the event of liquidation under Section 53 of the Code. The Liquidation Value of the Corporate Debtor was determined to be Rs. 37.73 Crores, with Rs. 33.23 Crores available to Financial Creditors after deductions. The Resolution Plan provided Rs. 47.44 Crores to Financial Creditors, with Rs. 18.54 Crores allocated to the Applicant, exceeding the liquidation value of Rs. 15.06 Crores.

Judgment:
The Adjudicating Authority concluded that the Resolution Plan complied with the priority payment provisions for dissenting Financial Creditors. The Applicant was entitled to Rs. 18.54 Crores, payable upfront within three months. The IA was admitted, and the CoC/Resolution Applicant was instructed to pay the amount to the Applicant as per the Code's provisions. The IA was disposed of with these observations and instructions.

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