2020 (10) TMI 225 - Tri - Insolvency and Bankruptcy

Tribunal upholds Committee of Creditors' Resolution Plan, dismissing Applicant's plea for higher settlement offer

Invent Asset Securitization and Asset Reconstruction Private Limited Versus Vijendra Kumar Jain, Resolution Professional of Shree Vindhya Paper Mills Limited, Alpha Buildhome Private Limited, Constantia Corporate Shared Services Private Limited, (Formerly Constantia Properties Private Limited) And Stressed Assets Stabilization Fund Versus Shree Vindhya Paper Mills Limited

The Tribunal upheld the Resolution Plan approved by the Committee of Creditors (CoC), emphasizing the CoC's discretion in fund distribution. The ... Increase in the number of settlement claim - Revision of Resolution Plan - revision and improvements in the settlement of claim amount to be offered to the Applicant and the 2nd charge holders as the offer of 0.5% on principal outstanding envisaged under the proposed Resolution Plan is very low - HELD THAT:- Admittedly the liquidation value payable to the Applicant is “NIL”. However, in the distribution mechanism as provided in the Resolution Plan, the Applicant is getting a sum of ₹ 1,81,676/- - Even though the Resolution Applicants have agreed to consider the improvement of payment for the second charge holders, the Resolution Applicants after consideration informed the CoC that any improvement has to be made by CoC only and they are not in a position to improve offer of payment to creditors of ₹ 11,03,24,869/-. So, the request of the second charge holders was not considered by the Resolution Applicants as well as the CoC while deciding the distribution pattern. The decision of the CoC in allocating 0.5% of the debt due to the second charge holders cannot be questioned and the same is not justiciable - application dismissed. Issues Involved:1. Revision and improvement of the settlement of claim amount to the Applicant and second charge holders.2. Direction to the Resolution Applicant to increase the settlement amount.3. Restraint on the Resolution Professional from seeking approval of the proposed Resolution Plan.4. Stay on further steps for approval of the Proposed Resolution Plan without considering the Applicant's claim.Detailed Analysis:1. Revision and Improvement of the Settlement of Claim Amount:The Applicant, a Financial Creditor of the Corporate Debtor under Corporate Insolvency Resolution Process (CIRP), sought the Tribunal's intervention to revise the Resolution Plan to improve the settlement offer of 0.5% on the principal outstanding, which was deemed very low. The Applicant had a second charge on the immovable property of the Corporate Debtor and argued that the Resolution Plan was arbitrary and unfair, especially since Operational Creditors were in a better position percentage-wise.2. Direction to the Resolution Applicant to Increase the Settlement Amount:The Applicant contended that the Resolution Professional admitted their claim as a second charge holder and that the Resolution Applicants had initially agreed to consider improving the offer. However, the final Resolution Plan did not reflect any improvement, and the Applicant was offered a meager sum of Rs. 1,81,676 against a principal outstanding of Rs. 46,89,86,949.3. Restraint on the Resolution Professional from Seeking Approval:The Respondents argued that the Corporate Debtor was non-functional since 2005, with a liquidation value of approximately Rs. 4,00,00,000, and the Resolution Plan was for Rs. 32,28,00,000. Despite discussions in the 6th CoC meeting about improving the 0.5% offer, the Resolution Applicants did not commit to any changes. The Plan was approved by the Committee of Creditors (CoC) with a 93.06% voting share, meeting the requisite majority under Section 30(4) of the Code.4. Stay on Further Steps for Approval Without Considering Applicant's Claim:The Tribunal observed that the liquidation value payable to the Applicant was 'NIL.' The Resolution Plan offered Rs. 1,81,676, which was better than the liquidation value. The Supreme Court in the Essar Steel case emphasized that the CoC has the authority to decide the distribution of funds, considering the security interest of secured creditors. The CoC's commercial wisdom in deciding the distribution pattern is paramount and not subject to judicial review unless it violates Section 30(2) of the Code.Conclusion:The Tribunal concluded that the CoC's decision to allocate 0.5% of the debt due to second charge holders was within its commercial wisdom and not justiciable. The Applicant's cause of complaint lacked merit, as the liquidation value attributable to them was zero. The Application was thus rejected with no costs.