2020 (11) TMI 121 - AT - Insolvency and Bankruptcy

Tribunal Upholds Resolution Plan Approval & Distribution Mechanism

IIFCL Mutual Fund Versus Committee of Creditors of GVR Infra & Others

The Tribunal dismissed the appeal challenging the approval of the Resolution Plan and the share proportion of the Resolution Fund distribution. It ... Approval of the Resolution Plan - distribution mechanism - revision of share proportion of the resolution fund amongst the Secured Financial Creditors equally - HELD THAT:- The Adjudicating Authority was of the view that the same was not in conflict with the provisions of Section 30(2) of the I&B Code. Thus, the resolution plan in question came to be approved. As noticed elsewhere in this judgment, the claim of the Appellant as Financial Creditor has been admitted by the Resolution Professional during the Corporate Insolvency Resolution Process and the Appellant, as a constituent of the Committee of Creditors having voting right of 3.94%, has assented to the approval of the resolution plan of the Successful Resolution Applicant. After admission of Appellant’s claim by the Resolution Professional he can hardly have a grievance against the Resolution Professional. Though, the Appellant appears to have raised an objection in regard to inclusion of uninvoked Bank Guarantees in the admitted claim, its approval of the resolution plan as an assenting Financial Creditor would estop it from questioning the same resolution plan, though only in regard to distribution mechanism, which admittedly rests upon commercial wisdom of the Committee of Creditors, who set apart amount of ₹ 135 Crores as contingency fund to take care of certain eventualities which in itself was a business decision based on commercial wisdom of Committee of Creditors binding all constituents of Committee of Creditors including the Appellant. The scope of judicial review under Section 61(3) of I&B Code being limited to grounds enumerated therein and no material irregularity having been shown to have occurred during the Corporate Insolvency Resolution Process before approval of the Resolution Plan by the Committee of Creditors, the Appellant has no case. It is not the Appellant’s grievance that he has been discriminated against as a dissenting Financial Creditor or that his admitted claim has not been taken into consideration while allocating the amount in terms of the distribution mechanism found perfectly in order by the Adjudicating Authority. No case for judicial interference is made out - Appeal dismissed. Issues:Challenge to approval of Resolution Plan and share proportion of Resolution Fund distribution.Analysis:The appellant, a member of the Committee of Creditors, challenged the approval of the Resolution Plan by the Successful Resolution Applicant, alleging inequitable distribution of proceeds among Financial Creditors. The appellant also sought revision of share proportion of the Resolution Fund, which was dismissed. The Committee approved the revised Resolution Plan with 67.97% voting in favor. The appellant objected to the allocation of Rs. 135 Crores to only four Secured Creditors, contending it violated Section 53 of the Insolvency and Bankruptcy Code. The Resolution Professional defended the allocation as a business decision to maintain the Corporate Debtor's operations.The Tribunal noted the appellant's voting in favor of the Resolution Plan and subsequent objection to the distribution mechanism. Citing legal precedents, the Tribunal highlighted that the business decisions of the Committee of Creditors, including approval or rejection of Resolution Plans, are not subject to judicial review unless specific grounds are met. The Tribunal emphasized that the appellant, having assented to the Resolution Plan, could not challenge it based on the distribution mechanism, especially when the Resolution Professional acted within the Committee's commercial wisdom.The Tribunal found no grounds for judicial interference, stating that the appellant's admitted claim had been considered, and the distribution mechanism was in order. The Tribunal concluded that the appellant's grievance did not warrant intervention, dismissing the appeal for lacking merit. No costs were awarded in the judgment.In summary, the Tribunal dismissed the appeal challenging the approval of the Resolution Plan and the share proportion of the Resolution Fund distribution, emphasizing the limited scope of judicial review in matters concerning Committee of Creditors' decisions and commercial aspects of insolvency resolution. The Tribunal upheld the Resolution Plan's approval and distribution mechanism, finding no basis for judicial intervention based on the appellant's objections post-approval.