Tribunal Rules Third-Party Inclusion in Resolution Plan Valid under I&B Code

The Tribunal held that including a third-party company in the Resolution Plan was permissible under the I&B Code, 2016. The plan's treatment of Financial Creditors based on assent or dissent was found not to be discriminatory. The Resolution Plan was deemed compliant with the Code's provisions, and both appeals were dismissed without costs.

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Issues Involved:
1. Whether a third party company, Facor Power Limited (FPL), can be dealt with in a Resolution Plan under corporate insolvency resolution process against the Corporate Debtor Ferro Alloys Corporation Limited (FACL).
2. Whether the Adjudicating Authority can approve a Resolution Plan which is discriminatory and gives differential treatment amongst the same Class of Financial Creditors, merely based on assenting or dissenting Financial Creditors.
3. Whether the approved Resolution Plan filed by Sterlite Power Transmission Limited is violative of Section 30(2) of the I&B Code, 2016.

Issue-wise Detailed Analysis:

Issue No. 1:
The Appellant contended that the Resolution Plan included assets of a third party, Facor Power Limited (FPL), which is not permissible under the I&B Code, 2016. The Appellant argued that the plan did not ascribe any value to the shares of FPL, which were valued at more than Rs. 538 crores, thus violating Section 60(5) of the Code. The Respondent No. 3 countered that the Resolution Plan did not mandate the automatic transfer of shareholding and any such transfer required the consent of the relevant shareholders. The shares held by the Corporate Debtor in FPL were valued at Rs. 95 crores and were part of the assets of the Corporate Debtor. The Tribunal referenced the JSW Steel case, affirming that the Resolution Applicant could decide on the rights over subsidiaries. The Tribunal concluded that the inclusion of FPL in the Resolution Plan was legitimate and the objection was not sustainable.

Issue No. 2 & 3:
The Appellant in Appeal No. 462 of 2020 argued that the Resolution Plan was discriminatory as it provided differential treatment to Financial Creditors based on their assent or dissent. The consenting Financial Creditors received Non-Convertible Secured Debentures and upfront cash, while dissenting Financial Creditors only received Non-Convertible Secured Debentures. The Appellant cited the Supreme Court's judgment in the ESSAR Steel case, emphasizing equitable treatment for creditors within the same class. The Respondent No. 3 and the Resolution Professional argued that the plan complied with Section 30(2)(b) of the Code, which ensures a minimum payment to dissenting Financial Creditors. The Tribunal noted that the amendment to Regulation 38(1) of CIRP Regulations, which mandates priority in payment to dissenting Financial Creditors, came into effect after the approval of the Resolution Plan. The Tribunal held that the plan did not give differential treatment based on assent or dissent and was not discriminatory.

Conclusion:
The Tribunal found that the objections regarding the inclusion of FPL in the Resolution Plan and the alleged discrimination among Financial Creditors were not sustainable. The approved Resolution Plan was in conformity with the provisions of the I&B Code, 2016. Both Appeals were dismissed, and no order as to costs was made.

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