Tribunal Orders Disbursement of Approved Resolution Plan within 90 Days

The Tribunal allowed the Application filed under the Insolvency and Bankruptcy Code, directing the 1st Respondent to disburse the amount due to the Applicant as per the approved Resolution Plan within 90 days. It emphasized the binding nature of the Resolution Plan's terms on all stakeholders, rejecting the Committee of Creditors' attempt to allocate additional litigation costs to related party Financial Creditors post-approval. The decision underscored the necessity of incorporating all relevant costs into the Resolution Plan initially.

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Issues: Challenge to Resolution Plan Allocation for Additional Litigation Costs

Issue 1: Challenge to Resolution Plan Allocation for Additional Litigation Costs
The judgment involves an Application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, where the Corporate Insolvency Resolution Process (CIRP) was initiated against a Corporate Debtor. The Resolution Plan was approved by the Committee of Creditors (CoC) and submitted to the Tribunal. The Applicant, a Financial Creditor, challenged the Resolution Plan's provision for meeting additional litigation costs from the amounts payable to related parties, including the Applicant. The Applicant sought disbursement of a specific amount along with interest as per the Resolution Plan and relevant circulars issued by the IBBI.

Issue 2: CoC's Decision and Applicant's Counter Statement
The CoC approved the Resolution Plan, allocating a portion of the funds to related party Financial Creditors to cover contingent litigation costs. The CoC justified this allocation due to pending litigations and inability to increase the resolution plan amount further. The Applicant, also a shareholder of the Corporate Debtor, contended that the CoC's decision to earmark funds for litigation costs was not included in the Resolution Plan. The CoC's decision was based on commercial wisdom, considering various pending litigations and the inability to raise additional funds.

Issue 3: Tribunal's Analysis and Decision
The Tribunal analyzed the Resolution Plan's approval and found that the earmarked amount for related party Financial Creditors was binding on all stakeholders, including the Applicant. The Tribunal emphasized that the Resolution Plan's terms, once approved, were mandatory for all parties involved. The Tribunal rejected the CoC's argument that additional litigation costs should be borne by related party Financial Creditors post-approval of the Resolution Plan. It held that such costs should have been factored into the Resolution Plan initially. Consequently, the Tribunal directed the 1st Respondent to disburse the amount due to the Applicant as per the Resolution Plan within 90 days from the date of the Order.

In conclusion, the Tribunal allowed the Application, emphasizing the importance of adherence to the approved Resolution Plan's terms and rejecting the CoC's attempt to allocate additional litigation costs to related party Financial Creditors after the Resolution Plan's approval.

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