2021 (7) TMI 1175 - Tri - Insolvency and Bankruptcy

Tribunal Upholds Creditors' Decision in Resolution Plan Dispute

The Tribunal upheld the Committee of Creditors' decision to reject the applicant's resolution plan and approve the plan of the third respondent. It found ... Acceptance or rejection of Resolution plan by CoC - Interference allowed with the commercial wisdom of CoC or not - Seeking to set-aside the decision of the Committee of Creditors (COC) of the corporate debtor in approving the resolution plan of the third respondent - HELD THAT:- A bare perusal of the decision in K. Sashidhar [2019 (2) TMI 1043 - SUPREME COURT], made it clear that while rejecting or approving a resolution plan, the commercial wisdom of the COC cannot be interfered or modified by the Adjudicating Authority, as long as the resolution plan approved by the COC satisfies the requirements under Section 30(2) of the Code. The Hon'ble Apex Court in K. Sashidhar and in various subsequent decisions and also the Hon'ble NCLAT have categorically held that the COC while exercising its commercial wisdom can reject the resolution plan of an H1 bidder and can accept the resolution plan of other bidders, keeping in view the various aspects such as feasibility, viability, credit worthiness of the concerned applicant and the source of funds thereto, etc. There are no irregularity, in the decision of the COC in rejecting the resolution plan of the applicant and approving the resolution plan of the third respondent. It is further to be seen that the applicant was very much invited to all the COC meetings upto 18th COC whereunder his plan was discussed, deliberated and the applicant was asked to improve the same. There are no merits in the application - application dismissed. Issues Involved:1. Legality of the Committee of Creditors (COC) decision to approve the resolution plan of Kals Distilleries Private Limited over Som Distilleries Private Limited.2. Allegations of collusion and bias within the COC.3. Compliance with the Insolvency and Bankruptcy Code (IBC) and its regulations.4. Validity of the commercial wisdom exercised by the COC.Detailed Analysis:1. Legality of the COC Decision:M/s. Som Distilleries Private Limited filed an application to set aside the COC's decision approving the resolution plan of Kals Distilleries Private Limited and sought reconsideration of its own resolution plan. The applicant had submitted its resolution plan within the stipulated timeline and was initially declared the H1 bidder. However, the COC rejected the applicant's plan without voting, deeming the financial offer inadequate. Subsequent EOIs did not yield other plans until the third respondent was allowed to submit a resolution plan by an order of the Adjudicating Authority dated 04.04.2019. The applicant's plan was eventually rejected by 100% vote of the COC, and the third respondent's plan was approved by the same margin.2. Allegations of Collusion and Bias:The applicant alleged that M/s. Mahalaxmi Traders, a COC member with a 22.24% voting share, acted in collusion with Kals Distilleries Private Limited. The applicant argued that the fifth respondent had vested interests due to shared directorships and business interests in the alcoholic beverages industry, which influenced the rejection of the applicant's plan and the approval of the third respondent's plan. The applicant contended that the resolution plan was disclosed to all COC members, enabling the third respondent to gain an unfair advantage.3. Compliance with IBC and Regulations:The applicant argued that the COC and the Resolution Professional (RP) contravened the IBC and its regulations by rejecting the H1 bid and approving the H2 bid with alleged malafide intentions. The applicant cited several legal precedents to support its claim of procedural impropriety and bias.4. Validity of Commercial Wisdom:The respondents, including the RP, argued that the commercial wisdom of the COC is paramount and not subject to judicial review, provided the resolution plan meets the requirements of Section 30(2) of the IBC. The COC's decision to reject the applicant's plan and approve the third respondent's plan was based on commercial considerations, including feasibility, viability, and creditworthiness. The respondents contended that even without the fifth respondent's vote, the applicant's plan would still have been rejected, and the third respondent's plan approved with the required majority.Judgment:The Tribunal referred to the Supreme Court's decision in K. Sashidhar v. Indian Overseas Bank, emphasizing that the commercial wisdom of the COC cannot be interfered with by the Adjudicating Authority if the approved resolution plan complies with Section 30(2) of the IBC. The Tribunal found no irregularity in the COC's decision-making process, noting that the applicant was involved in all relevant COC meetings and had opportunities to improve its plan. The Tribunal dismissed the application, finding no merit in the allegations of collusion, bias, or procedural violations.