Adjudicating Authority upholds rejection of Resolution Plan and approves 'Kals Distilleries' plan.

The Adjudicating Authority dismissed both Appeals challenging the rejection of the Appellant's Resolution Plan and the approval of 'Kals Distilleries Private Limited's' plan. The rejection was upheld due to lack of votes even without alleged colluding member participation. 'Kals Distilleries Private Limited's' plan approval was based on compliance with the Insolvency and Bankruptcy Code, 2016, and commercial wisdom of the CoC. Allegations of collusion lacked substantial evidence. The Authority emphasized the importance of CoC's decisions and upheld their rejection as a valid business decision.

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Issues:
- Challenge to order rejecting Appellant's Resolution Plan
- Approval of Resolution Plan of 'Kals Distilleries Private Limited'
- Allegations of collusion and fraud
- Compliance with Insolvency and Bankruptcy Code, 2016

Analysis:
1. Challenge to order rejecting Appellant's Resolution Plan:
The Appellant filed two Appeals challenging different orders passed by the Adjudicating Authority. The first Appeal (AT) (Ins.) No. 910 of 2021 contested the rejection of the Appellant's Resolution Plan by the Committee of Creditors (CoC) in a meeting on 04.06.2019. The Appellant alleged collusion and fraud by a CoC member, 'M/s. Mahalaxmi Traders,' claiming that this led to the rejection of their plan. However, the Adjudicating Authority rejected the Appellant's challenge on 16.07.2021, stating that even without 'M/s. Mahalaxmi Traders' votes, the Appellant's plan would have been rejected by 77.76%. The Resolution Plan of 'Kals Distilleries Private Limited' was also approved in the same meeting, which the Appellant argued was not compliant with the Insolvency and Bankruptcy Code, 2016.

2. Approval of Resolution Plan of 'Kals Distilleries Private Limited':
The second Appeal (AT) (Ins.) No. 909 of 2021 was filed by the Appellant questioning the approval of the Resolution Plan of 'Kals Distilleries Private Limited' by the Adjudicating Authority. The CoC had approved this plan with 100% votes after rejecting the Appellant's plan. The Adjudicating Authority, in its order dated 13.10.2021, found that the CoC's rejection of the Appellant's plan was mainly based on the creditworthiness of 'Som Distilleries Pvt. Ltd.' The Authority thoroughly assessed the compliance of 'Kals Distilleries Private Limited's' plan with the relevant provisions of the Insolvency and Bankruptcy Code, 2016, and the CIRP Regulations, ultimately approving the plan as it met all requirements.

3. Allegations of collusion and fraud:
The Appellant alleged collusion and fraud between 'M/s. Mahalaxmi Traders' and the 'Successful Resolution Applicant.' However, the Adjudicating Authority found no substantial evidence to support these claims beyond the Appellant's allegations. The Authority emphasized that proving fraud and collusion requires more than mere allegations and that the commercial wisdom of the Financial Creditors, who rejected the Appellant's plan with 100% votes, should not be disregarded based on unsubstantiated claims.

4. Compliance with Insolvency and Bankruptcy Code, 2016:
The Adjudicating Authority, guided by the Hon'ble Supreme Court's decision in 'K. Sashidhar v. Indian Overseas Bank,' recognized the importance of the CoC's commercial wisdom in the insolvency resolution process. The Court highlighted that the Financial Creditors' decisions are assumed to be well-informed and made after thorough examination. The Authority concluded that the CoC's rejection of the Appellant's plan did not require intervention, as it was a collective business decision based on the plan's viability and feasibility.

In conclusion, both Appeals were dismissed as the Adjudicating Authority's decisions regarding the rejection of the Appellant's plan and the approval of 'Kals Distilleries Private Limited's' plan were found to be justified and compliant with the relevant legal provisions.

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