Tribunal: Resolution Plan Discriminatory & Violates IBC

The Tribunal found the Resolution Plan discriminatory and in violation of the IBC. It determined that the categorization of Financial Creditors lacked a sound principle and confirmed the exclusive security/charge over trademarks in favor of the Appellant. The matter was remitted to the CoC for proper distribution of the resolution amount in accordance with relevant regulations. The Appeal was allowed without costs.

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Issues Involved:
1. Exclusive security/charge over trademarks.
2. Criteria for categorizing Financial Creditors (FCs) into categories A and B.
3. Discrimination and violation of the Insolvency and Bankruptcy Code (IBC) in the Resolution Plan.
4. Challenge to the Resolution Plan approved by the Committee of Creditors (CoC).
5. Necessity of challenging the subsequent order approving the Resolution Plan.

Issue-wise Detailed Analysis:

Issue No. (i): Exclusive Security/Charge Over Trademarks
The Appellant (IDBI Bank) claimed exclusive security over certain trademarks based on a deed of hypothecation dated 03.09.2012. The Respondents argued that a Memorandum of Understanding (MOU) dated 30.05.2014 among six Financial Creditors, including the Appellant, indicated shared security over the trademarks. The Tribunal found that the MOU did not override the hypothecation deed and was valid only for one year. Consequently, the Appellant held an exclusive charge over the trademarks.

Issue No. (ii): Criteria for FCs Category A and B
The Resolution Applicant categorized Financial Creditors into categories A and B based on core and non-core assets of the Corporate Debtor. Category A included assets essential for running the business, while category B included non-essential assets. The Tribunal found that the categorization lacked a sound principle, as the Resolution Applicant could not justify the basis of categorization. Additionally, the distribution of funds was not based on a consistent or logical principle.

Issue No. (iii): Discrimination and Violation of the IBC
The Resolution Plan offered an upfront cash resolution amount of Rs. 350 Crores, with the Appellant receiving only 4.11% of this amount, which was lower than its pro-rata entitlement. In contrast, Canara Bank received a significantly higher percentage. The Tribunal held that the Resolution Plan was discriminatory and violated the IBC, as it treated similarly situated creditors differently without a justified basis.

Issue No. (iv): Challenge to the Resolution Plan Approved by the CoC
The Respondents argued that since the Resolution Plan was approved by 81.39% of the CoC members, it could not be challenged. The Tribunal disagreed, stating that if the Resolution Plan discriminates between similarly situated creditors, it can be questioned. The Appellant had raised objections during the CoC meetings, indicating that the issue was not raised for the first time before the Adjudicating Authority.

Issue No. (v): Necessity of Challenging the Subsequent Order
The Tribunal held that the Appellant was not required to challenge the subsequent order dated 03.06.2019, which approved the Resolution Plan. The Tribunal found that the Resolution Plan was not in conformity with the amended Section 30(4) of the IBC and Regulation 38(1) of the IBBI Regulations. The Tribunal set aside both the impugned order and the subsequent order approving the Resolution Plan.

Conclusion:
The Tribunal found that the Resolution Plan was discriminatory and violated the IBC. The categorization of Financial Creditors lacked a sound principle, and the Appellant held an exclusive charge over the trademarks. The matter was remitted back to the CoC with directions to distribute the resolution amount in conformity with Section 30(4) and Regulation 38 of the IBBI Regulations. The Appeal was allowed without any order as to costs.

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