2022 (3) TMI 821 - AT - Insolvency and Bankruptcy

Tribunal Upholds Resolution Plan under Insolvency Law

The Tribunal upheld the resolution plan, finding it compliant with the Insolvency and Bankruptcy Code. It emphasized the commercial wisdom of the ... Validity of approval of resolution plan of corporate debtor - it is alleged that the said order has not considered the claims of the operational creditors adequately and only around 0.16% of the admitted claims of the operational creditors have been taken care of in the approved resolution plan - whether the allocation towards settlement of the claim of the operational creditor DVC has been in accordance with legal provisions of the IBC, and the resolution plan is viable and feasible? - whether Appellant’s rights that disputes relating to PPA should be decided under WBERC Regulations have been infringed in adjudication of the successful resolution plan under IBC? HELD THAT:- The amount to be paid to the operational creditors satisfies the condition imposed by Section 30(2)(b) of IBC and hence the successful resolution plan satisfies the provisions of IBC. Furthermore, this payment is in accordance with the commercial wisdom of the COC - it is clear that the commercial wisdom of the CoC in arriving at a business decision has been given primacy and finality and is not open to judicial review unless the decision carries any infirmity under law. In the present case, there is any dispute to be resolved during the moratorium period. The pre-CIRP claim of DVC has been dealt with as per provisions of IBC in the successful resolution plan and and since a fresh connection has to be provided to the corporate debtor after the completion of CIRP, we have surmised that it shall be given under the WBERC Regulations. Thus there is no dissonance in the present case vis-à-vis the Embassy Property Developments Judgment. Thus, the liabilities of DVC that relate to past dues prior to the Effective Date have been extinguished under the approved Resolution Plan and DVC is prohibited from raising any further demand on this account. The clause (d) in Para 6 Section VI of the Resolution Plan directs DVC to restore the power connection immediately after the Effective Date and not withhold/disconnect power supply on the ground of pending old dues whose claim has been submitted to Resolution Professional during CIRP and which have been taken care of in the resolution plan and clause (f) directs DVC to commit supply of power to the plant of CD immediately after the Effective Date - Also as the successful resolution applicant has to apply for fresh connection, payment of security deposit and any other charges that may be admissible under WBERC Regulations will have to be paid by the successful resolution applicant. The Resolution Plan which has taken care of the debts of the Operational Creditors in accordance with provisions of section 30(2)(b) shall ipso facto be taken as fair and equitable to the Operational Creditors since the distribution of total operational debt amount approved in the Successful Resolution Plan is in accordance with this provision of IBC - the treatment of past dues of the Appellant/DVC in the approved Resolution Plan is in accordance with the legal provisions of IBC and by virtue of a finality and primacy accorded to the business decision of the CoC as per its commercial wisdom cannot be considered in judicial review. Since NCLT does not hold equity based jurisdiction and any distribution which is in accordance with section 30(2)(b) of the IBC is considered fair and equitable, the Appellant’s claim of adjudicating past dues under the Electricity Act of WBREC Regulations cannot be upheld. Thus, the Resolution plan as approved by the CoC using its commercial wisdom and subsequent approval by the Adjudicating Authority vide the Impugned Order does not suffer from any legal infirmity. Moreover the new connection to the successful resolution applicant/corporate debtor should be given under WBERC Regulations as the CIRP has ended and a fresh power purchase agreement is necessary which will require fresh security deposit and payment of any other charges as required under WBERC Regulations, which will be in accordance with the modifications in approved resolution plan - appeal disposed off. Issues Involved:1. Adequacy of claims settlement for operational creditors under the approved resolution plan.2. Jurisdiction and applicability of WBERC Regulations concerning the Power Purchase Agreement (PPA) and past dues.Detailed Analysis:1. Adequacy of Claims Settlement for Operational Creditors:The Appellant contested the approval of the resolution plan by the Adjudicating Authority (NCLT, Kolkata) on the grounds that it inadequately addressed the claims of operational creditors, specifically the Damodar Valley Corporation (DVC), which received only 0.16% of its admitted claims. The Appellant argued that the total dues, including arrears, amounted to Rs. 39,08,27,846, but the resolution plan only allocated Rs.0.14 crore for all operational creditors.The Tribunal noted that the liquidation value of the corporate debtor was Rs. 6.52 crore, and in the event of liquidation, operational creditors would receive nothing due to the higher priority claims of financial creditors amounting to Rs. 411.16 crores. The resolution plan provided Rs.0.14 crore for operational creditors, which was proportionately distributed, with DVC receiving Rs.0.03 crore. This allocation was deemed compliant with Section 30(2)(b) of the IBC, which requires that operational creditors receive at least the amount they would get in liquidation.The Tribunal emphasized the primacy of the commercial wisdom of the Committee of Creditors (CoC) in approving the resolution plan, as upheld by the Supreme Court in various judgments, including Ghanashyam Mishra & Sons Private Limited vs. Edelweiss Asset Reconstruction Company Ltd. and Pratap Technocrats (P) Ltd. vs. Reliance Infratel Ltd. The Tribunal concluded that the resolution plan's allocation to operational creditors was fair and equitable under the IBC framework.2. Jurisdiction and Applicability of WBERC Regulations:The Appellant argued that disputes regarding the PPA and past dues should be adjudicated under the Electricity Act and West Bengal Electricity Regulatory Commission (WBERC) Regulations, not under the IBC. The Appellant cited Supreme Court judgments in Embassy Property Developments Private Ltd. vs. State of Karnataka and Gujarat Urja Vikas Nigam Limited vs. Amit Gupta to support this claim.The Tribunal distinguished the present case from Embassy Property Developments, noting that the dispute concerned pre-CIRP dues, which were addressed under the IBC in the resolution plan. The Tribunal held that the resolution plan's provisions, including the extinguishment of past dues and the requirement for a new power connection under WBERC Regulations, were appropriate. The Tribunal also clarified that the new connection would be subject to the prevailing tariff rates and conditions at the time of the agreement.Conclusion:The Tribunal upheld the resolution plan approved by the CoC and the Adjudicating Authority, finding no legal infirmity. The Tribunal confirmed that the resolution plan complied with the IBC provisions and that the commercial wisdom of the CoC in making business decisions should not be interfered with. The appeal was dismissed with modifications to ensure the new power connection complied with WBERC Regulations, requiring a fresh security deposit and other applicable charges.