Tribunal affirms Committee of Creditors' resolution plan, emphasizing commercial wisdom.

The tribunal upheld the resolution plan approved by the Committee of Creditors (CoC), emphasizing the commercial wisdom exercised in its approval. The plan's feasibility and viability were confirmed, with payments to operational and financial creditors aligning with Insolvency and Bankruptcy Code provisions. Despite a challenge regarding the late appointment of valuers, the tribunal found no substantial impact on the valuation process. The appeal was dismissed, affirming the legitimacy and legal validity of the resolution plan.

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Issues Involved:
1. Feasibility and viability of the proposed resolution plan, particularly the treatment of operational and financial debts.
2. Validity of the liquidation value assessment process due to the late appointment of registered valuers.

Detailed Analysis:

1. Feasibility and Viability of the Proposed Resolution Plan:

The Appellant contended that the resolution plan approved by the Committee of Creditors (CoC) did not treat operational and financial creditors on parity. The Appellant cited the judgment in the matter of Binani Industries Ltd. and Ors vis. Bank of Baroda and Ors, emphasizing that the Insolvency and Bankruptcy Code (IBC) aims to balance the interests of all stakeholders, including operational creditors.

The Appellant further referred to the judgment of the Hon’ble Supreme Court in the matter of Committee of Creditors of Essar Steel India Limited vs. Satish Gupta and Ors, which mandates that the CoC should examine the feasibility and viability of a resolution plan, including the manner of distribution of funds among various creditors.

The Respondent argued that the CoC approved the resolution plan by an 82.75% voting share, exercising its commercial wisdom. The liquidation value of the corporate debtor’s assets was assessed at Rs. 6.52 crores, and the allocation to operational creditors in the resolution plan was in accordance with section 53 of the IBC. The Respondent relied on the judgment in the matter of Pratap Technocrats (P) Ltd. versus Reliance Infratel Ltd. (Monitoring Committee), asserting that the resolution plan complied with the requisite provisions of IBC.

The tribunal noted that the liquidation value of the corporate debtor was Rs. 6.52 crores, and in the event of liquidation, the amount to be paid to operational creditors would be ‘NIL’ due to the admitted claim of financial creditors amounting to Rs. 411.16 crores. The resolution plan provided Rs.0.14 crore for operational creditors, which was proportionally distributed among them.

The tribunal referred to the judgment of the Hon’ble Supreme Court in the matter of Ghanashyam Mishra & Sons Private Limited through the authorized signatory Vs Edelweiss Asset Reconstruction Company Ltd. through the Director and Ors, which emphasized the paramount status of the commercial wisdom of the CoC without judicial intervention. The tribunal also cited the judgment in the matter of India Resurgence ARC Pvt. Ltd., which held that business decisions taken in the exercise of the commercial wisdom of the CoC should not be interfered with unless creditors belonging to a class are denied fair and equitable treatment.

2. Validity of the Liquidation Value Assessment Process:

The Appellant argued that the appointment of registered valuers was not done within the stipulated time period as required by Regulation 27 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The valuers were appointed two days later than the prescribed time limit, which the Appellant claimed vitiated the entire valuation process.

The Respondent countered that the late appointment of valuers was a mere technical defect that did not cause substantial difference in the liquidation assessment process. There was no other allegation against the valuation done by the registered valuers.

The tribunal noted that the compliance certificate under Regulation 39(4) of the CIRP Regulations, which included the fair and liquidation values, was accepted by the Adjudicating Authority. The tribunal found no organic error in the calculation of the liquidation value and concluded that the payment proposed in the resolution plan was in accordance with the assessed liquidation value.

Conclusion:

The tribunal held that the resolution plan was approved by the CoC in its commercial wisdom and subsequently by the Adjudicating Authority. The feasibility and viability of the resolution plan were established, and the payments to operational and financial creditors were in accordance with the provisions of IBC. The appeal was dismissed, and the resolution plan was upheld as legitimate and having the force of law.

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