2022 (4) TMI 208 - AT - Insolvency and Bankruptcy

Tribunal upholds Resolution Plan, emphasizes limited jurisdiction, Operational Creditors receive 4.48%. Previous appeal finality noted.

The Tribunal dismissed the Appeal, upholding the approved Resolution Plan and emphasizing the limited jurisdiction to interfere with the Committee of ... Limited judicial review of Committee of Creditors' commercial wisdom - treatment of operational creditors under a resolution plan - priority of payments in insolvency and adequacy vis-a -vis liquidation value - judicial review under Section 30(2) of the Code - finality and implementation of an approved resolution planTreatment of operational creditors under a resolution plan - priority of payments in insolvency and adequacy vis-a -vis liquidation value - limited judicial review of Committee of Creditors' commercial wisdom - judicial review under Section 30(2) of the Code - finality and implementation of an approved resolution plan - Whether the Resolution Plan adequately protected the interests of operational creditors and complied with the Code such that the Tribunal should not interfere with the commercial decision of the Committee of Creditors. - HELD THAT: - The Tribunal applied the limited scope of judicial review available under the Code and relevant precedents, holding that it cannot supplant the commercial wisdom of the Committee of Creditors except where there is material irregularity or non-compliance with statutory requirements. The plan's distributions to operational creditors were examined against the liquidation-value benchmark; the Tribunal observed that the plan provided amounts not less than what operational creditors would receive on liquidation and noted the Assessee's liquidation value was assessed as nil. In view of these findings, the distributions were held to be in accordance with the statutory order of priority and the requirements that the Committee must have considered maximisation of asset value and interests of stakeholders under Section 30(2). The Tribunal also emphasized the concluded and implemented nature of the approved plan and declined to direct the CoC to revisit its commercial decision at a belated stage absent substantial evidence of material irregularity. Accordingly, there was no jurisdictional basis to set aside or remit the plan on the facts before the Tribunal. [Paras 6, 7, 8, 10]The Tribunal dismissed the appeal, finding no basis to interfere with the Committee of Creditors' commercial wisdom and holding that the Resolution Plan met the statutory requirements with respect to operational creditors and priority of payments; the approved and implemented plan would not be reopened.Final Conclusion: Appeal dismissed. The Tribunal, applying the limited judicial review under Section 30(2), held that the Resolution Plan complied with the Code in its treatment of operational creditors and with the order of priority; having been approved and implemented, it will not be reopened in the absence of material irregularity. Issues Involved:1. Protection of Operational Creditors' interests.2. Commercial wisdom of the Committee of Creditors (CoC).3. Jurisdiction of the Tribunal to interfere with the CoC's decisions.4. Compliance with the Insolvency and Bankruptcy Code, 2016.Issue-wise Detailed Analysis:1. Protection of Operational Creditors' Interests:The Appellant argued that the interests of the Operational Creditors should be protected, referencing the Supreme Court's judgment in the case of 'Committee of Creditors of Essar India Limited' Vs. 'Satish Kumar Gupta & Ors.' The Appellant emphasized that the Code aims to ensure the Corporate Debtor operates as a going concern during the Insolvency Resolution Process, requiring payments to Operational Creditors. The Appellant contended that they were given a meager 4.48% of the total admitted claim, whereas Financial Creditors received significantly higher payments.2. Commercial Wisdom of the Committee of Creditors (CoC):The Respondent/CoC argued that the Resolution Plan was non-discriminatory and compliant with Sections 30(2) and 53 of the Code. They cited the Supreme Court's rulings in 'K Sashidhar' Vs. 'Indian Overseas Bank & Ors.' and 'Ghanashyam Mishra and Sons Private Limited' Vs. 'Edelweiss Asset Reconstruction Company Limited' to support their stance that the commercial wisdom of the CoC is not justiciable and should not be interfered with by the Tribunal.3. Jurisdiction of the Tribunal to Interfere with the CoC's Decisions:The Tribunal noted that its jurisdiction to interfere with the CoC's decisions is limited. The Tribunal can only review whether the Resolution Plan meets the requirements of Section 30(2) of the Code. The Tribunal emphasized that it cannot interfere with the commercial decisions of the CoC unless there is substantial evidence of material irregularity or actions contrary to the law.4. Compliance with the Insolvency and Bankruptcy Code, 2016:The Tribunal observed that the Resolution Plan provided for payments to Operational Creditors in a manner consistent with Section 53 of the Code. The total payments received by Financial Creditors under the Resolution Plan were 23.22% of the admitted claims, while direct Financial Creditors received 29.50% of their admitted debt. Given that the liquidation value of the Appellant's claim was 'NIL,' the Tribunal found the distribution in the Resolution Plan to be compliant with the Code.Conclusion:The Tribunal dismissed the Appeal, noting that the Resolution Plan had been approved and implemented, and it would not be appropriate to revisit the CoC's commercial wisdom at this late stage. The Tribunal also referenced a previous dismissal of a similar appeal against the same Impugned Order, which had attained finality. The Tribunal directed the Registry to upload the Judgment on its website and send a copy to the Adjudicating Authority.Final Order:The Appeal is dismissed with no order as to costs.