2022 (7) TMI 311 - Tri - Insolvency and Bankruptcy

Tribunal upholds CoC decision on resolution plan citing commercial feasibility, payment terms, and procedural compliance

Silicon Jewel Industries (Pvt.) Ltd. and Ors. Versus Kailash T. Shah, RP for Sterling Lam Limited and Ors.

The Tribunal upheld the decision of the CoC to approve a different resolution plan over the Applicants' plan, citing commercial feasibility and concerns ... Seeking direction to the Respondents to consider the resolution plan of the Applicants - seeking for quashing the 7th CoC meeting dated 13.10.2021 - HELD THAT:- The CoC considered all the resolution plans submitted by the prospective resolution applicants in the 7th meeting at 4:00 PM including the revised resolution plan of the Successful Resolution Applicants. The CoC did not approve the resolution plan of the Applicants as the payment term of the resolution plan was 6 years. Moreover, the Applicants had proposed in the resolution plan to extinguish the guarantee given by the Suspended Management of the Corporate Debtor. The resolution plan of the Successful Resolution Applicant was considered by the CoC as more feasible and viable hence the sole member of the CoC approved the resolution plan of the Successful Resolution Applicant. It is also noted that the Applicants were given an opportunity to revise the resolution plan but, the Applicants had not submitted the resolution plan at a given time. The contention of the Applicants that the offered value of the resolution plan of the Applicants was more than the offered value of the Successful Resolution Applicant even then the CoC rejected the resolution plan of the Applicants is not well-founded - It is not a disputed fact that the Applicants had not submitted the revised resolution plan at 3:30 PM on the day of the 7th CoC meeting. Moreover, the CoC in its commercial wisdom considered the resolution plan of the Successful Resolution Applicant more feasible and viable and approved the plan which is equally important as the maximization of the value of the assets of the Corporate Debtor. Thus, no violation of the IB Code was committed by Respondents during the 7th CoC meeting - application rejected. Issues:Challenge to CoC meeting decision and direction to consider resolution plan.Analysis:The application was filed under section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking to quash the 7th CoC meeting dated 13.10.2021 and direct the Respondents to consider the Applicants' resolution plan. The Applicants argued that their plan was unfairly rejected in favor of another applicant's plan. The Applicants' initial offer was Rs. 8,32,90,000/-, later revised to Rs. 14,21,00,000/- with a payment term of 6 years. However, they were asked to further revise their plan during the CoC meeting. The CoC approved a different resolution plan with a lower offer than the Applicants' final revised amount of Rs. 9,40,00,000/-. The Applicants alleged procedural irregularities and violation of the IB Code in the CoC meeting.The Respondents contended that the CoC properly considered all resolution plans, including the Applicants', but found the successful resolution plan more feasible and viable. The CoC raised concerns about the payment term and the proposal to extinguish personal guarantees, which influenced their decision. The Applicants were given an opportunity to revise their plan during the meeting but failed to do so within the specified time. The CoC ultimately approved the resolution plan they deemed most beneficial for maximizing the Corporate Debtor's assets.The Tribunal examined the sequence of events during the 7th CoC meeting and found that the Applicants were given a fair chance to present their revised plan. However, the Applicants' failure to submit the revised plan within the set timeframe was noted. The CoC's decision to approve the other resolution plan was based on commercial wisdom and feasibility, not solely on the offered amount. The Tribunal concluded that there was no violation of the IB Code by the Respondents during the meeting and subsequently rejected the Applicants' application.