2022 (8) TMI 934 - AT - Insolvency and Bankruptcy

Tribunal upholds Resolution Plan approval under I&B Code, emphasizing non-justiciability of CoC's commercial decisions.

The Tribunal upheld the Adjudicating Authority's approval of the Resolution Plan under the I&B Code, dismissing the appeal challenging the decision. ... Approval of Resolution Plan - Sub-section (1) of Section 31 of the I&B Code, 2016 - HELD THAT:- As per the provision and procedure prescribed with regard to approval of Resolution Plan and the powers and functions of the Committee (CoC) as detailed out, the CoC has evaluated the plan after detailed deliberations on feasibility and viability of each Resolution Plan as discussed in 9th CoC meeting. This Tribunal does not find any contravention of law by the Committee regarding approval of the plan of 3rd Respondent - It is apt to point out that the Appellant has failed to point out the contravention of any provision by the CoC in approving the plan. This Tribunal is of the view that the CoC has meticulously evaluated the matrix in approving the plan of the 3rd Respondent and it is not the case of the Appellant that they are challenging the RFRP, however, it is their case that the steps prescribed in RFRP are not followed. This Tribunal cannot go into the technical issues when there is no contravention of the provisions of law. From the record and the order passed by the Adjudicating Authority, this Tribunal finds that there is neither any material regularity nor contravention of any provisions of law by the CoC and the plan has been rightly approved by the Adjudicating Authority - the plan has been approved by the sole member of CoC with 100% voting share in their commercial wisdom as contemplated under the law. Therefore, the commercial wisdom of the creditors is paramount and cannot be interfered with by the Adjudicating Authority or this Tribunal. It is the settled proposition of law that the commercial wisdom of the Committee of Creditors in approving or rejecting a resolution plan is essentially based on a business decision which involves evaluation of resolution plan based on its feasibility besides the Committee of Creditors being fully informed about the viability of the Corporate Debtor. The Committee of Creditors invariably examine the Resolution Plan and an assessment is made through their team of experts in that regard - Further, there is no such mechanism under the Code that gives the right to the Unsuccessful Resolution Applicant to challenge the score granted as per the evaluation matrix prepared by the CoC and the Resolution Professional as per the provisions of CIRP Regulations. This Tribunals comes to an irresistible and inescapable conclusion that there is no legal infirmity or illegality in the order passed by the Adjudicating Authority - Appeal dismissed. Issues Involved:1. Approval of the Resolution Plan by the Adjudicating Authority.2. Allegations of contravention of the I&B Code, 2016, and its Regulations.3. Evaluation criteria and scoring by the Committee of Creditors (CoC).4. Commercial wisdom of the CoC.5. Powers and jurisdiction of the Adjudicating Authority and Appellate Tribunal.Issue-Wise Detailed Analysis:1. Approval of the Resolution Plan by the Adjudicating Authority:The appeal challenges the order dated 02.01.2020, where the Adjudicating Authority (NCLT) approved the Resolution Plan under Section 31(1) of the I&B Code, 2016. The Appellant argued that the approval contravened the I&B Code and its regulations. The Corporate Debtor was admitted into CIRP on 03.12.2018, and the CoC, consisting of the sole Financial Creditor (2nd Respondent), approved the Resolution Plan of the 3rd Respondent by 100% voting share.2. Allegations of Contravention of the I&B Code, 2016, and its Regulations:The Appellant contended that the Adjudicating Authority failed to appreciate material irregularities, including incorrect calculation of the evaluation criteria in the RFRP. The Appellant claimed that their plan scored higher in upfront payment but was awarded zero in NPV payments, which they argued was incorrect. The Appellant relied on precedents, including Padmanabhan Venketesh Vs. Shri V. Venkatachalam and Rajputana Properties Pvt. Ltd. Vs. Ultra Tech Cement Ltd.3. Evaluation Criteria and Scoring by the Committee of Creditors (CoC):The CoC evaluated the Resolution Plans based on an evaluation matrix. The Appellant's plan scored 56/100, while the 3rd Respondent's plan scored 58/100. The CoC found the 3rd Respondent's plan more feasible and viable, addressing the interests of all stakeholders and providing a time-bound resolution. The CoC considered the Appellant's revised plan but concluded that the 3rd Respondent's plan remained superior even after recalculations.4. Commercial Wisdom of the CoC:The CoC's decision to approve the 3rd Respondent's plan was based on commercial wisdom, which is paramount and beyond judicial intervention. The CoC considered various factors, including the feasibility, viability, and financial strength of the 3rd Respondent. The Supreme Court in K. Shashidhar Vs. Indian Overseas Bank and Maharashtra Seamless Ltd. Vs. Padmanabhan Venkatesh emphasized that the commercial wisdom of the CoC is non-justiciable and cannot be interfered with by the Adjudicating Authority or the Appellate Tribunal.5. Powers and Jurisdiction of the Adjudicating Authority and Appellate Tribunal:The Adjudicating Authority's role is limited to ensuring compliance with Section 30(2) of the Code and cannot evaluate the commercial decisions of the CoC. The Appellate Tribunal's jurisdiction is also circumscribed, limited to grounds specified in Section 61(3) of the Code. The Tribunal found no contravention of the provisions of the Code or material irregularity in the CoC's decision.Conclusion:The Tribunal concluded that there was no legal infirmity or illegality in the Adjudicating Authority's order. The CoC's decision, based on commercial wisdom, was upheld. The appeal was dismissed, and the Resolution Plan approved by the Adjudicating Authority was found to be in accordance with the law. The Tribunal emphasized that it cannot substitute its views for the commercial wisdom of the CoC, nor delve into technical complexities unless there is a clear contravention of the law.