Tribunal Affirms Resolution Plan Compliance, Upholds CoC's Decisions, Declares Asset Distribution Fair Under IBC.

The Tribunal dismissed the appeal, affirming the Resolution Plan's compliance with the IBC and relevant regulations. It upheld the commercial wisdom of the CoC, emphasizing its non-justiciable nature, and found no material irregularity in the approval process. The Tribunal determined that the distribution of assets, including the 2% payment to Operational Creditors, was fair and equitable under the IBC. Allegations of discrimination and procedural non-compliance were rejected, as the Tribunal found no prejudice or deficiency in service by the Resolution Professional. The objections raised by Operational Creditors were deemed unsustainable.

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Issues Involved:

1. Admittance of only 2% of the Operational Creditors' claims.
2. Compliance with Section 24(3) of the Insolvency and Bankruptcy Code (IBC), 2016.
3. Distribution of assets under the Resolution Plan.
4. Alleged discrimination against Operational Creditors.
5. Commercial Wisdom of the Committee of Creditors (CoC).
6. Disclosure of Liquidation Value and Fair Value.
7. Validity of the Resolution Plan approval process.

Detailed Analysis:

1. Admittance of only 2% of the Operational Creditors' claims:

The Appellants challenged the Resolution Plan approved by the Adjudicating Authority, arguing that only 2% of their claims were admitted, while workmen and other statutory dues were paid 100%. The Tribunal noted that the Resolution Applicant offered Rs. 655.21 lakhs against the liquidation value of Rs. 308.14 lakhs. Under Section 30(2)(b) of the IBC, the amount payable to Operational Creditors in liquidation was NIL in both situations considered. Therefore, the provision of 2% payment to Operational Creditors was deemed compliant with the IBC and relevant regulations.

2. Compliance with Section 24(3) of the Insolvency and Bankruptcy Code (IBC), 2016:

The Appellants argued that Section 24(3) of the IBC was not complied with, as they were not given notice of the CoC meetings. The Tribunal found that while Section 24(3)(c) specifies that Operational Creditors with aggregate dues of at least 10% must be notified, Section 24(4) clarifies that their absence does not invalidate the proceedings. Moreover, there was no evidence that the Appellants had provided a representative's name to the Resolution Professional (RP). Hence, no prejudice was caused to the Appellants.

3. Distribution of assets under the Resolution Plan:

The Tribunal observed that the distribution of assets under the Resolution Plan was fair and equitable. The Resolution Plan's value was significantly higher than the liquidation value, and the payment to Operational Creditors, though only 2%, was in accordance with Section 30(2)(b) of the IBC. The Tribunal rejected the Appellants' contention that they were entitled to more in liquidation.

4. Alleged discrimination against Operational Creditors:

The Appellants claimed that the Resolution Plan was discriminatory as it provided only 2% to Operational Creditors while paying 100% to other stakeholders. The Tribunal noted that the distribution was in line with the priority order in Section 53 of the IBC, where Operational Creditors rank lower than employees. The Tribunal found no discrimination or deficiency in service by the RP.

5. Commercial Wisdom of the Committee of Creditors (CoC):

The Tribunal emphasized that the commercial wisdom of the CoC is non-justiciable. The CoC had approved the Resolution Plan with 100% voting, and the Tribunal cited Supreme Court judgments affirming that neither the Adjudicating Authority nor the Appellate Tribunal can interfere with the CoC's commercial decisions. The Tribunal found no material irregularity in the CoC's approval process.

6. Disclosure of Liquidation Value and Fair Value:

The Appellants argued that they were not informed of the Liquidation Value. The Tribunal referred to Regulation 35 of the IBBI Regulations, 2016, which mandates that only CoC members are entitled to know the Fair Value and Liquidation Value. The Tribunal held that the Appellants were not required to know these values and that confidentiality must be maintained to prevent undue claims.

7. Validity of the Resolution Plan approval process:

The Tribunal found that the Resolution Plan approval process was valid. The CoC had discussed the Adjudicating Authority's directions, and the 82% Voting Right Member, who had earlier raised objections, had approved the Plan. The Tribunal concluded that there was no illegality or infirmity in the Adjudicating Authority's order approving the Resolution Plan.

Conclusion:

The Tribunal dismissed the Appeal, affirming that the Resolution Plan complied with the IBC and relevant regulations. The commercial wisdom of the CoC was upheld, and no material irregularity was found in the approval process. The objections raised by the Operational Creditors were deemed unsustainable.

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