Tribunal Upholds Resolution Plan under I&B Code, Emphasizes Commercial Wisdom

The Tribunal upheld the Resolution Plan dated 07.01.2019, finding it compliant with the I&B Code, 2016. Emphasizing the commercial wisdom of the CoC, the Tribunal dismissed the appeal challenging the Plan's approval, noting full settlement of liabilities and NIL liquidation value for Operational Creditors. The Tribunal held that the Adjudicating Authority's role does not extend to second-guessing the CoC's commercial decisions, ultimately affirming the Resolution Plan's validity.

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Issues Involved:
1. Approval of the Resolution Plan.
2. Treatment of Operational Creditors.
3. Compliance with I&B Code, 2016.
4. Commercial Wisdom of the Committee of Creditors.
5. Jurisdiction of the Adjudicating Authority.

Issue-wise
Detailed Analysis:

Approval of the Resolution Plan:
The Appellant, an Operational Creditor, challenged the approval of the Resolution Plan dated 07.01.2019, which was approved by the Committee of Creditors (CoC) with 69.04% votes and subsequently by the Adjudicating Authority (National Company Law Tribunal, Bengaluru Bench) on 10.05.2019. The Appellant argued that the Resolution Plan did not provide for any payment to Operational Creditors and failed to meet the requirements of the I&B Code, 2016, particularly regarding the maximization of the value of the Corporate Debtor's assets and equitable treatment of creditors.

Treatment of Operational Creditors:
The Appellant contended that the Resolution Plan was inequitable as it provided no payment to Operational Creditors, citing that the liquidation value due to them was NIL. The Appellant emphasized that the Resolution Plan should ensure equitable treatment and non-discriminatory provisions for Operational Creditors. The Appellant argued that the assets of the Corporate Debtor were valued at Rs. 80.75 Crores, but the Resolution Plan provided for a takeover at Rs. 50.50 Crores, significantly below the asset value. The Appellant also highlighted that the Resolution Applicant only needed to bring in Rs. 5 Crores initially, with the remaining Rs. 45.50 Crores to be raised from the sale of non-core assets of the Corporate Debtor.

Compliance with I&B Code, 2016:
The Appellant asserted that the Resolution Plan did not comply with the I&B Code, 2016, as it failed to maximize the value of the Corporate Debtor's assets and did not provide equitable treatment to Operational Creditors. The Appellant referred to various judgments, including Binani Industries Limited v. Bank of Baroda and Swiss Ribbons Pvt. Ltd. v. Union of India, to support their argument that the Resolution Plan should balance the interests of all stakeholders and ensure fair treatment of Operational Creditors.

Commercial Wisdom of the Committee of Creditors:
The 2nd Respondent and the 4th Respondent argued that the Resolution Plan was approved by the CoC in its commercial wisdom after thorough discussions and negotiations. They emphasized that the CoC's decision should not be interfered with by the Adjudicating Authority or the Appellate Tribunal. The 2nd Respondent pointed out that the Resolution Plan was in compliance with Section 30(2)(b) of the I&B Code, 2016, as the liquidation value for Operational Creditors was NIL, and thus, no amount was assigned to them.

Jurisdiction of the Adjudicating Authority:
The 4th Respondent contended that the Appellant's challenge was not maintainable as it sought to question the commercial decision of the CoC. They argued that the jurisdiction of the Adjudicating Authority under the I&B Code, 2016, does not extend to altering the commercial wisdom of the CoC. The Adjudicating Authority's role is limited to ensuring that the Resolution Plan complies with the requirements of Section 30(2) of the I&B Code, 2016.

Conclusion:
The Tribunal concluded that the Resolution Plan dated 07.01.2019, submitted by the 2nd Respondent and approved by the CoC and the Adjudicating Authority, was in compliance with the I&B Code, 2016. The Tribunal emphasized that the commercial wisdom of the CoC, which approved the Resolution Plan with a requisite majority, should not be interfered with. The Tribunal also noted that the Resolution Plan provided for the full and final settlement of all liabilities of the Corporate Debtor and that the liquidation value for Operational Creditors was NIL, thus satisfying the requirements of the I&B Code, 2016. Consequently, the Tribunal dismissed the appeal, finding no merit in the Appellant's contentions.

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