Appellate Tribunal Upholds Committee of Creditors' Resolution Plan Despite Unsecured Creditor Objections

The Appellate Tribunal upheld the approval of the Resolution Plan by the Committee of Creditors, despite objections raised by an Unsecured Financial Creditor regarding fairness, compliance with the law, treatment of Operational Creditors, and involvement of a potentially fraudulent company. The Tribunal emphasized the commercial wisdom of the Committee of Creditors and limited grounds for challenging the plan's approval. It noted that allocation to creditors, including the objecting party, above the liquidation value does not invalidate the plan. The Tribunal dismissed the appeal, stating it could not interfere with the approved Resolution Plan.

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Issues Involved:
1. Challenge to order approving Resolution Plan.
2. Objections raised by Unsecured Financial Creditor regarding Resolution Plan.

Issue 1: Challenge to order approving Resolution Plan
The Appellate Tribunal heard the appeal challenging the order dated 06.02.2023, which disposed of two separate applications: I.A. No.314/(AHM)/2021 for approval of the Resolution Plan by the Successful Resolution Applicant, and I.A. No.431/(AHM)/2021 raising objections to the Resolution Plan. The Appellant, an Unsecured Financial Creditor with a 0.264% vote share in the Committee of Creditors (CoC), contested the approval of the plan by the CoC with over 99% vote share. The objections raised by the Appellant included concerns about the fairness of the Resolution Plan in terms of settling claims of Operational Creditors, the provision of performance security, and the treatment of Operational Creditors in the plan.

Issue 2: Objections raised by Unsecured Financial Creditor regarding Resolution Plan
The Appellant objected to the Resolution Plan on various grounds, including the alleged failure to balance the interests of stakeholders, non-compliance with Section 30(2)(b) of the Insolvency and Bankruptcy Code, 2016, and inadequate payment to Operational Creditors compared to Financial Creditors. The Resolution Plan was criticized for not ensuring equitable treatment of Operational Creditors and for providing insufficient performance security. The Appellant also raised concerns about the involvement of a potentially fraudulent company in taking over the Corporate Debtor. Despite objections, the Tribunal upheld the approval of the Resolution Plan by the CoC, emphasizing the commercial wisdom of the CoC and limited grounds for challenging the plan's approval under the law.

The Tribunal noted that mere allocation of a small amount to creditors, such as the Appellant, does not necessarily invalidate the Resolution Plan unless the allocated amount is below the liquidation value. Additionally, the Tribunal acknowledged the pending cases against the Asset Reconstruction Company but stated that the legal process would proceed accordingly. The Tribunal concluded that it could not interfere with the approval of the Resolution Plan, especially since the Adjudicating Authority had addressed pending applications regarding claim rejections and ensured pro rata distribution of amounts from the escrow account as per the Resolution Plan. Consequently, the Appeal was dismissed.

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