2023 (4) TMI 217 - AT - Insolvency and Bankruptcy

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

Pani Logistics Through its sole proprietor, Kiran M. Jain Versus Vikas G. Jain & Ors.

The Appellate Tribunal upheld the approval of the Resolution Plan by the Committee of Creditors, despite objections raised by an Unsecured Financial ... Approval of Resolution Plan - allocation of meagre amount (not an issue here) - It is submitted that one of the objection raised by M/s Vedanta Ltd. was with regard to conflict of interest between the Successful Resolution Applicant and the Financial Creditors, which was dealt and rejected by the Adjudicating Authority - HELD THAT:- The commercial wisdom of the Committee of Creditors in approval of a resolution plan is to be given due regard is the settled law of the Hon’ble Supreme Court in Essar Steel India Ltd. Committee of Creditors vs. Satish Kumar Gupta [[2019 (11) TMI 731 - SUPREME COURT]] - Approval of Resolution Plan by the Adjudicating Authority can be questioned on a limited ground that plan is violative of any statutory provision including provision of Section 30 Sub-section (2) of the I&B Code. One of the submission which has been raised by learned counsel for the Appellant is that very limited amount has been paid to the Appellant and other creditors that comes to 0.0969% of the admitted claim - Present is not a case that it is contended that payment to the other creditors/ Operational Creditors is less than the liquidation value. The allocation in the plan to the creditors can be questioned when the plan value earmarked for them is less than the liquidation value. Mere allocation of meagre amount cannot be a ground to question the resolution plan. The order approving the Resolution Plan, need not be interfered - appeal dismissed. 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 PlanThe 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 PlanThe 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.