2023 (6) TMI 505 - AT - Insolvency and Bankruptcy

Tribunal approves Company Appeal, prioritizes Resolution Plan over liquidation under I&B Code

The Tribunal allowed the Company Appeal, setting aside the Order directing liquidation and remanding the matter for the approval of the Resolution Plan ... Seeking approval of the Resolution Plan - Section 31(1) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- It is significant to mention that Section 238 of the Code, will prevail over any of the provisions of the SARFAESI Act, 2002, if it is inconsistent with any of the Provisions of the ‘I&B Code, 2016’ and therefore the Adjudicating Authority ought not to have placed reliance on Section 10(2) of the SARFAESI Act, 2002. It is also pertinent to mention that the CoC has approved the Resolution Plan by the majority of 98.70% in its 27th meeting, held on 19/10/2020. The Hon’ble Supreme Court in a Catena of Judgments has held that the commercial wisdom of the CoC is non-justifiable and in the instant case, there are no material irregularity, under Section 30(2) of the ‘IBC Code, 2016’. Keeping in view, the clarification given by the Counsel for RBI that the ‘prior permission’ is not required, this ‘Tribunal’ is of the considered view that the Adjudicating Authority ought not to have rejected the Resolution Plan, more so, when the principal objective of the Code is that ‘revival of the Corporate Debtor and Resolution’. Liquidation ought to be the last resort, keeping in view the scope and spirit of the Code. The Order of the Adjudicating Authority directing ‘Liquidation’ is set aside and the matter is remanded to the Adjudicating Authority for approval of the Resolution Plan under Section 31(1) of the IBC Code, 2016 - Appeal allowed. Issues Involved:Challenge to the Impugned Order dated 14/10/2021 dismissing the Application seeking approval of the Resolution Plan under Section 31(1) of the Insolvency and Bankruptcy Code, 2016. The rejection based on the requirement of prior approval from RBI for an ARC to submit a resolution plan as a co-applicant.Issue 1: Requirement of RBI Approval for ARC as Co-ApplicantThe Adjudicating Authority dismissed the Application seeking approval of the Resolution Plan, citing the need for prior approval from RBI for an ARC to submit a resolution plan as a co-applicant. The Authority held that the Resolution Plan contravened Section 30(2)(e) of the I&B Code, 2016, as M/s Invent Assets Securitisation & Reconstruction Private Limited could not submit a resolution plan as a co-applicant without RBI's approval under Section 10(2) of the SARFAESI Act. The Authority referred to previous judgments emphasizing the necessity of RBI approval for ARC participation in the resolution process.Issue 2: Approval of Resolution Plan by Committee of CreditorsThe Committee of Creditors approved the Resolution Plan with a 98.70% majority vote. However, the Adjudicating Authority rejected this approval, considering the Resolution Plan as conditional due to the involvement of an ARC as a co-applicant, subject to RBI approval. The Appellant argued that the rejection was erroneous and that the commercial wisdom of the CoC should prevail, as upheld by the Supreme Court in various judgments.Issue 3: Impleadment of RBIThe Tribunal considered the impleadment of RBI in the matter, with the Appellant seeking to include RBI and Long View Resources (HK) Private Ltd. as co-applicants. The Counsel for RBI argued against the necessity of impleading RBI, citing the criteria for determining a necessary party under Order 1, Rule 10 of the Civil Procedure Code. The Tribunal focused on whether RBI's prior approval was indeed required for ARC participation in the resolution process.Conclusion:The Tribunal allowed the Company Appeal, setting aside the Order directing liquidation and remanding the matter for the approval of the Resolution Plan under Section 31(1) of the I&B Code, 2016. Emphasizing the objective of corporate revival and resolution over liquidation, the Tribunal highlighted the importance of timely resolution. The Adjudicating Authority was instructed to decide on the Resolution Plan within one week from the date of the Order, with all parties required to appear accordingly.