2023 (8) TMI 193 - AT - Insolvency and Bankruptcy

Company Appeal Dismissed in Resolution Plan Dispute, Tribunal Upholds Compliance with Insolvency Law

The Assistant Commissioner of Central Tax Versus Mr. Sreenivasa Rao Ravinuthala, M/s Renganayaki Agencies

The Company Appeal challenging the approval of the Resolution Plan was dismissed. The Tribunal confirmed the Resolution Plan's compliance with Section ... Approval of the Resolution Plan challenged - challenged on the ground that as per the Resolution Plan, only 0.13% has been earmarked towards Government dues, and the Financial Creditor is getting 44.5% of the Claim amounts and the other Operational Creditors are getting 0.51% of their Claim amounts, which is stated to be unfair. HELD THAT:- The Hon’ble Supreme Court in a Catena of Judgments in the matter of KALPRAJ DHARAMSHI & ANR. VERSUS KOTAK INVESTMENT ADVISORS LTD. & ANR. [2021 (3) TMI 496 - SUPREME COURT] has observed that the Commercial Wisdom of the CoC is non-justiciable, unless it is not in accordance with Section 30(2) of the Code. In the instant case, this Tribunal do not find any such irregularity in the Provisions of the Resolution Plan, as specified under Section 30 (2) of the Code. Additionally, this ‘Tribunal’ is quite alive and conscious of the fact that the Resolution Plan was fully implemented and the Successful Resolution Applicant had made payments amounting to Rs. 35,25,00,000/- to all the Creditors and almost 2 years has passed since the approval of the Resolution Plan and this ‘Tribunal’ does not find any tangible and substantial reasons to set the clock back at this point of time. Appeal dismissed. Issues Involved:1. Challenge to the approval of the Resolution Plan.2. Status of the Appellant as a Secured Creditor.3. Compliance with Section 30(2) of the Insolvency and Bankruptcy Code (IBC).4. Applicability of the Supreme Court's decision in 'State Tax Officer Vs. Rainbow Papers Limited'.5. Commercial Wisdom of the Committee of Creditors (CoC).Summary:1. Challenge to the Approval of the Resolution Plan:The Appellant contested the Impugned Order dated 13/08/2020, which approved the Resolution Plan of 'M/s Renganayaki Agencies'. The Appellant argued that the Corporate Debtor owed Rs. 22,60,32,948/- in Central Excise Duty, interest, and penalties, and that the Resolution Plan allocated only 0.13% towards Government dues, which was unfair compared to the 44.5% allocated to Financial Creditors and 0.51% to other Operational Creditors.2. Status of the Appellant as a Secured Creditor:The Appellant claimed to be a Secured Creditor due to an attachment on the Corporate Debtor's property. However, the Tribunal concluded that the Appellant could not be treated as a Secured Creditor under Section 11E of the Central Excise Act, 1944, which is distinct from the provisions of the Gujarat VAT Act, 2003, as discussed in 'State Tax Officer Vs. Rainbow Papers Limited'. The Tribunal emphasized that Section 11E excludes charges created by operation of law and is different from the GVAT Act, 2003.3. Compliance with Section 30(2) of the Insolvency and Bankruptcy Code (IBC):The Adjudicating Authority confirmed that the Resolution Plan met the requirements of Section 30(2) of the Code and Regulations 37, 38, 38(1A), and 39(4) of the CIRP Regulations, 2016. The Tribunal found no irregularities in the provisions of the Resolution Plan as specified under Section 30(2) of the Code.4. Applicability of the Supreme Court's Decision in 'State Tax Officer Vs. Rainbow Papers Limited':The Tribunal distinguished the present case from the 'Rainbow Papers' case, noting that Section 11E of the Central Excise Act, 1944, is distinct from Section 48 of the GVAT Act, 2003. The Tribunal concluded that the decision in 'Rainbow Papers' could not be applied to the facts of this case.5. Commercial Wisdom of the Committee of Creditors (CoC):The Tribunal reiterated that the commercial wisdom of the CoC is non-justiciable unless it contravenes Section 30(2) of the Code. Citing various Supreme Court judgments, the Tribunal emphasized that neither the NCLT nor the NCLAT has the jurisdiction to reverse the commercial decisions of the CoC. The Tribunal found that the Resolution Plan was fully implemented, with payments amounting to Rs. 35,25,00,000/- made to all creditors, and saw no substantial reason to reverse the approval of the Resolution Plan.Conclusion:The Company Appeal (AT) (CH) (Ins) No. 346/2021 was dismissed, and the connected pending Interlocutory Applications were closed.