2023 (8) TMI 548 - AT - Insolvency and Bankruptcy

Court allows appeal, directs Resolution Plan reconsideration with Addendum to protect Financial Creditors

OCEAN CAPITAL MARKET LTD. Versus UDAY NARAYAN MITRA, STATE BANK OF INDIA, PAYAL AGARWAL, PUNJAB NATIONAL BANK, BANK OF INDIA, KOTAK MAHINDRA BANK, ICICI BANK LIMITED, IDBI BANK LIMITED, EDELWEISS ASSET RECONSTRUCTION COMPANY

The Court allowed the appeal, set aside the Adjudicating Authority's rejection of the Resolution Plan, and directed the Successful Resolution Applicant to ... Application filed by the Resolution Professional for approval of the Resolution Plan of the Appellant rejected - Appellant submits that in the Resolution Plan relevant clause which provide for assignment of security interest in favour of the Appellant was voted upon by the CoC and no objection was raised at any point of time by the Dissenting Financial Creditors about the aforesaid - HELD THAT:- The objection which was raised by the Dissenting Financial Creditor before the Adjudicating Authority, has been noticed in detail by the Adjudicating Authority. The submission on behalf of the Resolution Applicant to modify the plan and not to demand release of the Personal and Corporate Guarantees of dissenting and absenting financial creditors has also been noted. The stand which has been taken by the Successful Resolution Applicant in this Appeal is that the Successful Resolution Applicant has submitted an undertaking that the Personal and Corporate Guarantees of the Dissenting Financial Creditors shall not be assigned and they will be allowed to retain their Personal Guarantees - it is not necessary to consider submission as to whether the Resolution Plan violates Section 30(2)(e) of the IBC Code since the Successful Resolution Applicant himself is ready to modify the clauses which provide for assignment of securities in favour of Successful Resolution Applicant. There is no lack of jurisdiction in the Adjudicating Authority to remit the plan for reconsidering the amendment which the Successful Resolution Applicant himself was requesting to be carried out. The present is a case where the Corporate Debtor is sought to be revived by a Resolution Plan which was approved by the majority. It is also relevant to notice that the Appellant’s Resolution Plan value is Rs.432.90 Crore where the liquidation value of the Corporate Debtor was only Rs.147.11 Crores. The Successful Resolution Applicant has proposed an excess amount of Rs.285.79 Crores - The Resolution Applicant having himself expressed not insist for assignment of Personal and Corporate Guarantees and to be continued with the Dissenting Financial Creditors, the Adjudicating Authority ought not to have rejected the Resolution Plan and accepting the request of the Dissenting Financial Creditor ought to have remitted the plan to the CoC for reconsideration. The ends of justice be served in permitting the Successful Resolution Applicant to prepare an Addendum to the Resolution Plan incorporating condition as given in the Affidavit dated 20.02.2023, which Addendum be placed before the CoC for voting by the Resolution Professional and after decision of the CoC, in event, the CoC decides to approve the Addendum, the Addendum as well as the Resolution Plan be submitted before the Adjudicating Authority for fresh consideration - appeal disposed off. Issues Involved:The judgment involves the rejection of a Resolution Plan by the Adjudicating Authority based on objections raised by Dissenting Financial Creditors regarding the assignment of securities to the Resolution Applicant, as well as the subsequent appeal by the Successful Resolution Applicant challenging this decision.Details of the Judgment:1. Approval of Resolution Plan:The Resolution Plan submitted by the Appellant for the Corporate Debtor was approved by 76.67% of the Committee of Creditors (CoC) in a meeting held on 30.11.2022.2. Objections by Dissenting Financial Creditors:Dissenting Financial Creditors, including Punjab National Bank, Bank of India, and Kotak Mahindra Bank, raised objections to the Resolution Plan due to clauses requiring the assignment of their securities to the Resolution Applicant.3. Adjudicating Authority's Decision:The Adjudicating Authority rejected the Resolution Plan, citing that the provision for the assignment of securities of Dissenting Financial Creditors to the Resolution Applicant violated Section 128 of the Contract Act and Section 30(2)(e) of the IBC 2016.4. Appellant's Submission:The Successful Resolution Applicant submitted an affidavit on 20.02.2023, undertaking not to assign the securities of Dissenting Financial Creditors. They also expressed readiness to submit an Addendum to the Resolution Plan reflecting this change.5. Court's Analysis:The Court considered the submissions of both parties and noted the objections raised by the Dissenting Financial Creditors regarding the modification of the Resolution Plan.6. Remittance for Consideration:The Court opined that the Resolution Plan, approved by a significant majority, should be remitted back to the CoC for reconsideration with the proposed Addendum reflecting the undertaking made by the Successful Resolution Applicant.7. Ends of Justice:Given the substantial value of the Resolution Plan compared to the liquidation value of the Corporate Debtor, the Court emphasized the importance of allowing the Successful Resolution Applicant to present the Addendum for CoC approval and subsequent consideration by the Adjudicating Authority.8. Directions of the Court:The Court allowed the Appeal, set aside the Adjudicating Authority's order, and directed the Successful Resolution Applicant to submit the Addendum within two weeks. The Resolution Professional was instructed to present the Addendum to the CoC for voting and subsequently seek approval from the Adjudicating Authority in case of CoC's approval.This summary provides a detailed overview of the issues involved in the judgment, the key arguments presented by the parties, and the Court's decision and directions in response to the appeal.