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

The Court allowed the appeal, set aside the Adjudicating Authority's rejection of the Resolution Plan, and directed the Successful Resolution Applicant to submit an Addendum undertaking not to assign securities of Dissenting Financial Creditors. The Resolution Plan, approved by a significant majority, is to be remitted back to the Committee of Creditors for reconsideration with the proposed Addendum. The Court emphasized the importance of considering the Resolution Plan's substantial value compared to the liquidation value of the Corporate Debtor.

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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.

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