2023 (8) TMI 798 - AT - Insolvency and Bankruptcy

Financial Creditor's Appeal Dismissed in Resolution Plan Approval Case

Peter Beck and Partner Vermoegensverwaltung GMBH Versus Sharon Bio-medicine Limited & Ors.

The Tribunal dismissed the appeal filed by a dissenting Financial Creditor challenging the approval of the Resolution Plan by the Adjudicating Authority. ... Approval of the Resolution Plan - dissenting Financial Creditor - discrimination with the payment to unsecured financial creditors or not - HELD THAT:- The Form-H clearly indicate that there are two different categories one who did not vote in favour of the resolution plan and other those who voted in favour of the resolution plan. Form-H also clearly indicate that there can be different payment to the two categories. Thus, the submission of the Appellant that there cannot be any discrimination with the payment to unsecured financial creditors who did not vote in favour of the plan and those who voted in favour of the plan cannot be accepted. The assenting financial creditors entitled for payment as proposed in the plan and dissenting financial creditor is entitled as per the minimum entitlement as per Section 30(2)(b). There is no dispute that liquidation value of the Appellant in the present case is nil. The submission of the Appellant that there is a discrimination between the payment of assenting unsecured financial creditor and dissenting unsecured financial creditor cannot be accepted and on the ground, as urged by the Appellant in this Appeal, the Resolution Plan approved by the Adjudicating Authority cannot be held to be discriminatory. There is no error in the order of the Adjudicating Authority approving the Resolution Plan - there is no merit in the Appeal - appeal dismissed. Issues Involved:1. Approval of the Resolution Plan by the Adjudicating Authority.2. Alleged violation of Section 30(2)(b) of the Insolvency and Bankruptcy Code (IBC) and Regulation 38(1)(b) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.3. Discrimination in payment to unsecured Financial Creditors based on their 'assent' and 'dissent'.Issue-Wise Comprehensive Details:1. Approval of the Resolution Plan by the Adjudicating Authority:The appeal was filed by a dissenting Financial Creditor challenging the order dated 17.05.2023, which approved the Resolution Plan submitted by Respondent No.4. The Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor was initiated on 25.04.2017. The Appellant's Resolution Plan was initially approved on 28.02.2018 but was delayed and not implemented. The Adjudicating Authority directed the Committee of Creditors (CoC) to initiate a fresh CIRP, and Respondent No.4's plan was approved by a 79.28% majority. The Appellant abstained from voting and later filed an appeal against the approval.2. Alleged Violation of Section 30(2)(b) of IBC and Regulation 38(1)(b) of Regulations, 2016:The Appellant argued that the Resolution Plan violated Section 30(2)(b) of the IBC and Regulation 38(1)(b) of the Regulations, 2016, by discriminating against unsecured Financial Creditors based on their 'assent' and 'dissent'. The Appellant cited amendments in the IBC and Regulations that indicate the legislature never intended any discrimination between one class of Financial Creditor. The Appellant referenced judgments, including 'Central Bank of India v. Resolution Professional of the Sirpur Paper Mills Ltd.' and 'Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Ors.', to support their claim.3. Discrimination in Payment to Unsecured Financial Creditors:The Appellant contended that the Resolution Plan discriminates against dissenting Financial Creditors by proposing 'nil' payment to them while paying INR 1.48 Cr. to 'Indian Factoring and Financial Services Pvt. Ltd.', an assenting unsecured Financial Creditor. The Respondents argued that the Resolution Plan is compliant with all provisions of the IBC and that the CoC's approval represents their commercial wisdom, which should not be interfered with. The Respondents also stated that the treatment of dissenting Financial Creditors is in accordance with the IBC and Regulations, 2016, and that the liquidation value due to the Appellant being nil means there is no discrimination.Tribunal's Analysis and Conclusion:The Tribunal examined the relevant provisions of the IBC and Regulations, noting that Section 30(2)(b) specifically contemplates the payment of debts to Financial Creditors who do not vote in favor of the Resolution Plan, which should not be less than the amount payable in the event of liquidation. Regulation 38 (a) & (b) provides that dissenting Financial Creditors shall be paid in priority over those who voted in favor of the plan. The Tribunal referenced the Hon'ble Supreme Court's judgment in 'Committee of Creditors of Essar Steel India Limited', which clarified that differential payment to different classes of creditors is permissible and that the CoC's commercial wisdom should not be interfered with.The Tribunal found that the Appellant's claim of discrimination was not supported by the IBC provisions or the Regulations. The Tribunal also referenced Form-H under Regulations 2016, which indicates that there can be different payments to Financial Creditors who did not vote in favor of the plan and those who did. The Tribunal concluded that the assenting Financial Creditors are entitled to payment as proposed in the plan, while dissenting Financial Creditors are entitled to the minimum amount as per Section 30(2)(b), which in this case was nil for the Appellant.Final Judgment:The appeal was dismissed, and the Tribunal upheld the Adjudicating Authority's order approving the Resolution Plan, finding no error or discrimination in the plan.