2023 (10) TMI 235 - AT - Insolvency and Bankruptcy

Tribunal Upholds Creditors' Decision on Resolution Plan, Dismisses Appeals

Deputy Commissioner, UTGST, Daman Versus Rajeev Dhingra IRP for Radha Madhav Corporation Ltd.

The Tribunal dismissed all appeals, upholding the approval of the resolution plan by the Committee of Creditors (CoC) and the Adjudicating Authority. It ... Rejection of Resolution Plan - validity of the plan - resolution plan already approved by 100% majority of CoC and also approved by Adjudicating Authority - it is the contention of CRP that the RP treated them unfairly and unjustly by not entertaining their resolution plan. HELD THAT:- Even after the Adjudicating Authority had allowed consideration of their plan by the RP, the RP had managed to persuade the CoC to not consider the resolution plan on its own merits by raising hyper-technical objections. Thus, the RP failed to discharge the duties as mandated by law to ensure the revival of the corporate debtor by not adopting a fair and transparent process. Furthermore, CRP has alleged that the RP had endorsed the resolution plan of Vama though it was not meeting the requirements under applicable law. From the facts of the case there are no doubt in mind that the CRP did not submit their EOI on time either in the first or second round of Form G. However as and when it was received the RP had apprised the CoC. Besides being non-serious and casual about complying with timelines stipulated in the IBC, even while submitting their EoI they had failed to adhere to mandatory requirements of RFRP. Even the EMD payment was made belatedly and that too for Rs. 2.25 crore as against requirement of Rs 2.5 crore. The CoC deliberated upon the matter and ultimately passed the resolution not to consider the non-compliant plan of CRP in the interests of the corporate debtor and this was communicated to CRP. There are no lapse or irregularity on the part of the RP or the CoC in not entertaining the belated and defective plan of CRP. The CoC has meticulously evaluated the matrix in approving the plan of Vama and the sole member of CoC having 100% voting share has already approved the plan in their commercial wisdom as contemplated under the law. That being the case, the Adjudicating Authority cannot substitute its views with the commercial wisdom of the CoC nor deal with the merits of Resolution Plan unless it is found it to be contrary to the express provisions of law and against the public interest. There is neither any material regularity nor contravention of any provisions of law by the CoC and the plan has been rightly approved by the Adjudicating Authority. The IBC provides for an initiation of timely resolution of the corporate debtor and in the instant case the resolution plan having already been approved by the CoC and the Adjudicating Authority and implemented by the SRA, it cannot now be open to interference on an appeal preferred by an unsuccessful resolution applicant. It is equally significant to note that following the rejection of the plan of CRP by the CoC, CRP accepted the EMD refund and did not approach the Adjudicating Authority objecting to the resolution plan. It is, therefore, clear that CRP did not challenge the resolution plan before the Adjudicating Authority at the right point of time and raking up the matter belatedly - no case has made by CRP to establish any procedural or material irregularity committed by the RP/CoC in rejecting their EoI and that the challenges raised by the CRP clearly fall within the domain of commercial wisdom of the CoC which is non-justiceable. Nor has CRP been able to establish any contravention of law by the Adjudicating Authority in approving the resolution plan of Vama. Tenability of the contentions raised by UTGST and AC-CGST that rejection of their claims by the RP and CoC was not in consonance with the requirements of law - HELD THAT:- There has been no dereliction of duty on the part of the RP in rejecting the belated claims of UTGST and AC-CGST - there are no error or irregularity on the part of RP to have rejected the belated claims of UTGST and AC-CGST. Furthermore, the Adjudicating Authority in the first impugned order has taken note that the resolution plan submitted by the SRA – Vama has taken into account the interest of government authorities and provided for appropriate treatment of admitted government dues. The Resolution Plan submitted by the Vama has dealt with the claims of Operational Creditors to the extent of Rs. 10 lakhs besides earmarking an additional sum of Rs. 25 lakhs for all the Government Department claims and undertaken to pay all the PF dues at actuals based on the outcome of an ongoing legal case at Delhi High Court with respect thereto. Thus, the approval of resolution plan of SRA-Vama by Adjudicating Authority, which was approved by the CoC with 100% vote share, does not suffer from any material or procedural infirmities. There are no illegality in either the first or second impugned order of the Adjudicating Authority which may warrant any interference in the exercise of appellate jurisdiction - there are no merit in any appeal - appeal dismissed. Issues Involved:1. Whether any material irregularity was committed by the RP and the CoC in rejecting the resolution plan of CRP or by the Adjudicating Authority in approving the resolution plan of SRA-Vama.2. Whether the rejection of claims by the RP of UTGST and AC-CGST affects the legality of the resolution plan approved by the Adjudicating Authority.Summary:Issue 1: Material Irregularity in Rejection of CRP's Plan and Approval of Vama's PlanThe Appellant-CRP contended that the RP acted arbitrarily by not accepting their resolution plan despite the Adjudicating Authority's directions to consider it. CRP alleged that the RP endorsed Vama's resolution plan, which was below the liquidation value and did not meet the requirements under applicable law. The CoC and RP countered that CRP's plan was rightly rejected due to non-compliance with mandatory requirements and belated submission. The Adjudicating Authority found no contravention of law in Vama's plan, noting that the plan value being less than the liquidation value is permissible as per Supreme Court precedent. The Tribunal held that the CoC's commercial wisdom in approving Vama's plan is non-justiciable and found no material irregularity or contravention of law by the RP or CoC.Issue 2: Rejection of Claims by UTGST and AC-CGSTUTGST and AC-CGST argued that their claims were wrongly rejected by the RP due to delay in filing, emphasizing that the RP does not have adjudicatory powers to accept or reject claims. They contended that the resolution plan does not meet the requirements under applicable law as it ignores statutory dues. The RP and CoC maintained that claims filed after the extended period cannot be accepted as per CIRP Regulations. The Tribunal noted that both UTGST and AC-CGST filed their claims after the extended 90-day period and found no dereliction of duty by the RP in rejecting these belated claims. The Tribunal also observed that the resolution plan provided for appropriate treatment of admitted government dues and upheld the Adjudicating Authority's approval of the resolution plan.Conclusion:The Tribunal dismissed all four appeals, finding no illegality in the Adjudicating Authority's orders, and upheld the resolution plan approved by the CoC and the Adjudicating Authority.