2024 (2) TMI 557 - AT - Insolvency and Bankruptcy

Resolution Plan approved with 90.45% creditor vote despite financial creditor's dissent under Section 30(2) IBC

Paridhi Finvest Private Limited Versus Value Infracon Buyers Association, Sanjay Kumar Singh, Resolution Professional

NCLAT dismissed appeal challenging Resolution Plan approval in CIRP proceedings. Resolution Professional filed application after no plans received within ... Application filed by Resolution Professional (RP) for approval of Resolution Plan - waterfall mechanism - HELD THAT:- From the facts, which have been brought on record, it is clear that in pursuance of Form-G issued on 20.11.2018, no Resolution Plan was received. The 180 days of CIRP period had come to an end. The RP filed an Application before the Adjudicating Authority for exclusion of period. The RP also in the Application stated before the Adjudicating Authority that now the Flat Buyers Association is desirous to complete the project with the help of a developer. The Adjudicating Authority, noticing the fact that Flat Buyers themselves are desirous to complete the project, extended the period of CIRP. In the order dated 03.07.2019, the extension of CIRP was granted by the Adjudicating Authority, taking the note of the fact that now Flat Buyers Association is desirous to complete the unfinished project. The Appellant dissented with the Resolution Plan. As per Section 30, subsection (2) of the IBC, a dissenting Financial Creditor is entitled for the amount, which shall not be less than the amount, which the dissenting Financial Creditor is entitled in event of liquidation of the Corporate Debtor. The amount is to be distributed in accordance with order of priority provided in sub-section (1) of Section 53. The Resolution Plan, which has been approved by the CoC with 90.45% vote share and through which Resolution Plan the completion of unfinished project is helping in resolution of the CIRP of the Corporate Debtor and in which 97% vote share are being held by the Flat Buyers themselves, the Resolution Plan cannot be set aside at the instance of Appellant, who is being paid the amount as per Section 30, sub-section (2). There are no ground to interfere with the impugned order - The Appeal is dismissed. Issues Involved:1. Approval of the Resolution Plan by the Adjudicating Authority.2. Compliance with the Insolvency and Bankruptcy Code (IBC) and CIRP Regulations.3. Entitlement and payment to the dissenting Financial Creditor.4. Performance guarantee and eligibility of the Resolution Applicant.5. Distribution of assets as per security interest.Summary:1. Approval of the Resolution Plan by the Adjudicating Authority:The Appellant, a Financial Creditor, challenged the order dated 28.04.2022 by the National Company Law Tribunal (NCLT), Principal Bench, New Delhi, which approved the Resolution Plan submitted by Value Infra Buyers Association. The Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor commenced on 04.05.2018. The Resolution Plan was approved by the Committee of Creditors (CoC) with 90.45% vote share.2. Compliance with the Insolvency and Bankruptcy Code (IBC) and CIRP Regulations:The Appellant contended that the Resolution Plan did not comply with the CIRP Regulations, 2016, particularly in terms of the payment to the Appellant and the lack of a performance guarantee from the Resolution Applicant. The Resolution Plan was submitted by the Flat Buyers Association after the Adjudicating Authority extended the CIRP period, allowing the association to complete the unfinished project.3. Entitlement and payment to the dissenting Financial Creditor:The Appellant, as a dissenting Financial Creditor, argued that the amount proposed under the Resolution Plan was not in accordance with the liquidation value. The Tribunal held that the Appellant was entitled to an amount not less than what would be payable in the event of liquidation, as per Section 30(2) of the IBC. The Appellant's vote share was 2.38%, and the amount proposed in the Plan was Rs.1,00,00,000/-, which was more than the proportionate liquidation value.4. Performance guarantee and eligibility of the Resolution Applicant:The Appellant argued that no performance guarantee was taken from the Resolution Applicant and that the applicant was not listed as a Prospective Resolution Applicant in response to Form-G. The Tribunal noted that the CoC, which included 97% of the Flat Buyers, chose not to ask for a performance guarantee. The Resolution Plan was submitted by the Flat Buyers Association with the liberty granted by the Adjudicating Authority, making the argument about the list of Prospective Resolution Applicants irrelevant.5. Distribution of assets as per security interest:The Appellant claimed entitlement to payment based on the security value of an equitable mortgage of 30 units. The Tribunal referred to the Supreme Court's judgment in India Resurgence ARC Pvt. Ltd. v. Amit Metaliks & Anr., stating that a dissenting secured creditor cannot insist on payment as per security interest when a Resolution Plan is approved. The Tribunal also cited its own judgment in ICICI Bank Limited vs. BKM Industries Limited, emphasizing that distribution of assets among Financial Creditors is based on admitted debt, not security interest.Conclusion:The Tribunal concluded that the Resolution Plan, approved by the CoC with a 90.45% vote share and supported by the Flat Buyers holding 97% of the vote share, was in compliance with the IBC. The Appellant was being paid an amount in accordance with Section 30(2) of the IBC, and no grounds were found to interfere with the impugned order. The appeal was dismissed, and parties were to bear their own costs.