2024 (2) TMI 677 - AT - Insolvency and Bankruptcy

Section 7 application upheld for Rs. 12.38 crore debt default exceeding threshold, Resolution Plan approved with additional payment

Rosario D'Souza Versus Union Bank of India, Dolphin Marine Foods and Processors (India) Private Limited And Rosario D'Souza Versus Mr. Mahesh Chand Gupta, Union Bank of India, Mrs. Lalita S Powle in consortium with Suyog Agro & Poultry Products Pvt. Ltd., Dolphin Marine Foods and Processors (India) Private Limited

Rosario D'Souza Versus Union Bank of India, Dolphin Marine Foods and Processors (India) Private Limited And Rosario D'Souza Versus Mr. Mahesh Chand Gupta, ... Issues Involved:1. Admission of application under Section 7 of the Insolvency and Bankruptcy Code (IBC).2. Challenge of approval of the Resolution Plan.Summary:Issue 1: Admission of application under Section 7 of the Insolvency and Bankruptcy Code (IBC):The appeal was filed under Section 61 of the Insolvency & Bankruptcy Code, 2016, challenging the order dated 03.08.2021 by the National Company Law Tribunal, Mumbai Bench, which initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The appellant, a member of the suspended board of directors, argued that there was no default at the time of filing the application under Section 7 of the Code, as the Corporate Debtor was making payments regularly, and the account never exceeded the sanctioned credit limits. The appellant also cited RBI Prudential Norms and claimed that the Corporate Debtor was not in default. The respondent countered these claims, stating that the Corporate Debtor failed to repay dues, leading to the account being declared as NPA on 30.04.2018. The respondent also initiated proceedings under the SARFAESI Act, 2002, and eventually filed an application under Section 7 of the Code to protect its financial interest. The tribunal noted that the Corporate Debtor had indeed defaulted, and the outstanding dues were more than the threshold limit of Rs. 1 Crore. The tribunal found no error in the impugned order and dismissed the appeal.Issue 2: Challenge of approval of the Resolution Plan:The appellant challenged the approval of the Resolution Plan by the Adjudicating Authority. The appellant argued that the additional payment of Rs. 1 Crore to the respondent (Union Bank of India) was not in conformity with the provisions of the Code. The respondent countered, stating that the payment was towards accrued interest from the CIRP commencement date till realization of dues, which is permissible. The tribunal noted that the Resolution Plan was approved by the CoC with 100% voting rights and was in compliance with the provisions of the Code. The tribunal emphasized the limited scope of judicial review over the commercial wisdom of the CoC, as established by the Supreme Court. The tribunal found that the Resolution Plan fairly distributed the amount among stakeholders and adhered to the Code's provisions. Consequently, the tribunal dismissed the appeal, finding no error in the impugned order.Conclusion:Both appeals were found to be devoid of merit and were dismissed. The tribunal upheld the decisions of the Adjudicating Authority, affirming the initiation of CIRP and the approval of the Resolution Plan.