2024 (12) TMI 361 - AT - IBC

Resolution plan approval upheld as Regulation 37(ba) restructuring provisions deemed discretionary not mandatory under IBC

NCLAT dismissed appeal challenging approval of resolution plan. Tribunal held that Regulation 37(ba) regarding corporate restructuring through merger, ... Approval of Resolution Plan - violation of Regulation 37(ba) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - HELD THAT:- Regulation 37 has to be read to mean that Resolution Plan shall provide for the measures as may be necessary, including but not limited to as has been enumerated in Clause a to m. Clause (ba) on which reliance has been placed by the Appellant is regarding the restructuring of the Corporate Debtor, by way of merger, amalgamation and demerger. The above Clause in the Plan is required to be put if it is necessary, thus it cannot be said that Resolution Plan which does not contain any Plan pertaining to Regulation 37(ba) violates any provisions of law. The use of expression “as may be necessary” clearly indicates the intent of the statutory requirement. The Clause pertaining to restructuring of the Corporate Debtor is required to be put when it is necessary for insolvency resolution of the Corporate Debtor, hence a Plan which does not contain such Clause regarding restructuring of the Corporate Debtor cannot be said to violate any provisions of law. The Appellant in the Appeal has not made out any ground to the effect that Resolution Plan submitted by Respondent No. 3 violates any of the provisions of Section 30(2) of the IBC. It is well settled that commercial wisdom of the CoC in approving the Resolution Plan needs no interference by the Adjudicating Authority/Appellate Tribunal unless the Plan is violative of Section 30(2). The Hon’ble Supreme Court in the matter of K. Sashidhar Vs. Indian Overseas Bank & Ors. [2019 (2) TMI 1043 - SUPREME COURT], has held that legislature has not endowed the Adjudicating Authority with the jurisdiction or authority to analyse or evaluate the commercial decision of the CoC. Insofar as submission that proceeding by SRA itself has filed an Application for recall of the approval of the Resolution Plan is not the issue which need to be considered in this Appeal. There are no ground to interfere with the decision of the Adjudicating Authority approving the Resolution Plan submitted by the Respondent No. 3 - there is no merit in the Appeal - The Appeal is dismissed. Issues:Challenge to the Order approving Resolution Plan by Suspended Directors.Alleged procedural violations by Resolution Professional.Compliance with Regulation 37(ba) of the Insolvency and Bankruptcy Board of India Regulations.Approval of Resolution Plan without voting on second Addendum.Allegations of non-implementation of Resolution Plan by Successful Resolution Applicant.Analysis:The judgment involves an appeal by two Suspended Directors of a Corporate Debtor challenging the Order approving the Resolution Plan submitted by Respondent No. 3. The key issues revolve around alleged procedural violations by the Resolution Professional and compliance with Regulation 37(ba) of the Insolvency and Bankruptcy Board of India Regulations. The Appellants raised objections regarding the Resolution Plan's approval without voting on the second Addendum and the non-implementation of the Plan by the Successful Resolution Applicant.The Appellants contended that the Resolution Professional violated procedural requirements, including not sharing the Valuation Report with the Suspended Management and not putting the second Addendum for voting. They argued that the Resolution Plan should be rejected due to these violations. On the other hand, the Resolution Professional defended their actions, stating that all necessary processes were followed, and there was no breach of Regulation 37(ba) as restructuring clauses are not mandatory in the Plan.The judgment analyzed Regulation 37(ba) and clarified that the restructuring clause is only required if necessary for insolvency resolution, thus a Plan lacking such provision does not violate the law. It also found that the second Addendum was not voted upon as the Revised Resolution Plan with the first Addendum was approved. The judgment emphasized that interference with the commercial wisdom of the Committee of Creditors is not warranted unless the Plan violates Section 30(2) of the Insolvency and Bankruptcy Code.Regarding the Valuation Report, it was shared with the CoC members, and no objections were raised, precluding the Appellants from raising valuation issues at this stage. The judgment also noted that the Application for recall of the approved Resolution Plan by the Successful Resolution Applicant was not a ground for consideration in the Appeal. Ultimately, the judgment concluded that there were no grounds to interfere with the Adjudicating Authority's decision to approve the Resolution Plan, dismissing the Appeal for lack of merit.