2026 (1) TMI 529 - AT - IBC

Late challenge to approved resolution plan's distribution under IBC s.61(2) rejected; appeal dismissed as time-barred.

The dominant issue was maintainability under s.61(2) IBC. The appellate tribunal held the appeal was filed beyond the statutory period, no application for ... Maintainability of appeal - Limitation under Section 61(2) - CIRP - unjustifiable delay on the part of the Appellant - discrimination in payment of the resolution plan - seeking to setting aside of the Resolution Plan, but only seeking to establish that the Adjudicating Authority has failed to discharge the statutory duty enjoined under the Code - Whether the Adjudicating Authority failed to appreciate that Section 30(2)(b)(ii) of the Code only provides for the minimum amount payable, and that the said provision does not permit inequitable, unfair and discriminatory treatment between Assenting Secured Financial Creditors and Dissenting / Abstaining Secured Financial Creditors when it comes to payment/distribution of the resolution amount? - HELD THAT:- We find that sufficient cause for the condonation of delay has not come on record or explained in any hearing. Perusal of record shows that there is no application for condonation of delay. The law as per Section 61(2) of the Code is very clear that the Appeal has to be filed within 30 days and beyond 30 days, basis sufficient cause, the condonation can be allowed up to 15 days. Basis date of issue of the certified copy of the impugned order, which is placed on record, with a date of 14.02.2022, the limitation has been counted and taken within time, but which is against the provisions in the Code. And the Appeal should be dismissed on this ground alone. There is nothing on record to suggest that the Appellants objected to the Resolution plan, post approval by the CoC and pre-approval by the Adjudicating Authority even though they were having full knowledge of contents of the resolution plan. We observe that even though the Appellant claims that it is not challenging the resolution plan and it is just raising a question of discrimination, basis which distribution to the dissenting Financial Creditor is lower than the assenting Financial Creditor and even less than the Operational Creditor, effectively it is challenging the resolution plan. To us this is a case of challenge of resolution plan disguised as the modification in the distribution. We are convinced with the arguments of R5/SBI that IAs filed before the AA were much belated and unjustified and ought not to have been entertained at all. Perusal of the submissions of the SRA and RP and the reliefs sought by the Appellant, which, interalia, include modifying the provisions of the resolution plan which provide for the distribution of amounts payable to assenting and dissenting Financial Creditors, modifying the definitive documents executed pursuant to implementation of the resolution plan and in effect to stay the implementation of the resolution plan, we observe that it is effectively challenging the resolution plan. Such a challenge could have been done as an appeal before the Adjudicating Authority, within the statutory period provided under the Code, but it was not done so. We observe that the Appellant has filed the impugned application on 09.09.2021, only to circumvent the limitation period for filing appeals. The resolution plan was approved vide order dated 27.03.2019 and the order is not under challenge and has never been under challenge by any of the two parties. The Appellants cannot be allowed to challenge the resolution plan in the garb of their IAs being dismissed, when the order dated 27.03.2019, of the Adjudicating Authority approving the resolution plan has attained finality. We note that the resolution plan stands frozen upon its approval. By seeking amounts other than in the resolution plan, the resolution applicant could not be saddled with liabilities which were not foreseen by it. We also observe that the resolution plan had been agitated earlier by one Resolution Applicant Sharad Sanghi and it was settled as per orders of this Appellate Tribunal on 19th March 2019 and Appellant in the present case being a FC, was fully aware of the proceedings. Thus, we observe that it could have intervened or filed an Appeal, which it didn’t do. By allowing the present IA of the Appellant in this case we cannot reopen the approval of the resolution plan. The Appellant is thus estopped from any relief on this Appeal. No appeals were filed against the resolution plan approval order within the statutory period prescribed under the Code and therefore the resolution plan approved attained finality. Being a Financial Creditor of the company, the appellant was at all times aware of all the developments with respect to the resolution plan from the date of the plan approval order till its implementation on 09.11.2021. Despite this, Appellant had chosen to file an application in September 2021, about 30 months after the approval of the resolution plan. There is an unjustifiable delay on the part of the Appellant in challenging the provisions of the resolution plan. The Appellant is effectively seeking to challenge the resolution plan at this belated stage, after the resolution plan has already attained finality. Thus, on the count of limitation under Section 61(2) of the Code, the Appeal is not maintainable. Accordingly, the Appeal doesn’t deserve to be entertained. No intervention is required in the orders of the Adjudicating Authority. We also observe that the Appellants have been wasting the precious time of both NCLT and NCLAT by filing unjustified claims and that too belatedly. Basis above analysis, the appeal is dismissed as not maintainable. Issues: (i) Whether amongst the same class of creditors (i.e., Secured Financial Creditors) there can be discrimination in payment of the resolution value only on the basis of the vote cast by them? (ii) Whether Section 30(2)(b)(ii) of the Code provides only for a minimum amount payable and does not permit inequitable, unfair and discriminatory treatment between Assenting Secured Financial Creditors and Dissenting / Abstaining Secured Financial Creditors in distribution of the resolution amount? (iii) Whether the Adjudicating Authority erred in dismissing IA 2028 of 2021 by relying on the decision in Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd.?Issue (i): Whether amongst the same class of creditors (i.e., Secured Financial Creditors) there can be discrimination in payment of the resolution value only on the basis of the vote cast by them?Analysis: The legal framework comprises the Code provisions governing resolution-plan approval and the binding effect of an approved plan. Approval under Section 31 fixes the contents of the plan and the claims and distributions specified therein. The statutory and regulatory scheme (including the CIRP Regulations) contemplates that the Committee of Creditors exercises commercial judgment in structuring payments under a plan, and once the Adjudicating Authority approves a plan in conformity with the Code and Regulations the distributions provided by the plan stand binding on stakeholders. A challenge to distributions that effectively seeks to alter the approved plan amounts to reopening an approved plan and must confront the finality and binding effect conferred by Section 31 and the limitations on jurisdiction to modify an approved plan after implementation.Conclusion: Discrimination in payment under an approved resolution plan that is reflected in the plan is not amenable to reallocation by way of belated applications; the appeal seeking modification of distributions on the basis of voting was not maintainable and cannot be entertained to alter the approved plan.Issue (ii): Whether Section 30(2)(b)(ii) of the Code provides only for a minimum amount payable and does not permit inequitable, unfair and discriminatory treatment between Assenting Secured Financial Creditors and Dissenting / Abstaining Secured Financial Creditors in distribution of the resolution amount?Analysis: Section 30(2)(b)(ii) prescribes the minimum quantum payable to financial creditors who do not vote in favor of the plan, and Explanation 1 clarifies that distributions under that clause must be fair and equitable. The statutory scheme leaves amounts above that minimum to the commercial decision-making of the Committee of Creditors; the Adjudicating Authority and Appellate Tribunal do not have residual equity jurisdiction to re-engineer commercial allocations made by the requisite CoC majority so long as the plan conforms to the Code and Regulations. Accordingly, Section 30(2)(b)(ii) protects a floor entitlement to dissenting creditors but does not, by itself, create a right to convert an approved plan’s allocation into parity where the CoC’s commercial decision provides otherwise.Conclusion: Section 30(2)(b)(ii) sets a minimum/floor for dissenting creditors and Explanation 1 requires fairness; it does not entitle a court or tribunal to reallocate or equalize approved plan payments among creditors contrary to the CoC-approved allocation where the plan complies with the Code.Issue (iii): Whether the Adjudicating Authority erred in dismissing IA 2028 of 2021 by relying on the decision in Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd.?Analysis: The cited authority establishes that once a resolution plan is approved under Section 31, claims and distributions provided in the plan stand frozen and binding on stakeholders, and claims not part of the plan are extinguished. Where a plan has attained finality and implementation is underway, a belated attempt to alter plan distributions is incompatible with that binding effect and finality. The principles in the cited decision therefore bear directly on the maintainability of applications seeking to modify distributions after approval, particularly when the statutory limitation periods and finality rules are implicated.Conclusion: Reliance on the cited decision was appropriate; the Adjudicating Authority did not err in applying the principle of finality of an approved resolution plan in dismissing the application.Final Conclusion: An approved resolution plan under Section 31 of the Code is final and binding; distributions specified in an approved plan cannot be reopened or reallocated by belated challenges that circumvent limitation rules or seek to modify the plan outside the statutory scheme. Applications which effectively seek to alter approved plan allocations after the plan has attained finality and implementation are not maintainable.Ratio Decidendi: Approval of a resolution plan under Section 31 of the Insolvency and Bankruptcy Code, 2016 freezes the claims and distributions specified in the plan and precludes judicial or appellate reallocation of those distributions by belated challenge; challenges to distribution must be brought within the statutory framework and limitation periods and cannot be used to reopen an approved and implemented plan.