Resolution plan approval upheld where a financial creditor could vote on its own plan and statutory dues yielded to insolvency waterfall rules.

A resolution applicant who was also a financial creditor was permitted to vote on its own plan under the statutory exception, so the conflict-of-interest objection failed. The plan also satisfied the treatment required for dissenting financial creditors and statutory dues, with dissenters to be paid in priority at least up to liquidation value and government claims governed by the Code's waterfall mechanism. Feasibility, viability and CoC approval were upheld because the Committee had considered the plan and the Adjudicating Authority could not replace that commercial wisdom absent material illegality. The adverse remarks against the resolution professional were expunged, and the resolution plan was approved.

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Issues: (i) whether a financial creditor who is also a resolution applicant may vote on its own resolution plan and whether the plan was vitiated by conflict of interest; (ii) whether the resolution plan complied with the requirements relating to payment of dissenting financial creditors and treatment of statutory dues; (iii) whether the plan satisfied the requirements of feasibility, viability and commercial approval by the CoC; and (iv) whether the adverse remarks against the resolution professional were sustainable.

Issue (i): whether a financial creditor who is also a resolution applicant may vote on its own resolution plan and whether the plan was vitiated by conflict of interest

Analysis: The proviso to Section 30(5) of the Insolvency and Bankruptcy Code, 2016 expressly permits a resolution applicant who is also a financial creditor to vote in the Committee of Creditors. The principle that no one should be a judge in his own cause cannot override the statutory exception enacted by Parliament. Since the plan was approved by the requisite CoC majority, the Adjudicating Authority could interfere only within the limited scope of Section 30(2) and the CIRP Regulations.

Conclusion: The plan was not invalid merely because the successful resolution applicant was also a financial creditor and voted on its own plan; the conflict-of-interest objection was rejected.

Issue (ii): whether the resolution plan complied with the requirements relating to payment of dissenting financial creditors and treatment of statutory dues

Analysis: The plan clauses provided that dissenting financial creditors would be paid in priority and not less than the liquidation value, which met Section 30(2)(b) and Regulation 38(1)(b). As to statutory dues of Customs, Income Tax and SEBI, the judgment held that Section 142A of the Customs Act, 1962 is subject to the Insolvency and Bankruptcy Code, 2016, and that the waterfall mechanism under Section 53 governs their treatment. The reliance on Rainbow Papers was held inapplicable on these facts, while Sundresh Bhatt supported the overriding effect of the Code.

Conclusion: The plan was held compliant on the treatment of dissenting financial creditors and statutory authorities.

Issue (iii): whether the plan satisfied the requirements of feasibility, viability and commercial approval by the CoC

Analysis: The minutes of the CoC meeting showed discussion on feasibility and viability, and the plan contained projections, working capital infusion and funding arrangements through an SPV. The CoC had considered the plan and approved it in exercise of its commercial wisdom. The Adjudicating Authority was not entitled to substitute its own subjective assessment for that commercial decision in the absence of material illegality or non-compliance.

Conclusion: The objections regarding feasibility, viability and alleged lack of CoC deliberation were rejected.

Issue (iv): whether the adverse remarks against the resolution professional were sustainable

Analysis: The adverse observations were founded on the same rejected objections regarding valuation, document production, Form-H compliance, dissenting creditor treatment and alleged omission of assets. Once those findings were disapproved, the basis for the personal strictures against the resolution professional disappeared.

Conclusion: The adverse remarks against the resolution professional were expunged.

Final Conclusion: The resolution plan was held approvable under the Code, the rejection order was set aside, and the appeal succeeded with consequential approval of the resolution plan.

Ratio Decidendi: A resolution applicant who is also a financial creditor may vote on its own plan under the proviso to Section 30(5) of the Insolvency and Bankruptcy Code, 2016, and the Adjudicating Authority's review remains confined to statutory compliance under Section 30(2) and the CIRP Regulations; government dues under the Customs Act must yield to the Code's waterfall mechanism where inconsistent.

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