TaxTMI 
TaxTMI 
2020 (7) TMI 6
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....16 filed by Resolution Professional and approved the plan whereas rejected the MA No. 602/2019 filed by the A-1 and also rejected the objections filed by A-2. 2. Brief facts of the case are that the CP No. 1095/I&B/NCLT/MAH/2017 was filed by Punjab National Bank under section 7 of I&B Code for initiation of Corporate Insolvency Resolution Process against Anand Distilleries (P.) Ltd., Corporate Debtor. The petition was admitted by the Adjudicating Authority vide order dated 14-2-2018. The Committee of Creditors confirmed the appointment of IRP, Mr Dushyant C Dave as Resolution Professional in their first meeting held on 20-3-2018. The 180 days for CIRP was further extended by the Adjudicating Authority, for another 90 days vide order dated 9-8-2018. 3. The RP on 17-5-2018 published advertisement inviting Expression of Interest till 16-6-2018 in all India edition of Business Standard, Dainik Bhaskar and Nagpur edition of Deshonnati. As no plan was received till 16-6-2018 again the public notice was issued in newspapers and last date for submission of Expression of Interest was 30-7-2018 and the same was extended twice first till 30-9-2018 and subsequently till 15-10-2018. The R....
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....est approximately Rs. 52.50 crores which consists of Rs. 35.60 crores towards liability of the corporate debtor and Rs. 12.90 crores towards capital investment for upgradation of the plant of the corporate debtor and Rs. 4 crores towards working capital for the corporate debtor. 7. After elaborate discussions, Adjudicating Authority rejected the application on two grounds, firstly the A-1 has come after the submissions of approved resolution plan to the Adjudicating Authority and secondly the COC or RP has not sought any relief to recall the approved resolution plan and for allowing them to reconsider the approved resolution plan along with the new resolution plan offering better value. Adjudicating Authority suo moto cannot direct the COC to consider the new resolution plan and re-consider the already approved resolution plan. As the decision of the COC accepting or rejecting the resolution plan is limited to the grounds mentioned in Section 30(2) and purely commercial decision of COC cannot be adjudicated by the Adjudicating Authority. Thus Adjudicating Authority rejected the application of the A-1, and approved the plan by the impugned order. 8. Learned counsel for the A-1....
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....s to challenge the resolution plan by way of an appeal. Thus the appeal is liable to be dismissed. 13. Learned counsel for the Respondent No. 1 submitted that the Adjudicating Authority after elaborate discussions rightly rejected the objections raised by A-2, hence he has also no locus to challenge the approved plan. 14. Learned counsel for Respondent No. 2 representing successful Resolution Applicant submits that as per approved plan he has deposited the substantial amount and there is no merit in these appeals, therefore, the appeals be dismissed. 15. We have considered the submissions of Learned counsel for the parties. 16. The Hon'ble Supreme Court in the Case of Committee of Creditor of Essar Steel India Ltd. v. Satish Gupta & Ors. 2019 SCC Online SC 1478, ruled the scope of judicial review by the Adjudicating Authority and powers of Appellate Tribunal. Therefore, we would like to refer the relevant Paragraphs which reads as under: "Jurisdiction of the Adjudicating Authority and the Appellate Tribunal 45. As has already been seen hereinabove, it is the Adjudicating Authority which first admits an application by a financial or operational cred....
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....bunal as follows: "42. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan "as approved" by the requisite percent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated requirements. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides: (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board. The Board referred to is established under section 188 of the I&B Code. The powers and functions of th....
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....n provided for repayment in priority to all other debts; or (v) the resolution plan does not comply with any other criteria specified by the Board. ** ** **" 44. On a bare reading of the provisions of the I&B Code, it would appear that the remedy of appeal under Section 61(1) is against an "order passed by the adjudicating authority (NCLT)" - which we will assume may also pertain to recording of the fact that the proposed resolution plan has been rejected or not approved by a vote of not less than 75% of voting share of the financial creditors. Indubitably, the remedy of appeal including the width of jurisdiction of the appellate authority and the grounds of appeal, is a creature of statute. The provisions investing jurisdiction and authority in the NCLT or NCLAT as noticed earlier, has not made the commercial decision exercised by the CoC of not approving the resolution plan or rejecting the same, justiciable. This position is reinforced from the limited grounds specified for instituting an appeal that too against an order "approving a resolution plan" under Section 31. First, that the approved resolution plan is in contravention of the provisions of any law f....
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.... the resolution plan is by a vote of not less than 75% (as in October, 2017) of voting share of the financial creditors. Conversely, the legislative intent is to uphold the opinion or hypothesis of the minority dissenting financial creditors. That must prevail, if it is not less than the specified percent (25% in October, 2017; and now after the amendment w.e.f. 6-6-2018, 44%). The inevitable outcome of voting by not less than requisite percent of voting share of financial creditors to disapprove the proposed resolution plan, de jure, entails in its deemed rejection. ** ** ** 49. The argument, though attractive at the first blush, but if accepted, would require us to re-write the provisions of the I&B Code. It would also result in doing violence to the legislative intent of having consciously not stipulated that as a ground - to challenge the commercial wisdom of the minority (dissenting) financial creditors. Concededly, the process of resolution plan is necessitated in respect of corporate debtors in whom their financial creditors have lost hope of recovery and who have turned into non- performer or a chronic defaulter. The fact that the concerned corporate debtor was ....
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....e grounds under section 61(3) of the I&B Code. It does not postulate jurisdiction to undertake scrutiny of the justness of the opinion expressed by financial creditors at the time of voting. To take any other view would enable even the minority dissenting financial creditors to question the logic or justness of the commercial opinion expressed by the majority of the financial creditors albeit by requisite percent of voting share to approve the resolution plan; and in the process authorize the adjudicating authority to reject the approved resolution plan upon accepting such a challenge. That is not the scope of jurisdiction vested in the adjudicating authority under section 31 of the I&B Code dealing with approval of the resolution plan." 48. Thus, it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of Section 30(2) of the Code, insofar as the Adjudicating Authority is concerned, and Section 32 read with Section 61(3) of the Code, insofar as the Appellate Tribunal is concerned, the parameters of such review having been clearly l....