TaxTMI 
TaxTMI 
2019 (5) TMI 1930
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....C is not eligible to vote on such plan in the absence of ascertaining compliance with the mandatory provisions of the Code; b) Declare that the Resolution Plan dated 11.12.2018 is discriminatory and contrary to the Code and applicable law. 2. Two Applications preferred Challenging Approval of Resolution Plan by the COC . As Common question of law are involved and are based on the same set of facts, they were heard together and disposed of by the Common order. 3. The brief averments made in IA No.24 of 2019. 4. The averments made in Application are as follows: a) It is averred that the corporate insolvency resolution process for the Corporate Debtor was initiated pursuant to a petition under Section 7 of the Code filed by Canara Bank. This Tribunal vide its order dated 19.07.2017, was pleased to admit the petition and appointed Mr.KoteswaraRaoKaruchola as the Interim Resolution Professional ("IRP') for the Corporate Debtor. Subsequently, Dr.MamtaBinani replaced the IRP and was confirmed as the Resolution Professional of the Corporate Debtor. b) It is averred that the Resolution Professional received three resolution plans from Bennett Coleman ....
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.... vide its letter dated 27.11.2018 addressed to the Resolution Professional. The letter was also copied to the other members constituting the COC.In such letter, the Applicant once again reiterated its objections to the Resolution Plan on the grounds that the settlement offered to the Applicant against its claims was unacceptable being less than its pro-rata entitlement and that the Applicant should be treated at par with other Financial Creditors, and also informed that the Resolution Plan is violation of Binani Judgement. h) It is averred that the Applicant wrote another letter dated 06.12.2018 to the Resolution Professional and also copied the same to the other members constituting the COC reiterating its concerns and objections regarding the Resolution Plan. i) It is averred that Resolution Professional and Members of COC failed to verify the Resolution Plan is in Compliance with the provisions of applicable law. It is further averred that without ascertaining compliance with the mandatory provisions of the Code, and without even attempting to discharge their statutory obligations under the Code, the Resolution Professional and the other members of COC proceede....
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....nt has a share of 6.71% of the total admitted claims of all the Financial Creditors. o) It is averred that In the Resolution Plan, the upfront cash arnount offered to the Financial Creditors is Rs. 350.00 Crores. Whereas the upfront cash amount offered to the Applicant is Rs. 13, 49, 75,617which comprises merely 4.11% of the total upfront cash resolution amount offered by the Resolution Applicant. As a corollary to certain Financial Creditors such as the Applicant receiving an amount lower than their pro-rata entitlement in the upfront cash resolution amount, certain Financial Creditors under the Resolution Plan have been provided with disproportionate higher amounts against their admitted pro-rata entitlement. 5. The brief averments made in the Counter filed by the Resolution Applicant are as follows : a) It is averred that the Resolution Plan Submitted by the Resolution Applicant has been approved by the majority of members of the Committee of Creditors with 81.39% voting share in e-voting. b) It is averred that the Code has not provide any ground to challenge the "Commercial Wisdom" of the individual financial creditors or their collective dec....
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....rademarks of the corporate debtor. But the fact is that a memorandum of understanding was executed by and between 6 financial creditors of the corporate debtor including IDBI Bank agreed to sell the trademark of the Corporate Debtor and distribute the funds received among themselves as per the terms of the MOU from which it is evident that IDBI Bank was not the sole charge holder of the Trademark. h) It is averred that the Resolution Plan cannot be rejected on the ground that the individual dissenting financial creditor is dissatisfied with the decision of the majority of the COC. i) It is averred that the Resolution Plan submitted by the Resolution Applicant has maximized the value of the assets of the Corporate Debtor and there is no discrimination made by the Resolution Applicant as regards to distribution of funds under the resolution plan among the financial creditors of the corporate debtor. 6. The brief averments made in the Counter filed by the Resolution Professional are as follows : a) It is averred that she is unable to offer her comments to the commercial aspects of the Resolution Plan including but not limited to the purported discriminati....
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....d which are not required for running the business only in a view to maximize the value to the lenders. d) It is averred that the Resolution Application amount was allotted strictly on the basis of the priority of charge. e) It is averred that the IDBI does not have any security interest other than charge on the trade mark. The Charge on the trade mark is also not exclusive charge in favour of the IDBI Bank. f) It is averred that the COC in there Commercial wisdom approved the plan, the applicant has no locus to interfere with the Commercial decision of the COC. 8. The brief averments made in IA No. 121 of 2019. 9. The brief averments made in the Application are as follows: a) The application is filed by the Indian Overseas Bank being aggrieved by the approval of the Resolution plan as the approved plan is failed to do justice to the Applicant who is a secured Financial Creditor. b) It is averred that this tribunal by order dated 19.07.2017 admitted the Section 7 petition and appointed Mr. Koteswara Rao Karuchola as the Interim Resolution Professional for the Corporate Debtor. Subsequently, Dr. Mamta Binani replaced the IRP and was ....
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.... in distributing the proceeds under the Resolution Plan to the Financial Creditors. b) It is averred that the COC failed to arrive a decision as regards to distribution of the proceeds under the Resolution Plan among the Financial Creditors and it is only there after the Resolution Applicant exercised its own judgement after carrying out the necessary due diligence and after taking in to account the suggestions of the Committee of Creditors decided to distribute under the Resolution Plan. c) It is averred that the Resolution Plan has been approved by the overwhelming majority by 81.39% of the Committee of Creditors after being duly satisfied that there is no discrimination whatsoever as regards to the distribution of the proceeds under the Resolution plan. 11. The brief averments made in the Counter filed by the Canara Bank are as follows a) It is averred that the Resolution Applicant made allocation to each member of COC on the basis of security interest. The Financial Creditors were divided in to two categories Category-A lenders and Category- B lenders on the basis of the assets which are required for the Corporate Debtor for running the business an....
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....basis. The counsel contended, the Resolution Plan being discriminatory inter-se Financial creditors and it is against to the provisions of the Code. Counsel contended as per Resolution Plan, the upfront cash resolution amount offered to the financial Creditors is Rs. 350 crores and amount offered to the Applicant is Rs. 13,49,75,617/- which comprises merely 4.11% of the total upfront cash resolution amount offered by the Resolution Applicant. It is lower than the pro-rata entitlement in the upfront cash resolution amount. 16. The contention of Learned Counsel, certain Financial Creditors under the Resolution Plan have been provided with disproportionately higher amount against their admitted pro-rata entitlement. Therefore, it is ex-facie evident that Resolution Plan is discriminatory inter-se the Financial Creditors of Corporate Debtor Company. The main contention of the Counsel that all Financial Creditors are to be treated equally. The Counsel has shown Annexure-14 which would show the pro-rata shares of admitted claims of Financial creditors as against the amount offered to them under Resolution Plan. Annexure-16 shows that IDBI Bank was allotted Rs. The Counsel ....
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....Applicant filed reply. The Resolution Applicant would contend that from time to time it had revised its Resolution Plan as per directions of COC. The Resolution Applicant first requested the COC to suggest method010U/ mode of distribution of the Resolution Fund to various Financial Creditors. The Resolution Applicant further contended, in spite of several months of deliberations between different Financial Creditors of COC, they could not reach to a consensus as regards to the distribution of the proceeds of the Resolution fund. At the 20thCoC meeting held on 10.12.2018, the Resolution Applicant was invited and requested to exercise its discretion and judgment and distribute the proceeds of the upfront amount to the Financial Creditors.He has filed minutes of 20thCoC meeting shown as Annexure-C to the reply. The Resolution Applicant denied that there is any discrimination in the allotment of Resolution Fund to the Financial Creditors. The Resolution Applicant admitted that it is a settled principle of law, the Resolution Plan cannot discriminate between two sets of creditors who are similarly situated. 19. The contention of Resolution Applicant that IDBI Bank, the Applicant here....
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....n Applicant. The account is not a consortium account. It has multiple banking facility. Each individual bank has exclusive Prime & Collateral Securities besides holding securities on pari-passu basis. The Resolution fund was allotted to various Financial Creditors on the basis of security interest. The Resolution Applicant made allocation as there was no consensus among the members of COC. The allotment was made among the Financial Creditors basing on the security interest held by each of the Bank. The Financial Creditors basing on security in their favour were categorized into category 'A' & category 'B' lenders. The segregation is made basing on the security classified as core assets and non-core assets. Category 'A' are those assets which are required for the Corporate debtor for running the business and Non-core Assets are those assets which are not required for running the business. Thus, categorization of financial creditors does not arnount to discrimination. It is multiple banking facility.lt is contended, Canara Bank had priority charge on the current assets. The Liquidation Value attributable to Canara Bank was arrived at Rs. 144.18 crores. Therefo....
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....f 2018 dated 05.02.2018. ii) Hon'ble NCLAT Judgement in Company Appeal (AT) (Insolvency) No.82 of 2018. iii) Hon'ble NCLAT Judgement in Company Appeal (AT) (Insolvency) No. 316 & 317 of 2018. iv) Hon'ble Apex Court judgement in AP (Civil) No. 99/2018. 27. The Learned Counsel for Canara Bank relied on the decision of Hon 'ble Apex Court in Swiss Ribbons Pvt Ltd and Anr Vs. Union of India and Others in WP (Civil) No. 99/2018 dated 25.01.2019. The Learned Counsel has relied on para 85 of the Judgement and contended, once commercial decision was taken by COC, the question of Applicant seeking indulgence of the Tribunal to interfere the commercial decision will not be tenable. 28. Similarly, the Learned Counsel for Canara Bank also relied on the decision of NCLAT in Company Appeal (AT) (Insolvency) No. 316 & 317 of 2018 dated 20.07.2018 and relied on para 15 of the judgement. The Learned Counsel for Canara Bank also relied on the decision of Hon 'ble NCLAT in Binanilndustries Limited Vs Bank of Baroda &Anr in Company Appeal (AT) (Insolvency) No.82 of 2018 and contended approval of the Resolution Plan is in the domain of COC and not wi....