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2022 (10) TMI 95
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....NT ( Per Hon'ble Mr. Justice M. Satyanarayana Murthy ) Aggrieved by the order dated 08.11.2021 passed by the National Company Law Tribunal, Cuttack Bench (hereinafter referred as 'Adjudicating Authority') in I.A. No.141/CTB/2020 along with CP(IB) No. 1411/MB/2018 and T.P. No. 203/CTB/2019 and received by the Appellant on 26.11.2021, has preferred this Appeal challenging the findings recorded by National Company Law Tribunal, Cuttack Bench on various grounds. 2. The Appellant is the Chhattisgarh State Power Distribution Company Ltd. ('CSPDCL'), in terms of the Hon'ble Supreme Court judgment dated 25.04.2014 passed in Civil Appeal No. 5479 of 2013 (2014) 8 SCC 444 in case of M/s Sesa Sterlite Ltd. Vs. OERC & Ors, CSS & ASC as compensation to the distribution licensee irrespective of the fact whether its line is used or not, but for the open access, the consumer would pay tariff applicable for supply which would include an element of cross subsidy surcharge on certain other categories of consumers. Such surcharge is meant to compensate such Distribution licensee from the loss of cross subsidy that such Distribution licensee would suffer by the reason of the consumer taking su....
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....CLT, Cuttack Bench in I.A. No.141/CTB/2020 along with CP(IB) No. 1411/MB/2018 and T.P. No. 203/CTB/2019 had approved the Resolution Plan dated 26.06.2020 submitted by 4th Respondent without application of mind and without scrutinizing the Resolution Plan. 9. The same is challenged in the Appeal, on the ground that the financial proposal against the total dues amounting to Rs.48.38 crores of Operational Creditors were made without actual assessment of Liquidation Value of Corporate Debtor which dehors the provisions of Section 30(2)(b) read with Section 53 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred as 'IBC'), 2016. The Resolution Professional intentionally made allocation of Operational Debt of Rs. 14,70,72,580/- of the Appellant being Operational Creditor in Schedule 7 Statutory Liabilities of Resolution Plan, due to which claims of Appellant was placed in the last of waterfall model and Appellant's 100% claim had been lost. 10. The order passed by Tribunal is in violation of Regulation 38(1A) of IBBI (CIRP) Regulations as Respondent failed to include the Operational Creditors of the Company in CoC, and that no registered valuer was appointed as per Reg....
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....16.84 2. Operational Creditors 3.50 3. Financial Creditors 143.23 4. Employees and Workmen 1.64 Total 165.21 6,00,00,000 new Equity Shares @ Rs.10/- each aggregating to Rs.60 Crores were allotted to the Respondent No.4, its promoters and group of companies on 22nd December, 2021 and all existing (pre-resolution plan) Equity and Preference Shares in the Share Capital of the Respondent No.1 stood cancelled in terms of the resolution plan. The Authorised, Issued, Subscribed and Paid-Up Share Capital of the Respondent No.1 and the Memorandum and Articles of the Respondent stood altered accordingly. The Board of Directors of the Respondent No.1 was also reconstituted. At the 5th meeting of the Monitoring Agency of the Corporate Debtor constituted in accordance with the approved resolution plan, which was held on 24th December, 2021, it was duly placed on record that all payments as per the approved resolution plan has been completed and the resolution plan had been implemented before the Completion Date which was 22nd December, 2021 and within the timelines of 45 days as mentioned in the resolution plan. Further, the receipt o....
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....not to the others. It also denies the allegation that no registered valuer was appointed by the RP while, supporting the order impugned in Company Appeal. 16. It is also contended that the approval of resolution plan is the commercial wisdom of CoC and the Adjudicating Authority has nothing to do with the approval of the resolution plan by the CoC. Since it is in compliance of the mandatory provisions of IBC, the Adjudicating Authority approved it. There is absolutely no illegality and requested to dismiss the Appeal. 17. During hearing the Learned Senior Counsel Ms. Suruchi Aggarwal representing the Appellant Chhattisgarh State Power Distribution Company Ltd. ('CSPDCL') reiterated the contentions in the appeal while pointing out that the additional affidavit filed by the Appellant totally changed the earlier plea and filed a rejoinder to the additional affidavit. It amounts to amending the pleadings thereby not permissible. It is also contended that the Respondent IRP did not follow the procedure laid down in IBC and Regulation framed thereunder. More particularly, failed to intimate the liquidation value of the Corporate Debtor and failed to appoint registered valuer for as....
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....rom Financial Creditor while approving the Resolution plan making the Appellant to loss 100% of its claim, if so, the order is liable to be set aside. (ii) Whether the Resolution Professional is under legal obligation to inform the fair, liquidation value of the Corporate Debtor to the Appellant, who is not a member of CoC? (iii) Whether the alleged failure to appoint a registered valuer for valuing the Corporate Debtor to fix, fair and liquidation value is an legality in the order passed by the Adjudicating Authority. Point No.1 20. The main contention of the Appellant before this Tribunal is that Section 30(2)(b) was not complied by Resolution Professional which vitiates the entire proceedings, discriminated the Appellant from Financial Creditor. 21. Section 30 deals with submissions of Resolution Plan and 30(2) obligates the Resolution Professional to examine each resolution plan issued by him to confirm that such resolution plan provide for payment of Insolvency Resolution Process cost in a manner specified by the Board in priority to the payment of other debts of the Corporate Debtor; provides for payment of debts Operational Creditor in such manner ....
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.... (i) any amount due to the Central Government and the State Government including the amount to be received on account of the Consolidated Fund of a State, if any, in respect of the whole or any part of the period of two years preceding the liquidation commencement date; (ii) debts owed to a secured creditor for any amount unpaid following the enforcement of security interest; f) any remaining debts and dues; g) preference shareholders, if any; and h) equity shareholders or partners, as the case may be." 23. The Resolution plan satisfied the requirement under Section 30(2)(b) for payment of dues in the priority specified under Section 53(1) the Resolution Professional is under obligation to place the same on its examination, before the CoC for approval. Here the RP, satisfied himself about the compliance of Section 30(2)(b) and 53(1) placed Resolution Plan for approval before the CoC and CoC approved the resolution plan with 100% voting. Thereupon, filed a petition under Section 31 before the Adjudicating Authority for approval of the resolution plan, accordingly, the same was approved. Here, the grievance of the Appellant is that it bein....
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.... observed as follows: "73. .... If the Adjudicating Authority finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the Committee of Creditors to re-submit such plan after satisfying the aforesaid parameters....." ".... The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority...." 28. But the discrimination pointed out in the Committee of Creditors of Essar Steel India Limited (supra) is a discrimination among the same Operational Creditors not between two classes of creditors. Though Section 30(2)(b) of IBC, minimum value to be paid to the Operational Creditor, as per the provision is the amount to be paid to such creditors in the event of liquidation of the Corporate Debtor under Section 53. 29. The Resolution Professional distributed the proportionate amount to the Operational Creditors strictly adhering to Section 30(2)(b) and Section 53 of IBC. Even otherwise, the plan was approved by the CoC with 100% majority voting share. The Adjudicating Authority shall examine, whether the approved resolution plan by....
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.... the resolution plan do not extend to examine the correctness or otherwise of the commercial wisdom exercised by the CoC. The limited judicial review available to Adjudicating Authority lies within the four corners of Section 30(2) of the Code, which would essentially be to examine that the resolution plan does not contravene any of the provisions of law for the time being in force, it conforms to such other requirements as may be specified by the Board, and it provides for: (a) payment of insolvency resolution process costs in priority; (b) payment of debts of operational creditors; (c) payment of debts of dissenting financial creditors; (d) for management of affairs of corporate debtor after approval of the resolution plan; and (e) implementation and supervision of the resolution plan. 77.2. The limitations on the scope of judicial review are reinforced by the limited ground provided for an appeal against an order approving a resolution plan, namely, if the plan is in contravention of the provisions of any law for the time being in force; there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resoluti....
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....pellant were to be accepted, the result would be that rather than insolvency resolution and maximisation of the value of assets of the corporate debtor, the process would lead to more liquidations, with every secured financial creditor opting to stand on dissent. Such a result would be defeating the very purpose envisaged by the Code; and cannot be countenanced. We may profitably refer to the relevant observations in this regard by this Court kin Essar Steel as follows:- "85. Indeed, if an "equality for all" approach recognising the rights of different classes of creditors as part of an insolvency resolution process is adopted, secured financial creditors will, in many cases, be incentivised to vote for liquidation rather than resolution, as they would have better rights if the corporate debtor was to be liquidated rather than a resolution plan being approved. This would defeat the entire objective of the Code which is to first ensure that resolution of distressed assets takes place and only if the same is not possible should liquidation follow." 31. The Counsel for the Respondent also raised a ground that the principle laid down in the Jaypee Kensington Boulevard Apart....
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.... not a ground for set aside the resolution plan since such discrimination is permissible in terms of the judgments referred above. 33. Apart from that the commercial wisdom of the CoC is final, in Committee of Creditors of Essar Steel India Limited (supra) held that: "It was beyond shadow of doubt that approval of the Resolution Plan fell within the domain of commercial wisdom of CoC and the scope of judicial review was limited to the four corners of Section 30(2) and 61(3) of IBC. In another judgment "Jaypee Kensington Boulevard Apartments Welfare Association & Ors. Vs. NBCC (India) Limited and Others" reiterated the same principle. In case of K. Sashidhar Vs. Indian Overseas bank & Ors. and Maharashtra Seamless Ltd. Vs. Padmanabhan Venkatesh & Ors. expressed the same view by Hon'ble Apex Court. In Pratap Technocrats Private Limited and Others Vs. Monitoring Committee of Reliance Infratel Limited and Another held that jurisdiction of Adjudicating Authority cannot extend into entering upon merits of a business decision made by a requisite majority of the CoC in its commercial wisdom. Under the Indian insolvency regime, it appears that a conscious choice has bee....
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....eting of CoC to the Operational Creditor, the Appellant herein does not arise and on that ground, decision taken by CoC cannot be set aside. Hence this contention is rejected, while answering the point in favour of respondent and against in Appellant. 36. One of the Contentions of the Appellant is that liquidation value of the Corporate Debtor was not intimated to the Appellant. Whereas, the Mr. Abhishek Anand contended that the liquidation value was kept as confidential and cannot be disclosed to the Prospective Resolution Applicant's as per Regulation 35(2) and 35(3) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulation, 2016. The Liquidation value was however, determined which will appear in Form-H submitted by RP under Regulation 35(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulation, 2016. Regulation 35 mandates disclosure of liquidation value to the members of the Committee of Creditors, the resolution professional shall provide the fair value and the liquidation value to every member of the committee in electronic form. Since the Appellant is not a me....