TaxTMI 
TaxTMI 
2023 (1) TMI 996
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....der' dated 10.05.2019 in IA/40 of 2019 in CP(IB) No. 136 / BB / 2017, whereby, the 'Application', filed by the '4th Respondent / Resolution Professional' of the '1st Respondent', [under Section 30 (6) (c) and 31 of the I & B Code, 2016], seeking approval of the 'Resolution Plan' dated 07.01.2019., submitted by the '2nd Respondent' / 'SPG Macrocosm Limited, through 'SPV Vision Textile' ('2nd Respondent' / 'Resolution Applicant'), as approved by the 'Committee of Creditors' by 'e-voting' on 15.01.2019, passed by the 'Adjudicating Authority', ('National Company Law Tribunal', Bengaluru Bench, Bengaluru), in 'Approving', the 'Resolution Plan', dated 07.01.2019 . 2. Earlier, the 'Adjudicating Authority', ('National Company Law Tribunal', Bengaluru Bench, Bengaluru), while passing the 'impugned order' dated 10.05.2019 in IA/40 of 2019 in CP(IB) No. 136 / BB / 2017 (Filed by the 'Petitioner / 2nd Respondent / Successful Resolution Applicant') through 'SPV Vision Textile', wherein, inter alia at Paragraphs 4 to 6, had observed the following: 4. "It is stated that last date of submission of Resolution Plan was 10 October 2018 and received on resolution plan from SPG Macrocosm Lt....
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....ional Creditor' of the 'Corporate Debtor' (under Section 9 of the I & B Code, 2016) and commenced the 'Corporate Insolvency and Resolution Process'. 4. According to the Learned Counsel for the Appellant, pursuant to an invitation for Claims, by the Creditors of the Corporate Debtor, the 'Appellant', as an 'Operational Creditor' of the Corporate Debtor had furnished a Claim of Rs.6,05,00,111/- to the Resolution Professional who had admitted only Rs.3.53 Crores of such 'Claim'. Also that, the interest portion of Appellant's claim was disallowed by the Resolution Professional, based on the reason that the 'Interest' was not mentioned in the Invoice. 5. It is represented on behalf of the Appellant that even in regard to the 'Admitted Claim' of Rs.3.54 Crores, nothing was paid to the Appellant, as per the Terms of the 'Resolution Plan', approved by the 'impugned order'. Apart from that, the 'Appellant' came to know of the 'inequitable' provisions of the Resolution Plan', which envisage 'No Payment' whatsoever of the 'Operational Creditors' of the 'Corporate Debtor', only when the 'Resolution Professional', sent a communication dated 26.06.2019, stating that the Appellant's Admitte....
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....provide for the complete takeover of these 'Assets', for only a sale consideration of Rs.50.50 Crores, which is substantially, below the 'Value of the Assets' of the 'Corporate Debtor'. Moreover, the Resolution Plan', envisages an immediate 'Restructuring of the Share Capital' of the 'Corporate Debtor', through a combination of 'Reduction of Share Capital' of the 'Public Shareholders', and the 'Preferential Allotment of Fresh Equity Shares', to the 'Resolution Applicant' (for 'Allotment Consideration of Rs.5 Crores' only). 11. The Learned Counsel for the Appellant, brings to the notice of this 'Tribunal', that by 'Restructuring', the 'Resolution Applicant', became a 97.88% Shareholder of the 'Corporate Debtor'. Besides this, the Resolution Applicant commits a further infusion of Share Capital of Rs.20 Crores, 'as and when required in the Company for its Revival through its Group Companies, Associates, Investors and Promoters'. 12. The Learned Counsel for the Appellant points out that there is no 'upfront investment', beyond Rs. 5 Crores, by the Resolution Applicant, which is given complete 'Liberty', to bring in the 'Funds', whenever it pleases. Also that, the 'Plan', provide....
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.... Comp. App (AT) (INS.) No. 850 of 2019, is to be allowed, by setting aside the 'impugned order' dated 10.05.2019 in IA/40 of 2019 in CP(IB) No. 136 / BB / 2017, in 'Approving the Resolution Plan', made by the 'Adjudicating Authority' ('Tribunal'), and thereby the interests of the 'Operational Creditors', are protected in a sufficient manner. Appellant's Citations: 17. The Learned Counsel for the Appellant, refers to the decision of the Hon'ble Supreme Court of India, in Binani Industries Limited v. Bank of Baroda (2018) SCC Online NCLAT 521, wherein at Paragraph 47 and 48, it is observed as under: 47. "We have noticed the relevant provision of the 'process document' and Section 25(2)(h) and held that the 'Committee of Creditors' have not acted in terms with the provisions of the 'I & B Code' and the 'process document'. The maximization of the value assets of the 'Corporate Debtor' cannot be ignored nor it can be ignored that the same should balance all the stakeholders. 48. If the 'Operational Creditors' are ignored and provided with 'liquidation value' on the basis of misplaced notion and misreading of....
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....he priority accorded to the claims of a similar class affects all members of the class in the same manner. The policy of equitable treatment permeates many aspects of an insolvency law, including the application of the stay or suspension, provisions to set aside acts and transactions and recapture value for the insolvency estate, classification of claims, voting procedures in reorganization and distribution mechanisms. An insolvency law should address problems of fraud and favouritism that may arise in cases of financial distress by providing, for example, that acts and transactions detrimental to equitable treatment of creditors can be avoided. 77. NCLAT has, while looking into viability and feasibility of resolution plans that are approved by the Committee of Creditors, always gone into whether operational creditors are given roughly the same treatment as financial creditors, and if they are not, such plans are either rejected or modified so that the operational creditors' rights are safeguarded. It may be seen that a resolution plan cannot pass muster under Section 30(2)(b) read with Section 31 unless a minimum payment is made to operational creditors, being not less th....
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....ake past and present payments to various operational creditors without which such operation as a going concern would become impossible. Sections 5(26), 14(2), 20(1), 20(2)(d) and (e) of the Code read with Regulations 37 and 38 of the 2016 Regulations all speak of the corporate debtor running as a going concern during the insolvency resolution process. Workmen need to be paid, electricity dues need to be paid, purchase of raw materials need to be made, etc. This is in fact reflected in this court's judgment in Swiss Ribbons (supra) as follows: "26. The Preamble of the Code states as follows: 'An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto.' 27. As is discernible, the Preamble gives an ins....
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....eing liquidation value - which in most cases would amount to nil after secured creditors have been paid - would certainly not balance the interest of all stakeholders or maximise the value of assets of a corporate debtor if it becomes impossible to continue running its business as a going concern. Thus, it is clear that when the Committee of Creditors exercises its commercial wisdom to arrive at a business decision to revive the corporate debtor, it must necessarily take into account these key features of the Code before it arrives at a commercial decision to pay off the dues of financial and operational creditors. 73. There is no doubt whatsoever that the ultimate discretion of what to pay and how much to pay each class or sub-class of creditors is with the Committee of Creditors, but, the decision of such Committee must reflect the fact that it has taken into account maximising the value of the assets of the corporate debtor and the fact that it has adequately balanced the interests of all stakeholders including operational creditors. This being the case, judicial review of the Adjudicating Authority that the resolution plan as approved by the Committee of Creditors has ....
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.... the said Regulation involves the resolution plan stating as to how it has dealt with the interests of operational creditors, which is not the same thing as saying that they must be paid the same amount of their debt proportionately. Also, the fact that the operational creditors are given priority in payment over all financial creditors does not lead to the conclusion that such payment must necessarily be the same recovery percentage as financial creditors. So long as the provisions of the Code and the Regulations have been met, it is the commercial wisdom of the requisite majority of the Committee of Creditors which is to negotiate and accept a resolution plan, which may involve differential payment to different classes of creditors, together with negotiating with a prospective resolution applicant for better or different terms which may also involve differences in distribution of amounts between different classes of creditors. 89. Indeed, by vesting the Committee of Creditors with the discretion of accepting resolution plans only with financial creditors, operational creditors having no vote, the Code itself differentiates between the two types of creditors for the reaso....
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.... 6 Other Debts and Dues Total Quite clearly, secured and unsecured financial creditors are differentiated when it comes to amounts to be paid under a resolution plan, together with what dissenting secured or unsecured financial creditors are to be paid. And, most importantly, operational creditors are separately viewed from these secured and unsecured financial creditors in S.No.5 of paragraph 7 of statutory Form H. Thus, it can be seen that the Code and the Regulations, read as a whole, together with the observations of expert bodies and this Court's judgment, all lead to the conclusion that the equality principle cannot be stretched to treating unequals equally, as that will destroy the very objective of the Code - to resolve stressed assets. Equitable treatment is to be accorded to each creditor depending upon the class to which it belongs: secured or unsecured, financial or operational." 2nd Respondent's Submissions: 20. It is the contention of the 2nd Respondent that Section 30 (2) (b) of the I & B Code, 2016, envisages two w....
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....orporate Debtor which run as under: a) To engage in textile manufacturing and e-commence the operations after due repairs and renovation b) Once the production is stabilised - to carry out modernisation and expansion c) To carry on backward and forward integration d) To add diversified / value added services such as trading, manufacturing, merchant manufacturing, letting out space for warehousing, processing centre, distribution centre targeting all the industries like agro-products, iron and steel, engineering FMCG, etc. 26. Also, in Clause 3.10 of the Resolution Plan, the 2nd Respondent had listed its 'capabilities to revive the Corporate Debtor', and run it as a 'Going Concern', and the same is as follows: (i) The Resolution Applicant is financially sound with a net worth of around Rs. 2024 lakhs. (ii) This acquisition will generate new employment to labour and staff. The acquisition will also increase the revenue to the Government of India and boost exports. (iii) Resolution Applicant being a trader / merchant exporter of textile over years, has good network in the industry on the manufacturing as well as marketi....
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....lant' is not entitled to get any 'relief', in the instant 'Appeal', and the same is liable to be dismissed, to 'secure the ends of justice'. 2nd Respondent's Decisions : 33. The Learned Counsel for the 2nd Respondent, cites the decision of the Hon'ble Supreme Court of India in Swiss Ribbons Pvt. Ltd. and Anr. v. Union of India & Ors. (2019) 4 SCC 17, wherein, at Paragraphs, 28, 82 and 84, it is observed as under: 28. "It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters / those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate....
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.... for the 2nd Respondent, adverts to the decision of the Hon'ble Supreme Court of India in Swiss Ribbons Pvt. Ltd. and Anr. v. Union of India & Ors. (2019) 4 SCC 17, wherein at Paragraph 27, it is observed as under: 27. "The Code is first and foremost, a Code for reorganization and insolvency resolution of corporate debtors. Unless such reorganization is effected in a time-bound manner, the value of the assets of such persons will deplete. Therefore, maximization of value of the assets of such persons so that they are efficiently run as going concerns is another very important objective of the Code. This, in turn, will promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When, therefore, a resolution plan takes off and the corporate debtor is brought back into the economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the hands of banks and financial institutions. Above all, ultimately, the interests of all stakeholders are looked after as the corporate debtor itself becomes a beneficiary of the resolution scheme - workers are paid, the creditors in the long ....
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....solvency resolution, the decision as to whether a particular resolution plan is to be accepted or not is ultimately in the hands of the Committee of Creditors; and even in such a decision making process, a resolution plan cannot be taken as approved if the same is not approved by votes of at least 66% of the voting share of financial creditors. Thus, broadly put, a resolution plan is approved only when the collective commercial wisdom of the financial creditors, having at least 2/3rd majority of voting share in the Committee of Creditors, stands in its favour. 77.6.1. The assessment about maximisation of the value of assets, in the scheme of the Code, would always be subjective in nature and the question, as to whether a particular resolution plan and its propositions are leading to maximisation of value of assets or not, would be the matter of enquiry and assessment of the Committee of Creditors alone. When the Committee of Creditors takes the decision in its commercial wisdom and by the requisite majority; and there is no valid reason in law to question the decision so taken by the Committee of Creditors, the adjudicatory process, whether by the Adjudicating Authority or....
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.... that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority. That is made non− justiciable. 34. In the report of the Bankruptcy Law Reforms Committee of November 2015, primacy has been given to the CoC to evaluate the various possibilities and make a decision. It has been observed thus: "The key economic question in the bankruptcy process When a firm (referred to as the corporate debtor in the draft law) defaults, the question arises about what is to be done. Many possibilities can be envisioned. One possibility is to take the firm into liquidation. Another possibility is to negotiate a debt restructuring,....
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....ssing their choice during consideration of the proposal for approval of a resolution plan. No more and no less. Indubitably, the legislature has consciously not provided for a ground to challenge the justness of the "commercial decision" expressed by the financial creditors - be it to approve or reject the resolution plan. The opinion so expressed by voting is non−justiciable. Further, in the present cases, there is nothing to indicate as to which other requirements specified by the Board at the relevant time have not been fulfilled by the dissenting financial creditors. As noted earlier, the Board established under Section 188 of the I&B Code can perform powers and functions specified in Section 196 of the I&B Code. That does not empower the Board to specify requirements for exercising commercial decisions by the financial creditors in the matters of approval of the resolution plan or liquidation process. Viewed thus, the amendment under consideration does not take the matter any further." 39. The Learned Counsel for the 2nd Respondent refers to the Judgement of the Hon'ble Supreme Court of India, in the matter of Kalparaj Dharamshi v. Kotak Investment Advisors Ltd., vide....
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....It is not in dispute, that there was no stay granted by NCLAT, while reserving the matters for orders. After a gap of five months and eight days, NCLAT passed the final order on 5.8.2020. It could thus be seen, that for a long period, there was no restraint on implementation of the resolution plan of Kalpraj, which was duly approved by NCLT. It is the case of Kalpraj, RP, CoC and Deutsche Bank, that during the said period, various steps have been taken by Kalpraj by spending a huge amount for implementation of the plan. No doubt, this is sought to be disputed by KIAL. However, we do not find it necessary to go into that aspect of the matter in light of our conclusion, that NCLAT acted in excess of jurisdiction in interfering with the conscious commercial decision of CoC." 40. The Learned Counsel for the 2nd Respondent, relies on the decision of the Hon'ble Supreme Court of India in Karad Urban Co-operative Bank Ltd. v. Swwapnil Bhingardevay, reported in (2020) 9 SCC at Page 729 at Spl. Pgs: 734 to 736, wherein at Paragraphs 12 to 14, it is observed as under: 12. "We have carefully considered the rival submissions. On the first question regarding the viability and feasib....
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....s 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....... 73..... Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of." 14. The principles laid down in the aforesaid decisions, make one thing very clear. If all the factors that need to be taken into account for determining whether or not the corporate debtor can be kept running as a going concern have been placed before the Committee of Creditors and the CoC has taken a conscious decision to approve the resolution plan, then the adjudicating authority will have to switch over to the hands off mode. It is not the cas....
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....ugned the merits of the commercial decision taken by the Committee of Creditors in approving the Resolution Plan of the Corporate Debtor. 44. Moreover, the jurisdiction under the I & B Code, 2016, does not extend to altering / changing the commercial wisdom of the Committee of Creditors', which took into consideration, the feasibility and viability of the Resolution Plan. Besides this, the Resolution Professional does not have any role to play, because of the supremacy being given to the commercial wisdom of the Committee of Creditors. Also that, any objection or contention relating to the 'approval' of the 'Resolution Plan' or its contents, including the aspect of distribution proposed, can only be addressed by the Members of the CoC and not by the Resolution Professional. 45. The Learned Counsel for the 4th Respondent points out the reading of the Regulation 39 of the CIRP Regulations, coupled with the ingredients of Section 30 (4) of the Code, unerringly, proceeds to point out that the 'approval by a majority of the 'Committee of Creditors', takes into account the 'Feasibility' and 'Viability', of the 'Resolution Plan', along with the aim of 'revival' of the 'Corporate Deb....
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....ng financial creditors and not to propound an independent plan of the appellant. Thus understood, Section 29-A of the I&B Code would have no application and in any case, if the proposed resolution plan is to be taken forward, the appellant has no causal connection with the resolution applicant. The learned counsel submits that the appeal be allowed and the matter be restored to the file of the adjudicating authority (NCLT) for reconsideration of the proposed resolution plan afresh. 22. Mr. Colin Gonsalves, learned Senior Counsel appearing for the workers' union concerning corporate debtor (IIL) submits that the rejection of the plan would have a direct impact on the workers engaged by the corporate debtor. According to him, the resolution plan manifests that the company is a viable company and all efforts should be made to revive the company and not to shove it into liquidation because of the whims and fancies of the minority financial creditors or, for that matter, in the guise of their commercial wisdom. Reliance is placed on United Bank of India, Calcutta Vs. Abhijit Tea Co. Pvt. Ltd.22, SCC para 20 and Karan Singh Vs. Bhagwan Singh23, SCC para 7 and additionally, on th....
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....or standing suspended by law. Among the important duties of the interim resolution professional is the receiving and collating of all claims submitted by creditors and the constitution of a Committee of Creditors - see Section 18(1)(b) and (c) of the Code. Under Section 20 of the Code, the interim resolution professional is to make every endeavour to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern. 54. Since it is the commercial wisdom of the Committee of Creditors that is to decide on whether or not to rehabilitate the corporate debtor by means of acceptance of a particular resolution plan, the provisions of the Code and the Regulations outline in detail the importance of setting up of such Committee, and leaving decisions to be made by the requisite majority of the members of the aforesaid Committee in its discretion. Thus, Section 21(2) of the Code mandates that the Committee of Creditors shall comprise all financial creditors of the corporate debtor. "Financial creditors" are defined in Section 5(7) of the Code as meaning persons to whom a financial debt is owed and includes a p....
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.... creditor' has been defined in Section 5(7) of the I&B Code to mean any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to. Be it noted that the process of insolvency resolution and liquidation concerning corporate debtors has been codified in Part II of the I&B Code, comprising of seven Chapters. Chapter I predicates that Part II shall apply in matters relating to the insolvency and liquidation of corporate debtor where the minimum amount of default is Rs. 1,00,000/-. Section 5 in Chapter I is a dictionary clause specific to Part II of the Code. Chapter II deals with the gamut of procedure to be followed for the corporate insolvency resolution process. For dealing with the issue on hand, the provisions contained in Chapter II will be significant. From the scheme of the provisions, it is clear that the provisions in Part II of the Code are self-contained code, providing for the procedure for consideration of the resolution plan by the CoC. 35. The stage at which the dispute concerning the respective corporate debtors (KS&PIPL and IIL) had reached the adjudicating authority (NCLT) is ascribable to Sect....
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....ckground in which the I&B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of Sick Industrial Companies Act, 1985 or under other such enactments which has now been forsaken. Besides, the commercial wisdom of the CoC has been given paramount status without any judicial intervention, for ensuring completion of the stated processes within the timelines prescribed by the I&B Code. There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject matter expressed by them after due deliberations i....
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....quiry 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 the Board have been delineated in Section 196 of the I&B Code. None of the specified functions of the Board, directly or indirectly, pertain to regulating the manner in which the financial creditors ought to or ought not to exercise their commercial wisdom during the voting on the resolution plan under Section 30(4) of the I&B Code." 48. The Learned Counsel for the 4th Respondent, cites the decision of Hon'ble Supreme Court of India in the matter of Kalparaj Dharamshi & Anr. v. Kotak Investment Advisors Ltd. ....
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.... non-justiciable." (emphasis supplied) 143. This Court has held, that it is not open to the Adjudicating Authority or Appellate Authority to reckon any other factor other than specified in Sections 30(2) or 61(3) of the I&B Code. It has further been held, that the commercial wisdom of CoC has been given paramount status without any judicial intervention for ensuring completion of the stated processes within the timelines prescribed by the I&B Code. This Court thus, in unequivocal terms, held, that there is an intrinsic assumption, that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. It has been held, that the opinion expressed by CoC after due deliberations in the meetings through voting, as per voting shares, is a collective business decision. It has been held, that the legislature has consciously not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the Adjudicating Authority an....
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....at is important is, the commercial wisdom of the majority of creditors, which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place." 49. The Learned Counsel for the 4th Respondent, falls back upon the decision of the Hon'ble Supreme Court of India in the matter of Karad Urban Co-operative Bank Ltd., v. Swwapnil Bhingardevay, 2020 9 SCC 729 at Spl Pgs.: 733 to 736 and 740, wherein at Paragraphs 10.1, 12, 13 and 41, it is observed as under: 10.1. "That the question of viability and feasibility, is to be left to the commercial wisdom of CoC and the same cannot be lightly interfered with by the Tribunal, in view of the law laid down by this court in Essar Steel India Ltd.6 and K. Sashidhar7. 12. We have carefully considered the rival submissions. On the first question regarding the viability and feasibility of a resolution plan, the law is now well−settled. In K. Sashidhar7, it was held as follows (SCC pp. 183, 186-87 & 189, paras 52, 57-58 & 64) "52 ... There is an intrinsic assumption that financial creditors are fully informed about the viabil....
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.... 73. .... Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of." 41. The third ground on which NCLAT proceeded, related to the ethanol plant and machinery. We have already dealt with this issue in detail, while dealing with the first issue. As stated therein, the SRA admittedly did not make his Resolution Plan on the strength of the ethanol plant and machinery in question. The threat looming large over the availability of the ethanol plant and machinery has admittedly been taken note of by the SRA and the CoC. The Resolution Plan does not give an indication anywhere that without this plant and machinery the whole resolution plan will fail. In paragraph 8.04 of the Resolution Plan, the SRA has undertaken to continue the operations i....
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.... Bankruptcy Board of India, and for matters connected therewith or incidental thereto." 27. As is discernible, the Preamble gives an insight into what is sought to be achieved by the Code. The Code is first and foremost, a Code for reorganisation and insolvency resolution of corporate debtors. Unless such reorganisation is effected in a time-bound manner, the value of the assets of such persons will deplete. Therefore, maximisation of value of the assets of such persons so that they are efficiently run as going concerns is another very important objective of the Code. This, in turn, will promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When, therefore, a resolution plan takes off and the corporate debtor is brought back into the economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the hands of banks and financial institutions. Above all, ultimately, the interests of all stakeholders are looked after as the corporate debtor itself becomes a beneficiary of the resolution scheme- workers are paid, the creditors in the long run will be repaid in full, and ....
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.... judicial review of the Adjudicating Authority that the resolution plan as approved by the Committee of Creditors has met the requirements referred to in Section 30(2) would include judicial review that is mentioned in Section 30(2)(e), as the provisions of the Code are also provisions of law for the time being in force. Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. 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 A....
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.... contrary, para 77 itself makes it clear that there is a difference in payment of the debts of financial and operational creditors, operational creditors having to receive a minimum payment, being not less than liquidation value, which does not apply to financial creditors. The amended Regulation 38 set out in para 77 again does not lead to the conclusion that financial and operational creditors, or secured and unsecured creditors, must be paid the same amounts, percentage wise, under the resolution plan before it can pass muster. Fair and equitable dealing of operational creditors' rights under the said Regulation involves the resolution plan stating as to how it has dealt with the interests of operational creditors, which is not the same thing as saying that they must be paid the same amount of their debt proportionately. Also, the fact that the operational creditors are given priority in payment over all financial creditors does not lead to the conclusion that such payment must necessarily be the same recovery percentage as financial creditors. So long as the provisions of the Code and the Regulations have been met, it is the commercial wisdom of the requisite majority of the Co....
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.... approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation. (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1) - it may, by an order, reject the resolution plan. (3)After the order of approval under sub-section (1) - (a) the moratorium order passed by the Adjudicating Authority under section 14 shall cease to have effect; and (b) the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database. (4) The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later: Provided that where the resolution plan contains a provision for combina....
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.... 28. No provision in the Code or Regulations has been brought to our notice under which the bid of any Resolution Applicant has to match liquidation value arrived at in the manner provided in Regulation 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. This point has been dealt with in Essar Steel. We have quoted above the relevant passages from this judgment. 29. It appears to us that the object behind prescribing such valuation process is to assist the CoC to take decision on a resolution plan properly. Once, a resolution plan is approved by the CoC, the statutory mandate on the Adjudicating Authority under Section 31(1) of the Code is to ascertain that a resolution plan meets the requirement of sub-sections (2) and (4) of Section 30 thereof. We, per se, do not find any breach of the said provisions in the order of the Adjudicating Authority in approving the resolution plan. 30. The Appellate Authority has, in our opinion, proceeded on equitable perception rather than commercial wisdom. On the face of it, release of assets at a value 20% below its liquidation value arrived at by th....
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.... observed as under: 44. "Once the Plan is approved by the Adjudicating Authority under Sub-Section (1) of Section 31 it shall be binding on the Creditors including the Operational Creditors i.e. the Appellants herein. 45. From the perusal of the Resolution Plan this Tribunal finds that there is no infirmity or illegality in the Plan as approved by the Committee of Creditors by majority vote of 95.07% and approved by the Adjudicating Authority and the same shall be binding on the Appellants apart from other stakeholders. This Tribunal comes to a resultant conclusion that the approval of Resolution Plan is legal and valid. It is also seen that there is no discrimination amongst the Operational Creditors, for the reason that no amounts earmarked for any of the Operational Creditors. Moreover, in the Plan nil payments have been shown against the payments to be made to the Operational Creditors. While so the question of discrimination arises when some of the Operational Creditors paid the dues by excluding some of the Operational Creditors. In the present case no such situation arises. Hence, there is no discrimination as alleged by the Appellants. No grounds have been....
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....ording to the 'Appellant / S.P. Coal Resources Pvt. Ltd.', had supplied the 'imported coal' to the '1st Respondent / Corporate Debtor'. over several years and raised, 14 Invoices in respect of the supply made. Because of the fact that the said Invoices, had remained unpaid, the Appellant is an 'Operational Creditor' of the 1st Respondent / Corporate debtor. 59. It transpires, before the 'Adjudicating Authority' / 'Tribunal', another 'Operational Creditor' Viz. SF Dyes, Bengaluru (3rd Respondent in the instant 'Appeal') of the '1st Respondent / Corporate Debtor' ('INDUS Fila), had filed an 'Application' in CP(IB)/136/BB/2017 under Section 9 of the I & B Code, 2016, which was admitted by the 'Adjudicating Authority', on 20.08.2018, resulting in the commencing of the 'Corporate Insolvency Resolution Process'. 60. It is brought to the fore that based on the commencement of the 'CIRP' of the '1st Respondent / Corporate Debtor', the 4th Respondent / Resolution Professional, had issued an 'Invitation' for 'Claims', by the Creditors of the Corporate Debtor, and the 'Appellant' as an Operational Creditor of the 1st Respondent / Corporate Debtor had furnished a 'Claim' of Rs.6,05,00,11....
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....re to be set aside because the 'impugned order', is against the well laid down principles of the I & B Code, 2016. 66. In the present case, it is quite evident that the 2nd Respondent through a 'Resolution Plan', had offered Rs.50.70 Crores as 'Full and Final Settlement' of all the 'Liabilities' of the '1st Respondent / Corporate Debtor', which was duly approved with requisite majority of the 'Committee of Creditors', in its 'commercial wisdom', ofcourse, after numerous rounds of discussions and negotiations. 67. In this connection, this 'Tribunal', pertinently points out that in respect of the dues of the Workmen, initially only Rs.17 Lakhs was provided and at the behest of the Adjudicating Authority, the 2nd Respondent had revised the Resolution Plan and earmarked Rs. 34 Lakhs, towards the Workmen dues. Also that, a Sum of Rs.50.70 Crores was fully used in the payment of (a) CIRP Costs (b) the dues of the Financial Creditors and the Workmen. As such, no amount remains to be allotted in respect of the other Creditors. Therefore, the 'Liquidation Value', payable to the 'Operational Creditors', is 'Nil'. Besides this, all the 'Creditors', had a significant haircut in the 'Corp....
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....vival' of the '1st Respondent / Corporate Debtor'. 72. It is brought to the fore that the 'Resolution Plan', was fully implemented and further that it must be borne in mind that the '2^nd Respondent' (after the 'impugned order' dated 10.05.2019), was passed in IA/40 of 2019 in CP(IB)/136/BB/2017, by the 'Adjudicating Authority' ('Tribunal'), had paid all the amounts, to be paid under the 'Resolution Plan', to the 'Financial Creditors' and the concerned 'Stakeholders', and the amounts were 'appropriated' and that the 'majority' of the 'Financial Creditors', had given 'No Due Certificates'. 73. Be it noted, that the I & B Code, 2016, is not a 'Debt Enforcement Procedure', and the same cannot be used as a mechanism for the 'Recovery of Dues', for the 'Creditors'. It is an axiomatic principle in 'Law', there is not rule for substituting any 'commercial' term(s) of the 'Resolution Plan', approved by the 'Committee of Creditors', especially, in the teeth of the 'Resolution Plan', satisfying the requirements of the ingredients of the I & B Code, 2016. 74. Added further, in the instant case, the 'method and manner of infusion of funds by the '2nd Respondent / 'Resolution Applicant....