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TaxTMI 
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2023 (4) TMI 413
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....thority' has approved the 'Resolution Plan' submitted by Respondent No.1 - the Resolution Professional of Madhya Bharat Phosphate Pvt. Ltd. ('Corporate Debtor') of Respondent No. 2- Shree Pushkar Chemicals and Fertilisers Ltd ('Successful Resolution Applicant'). 2. The 'Corporate Debtor' was incorporated on 06.01.1998 as a Private Limited Company and is engaged in the manufacture and sale of single super phosphates in India through two plants located at Meghnagar, Dist. Jhabua and Deewanganj. The 'Appellant' was providing electricity to the plant located at Meghnagar, Dist. Jhabua. 3. The 'Appellant' issued Notice of Permanent Disconnection to the 'Corporate Debtor' on 16.02.2018 for non-payment of dues and adjusted the security deposit of the 'Corporate Debtor' against outstanding dues of the 'Appellant' and issued a Bill after adjustment. It has been brought out that the electricity connection of the Corporate Debtor's Plant at Meghnagar, was permanently disconnected on 23.03.2018 on account of overdue payments. 4. The 'Appellant' issued a Bill for an amount of Rs. 19,99,792/- to the Corporate Debtor after adjusting the Security Deposit of Rs. 15,66,267.99. There were outs....
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....present appeal. 8. Heard the Counsel for the Parties, perused the record made available and examined the cited judgments passed by the Hon'ble Supreme Court of India as well its earlier order. 9. It is the case of 'Appellant' that the 'Resolution Plan' is not in conformity with Section 30 & 31 of the I & B Code, 2016 as interpreted by the Hon'ble Supreme Court in the case of Swiss Ribbons (P) Ltd. v. Union of India, [(2019) 4 SCC 17] and Essar Steel India Limited (Supra). The 'Appellant' has alleged that the 'impugned order' has failed to balance the interest of all stakeholders including operational creditors and therefore stand vitiated. The 'Appellant' also alleged that the 'Adjudicating Authority' did not consider that the 'Resolution Plan' does not give equal treatment to the 'Operational Creditors' with the 'Financial Creditors'. 10. The 'Appellant' also assailed that the 'Adjudicating Authority' who did not consider that against the electricity dues of Rs. 20,24,789/-, no specific provision is made and merely stated that payment of claim to the operational creditors to be on a pro rata basis to all 'Operational Creditors'. 11. The 'Appellant' is aggrieved that agains....
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....so bad in law in the teeth of Essar Steel India Limited (Supra)., in which the Hon'ble Supreme Court held that the 'Resolution Plan' which does not provide for payment of electricity dues in full ought to be modified. The 'Appellant' highlighted the Para-64 of the said judgment, which reads as under: "64...As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution applicant to the effect that such dues ought to be paid in full, so that the carrying on the business of the corporate debtor does not become impossible for want of a most basic and essential element for the carrying on such business, namely, electricity." (emphasis supplied) 17. The Appellant stated that in contrast to above ratio, in the present case, as against the full dues of Rs. 20,24,789/-, the 'Resolution Plan' provided only Rs. 2,03,813/- to the 'Appellant' and therefore the 'impugned order' approving the 'Resolution Plan', is against the law and need to be set aside. 18. The 'Appellant' took pains to emphasise that electricity dues takes precedence in....
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.... vide 'impugned order' dated 05.03.2020. 24. The 'Respondent' strongly pleaded that in a catena of judgments, it has been held that the approving or rejecting a resolution plan comes within the domain of commercial wisdom of the 'CoC' and the same cannot be subject to judicial review. It has further been held in several judgments that statutory dues/electricity dues can be waived by the 'Adjudicating Authority' while approving the 'Resolution Plan', as the object of the code is to maximize the assets of the 'Corporate Debtor'. 25. The 'Respondent No. 1' stated that the 'Resolution Applicant' on its own made a provision for payment to the 'Appellant' of their dues in pro rata manner in just and fair manner. 26. The 'Respondent No. 1' submitted that this 'Appellate Tribunal' in the matter of Uttrakhand Power Corporation Ltd. vs. M/s ANG Industries Ltd. [CA(AT) No. 298 of 2017] held that 'Uttrakhand Power Corporation Ltd' cannot recover outstanding dues for the period prior to 'CIRP'. 27. The 'Respondent No. 1' again reiterated that in several judgments, this 'Appellate Tribunal' has held that if a creditor does not file claim with the IRP/RP during the CIRP, and a 'Resolution Pla....
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....including shares held in any subsidiary of the corporate debtor, financial instruments, insurance policies; (vi) assets subject to the determination of ownership by a court or authority; (g) to perform such other duties as may be specified by the Board. Explanation. - For the purposes of this [section], the term "assets" shall not include the following, namely: - (a) assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment; (b) assets of any Indian or foreign subsidiary of the corporate debtor; and (c) such other assets as may be notified by the Central Government in consultation with any financial sector regulator. 30. Submission of resolution plan. - (1) A resolution applicant may submit a resolution plan [along with an affidavit stating that he is eligible under section 29A] to the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan - (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in pr....
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.... to have been given and it shall not be a contravention of that Act or law.] (3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub-section (2). [(4) The committee of creditors may approve a resolution plan by a vote of not less than [sixty-six] per cent. of voting share of the financial creditors, after considering its feasibility and viability, [the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interest of a secured creditor] and such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 (Ord. 7 of 2017), where the resolution applicant is ineligible under section 29A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it: Provided further that where the resolution applic....
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....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 combination, as referred to in section 5 of the Competition Act, 2002, the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors.]" (emphasis supplied) 31. This 'Appellate Tribunal' takes into account that....
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....f India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and the Resolution Plan as approved by the COC was submitted to the Adjudicating Authority for necessary approval under Section 30. Any interruption in the CIR Process at this stage by including a delayed claim/s would have meant setting the clock back and sending matter back to COC & RP. It cannot be ruled out that if the claim of the Operational Creditor State Tax Department, Government of Maharashtra was accepted at such a late stage, there could have been other such applicants too, who would have demanded accommodation on the same ground allowing late submission of their claims once this window would have opened. It would be trite to emphasise the fact that this would have meant complete disruption of the CIRP and the timelines stipulated therein. Delay would defeat Resolution as this would have resulted in the CIRP and approval of successful Resolution Plan to continue for an indefinite period of time, which is certainly not the intention of IBC. A real hazard in such an event could be liquidation, and corporate death, of an otherwise functional and corporate debtor, with which Resolution Plan appr....
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....way of adjustment from the Security deposit. In response, the 'Respondent No. 2' ('SRA') fairly admitted that he is willing to pay the Security deposit which was forfeited prior to the 'CIRP' and on submission of this Security deposit amount its electricity connection should be restored immediately. The Respondent argued that this will be in conformity with Ghanshyam Mishra (Supra) and in accordance with I & B Code, 2016 along with Regulation 35. This 'Appellate Tribunal' agrees with this submission of the 'Respondent No. 2' ('SRA'). 40. This 'Appellate Tribunal' notes that the very intent of the I & B Code, 2016 is for the revival of the 'Corporate Debtor' and the matter has been greatly amplified by the Hon'ble Supreme Court of India in the matter of Ghanshyam Mishra (Supra) as well as catena of the other Judgments where it has been settled, loud and clear, that no claim remains/ sustains after the 'Resolution Plan' is approved. If such claims are to be entertained at later stage then no 'Resolution Plan' will ever be successful since uncertain, unclaimed and non- admitted claims will be keep on pouring in and subsequently the implementation of the Resolution Plan would be almos....
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.... Creditors 18.15 3 Government dues/statutory liabilities (including direct and indirect taxes) and other Operational Creditors and Settlement of ex-workmen claims 0.62 Total 19.02 45. It is a settled principle that all stakeholders may have to take hair cut as decided and approved by the 'CoC' while assessing the viability of the Resolution Plan and after approval of the 'Resolution Plan', it cannot be challenged alleging lesser payment. 46. The 'Appellant' has taken the plea that electricity dues stand on completely different footing based on Section 66 of the Electricity Act, 2003 and Regulation 4.12 of the Madhya Pradesh Electricity Supply Code according to which notwithstanding provisions of any act, in case of any pending dues, supply of electricity to a premises may be refused. 47. The contention of the 'Appellant' cannot be sustained in view of 'non obstante clause' as provided in Section 238 of the I & B Code, 2016 which reads as under: "238 The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law". (emph....