TaxTMI 
TaxTMI 
2023 (11) TMI 375
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....o.471/KB/2022. In the said IA, the Applicant has sought direction to the Resolution Professional ("RP") to take into account the priority of distribution of the Plan realizations and taking into account the priority assigned to the dissenting Financial Creditor, who are also secured creditors. The Adjudicating Authority rejected the IA by the impugned order. Aggrieved by the order of rejection, this Appeal has been filed. 2. Brief facts of the case necessary for deciding this Appeal are: (i) The Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor was initiated by order dated 30.12.2020 in Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "IBC") filed by M/s Trimurti Associates Private Limited. (ii) The Appellant submitted its claim in Form-C for an amount of Rs.15,52,73,428/- (comprising of Rs.13.04 crores under the rupee term loan and Rs.2.48 crores under the working capital loan). The amount claimed by the Appellant in Form-C was admitted by the RP. The Appellant was also given a seat in the Committee of Creditors ("CoC"). (iii) A Resolution Plan was submitted by the Resoluti....
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....to account the priority on security interest of the financial creditors while determining the calculation methodology of the Creditors' proportional share in the liquidation value of the Corporate Debtor for the purpose of distribution under Section 53(1) of the Code; b) stay of a further proceedings in the instant corporate insolvency resolution process, pending disposal of the instant application; c) Ad-interim orders in terms of prayer (b) hereinabove; d) Any further order or orders and/ or direction or directions as may deem fit and proper" (viii) The Application filed by the Appellant was opposed by the RP as well as Successful Resolution Applicant. The Adjudicating Authority after hearing the parties, by the impugned order has rejected the Application. The Adjudicating Authority placed reliance on the judgment of the Hon'ble Supreme Court in India Resurgence ARC Private v. Amit Metaliks Limited and Anr. (2021) SCC OnLine SC 409. Aggrieved by the said order, this Appeal has been filed. 3. We have heard Shri Krishnendu Datta, learned Senior Counsel appearing for the Appellant. Shri Rishav Banerjee, learned Counsel appearing for Respondent ....
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....nsel has also relied on the judgment of this Tribunal in Small Industries Development Bank of India (SIDBI) vs. Vivek Raheja - Company Appeal (AT) (Insolvency) No.570 of 2022 and stated that accepting the submission advanced by the Appellant will ignite perverse incentives for secured creditors to vote for liquidation and shall be impeding the resolution of a Corporate Debtor, which is against the primary objective of the IBC. 6. The learned Counsel for the CoC has supported the submissions advanced on behalf of the RP. It is submitted that the Resolution Plan having been approved with 78.79% vote of CoC and the distribution to the Appellant is as per the Resolution Plan, the Appellant cannot be allowed to raise any grievance to the distribution, which has approval of the CoC. The Appellant being dissenting Financial Creditor, is entitled to only amount which it could have received in event the Corporate Debtor was liquidated. The Resolution Plan having already been approved by the Adjudicating Authority vide order dated 19.09.2023, no further grievance of the Appellant can be entertained. The Resolution Plan itself contemplate that amount proposed for payments towards Financial....
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....n in the 14th CoC Meeting, the RP circulated email dated 06.05.2022 to all Financial Creditors incorporating the proposed distribution as per lender wise. Along with email dated 06.05.2022 the RP has annexed a Chart, annexing the distribution matrix among secured creditors in the Resolution Plan. It is useful to extract the distribution matrix as circulated by RP is to the following effect: "Distribution matrix secured creditors in Resolution Plan for BKM Industries Ltd Amount offered to SFC in the resolution plan in Cr. 32 Assumption 1 Assumption 2 Bank Voting Shares Admitted claim Ratio of SFC admitted claim only Amounts per outstanding As per security interest - see working below Lender wise distribution of liquidation value as per Sec 53(1) SBI 30.11% 46.29 33.88% 10.84 8.76 11.76 Indian Bank 18.77% 28.86 21.12% 6.76 5.46 7.33 ACRE 15.79% 24.27 17.76% 5.68 0.15 6.17 ICICI Term loan 10.10% 13.04 9.55% 3.64 13.51 3.95 ICICI WCDL 2.48 1.82% IDBI 9.21% 14.15 10.36% ....
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.... in the notice and the voting item. RP took note of the same. * Keeping the paucity of time involved, the RP suggested for a voting on the agenda during the meeting itself. Some CoC members mainly Mr. Saurav Sharma from SBI and Mr. AK Jha from Indian bank informed the RP that they are ready to vote in the meeting itself. However, Mr. Rahul Saraff of ICICI Bank raised his concern that they would be requiring the approval from their higher authority for voting in this matter. After considering the CoC members requests RP announced in the meeting that he would initiate an e-voting for voting by the CoC members on the voting agenda and requested all the members to case their votes as soon as possible. * RP informed the CoC members that the e-voting platform would be opened from today late afternoon for the minimum hours as prescribed in IBC, 2016, in the context of time constrained. 3) Discussion on the voting of the final resolution plans submitted by the two prospective resolution applicants * RP informed the CoC members that once the voting on the distribution mechanism of amount offered for secured creditors in the resolution plan had been voted ....
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....ortion of admitted claim of the respective secured lenders, which was also in accordance with the Resolution Plan submitted by the Resolution Applicant, no challenge by the Appellant can be entertained. It is useful to notice paragraph 2.1 (d) of the Resolution Plan, which dealt with debt owed to the Financial Creditors. Paragraph 2.1.3 (d) is as follows: "2.1.3 (d) The amount proposed for payment towards Secured Financial Creditors shall be distributed amongst them based on the proportion of their admitted claim." 13. The Resolution Plan was approved in the 16th CoC Meeting. Thus, distribution to the Appellant is as per the decision of the CoC. Now the submission of the Appellant that distribution is not in accordance with Section 30, sub-section (2) (b) and the Appellant has not been paid the liquidation value needs to be considered. Section 30, sub-section (2) (b) provides as follows: "30(2)(b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than- (i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or ....
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....ding the liquidation commencement date; and (ii) debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in section 52; (c) wages and any unpaid dues owed to employees other than workmen for the period of twelve months preceding the liquidation commencement date; (d) financial debts owed to unsecured creditors; (e) the following dues shall rank equally between and among the following: - (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 India and 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." 15. When we look into Section 53, sub-section (1) (b), debt owed to a secured creditor has to be distributed equally bet....
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....eds of the Resolution Plan where following prayers were made: 1. The present application may kindly be allowed and the directions be issued to the Respondent No. 1 modify/clarify the distribution to dissenting members as per the Resolution Plan and distribute the proceeds of the resolution plan to Applicant SIDBI for an amount of Rs. 5,64,97,893/- in priority in accordance with provisions of IBC 2016 in the interest of justice and equity. 2. Interim stay be granted on distribution of the resolution plan amount by the Resolution Professional to the CoC members till the present application is decided." * The case of the Appellant in the Application was that as per security interest of the Appellant, the Appellant is entitled to 6.93 % i.e. the amount of Rs. 5,64,97,893/- and as per voting share as approved by the CoC, the Appellant is entitled to 2.03% i.e. Rs. 1,65,47,078/-. The case of the Appellant set up in the Application is that he is entitled for his distribution of plan amount as per value of the security interest of the Appellant. The Application was objected by the Resolution Professional. The Adjudicating Authority by the Impugned Order dated 17t....
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....ence to the value of the security interest held by it; and chose to remain a dissentient financial creditor. The dissention on the part of the appellant and response thereto by the resolution professional as also by other members of CoC was noted in the 14th meeting of CoC dated 31.07.2020 in the following words : - "Representative from Religare Finvest/India Resurgence ARC, Mr. Shakti inquired about the lower share they are getting as per Resolution Plan whereas the security interest held by them is far more. He also raised question about the fair market value and liquidation value of the CD. On this the RP informed him that the valuation exercise has been done by registered valuers of IBBI who were appointed by the erstwhile IRP and he do not find any inconsistency in the same. Other members also agreed on the same. Mr. Shakti then raised the point that in the present scenario it will be better for them if the company goes into Liquidation and they will realize their security interest by exercising option u/s 52(1)(b). The RP then replied that Liquidation option may be beneficial to one creditor but is definitely detrimental to other secured lenders who are having majori....
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.... Essar Steel as under:- "128. When it comes to the validity of the substitution of Section 30(2)(b) by Section 6 of the Amending Act of 2019, it is clear that the substituted Section 30(2)(b) gives operational creditors something more than was given earlier as it is the higher of the figures mentioned in sub-clauses (i) and (ii) of sub-clause (b) that is now to be paid as a minimum amount to operational creditors. The same goes for the latter part of sub - clause (b) which refers to dissentient financial creditors. Ms. Madhavi Divan is correct in her argument that Section 30(2)(b) is in fact a beneficial provision in favour of operational creditors and dissentient financial creditors as they are now to be paid a certain minimum amount, the minimum in the case of operational creditors being the higher of the two figures calculated under sub-clauses (i) and (ii) of clause (b), and the minimum in the case of dissentient financial creditor being a minimum amount that was not earlier payable. As a matter of fact, preamendment, secured financial creditors may cramdown unsecured financial creditors who are dissentient, the majority vote of 66% voting to give them nothing or....