TaxTMI 
TaxTMI 
2021 (10) TMI 1431
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....iled by the Resolution Professional) in CP(IB) No.48 of 2017 passed by the 'Adjudicating Authority' (National Company Law Tribunal, Ahmedabad Bench. 2. The 'Adjudicating Authority' (National Company Law Tribunal, Ahmedabad Bench) while passing the impugned order dated 08.03.2019 in I.A. No.41 of 2019 (preferred by the Appellant/Applicant in IA 259/2018(filed by Resolution Professional) in CP(IB) No.48 of 2017 at paragraph 20.1 to 29 had observed the following: 20.1 "During the pendency of IA 259 of 2018(filed for approval of Resolution Plan by the Resolution Professional), number of Intervention/Interlocutory applications are filed with various grievances, some of this are disposed of and some of those which have remained pending, are/were heard collectively for deciding I.A. No. 259 of 2018. 20.2 While proceeding further, it is pertinent to note that the Interlocutory applications are filed at much belated stage i.e. after the filing of I.A. No. 259 of 2018. The Resolution Plan was of dated 12th April, 2018 was approved by the CoC on 20th June, 2018. The applicants(Interveners) are/were well aware of their fate and position, as admitted in their applications b....
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....editors and their position, has also been clarified by the Hon'ble Supreme Court, in its judgement, in the matter of Swiss Ribbons Pvt. Ltd. & Ors. Vs. Union of India & Ors., wherein Hon'ble Apex Court, set out the distinction between 'financial creditors' and 'operational creditors' by observing that since the financial creditors are in the business of money lending, banks and financial institutions are best equipped to assess the viability and feasibility of the business of the corporate debtor. On the other hand, the operational creditors, who provide goods and services, are involved only in recovering amounts that are paid for selling goods and services and are typically unable to assess viability and feasibility of business. In this regard, it is also appropriate to refer the Bankruptcy Law Reforms Committee (BLRC) which conceptualized the 'I&B' Code as under: "The Committee deliberated on who should be on the creditors committee, given the power of the creditors committee to ultimately keep the entity as a going concern or liquidate it. The Committee reasoned that members of the creditors committee have to be creditors both with the capability to assess viability, as....
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....of Section 30(4) came into force, the Resolution Plan was approved, only with the majority of the CoC i.e. 72.192 per cent of voting in favour of the Resolution Applicant by the CoC, whereas the then requisite percentage of vote of CoC was 75 per cent. It is also a matter of record that the Alok Employees Benefit and Welfare Trust filed an IA being No. 135 of 2018 seeking approval of the Resolution Plan which was approved by 72.192 per cent only, when requisite criteria for approval of the Plan was 75 per cent i.e. prior to amendment, on the ground of the interest of employees, workers and other stakeholders, opposing the application filed by RP vide IA 136 of 2018 under Section 33(1) pf the Code with prayer for passing an order of liquidation. At that point of time, SICOM Ltd., filing p-67 of 2018 made a prayer to get himself impleaded in the IA 135 of 2018, so as to object the prayer of Alok Employees Benefits and Welfare Trust made in IA 135 of 2018 which was made for approval of the Resolution Plan, even if it was voted by 72.192 per cent only which was less than the required percentage of voting of 75 per cent as against the then requisite criterial of voting. However....
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....ursuance to the Public Notice dated July 19, 2017 submitted the Plan relating to the Insolvency resolution Process of Alok Industries Limited (Company)/ Corporate Debtor under the provisions of Insolvency and Bankruptcy Code, 2016 and the rules and regulations issued thereunder. 21.3 On perusal of the Resolution Plan, it is found: • that total outstanding financial debt of the Company/Corporate Debtor admitted by the RP towards its financial creditors is Rs. 29614,66,79,258 (Rupees Twenty-nine Thousand Six Hundred and Fourteen Crores Sixty-six Lakhs Seventy-nine Thousand Two Hundred Fifty-eight) as set out in Annexure D of the Information Memorandum. • That, the total outstanding operational debt of the Corporate Debtor Company admitted by the RP towards its operational creditors is Rs. 592,00,44,768 (Rupees Five Hundred Ninety-two Crores forty-four thousand seven hundred sixty-eight) as set out in Annexure D of the Information Memorandum. • That, the total outstanding towards workmen and Employees Dues of the Company admitted by the Resolution Professional towards its employees and workmen, is Rs. 73,01,06,951/- (Rupees Seventy three....
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....h dissenting Financial Creditors will be discharged out of the Financial Creditors Settlement Amount, in priority to any payments being made to the other Financial Creditors who vote in favour of the Plan. Sixth Subject to the adjustments in Section 3.2.2 of this Plan, payment of the Financial Creditors Settlement Amount 5,052 Seventh Need based working capital of the Company and any payment towards Outstanding Workmen and Employee Dues as per the provisions of this Plan, excluding any amounts paid towards the liquidation value of workmen as stated under the third step above (it being clarified that (i) no payments shall be made to any employee belonging to the Existing promoter Group, and (ii) all accrued but unpaid statutory dues owed by the Company with respect to any of its employees not belonging to the existing Promoter Group shall be paid in accordance with this Plan). Note 2: Please note that payments to and by the Company under any supply and offtake arrangement with RIL will be made to augment and meet the additional working capital requirements of the Company. Note 2: This amount shall stand reduced by an amount determined in accordance wit....
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....rtionately from the proceeds payable to each class of recipients under sub-section (1), and the proceeds to the relevant recipients shall be distributed after such deduction. Explanation - For the purpose of this section - (a) It is hereby clarified that at each stage of the distribution of proceeds in a class of recipients that rank equally, each of the debts will paid in full, or will be paid in equal proportion within the same proceeds are insufficient to meet the debts in full; and (b) the term "workmen's dues" shall have the same meaning as assigned to it in section 326 of the Companies Act, 2013 (18 of 2013). 23. Thus, Section 53 of the Code lists the priorities to be given to the beneficiaries, of liquidation value of the assets of the Corporate Debtor. The provisions of Section 53 make it amply clear that Operational Creditors are at the end of the list of beneficiaries as the Secured Financial Creditors have edge over the others. 24. It would also be pertinent to mention here that Operational Creditors have no locus standi as far as approval of the Resolution Plan by the COC is concerned. As per Section 24(3)(C), they are no....
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....rate Debtor consists of several employees and workmen whose daily bread is dependent on the outcome of the CIRP. If there is resolution applicant who can continue to run the corporate debtor as a going concern, every effort must be made to try and see that this is made possible. The 'I&B Code' defines 'Resolution Plan' as a plan for insolvency resolution of the 'Corporate Debtor' as a going concern. It does not spell out the shape, color and texture of 'Resolution Plan', which is left to imagination of stakeholders. Read with long title of the '185B Code', functionally, the 'Resolution Plan' must resolve insolvency (rescue a failing, but viable business); should maximize the value of assets of the 'Corporate Debtor', and should promote entrepreneurship, availability of credit and balance the interests of all the stakeholders. Looking to the object of IBC as well as the Legislative intent, it is amply clear that the "Resolution is Rule and the Liquidation is an Exception". Liquidation brings the life of a corporate to an end. It destroys organizational capital and renders resources idle till reallocation to alternate uses.....
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....mpletely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies." "39. In our view, neither the adjudicating authority (NCLT) nor the appellate authority (NCLAT) has been endowed with the jurisdiction to reverse the commercial wisdom of the dissenting financial creditors and that too on the specious ground that it is only an opinion of the minority financial creditors. The fact that substantial or majority per cent of financial creditors have accorded approval to the resolution plan would be of no avail, unless the approval is by a vote of not less than 75% (after amendment of 2018 w.e.f. 6-6-2018, 66%) of voting share of the financial creditors. To put it differently, the action of liquidation process postulated in Chapter III of the I&B Code, is avoidable, only if approval of the resolution plan is by a vote of not less than 75% (as in October 2017) of voting share of the financial creditors. Conversely, the legislative intent is to uphold the opinion or hypothesis of the minority dissenting financial creditors. That must prevail, if it is not less than the specified per cent (25% in October 2017; and now after the amendm....
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....30(4) of the I&B Code. 26. In the backdrop of the settled position of law and the decision of the Apex Court in Swiss Ribbons Pvt. Ltd., and Ors. v. Union of India & Ors and K Sasidhar V. Indian Overseas Bank & Ors, as discussed herein above in the preceding paragraphs, Interlocutory Applications as referred and discussed above are not maintainable. On perusal of the Resolution Plan, it is found that it meets the requirement of Section 31 r/ w Section 30(2) of the Code. Therefore, the present application IA 259 of 2018 is allowed subject to certain observation with regard to the Clause No. 3.2.3(iii) and clause No. 11 of Resolution Plan and sub para (n) of paragraph 33 along with the prayers (f) of paragraph 35 of IA 259 of 2018 which cannot be allowed as these are the subject matter of the various Competent Authorities having their own jurisdiction. 27. In this regard, this Adjudicating Authority is of the view that Clause No. 3.2.3(iii) at Page No. 19 of the Resolution Plan viz. all legal proceedings initiated before any forum by Of on behalf of the financial creditors to enforce any rights or claims against the Company/ Corporate Debtor or enforce or i....
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.... 28.1. Further, it is pertinent to mention herein that Resolution Applicant(s) itself in Clause No. 11.2 of the Resolution Plan has clarified that reliefs and the waivers as being sought for by the Resolution Applicant(s) as prayed for from the Adjudicating Authority, are not conditions to implementation of the Resolution Plan. The same are subject to the satisfaction of the conditions as set out in Section 9 of the Resolution Plan, even if, any of the waivers and reliefs sought under this Clause 11 of the Plan are not received or granted, the Resolution Applicant(s) will implement the Plan in accordance with its terms. Hence, Clause No. 9 of the Resolution Plan is also subject matter of the various Competent Authorities to whom Resolution Applicant(s) may approach. 28.2. Thus, not allowing the above said Clause No. 3.2.3 (iii) and Clause No. 11.1, 11.1.1 to 11.1.20 of the Resolution Plan, along with the prayers vide sub para (O of Paragraph No. 35 and pleadings made thereon in sub clause (n) of Paragraph No. 33 of application being IA No. 259 of 2018, is not going to make any hindrance for proper implementation of the Resolution Plan as those are the subject matter....
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....trary one as it fails to treat equals as equal and it also omits to provide any reasonable justification for such discrimination against the 'Operational Creditors' having dues over Rs.3 lakhs, including the Appellant and therefore, the 'Resolution Plan' is opposed to common sense besides the same, shocks the judicial conscious of the Tribunal. Added further, it is the fervent plea of the Learned Counsel for the Appellant that the impugned order approving the Plan fails to record any justification for such differentiation between the same Clause of 'Operational Creditors' without there being any intelligible criteria to support the same. 5. It is represented on behalf of the Appellant that the 'Resolution Professional' (1st Respondent) is to ensure that the 'Resolution Plan' is in strict compliance with the provisions of the 'I&B' Code, 2016 and other applicable Regulations before placing the same before the 'Committee of Creditors' for its approval under Section 30(3) of the Code. As a matter of fact, as per Section 30(2) of the Code, the 'Resolution Professional' shall examine the each 'Resolution Plan' and ensure that it satisfies the fulfilment of the ingredients of Section ....
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....uthority' (same Bench - National Company Law Tribunal, Ahmedabad Bench) on 08.03.2019 had approved a 'Resolution Plan' in the 'Corporate Insolvency Resolution Process' of 'Essar Steel' wherein, the I.A. 472 of 2018 (of the Appellant) was partly allowed and asked 'Committee of Creditors' to give 15% of the received Plan value to through the 'Operational Creditors' on pro-rata basis, whose claim are treated as NIL because of being more than one crore. Consequently, the Appellant received some amounts under the similar gas supply agreement in the case of 'Essar Steel' but will have to forgo its claim in the resolution of the 'Corporate Debtor' (Alok Industries Limited). 11. The Learned Counsel for the Appellant refers to the judgment of the Hon'ble Supreme Court in 'Essar Steel India Limited' 'Committee of Creditors' vs. 'Satish Kumar Gupta' reported in (2020) 8 SCC 531 wherein at paragraph 73 it is observed as under: " 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....
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.... from the 'Committee of Creditors', as summarized below:- 1. The objective of the 'I&B Code: As evident from the long title of the 'I&B Code', it is for 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 stakeholders. The recent Ordinance explicitly aims to promote resolution over liquidation. 2. The objective of the 'I&B Code' is Resolution. The Purpose of Resolution is for maximisation of value of assets of the 'Corporate Debtor' and thereby for all creditors. It is not maximisation of value for a 'stakeholder' or 'a set of stakeholders' such as Creditors and to promote entrepreneurship, availability of credit and balance the interests. The first order objective is "resolution". The second order objective is "maximisation of value of assets of the 'Corporate Debtor'' and the third order objective is "promoting entrepreneurship, availability of credit and balancing the interests". This order of objective is sacrosanct. In the matter ....
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....ovide goods and services. If they are not treated well or discriminated, they will not provide goods and services on credit. The objective of promoting availability of credit will be defeated. c. The 'I&B Code' is for reorganisation and insolvency resolution of corporate persons, ....for maximisation of value of assets of such persons to.... balance interests of all stakeholders. It is possible to balance interests of all stakeholders if the resolution maximises the value of assets of the 'Corporate Debtor'. One cannot balance interest of all stakeholders, if resolution maximises the value for a or a set of stakeholder such as 'Financial Creditors'. One or a set of stakeholders cannot benefit unduly stakeholder at the cost of another. d. The 'I&B Code' prohibits any action to foreclose, recover or enforce any security interest during resolution period and thereby prevents a creditor from maximising his interests. e. It follows from the above: i. The liabilities of all creditors who are not part of 'Committee of Creditors' must also be met in the resolution. ii. The 'Financial Creditors can modify the terms of existing liabilities, while ....
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.... the 'Corporate Debtor', 'Resolution Applicant' may propose a 'Resolution Plan' that entails change of management, technology, product portfolio or marketing strategy; acquisition or disposal of assets, undertaking or business; modification of capital structure or leverage; infusion of additional resources in cash or kind over time; etc. Each plan has a different likelihood of turnaround depending on credibility and track record of 'Resolution Applicant' and feasibility and viability of a 'Resolution Plan' are not amenable to bidding or auction. It requires application of mind by the 'Financial Creditors' who understand the business well. It is not recovery: Recovery is an individual effort by a creditor to recover its dues through a process that has debtor and creditor on opposite sides. When creditors recover their dues - one after another or simultaneouslyfrom the available assets of the firm, nothing may be left in due course. Thus, while recovery bleeds the 'Corporate Debtor' to death, resolution endeavors to keep the 'Corporate Debtor' alive. In fact, the 'I&B Code' prohibits and discourages recovery in several ways." 16. Also, in the aforesaid judgment wherein at....
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....aroda', 'Canara Bank', 'Bank of India' and 'State Bank of India' has been provided with 100% of their verified claim, the 'Resolution Applicant' ('Rajputana Properties Private Limited') has given lesser percentage to Export-Import Bank of India (72.59%) and State Bank of India-Hong Kong (10%). Discrimination has been made on the ground that some of the 'Financial Creditors' are direct exposure to the 'Corporate Debtor' or some of the 'Financial Creditors' to whom the 'Corporate Debtor' was guarantor. Even the guarantors who are treated to be the 'Financial Creditors', such as 'IDBI Bank Limited (Dubai Branch)', 'Bank of Baroda (London)', 'State Bank of India (Bahrain)', 'Syndicate Bank' have been provided with 100% proposed payment of their verified claim but the 'Export-Import Bank of India' and the 'State Bank of India (Hong Kong)' who are similarly situated have been discriminated. 20. Learned Senior Counsel appearing on behalf of the 'Rajputana Properties Private Limited' submitted that the 'Exim Bank' has been allotted 72.59% as the principal borrower is 'Binani Industries Limited' which itself is a non-performing asset and facing proceedings under the 'I&B Code'. ....
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..... ..... 43. From the two 'Resolution Plans', it will be clear that the 'Rajputana Properties Private Limited' in its 'Resolution Plan' has discriminated some of the 'Financial Creditors' who are equally situated and not balanced the other stakeholders, such as 'Operational Creditors'. Therefore, the Adjudicating Authority has rightly held the 'Resolution Plan' submitted by 'Rajputana Properties Private Limited' to be discriminatory. ...... 48. If the 'Operational Creditors' are ignored and provided with 'liquidation value' on the basis of misplaced notion and misreading of Section 30(2)(b) of the 'I&B Code', then in such case no creditor will supply the goods or render services on credit to any 'Corporate Debtor'. All those who will supply goods and provide services, will ask for advance payment for such supply of goods or to render services which will be against the basic principle of the 'I&B Code' and will also affect the Indian economy. Therefore, it is necessary to balance the 'Financial Creditors' and the 'Operational Creditors' while emphasizing on maximization of the assets of the 'Corporate Debtor'. Any 'Resolution Plan' if show....
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....ensuring equitable treatment to similarly placed creditors and states as follows: "Ensuring equitable treatment of similarly situated creditors 7. The objective of equitable treatment is based on the notion that, in collective proceedings, creditors with similar legal rights should be treated fairly, receiving a distribution on their claim in accordance with their relative ranking and interests. This key objective recognizes that all creditors do not need to be treated identically, but in a manner that reflects the different bargains they have struck with the debtor. This is less relevant as a defining factor where there is no specific debt contract with the debtor, such as in the case of damage claimants (e.g. for environmental damage) and tax authorities. Even though the principle of equitable treatment may be modified by social policy on priorities and give way to the prerogatives pertaining to holders of claims or interests that arise, for example, by operation of law, it retains its significance by 12 UNCITRAL Legislative Guide on Insolvency Law ensuring that the priority accorded to the claims of a similar class affects all members of the class in the same m....
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....the interests of all stakeholders, including financial creditors and operational creditors, of the corporate debtor. First Respondent Submissions 19. According to the Learned Counsel for the First Respondent, the 'Corporate Insolvency Resolution Process' (CIRP) in regard to the 'Corporate Debtor' was initiated upon the admission of an application filed by the 'State Bank of India' as per Section 7 of the 'I&B' Code through an order dated 18.07.2017, passed by the 'Adjudicating Authority', in and by which the First Respondent was appointed as an 'Interim Resolution Professional' and was latter affirmed as the 'Resolution Professional' by the 'Committee of Creditors' at its First Meeting that took place on 16.08.2017. In fact, in terms of the ingredients of the 'I&B' Code, the 'Resolution Professional' carried out the 'Corporate Insolvency Resolution Process' (CIRP) of the 'Corporate Debtor' in consultation with the 'Committee of Creditors' of the 'Corporate Debtor' and that the 'Resolution Applicants' submitted a 'Resolution Plan' on 12.04.2018 which was approved by the 'Committee of Creditors' at its 16th Meeting that took place on 20.06.2018 by 72.192% majority. Hence, the '....
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....Debtor' (other than Workmen and Employees dues) is approximately Rs.1109.81 crores. Further, the average Liquidation value of the 'Corporate Debtor' is approximately is Rs.4433 crores as per the liquidation value estimated by the two valuers appointed by the 'Resolution Professional'. Accordingly, the Liquidation value due to the 'Operational Creditors' is Nil. Considering that upon an application of the waterfall mechanism mentioned under Section 53 of the code, the whole sum of Rs.4433 crores would be exhausted in payment of the 'Corporate Insolvency Resolution Process', 'Costs', 'Liquidation Costs', 'Workmen' dues and the dues owed to the 'Secured Creditors' (i.e. 'Financial Creditors') which are substantially in excess of Rs.4433 crores. 23. The Learned Counsel for the First Respondent cites the decision of Hon'ble Supreme Court in 'Swiss Ribbon Pvt. Ltd. & Anr'. V. 'Union of India & Ors.' (Writ Petition (Civil) 99 of 2018), wherein it is observed and held 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 than liquidation value due to them.' On behalf of the 1st ....
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....lan' submitted by the 'Successful Resolution Applicant' segregated the 'Operational Creditors' and proposed different amount payable to the different classes of 'Operational Creditors' such as 'Workmen' and 'Employees', 'Creditors' having admitted claims of less than Rs.1 crores and Creditors having claims of over Rs.1 crore and that the Hon'ble Supreme Court had upheld that the 'Resolution Plan' was in compliance with the provisions of the Code and the relevant Regulations and had approved the 'Resolution Plan' therein. 27. The Learned Counsel for the First Respondent contends that the 'Adjudicating Authority' has been tasked to be a process supervisor to ensure compliance with law and exercise restricted jurisdiction under the provisions of the Code which are limited to the matters mentioned in Section 30(2) of the Code as observed by the Hon'ble Supreme Court of India in the matter of K. Shashidhar vs. Indian Oversees Bank & Anr. (vide Civil Appeal 10673 of 2018 dated 05.02.2019) and refers to paragraph 37 to 38, 44 wherein it is observed as under: "37. On a bare reading of the provisions of the I&B Code, it would appear that the remedy of appeal under Section 61(1) ....
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..... Thus, the prescribed authorities (NCLT/NCLAT) have been endowed with limited jurisdiction as specified in the I&B Code and not to act as a court of equity or exercise plenary powers. 28. Further, the same was also upheld in the decision of Hon'ble 'Supreme Court in 'Pratap Technocrats (P) Ltd.' vs. 'Monitoring Committee of Reliance Infratel Ltd. and Anr.' (2021) Scc OnLine SC 569 whereby and whereunder the Hon'ble Supreme Court at paragraph 34, 47 to 50 had observed and held that the ambit of the 'Adjudicating Authority' is to determine whether the amounts distributed to the 'Operational Creditors' are in consonance with Section 30(2)(b) of the Code and there does not lie any independent equity based jurisdiction with the 'Adjudicating Authority': " 34.These provisions indicate that the ambit of the Adjudicating Authority is to determine whether the amount that is payable to the operational creditors under the resolution plan is consistent with the above norms which have been stipulated in clause (b) of sub-clause (2) of Section 30. Significantly, Explanation-1 to clause (b), which is clarificatory in nature, provides that a distribution which is in accordance with th....
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....he insolvency process. The process envisaged by the IBC is a direct representation of certain economic goals of the Indian economy. It is enacted after due deliberation in Parliament and accords rights and obligations that are strictly regulated and coordinated by the statute and its regulations. To argue that a residuary jurisdiction must be exercised to alter the delicate economic coordination that is envisaged by the statute would do violence on its purpose and would be an impermissible exercise of the Adjudicating Authority's power of judicial review. The UNCITRAL, in its Legislative Guide on Insolvency Law, has succinctly prefaced its recommendations in the following terms:- "C. 15. Since an insolvency regime cannot fully protect the interests of all parties, some of the key policy choices to be made when designing an insolvency law relate to defining the broad goals of the law (rescuing businesses in financial difficulty, protecting employment, protecting the interests of creditors, encouraging the development of an entrepreneurial class) and achieving the desired balance between the specific objectives identified above. Insolvency laws achieve that balance by re....
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....ulation 38 of the 'CIRP' Regulations, and as such, there is no ground for initiating any disciplinary proceedings against the First Respondent. Second and Third Respondent(s) Pleas 31. The Learned Counsel for the Second Respondent contends that the Appellant is an 'Operational Creditors' of the 'Corporate Debtor', with an admitted claim of 506.42 crores and has questioned the treatment of the claims of the 'Operational Creditors' as per 'Resolution Plan' dated 12.04.2018. 32. The Learned Counsel for the Second Respondent points out that the Respondent Nos. 2 and 3 along with JMARC - March 2018 - Trust (Successful Resolution Applicants) do constitute the resolution consortium which was declared as the 'Successful Resolution Applicant' by the 'Adjudicating Authority' ('National Company Law Tribunal', Ahmedabad Bench) as per order dated 08.03.2019. 33. According to the Learned Counsel for the Respondent Nos.2 and 3 that the 'Liquidation Value' available to the 'Corporate Debtors', 'Operational Creditors' is Nil and as such, the 'Operational Creditors' (including the Appellant) were not entitled to receive any sum as per Section 30(2)(b) of the Code r/w Regulation 38 of CIR....
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....ms of Operational Creditors (other than employees and workmen who have been dealt with separately under Section 3,4 below), relating to the period prior to the Closing Date arise and/or are made and/or are admitted, then the amounts payable under this Plan to the Operational Creditors (other than (i) employees and workmen who have been dealt with separately under Section 3,4 below; and (ii) the dues owed by the Company to certain Operational Creditors(in each of whom the Company, as on the Insolvency Commencement Date, owes up to Rs. Company Appeal (AT) (Ins.) 492 of 2019 60 3,00,000 (Rupees Three Lakhs) and whose details are set out in Annexure 9), which aggregates to Rs. 4,83,47,321(Rupees Four Crores Eighty Three Lakhs Forty Seven Thousand Three Hundred Twenty One) shall remain NIL and shall not increase." 37. The Learned Counsel for the Second and Third Respondent points out that the 'Operational Creditors' as per Section 32(b) of the 'I&B' Code r/w Regulation 38 of CIRP Regulations are entitled to receive only such amounts payable to them, in the event of liquidation of the 'Corporate Debtor', as computed in terms of Section 53 of the Code and as such the Appellant is not e....
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....l's submission that the resolution plan must itself provide for distribution inter se between secured financial creditors. It is enough that under the Code and the Regulations, the resolution plan provides for distribution of amounts payable towards debts based upon a classification of various types of creditors. This both the original plan as well as the negotiated plan of ArcelorMittal have already done, as has been seen by us hereinabove, both plans containing the amount to be paid to workmen separately, operational creditors of INR 1 crore and less separately, operational creditors of INR 1 crore and over separately and financial creditors, subdivided into secured and unsecured as sub-classes, separately. All that was left for distribution by ArcelorMittal was distribution inter se between secured financial creditors which was then done by a majority of 92.24%, as has been seen above based upon the value of their respective security interests. Therefore, the allegation that the Committee of Creditors relieved Arcelor Mittal from the solemn offer made before the Supreme Court by reducing the offer amount of INR 42,000 crores by INR 2,500 crores so that Arcelor Mittal could acqui....
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....a collective business decision and in the instant case, the 'Resolution Plan' which envisages the amount and the manner of repayment of the dues of the 'Operational Creditors' stands accepted and duly approved by the 'Committee of Creditors'. 46. The Learned Counsel for the Second and Third Respondents relies on the decision of the Hon'ble Supreme Court in Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (India) Ltd. reported in (2021) SccOnLine SC 253, wherein at paragraph 200 to 204 it is observed as under: 200. In the aforesaid backdrop, the matter was considered in appeal filed by the resolution applicant. After having examined the relevant provisions of the Code and the CIRP Regulations as also the enunciations in Essar Steel (supra), this Court observed that there was no provision in the Code or Regulations under which the bid of any resolution applicant has to match the liquidation value; that the object behind such valuation process was to assist the CoC to take a proper decision on the resolution plan; and once the plan was approved by CoC, the Adjudicating Authority was only to ascertain if the resolution plan was meeting the requirements of ....
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....ther than commercial wisdom. On the face of it, release of assets at a value 20% below its liquidation value arrived at by the valuers seems inequitable. Here, we feel the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. Such is the scheme of the Code. Section 31(1) of the Code lays down in clear terms that for final approval of a resolution plan, the adjudicating authority has to be satisfied that the requirement of subsection (2) of Section 30 of the Code has been complied with. The proviso to Section 31(1) of the Code stipulates the other point on which an adjudicating authority has to be satisfied. That factor is that the resolution plan has provisions for its implementation. The scope of interference by the adjudicating authority in limited judicial review has been laid down in Essar Steel, the relevant passage (para 54) of which we have reproduced in earlier part of this judgment. The case of MSL in their appeal is that they want to run the company and infuse more funds. In such circumstances, we do not think the appellate authority ought to have interfered with the order of the ....
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....olution plan; and (e) implementation and supervision of the resolution plan. 204. 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; or there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period; or the debts owed to the operational creditors have not been provided for; or the insolvency resolution process costs have not been provided for repayment in priority; or the resolution plan does not comply with any other criteria specified by the Board. Fourth Respondent's Contentions 47. According to the Learned Counsel for the Fourth Respondent/ 'Committee of Creditors', as per common order dated 08.03.2019 in I.A. No.41 of 2019 and I.A. 259 of 2018 were determined by the 'Adjudicating Authority', culminating in approval of the 'Resolution Plan' furnished by the Respondent Nos.2 and 3 and rejection/ dismissal of Appellant's I.A. 41 of 2019. 48. The Learned Counsel for the Fourth Responden....
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....refers to the decision of Hon'ble Supreme Court in the 'Committee of Creditors' of 'Essar Steel India Ltd.' v. 'Satish Kumar Gupta' (2020) 8 SCC at page 531, wherein at paragraph 128 it is observed as under: 128. "Section 53 is only referred to in order that a certain minimum figure be paid to different classes of operational and financial creditors. It is only for this purpose that Section 53(1) is to be looked at as it is clear that it is commercial wisdom of the Committee of Creditors that is free to determine what amounts be paid to different classes and sub-classes of creditors in accordance with the provisions of the Code and the Regulations made thereunder..." 53. The Learned Counsel for the Fourth Respondent submits that the proceedings under the Code cannot be used for recovery of dues or for recovery of damages or to claim specific performance of a contract and in fact and in reality the Appellant had initiated arbitration against the 'Corporate Debtor' in regard to its alleged claim of Gas Supply Agreement. Therefore, it is the contention of the Learned Counsel for the Fourth Respondent that instead of proceedings with the Arbitration proceedings, the Appella....
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....d contractual dues by the 'Corporate Debtor' in respect of the years 2014- 2016 had made a claim and the Appellant / Applicant, had projected Section 9 application (filed under the Arbitration and Reconciliation Act, 1996) before the 'Civil Court of Dadra and Nagar Haveli' against the 'Corporate Debtor' and later the Arbitration Clause was invoked against the Appellant / Applicant through letter dated 16.05.2017 against the 'Corporate Debtor' for resolving the disputes as per 'Gas Sale Agreement' (in respect of all claims inclusive of TOP charges). 59. It is represented on behalf of the Appellant that Appellant / Applicant that the Appellant made a claim for Rs. 506.60 crores on 23.11.2017 before the 'Resolution Professional' and that the 'Resolution Professional' rejected the Appellant/Applicant's claim based on the reason that the 'Take or Pay Obligation' under the 'Gas Sale Agreement' was not to be termed as 'Operational Debt', resting on the reason that the said obligation is not for the 'Goods' and 'Services' used for production or output turned out by the 'Corporate Debtor'. Besides this, the 'Resolution Professional' opined that any claim furnished after the lapse of 'CIR....
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.... disentitling it of any payment in respect of the Resolution Plan, pertaining to its legitimate Claims. 65. The crux of the plea of the 1st Respondent (former Resolution Professional of Alok Industries Ltd) is that the average liquidation value of the Corporate Debtor comes to Rs.4,433/_ crores (in terms of the liquidation value estimated by two valuers appointed by the Resolution Professional) and the total financial outlay in terms of the Resolution Plan is Rs.6252/- crores. 66. The clear cut stand of the 1st Respondent is that upon an application of the ''Waterfall Mechanism' under the Head 'Distribution of Assets' in terms of the ingredients of Section 53 of the I&B Code, 2016, the sum of Rs.4433 crores (Liquidation value) will be exhausted as regards the payment of the Insolvency Resolution Process costs, workmen dues and the dues to be paid to the 'Financial Creditors', which are above Rs.4433 crores. 67. Although, according to the 1st Respondent, 'Operational Creditors were entitled to 'Nil' payment as per Section 32 of the Code, the fact of the matter is that the 'Resolution Applicants' in their commercial wisdom had provided for the full payment of Rs.4.83 crores ....