TaxTMI 
TaxTMI 
2025 (6) TMI 200
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....under Section 61 of the Insolvency and Bankruptcy Code, 2016 (Code), challenging the Impugned Order dated 18.12.2023 passed by the National Company Law Tribunal, Kolkata Bench ("Adjudicating Authority") in I.A. (IB) No. 1733/KB/2023 ("said Application") in C.P. (IB) No. 204/ KB/ 2021. 2. Ravi Sethia, who is Resolution Professional of Suasth Healthcare Foundation, is the Respondent No.1 herein. J.C. Flowers Asset Reconstruction Private Limited, who is a member of the Committee of Creditors ('CoC') of Suasth Health Care Foundation, is the Respondent No.2 herein. Axis Bank Limited, who is also another member of the CoC of Suasth Health Care Foundation, is the Respondent No.3 herein. Consortium of Nishkala Healthcare Private Limited & Ujin Pharma Chem, who is the Successful Resolution Applicant is the Respondent No.4 herein. 3. The Appellants submitted that the Corporate Debtor, was admitted into the Corporate Insolvency Resolution Process ("CIRP") on 31.08.2021. The Appellants submitted that they attended CoC meetings under Section 24 of the Code as members of the Suspended Board of Directors, qualifying as "participants" under Regulation 2(1)(l) of the IBBI (Insolvency....
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....pproving a plan that violates many laws and many provisions of the Code and Regulations. 7. The Appellants argued that the CoC's approval lacks valid commercial wisdom due to incomplete information, particularly the absence of a specified distribution mechanism for employees/workmen. The Appellants cited the judgement of the Hon'ble Supreme Court's in M.K. Rajagopalan v. Dr. Periasamy Palani Gounder [(2024) 1 SCC 42], to assert that commercial wisdom requires full information and deliberation. The Appellants submitted that clause 2.2(c)(i) of the Resolution Plan gives discretionary distribution facilitates discrimination among employees/workmen within the same sub-class, violating equitable treatment principles from Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors. [CA No. 8766-67 of 2019]. 8. The Appellants submitted that clause 2.2(c)(iii)(d) of the Resolution Plan violates Section 17B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act) by conditioning provident fund payments on EPFO's determination within a short timeframe, which is not permitted under the EPF Act. 9. The Appellants contended that clause 2.3(....
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....nts submitted that the Adjudicating Authority's approval subject to CoC allocation to the unsecured financial creditor tantamount to approval of non-compliant plans. 14. The Appellants submitted that the resolution plan fails to balance the interests of all stakeholders or maximize the value of Corporate Debtor's assets, which is admittedly not a going concern. The Appellants cited the Supreme Court's judgment in Committee of Creditors of Essar Steel India Limited (Supra) to argue that a "NIL" payment to the unsecured financial creditor does not balance stakeholder interests or maximize asset value. 15. The Appellants highlighted that clause 2.2(ii) of the resolution plan proposes Rs. 27,00,000 for operational creditors (excluding employees/workmen) on a pro-rata basis, while offering NIL payment to the unsecured financial creditor against its admitted claim of Rs. 60,37,46,150, without providing any rationale. The Appellants contended that the preferential treatment to operational creditors over the unsecured financial creditor, who ranks higher under Section 53(1)(d) of the Code's waterfall mechanism compared to operational creditors under Section 53(1)(f), is unjustified. ....
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....aim that the Resolution Plan fails to address provident fund dues is incorrect. The Employees Provident Fund Organisation (EPFO) has not filed any claim for pre-CIRP dues. The Respondent No. 1 submitted that Clause 2.2(iii)(d) of the Resolution Plan provides for payment of any pre-CIRP provident fund dues in priority to financial creditors, stating: "In the event the Corporate Debtor has failed to deposit the requisite contributions payable towards employee provident fund...such contributions...shall be made...in priority to the Financial Creditors..." The Respondent No 1 stated that Respondent No. 4 has committed to fund such payments if internal accruals are insufficient, subject to EPFO quantifying dues within stipulated timelines. The Respondent No. 1 clarified that this provision ensures compliance with the Employees Provident Fund and Miscellaneous Provisions Act, 1952, and prevents uncertainty from unquantified claims, thereby safeguarding stakeholder interests. 23. The Respondent No. 1 strongly objected to the Appellants contention that Hari Vitthal Mission ("HVM"), an unsecured financial creditor, cannot receive NIL payment and submitted that HVM was unsecur....
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....CoC further submitted that the Hon'ble Supreme Court of India, vide order dated 05.04.2024 in Civil Appeal No. 4419/2024, dismissed the challenge to Ramesh Kesavan, rendering the judgment final. The CoC contended that, as held by the Hon'ble Supreme Court of India in Manesh Agarwal v. Pramod Kumar Sharma & Anr., (2022 SCC OnLine SC 298), erstwhile directors lack locus to challenge the commercial wisdom of the CoC. The CoC submitted that the question of whether an erstwhile promoter/suspended director has locus to challenge a resolution plan approval is no longer res integra. 31. The CoC submitted that the Resolution Plan does not address any rights or claims of the Appellants, rendering them devoid of any prejudice from the Impugned Judgment dated 18.12.2023. The Appellants' objections, namely (a) the allocation of 'Nil' value to an unsecured financial creditor, allegedly violating Section 30(2) of the Code and (b) the distribution of payments to employees and workmen, do not pertain to their rights or claims. Thus, the Appellants are not "persons aggrieved" under Section 61 of the Code. The CoC further submitted that the unsecured financial creditor, HVM, has in....
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.... (P) Ltd. v. Amit Metaliks Ltd., [(2021) 19 SCC 672], where the Hon'ble Supreme Court of India held that the quantum of payments to different creditor classes is non-justiciable. The CoC further submitted that: the 'Nil' payment to HVM is permissible and non-violative of the Code and differential payments to creditor classes, including 'Nil' to HVM, reflect the CoC's commercial wisdom and are not discriminatory. 36. The CoC submitted that in its commercial wisdom and to ensure timely implementation, the CoC, vide meeting dated 26.12.2023, allocated INR 10 Lakh to HVM, disbursed in July 2024. Thus, any challenge regarding 'Nil' payment to HVM is infructuous. 37. The CoC contended that the treatment of Operational Creditors, being Employees and Workmen, under the Resolution Plan complies with the Code, and is free from material irregularity. As per Clause 2.2(i) of the Resolution Plan, these creditors are allocated INR 73 Lakhs against an admitted debt of approximately INR 1.53 Crore, representing 50% of their debt and meeting the minimum entitlement under Section 30(2)(b) of the Code. The CoC further submitted that the provision granting the Success....
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.... are neither financial creditors, operational creditors, nor workmen who would be directly affected by the approval of the resolution plan. The two issues raised by the Appellants are non- payment to an unsecured financial creditor and the manner of distribution to employees/workmen do not confer locus standi, as the concerned unsecured financial creditor has already filed a separate appeal and no workmen or unions have challenged the resolution plan. 43. The Respondent No.4 submitted that it is crucial to note the present proceedings originate from a Section 10 application initiated by the Corporate Debtor itself. This context makes it evident that the Appellants, as members of the suspended Board, are seeking to avoid payment of the admitted dues owed by the Corporate Debtor, while simultaneously attempting to obstruct the resolution process. 44. The Respondent No.4 submitted that the Appellants' contention regarding a violation of Section 30(2) of the Code specifically, the allocation of Nil value to an unsecured financial creditor (Hari Vittal Mission/HVM) is misplaced, as the Adjudicating Authority, while approving the resolution plan, has already directed the CoC to all....
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....s of the Corporate Debtor and thereby the hospital rune by the Corporate Debtor was shut down. 51. As regard, the allocation in favour of the employee and the workers is concerned, we note that in terms of Section 30(2) of the Code r/w Section 53 of the Code, they are entitled to receive the minimum amount based on the liquidation value of the Corporate Debtor and also get priority in terms of Section 53 of the Code. We have noted that the claim of such workers was Rs. 1,53,83,821/- whereas only Rs. 73 Lakhs has been allocated. 52. At this stage, we also take into consideration that the liquidation value of the Corporate Debtor has been stated to be Rs. 294 Crores, whereas the claims of the Secured Financial Creditor having first charge on the assets of the Corporate Debtor is Rs. 567.93 crores and other Secured Financial Creditor's having residual charge was the assets of the Corporate Debtor is Rs. 60.37 crores. Thus, after satisfying the claims of these Secured Financial Creditors, no amount remains in the kitty based on the liquidation value of the Corporate Debtor which could have been allocated to other Operational Creditors like workers/ employee as well as Unsecured F....
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....n the approved Resolution Plan. Thus, we find that the Resolution Plan does not discriminate based on the type of creditors to give preference to secured creditors both having first charge or having residual charges. 56. As regard, the other point taken up by the Appellants regarding NIL allocation of funds to the Unsecured Financial Creditor i.e., Hari Vitthal Mission is concerned, it is suffice to note that it is not for the Appellant to take up the case to other Unsecured Financial Creditor who are competent to raise their own cause. Incidentally, Hari Vitthal Mission has already taken up their cause of NIL allocation in connected appeal bearing Comp. App. (AT) (Ins.) No. 04 & 05 of 2024 which have also been heard by us along with this case and for which the judgment is also being pronounced along with this case. It may be worth pointing out that the HMV is Unsecured Financial Creditor and based on the judgment as contained in the ratio of Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors. [CA No. 8766-67 of 2019] the different categories of the creditors can be provided different amount in the Resolution Plan based on the assessment made by the ....