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2025 (8) TMI 896
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....vocates for RP. JUDGMENT ASHOK BHUSHAN, J. These three appeals have been filed against the same order dated 01.04.2025 passed by the National Company Law Tribunal (NCLT), Mumbai Bench, Court - I allowing I.A. Plan 11/2025 filed by Pulkit Gupta, Resolution Professional (RP) of Vadaraj Cement Ltd. and approving the resolution plan submitted by Nuvoco Vistas Corporation Limited [Successful Resolution Applicant (SRA)]. The appellants who had filed claim in the Corporate Insolvency Resolution Process (CIRP), of the corporate debtor as operational creditor have been proposed NIL payment. Aggrieved by the order approving the resolution plan, these appeals have been filed. 2. Brief facts of the case necessary to be noticed for deciding the appeal are: i. On an application filed by Oriental Bank of Commerce (now known as Punjab National Bank) under Section 7, CIRP against the corporate debtor - Vadaraj Cement Limited, commenced vide order dated 02.02.2024. ii. A public announcement was issued by Interim Resolution Professional (IRP) on 03.02.2024, inviting claim from the creditors of the corporate debtor. iii. Masyc Projects Private Limited, appellant ....
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....ed counsel, Mr. Viraj Parikh appearing for the RP. 4. Learned counsel for the appellant challenging the impugned order submits that adjudicating authority committed an error in approving the resolution plan, which resolution plan did not consider the claim of the operational creditor in accordance with the law. Resolution plan did not reflect that there was any due consideration of the claim of the operational creditors. It is submitted that Regulation 38(1A) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, (for short the CIRP Regulations, 2016) speaks of resolution plan, including s statement as to how it has dealt with the interest of all stakeholders, including operational creditors of the corporate debtor. It is submitted that there is no consideration in the resolution plan as to how the claim of the operational creditor has been dealt with. It is submitted that operational creditors are the creditors who provided goods and services to the corporate debtor and their claim was entitled to be considered with payment on priority. Learned counsel for the appellant has relied on the judgement of the Hon'ble Supreme Court in the matter of 'CoC ....
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.... by the counsel for the SRA. 7. We have considered the submissions of the counsel for the parties and perused the records. 8. Section 30(2) provides that RP shall examine each resolution plan to confirm that each resolution plan provides for requirement as enumerated therein. Section 30(2) is as follows: "30. Submission of resolution plan- (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 priority to the 2[payment] of other debts of the corporate debtor; (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 (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub- section (1) of section 53, whichever is high....
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....ority in sub-Section (1) of Section 53. The facts brought on the record indicate that the claim filed by the appellant as operational creditor was admitted by the RP and appellants were shown as operational creditor to the extent of the amount of claim admitted in the CIRP. The resolution plan which was submitted by the SRA and approved by CoC did not propose any payment to any of the operational creditors except for workmen, employees and government dues. The adjudicating authority in paragraph 20 of the impugned order has dealt with the key features and summary of the final resolution plan submitted by the resolution applicant and approved by the CoC. Under the heading 'C', treatment of operational creditor, workmen dues have been dealt and under the heading 'D', treatment of operational creditor, workmen employees have been dealt with and under the heading 'E', treatment of operational creditor (government dues) have been dealt with and it is under the heading 'F', that treatment of operational creditor (other than government dues, employees and workmen) have been dealt with. Clause F of the paragraph 20 of the impugned order is as follows: "F) TREATMENT OF OPERATIONAL ....
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....ts term; and (c) adequate means for supervising its implementation. (3) A resolution plan shall demonstrate that- (a) it addresses the cause of default; (b) it is feasible and viable; (c) it has provisions for its effective implementation; (d) it has provisions for approvals required and the timeline for the same; and (e) the resolution applicant has the capability to implement the resolution plan." 11. Hon'ble Supreme Court in 'CoC of Essar Steel India Limited' (supra) has held that equality for approach cannot be adopted for different class of creditors as part of insolvency resolution process. In paragraph 85 of the judgement following has been laid down: "85. Indeed, if an "equality for all" approach recognising the rights of different classes of creditors as part of an insolvency resolution process is adopted, secured financial creditors will, in many cases, be incentivised to vote for liquidation rather than resolution, as they would have better rights if the corporate debtor was to be liquidated rather than a resolution plan being approved. This would defeat the entire objective of the Code which is t....
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....ajority 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." 13. There cannot be any dispute to the proposition that as per requirement of Regulation 38 of CIRP Regulations, 2016 the plan has to contain a statement as to how it has dealt with the interest of all stakeholders, including the financial creditor with the operational creditor of the corporate debtor. The present is not a case where resolution plan does not deal with the treatment of financial creditor and operational creditor. We have noticed that in paragraph 20 of the judgement of the adjudicating authority treatment of financial creditors, operational creditors, workmen employees, government dues and operational creditor, other than government dues, employees and workmen has been provided for under the heading 'F', the claim of operational creators have been dealt with. The present is the case where the claim of secur....
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....as observed that giving NIL to Operational Creditors "would certainly not balance the interest of all stakeholders or maximise the value of assets of the Corporate Debtor if it becomes impossible to continue running its business as a going concern." 13. For these reasons, we find that the Impugned Order accepting the Resolution Plan cannot be upheld. The Resolution Plan does not appear to have taken care of interest of all stakeholders including Operational Creditors and the decision of the COC also does not reflect that it has taken into account the fact that the Corporate Debtor needs to be kept as a going concern and that there is Company Appeal (AT) (Ins) No.606 of 2019 need to maximise the value of the assets and that the interest of all the stakeholders including Operational Creditor has to be taken care of. 14. For the above reasons, we set aside the Impugned Order and remit the matter back to the Adjudicating Authority with a direction to send back the Resolution Plan to the Committee of Creditors to resubmit the Plan after satisfying the parameters as laid down by the Hon'ble Supreme Court in the Judgement in the matter of "Essar Steel", port....
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....an is approved by the requisite majority of the Committee of Creditors, the aforesaid plan must then pass muster of the Adjudicating Authority under Section 31(1) of the Code. The Adjudicating Authority's jurisdiction is circumscribed by Section 30(2) of the Code. In this context, the decision of this Court in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] is of great relevance. 66. In K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] this Court was called upon to decide upon the scope of judicial review by the Adjudicating Authority. This Court set out the questions to be determined as follows: (SCC pp. 173-74 & 176, paras 32 & 37) "32. Having heard the learned counsel for the parties, the moot question is about the sequel of the approval of the resolution plan by CoC of the respective corporate debtor, namely, KS&PIPL and IIL, by a vote of less than seventy-five per cent of voting share of the financial creditors; and about the correctness of the view [Kamineni Steel & Power (India) (P) Ltd. v. Indian Bank, 2018 SCC OnLine NCLAT 654] taken by NCLAT that the percent....
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....Crores after negotiations reduced the same to Rs.34.9500 Crores. In the process although earlier there was proposal to pay Operational Creditors 2.668 Crores, the figure converted to zero after negotiations with the COC. So much so for the trust law has put on the shoulders of the COC to protect interest of all stakeholders. It is clear from the Judgement of Hon'ble Supreme Court that the record should reflect that the Committee of Creditors has taken into account that Corporate Debtor needs to be kept a going concern; that maximising the value of assets is necessary and that the interest of all stakeholders including Operational Creditors has been taken care of. The Judgement says that the Adjudicating Authority should look into "reasons given by the Committee of Creditors while approving the Resolution Plan". 14. In the above circumstances in the `Hammond Power' (Supra), this Tribunal came to the view that the CoC has not applied its mind and has not taken care of all stakeholders and in the said circumstances, the Order was set aside. Judgment of this Tribunal in `Hammond Power' (Supra), was on the facts of the said case. In `Hammond Power' (Supra), also this Tribunal h....
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....be examined by the Government and the Board to find out as to whether there are any grounds for considering change in the legislative scheme towards the payment to the Operational Creditors, which also consist of Government dues and other statutory dues. We make it clear that our observation is only to facilitate the Government and other competent Authority to consider this issue and take decision, so as to the objective of equitable and fair distribution can be fulfilled with clear parameters to guide the all concerned to arrive at the fair and equitable distribution."" 18. The above indicates that this Tribunal is conscious to the legislative scheme as existing today, which does not mandate any payment to the operational creditor in event in the liquidation of the corporate debtor, the operational creditors were not getting any amount, the legislative scheme was said to be harsh and this Tribunal has opined that law in this regard need consideration whether if any change is required in the legislative scheme or not for which as early in May 2022, this Court has delivered judgement in 'Damodar Valley Corporation' (supra) and forwarded the copy to the Central Government as well ....