TaxTMI 
TaxTMI 
2025 (12) TMI 1559
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..... Neha Shivhare and Adv. Tara Ranade, Advocates for R3. JUDGMENT Ashok Bhushan, J. This appeal by the Appellant, an Assenting Financial Creditor of the Corporate Debtor has been filed challenging the order dated 10.10.2025 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench - I in IA(IBC)/2708(MB)2025 filed by the Respondent No.1 - IDBI Bank Ltd. - the Dissenting Financial Creditor of the Corporate Debtor. By the impugned order, the Adjudicating Authority has allowed the IA(IBC)/2708(MB)2025. Aggrieved by which order this appeal has been filed. 2. Brief facts of the case giving rise to this appeal are: 2.1 The CIRP of Reliance Communications Infrastructure Limited (RCIL) commenced vide order dated 26.09.2019. Reliance Projects & Property Management Services Limited; Respondent No.3 herein, submitted a resolution plan. The Resolution Plan came to be considered in the 18th meeting of the CoC held on 05.08.2021. Both the Appellant and Respondent No.1 and other financial institutions were members of the CoC. On the basis of e-voting the resolution plan was approved by 67.97% vote share of the CoC. Appellant - Bank of Baroda was one of the m....
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....icating Authority held that the CoC in its decision dated 27.10.2023 could not alter the financial layout in respect to the entitlement of Financial Creditors. The Adjudicating Authority held that as per the resolution plan Clause 3.3.20, the Reliance Bhutan Loan was to be assigned to the Approving Financial Creditor, which resolution plan was approved by the Adjudicating Authority. Approved resolution plan could not be modified by assigning the Reliance Bhutan Loan to the Dissenting Financial Creditors. The Dissenting Financial Creditors are not covered in the expression "other entity" as occurring in Clause 3.3.20 of the resolution plan. Aggrieved by the order, the Bank of Baroda has filed this appeal. 3. We have heard Shri Abhijeet Sinha, learned senior counsel for the Appellant and Shri Zarir Bharucha, learned senior counsel with Ms. Prachi Johri, Advocate appearing for the IDBI Bank - Respondent No.1. Ms. Anannya Ghosh, learned counsel has appeared for the Resolution Professional - Respondent No.2 and Shri Ritin Rai, learned senior counsel has appeared for the Successful Resolution Applicant - Respondent No.3. 4. Shri Abhijeet Sinha, learned counsel appearing for the App....
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....as agitated by the State Bank of India before this Tribunal and were dismissed. It is submitted that the Dissenting Financial Creditors are entitled for their entitlement in the resolution plan and by assignment of the Reliance Bhutan Loan in favour of Dissenting Financial Creditors their pay-outs in any manner are not being affected, as was approved in the resolution plan. The Adjudicating Authority committed error in allowing the application of the IDBI Bank. Learned counsel for the Appellant further submitted that all securities of the Reliance Bhutan Loan are in favour of the Dissenting Financial Creditors, hence, assignment of said loan in favour of the Dissenting Financial Creditors is in accordance with the security interest which they have in the loan. 5. Learned counsel appearing for the IDBI Bank refuting the submissions of learned counsel for the Appellant submits that in the resolution plan, which was proposed by Respondent No.3, the Reliance Bhutan Loan was to be assigned to the Approving Financial Creditors. The resolution plan which provided for assignment of Reliance Bhutan Loan to the Approving Financial Creditors was approved by the Adjudicating Authority vide ....
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.... where all aspects were considered. CoC in its meeting dated 27.10.2023 could not have taken any decision which has effect of modification of approved resolution plan. Resolution plan which is approved by the CoC is binding on the CoC even though application for approval of the plan is pending before the Adjudicating Authority. The decision of the CoC taken on 27.10.2023, thus, is clearly against the provisions of I&B Code and is an unauthorized and illegal decision which cannot be implemented. The expression "such other entity as may be identified by them" occurring in Clause 3.3.20 of the resolution plan cannot be interpreted to include the Dissenting Financial Creditors. 'Any such other entity' as occurring in above clause was to give leaveway to the Approving Financial Creditor to appoint a trust or financial institution to which Reliance Bhutan Loan may be assigned but the said expression cannot be read to meant as Dissenting Financial Creditor. The Reliance Bhutan Loan is in default which has been informed by the Resolution Professional itself to the lenders. It is settled law that Resolution Plan approved by the CoC cannot be allowed to be modified by CoC itself. 6. We ha....
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.... Upon approval of this Resolution Plan by the Adjudicating Authority in accordance with the Code, the aforesaid manner of distribution will be binding on all the Stakeholders of the Corporate Debtor." 8. Clause 1.2.13 which deals with Total Resolution Amount and the other distributable amounts is as follows: "1.2.13 The Total Resolution Amount and the other distributable amounts set out in sub-section 1.2.11 of Part B (Financial Proposal) above (excluding the Upfront Equity Infusion) (as specified in Section 2.4 (Acquisition of Management Control) of Part B (Financial Proposal) and the Interim Management Cost) under this Resolution Plan shall be distributed in the manner set out in the sub-section 1.2.3 of Part B (Financial Proposal) above on the basis of the Claims verified and admitted by the Resolution Professional, whether before or after the submission of this Resolution Plan. Provided that, the CoC may in its discretion adopt a different manner of distribution in accordance with Application Law and such decision of the CoC shall be accepted by the Resolution Applicant, subject to: i. The maximum amount payable by the Resolution Applicant under this Resolu....
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....nt of the Reliance Bhutan Loan in the manner specified above, neither the Corporate Debtor nor the Resolution Applicant or any of its Affiliates shall have any obligation whatsoever, including but not limited to the recovery or any payment obligation in relation to the said Reliance Bhutan Loan." 10. We also need to notice the plan approval order dated 19.12.2023 where in Para 26 of the order payment under plan has been dealt with. Note 2 as contained in Para 26 dealt with assignment of Reliance Bhutan Loan. Para 26 including Note 2 is as follows: "Payment under the Plan 26. The Plan contemplates the following overall payments for the insolvency resolution of the Corporate Debtor as a going concern pursuant to the provisions of the Code: S. No. Particulars Amount (INR) 1. Total Resolution Amount which may be increased by an additional amount of INR 35,00,00,000. (See Note 1 below) 57,00,00,000 2. Available cash balance and fixed deposit balances on the Effective Date (after payment of the CIRP Cost, Interim Management Cost, any other mandatory payments under the provisions of the Code and the creation of the Corpus) Upto 123,52,00,000....
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....g prayers: "V. PRAYERS 35. In the facts and circumstances set out above, the Applicant prays that this Hon'ble Tribunal be pleased to: a. Direct the Respondent No. 1 (Resolution Professional) to convene a meeting of the Committee of Creditors to vote on the proposal for re-allocation of distribution of proceeds under the Resolution Plan concerning the loan extended to Reliance Bhutan Limited and distribution of cash balance and fixed deposit balances as provided for the Resolution Plan, in terms of the following draft resolution: "In terms of sub-section 1.2.13 of Part B (Financial Proposal) and other relevant provisions of the resolution plan submitted by Reliance Projects and Property Management Services Limited ("Resolution Plan") which was approved by the Committee of Creditors ("CoC ") vide resolution passed in the 18th meeting of CoC held on August 05, 2021, to approve the following manner of re-allocation of payments to be made to the financial creditors of the corporate debtor: Sr. No. Particulars Amount Source Source Payment to Dissenting Financial Creditors As determined in accordance with the Resolution Plan, a....
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....12 of the reply following has been pleaded: "11. It is submitted that once the CoC has approved the resolution plan, there is no provision under the Code, which empowers the RP to put forth an agenda concerning distribution of proceeds under the resolution plan for voting before the CoC. On the contrary, Section 30(4) of the Code expressly requires the CoC to, int.er alia, consider the manner of distribution proposed under the resolution plan, prior to voting upon the resolution plan. The relevant portion of Section 30 reads thus - Section 30 - Submission of resolution plan - --- (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 matter 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 ... (Emphasis supplied) 12. Therefore, once the CoC has approved the re....
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....he CoC they can express their opinion in the said meeting. Para 4 of the order is as follows: "4) The Counsel for the Dissenting Financial Creditors seeks liberty to file Reply; however, this Bench feels that they, being a Member of the CoC, can express their opinion in the said meeting." 16. In pursuance of the order dated 17.10.2023, the Resolution Professional placed the agenda before the CoC. Copy of the minutes of the 30th CoC meeting dated 27.10.2023 has been placed on record as Annexure 9. The minutes contained objection of State Bank of India and other Dissenting Financial Creditors that the distribution as approved cannot be changed and reallocation of Reliance Bhutan Loan cannot be allowed as per provisions of the Resolution Plan. The minutes captures the objections of the State Bank of India, which is captured in the minutes of meeting in following words: "SBI representative stated that, we understand that reallocation of the Reliance Bhutan loan is not allowed as per the provisions of resolution plan. Reliance Bhutan loan is assigned to the assenting financial creditors and it cannot be proposed to now be reassigned to dissenting financial creditors....
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....he said resolution was approved despite dissent of IDBI Bank and other Dissenting Financial Creditors. It is to be noted that IA No.127 of 2022 came for consideration before the Adjudicating Authority on 10.11.2023 on which date the application was disposed of as infructuous recording following: "IA 127/2022 Ld. Counsel for the Applicant submits that prayer in IA 127/2022 pertains to convening of the CoC meeting, which has already been held in view of the directions of this Bench and appropriate resolution has been passed. However, the Counsel for SBI intervening in the application, submits that CoC ought not to have passed a resolution setting out the distribution mechanism amongst the class of creditors in terms of the earlier plan approved by the CoC and if the voting was to take place it ought to have been on the whole plan. In view of above, the IA 127/2022 is disposed of as infructuous." 18. We may also notice prayers made in IA No. 2708(MB)2025 filed by the IDBI Bank. IDBI Bank in the application has made following prayers in Para 55: "55. IDBI therefore prays: a) that this Hon'ble Tribunal be pleased to direct the SRA to p....
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....distribution mechanism by filing an application praying for calling for meeting of CoC to reassign the Reliance Bhutan Loan to the Dissenting Financial Creditors is clear proof that what was contemplated in the resolution plan was sought to be changed by the Bank of Baroda by filing an application. The law is well settled that after the resolution plan is approved by the CoC, the said approved resolution plan is binding on the Resolution Applicant as well as the CoC. Section 30(4) provides that the CoC may approve a resolution plan by vote of not less than 66% of voting share of the financial creditors, after considering its feasibility and viability, the manner of distribution proposed. When the resolution plan was approved by the CoC in its meeting dated 05.08.2021 (by e-voting on 31.08.2021), the said approval of resolution plan shall also be approval of resolution plan regarding manner of distribution of assets, which is statutory requirement under Section 30(4). Manner of distribution when once finalized, which contemplate assignment of Reliance Bhutan Loan to Approving Financial Creditors for their pay-outs, the said distribution mechanism could not have been allowed to be al....
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....n in the said meeting. 5) In view of the aforesaid, we direct the erstwhile Resolution Professional to convene a meeting of the CoC of the Corporate Debtor, to be held before 01.11.2023 to consider the following: "In terms of Sub-section 1.2.13 of Part B (Financial Proposal) and other relevant provisions of the Resolution Plan submitted by Reliance Projects and Property Management Services Limited (Resolution Plan) which was approved by the Committee of Creditors (CoC) vide resolution passed in the 18th meeting of CoC held on August 05,2021, to approve the following manner of re-allocation of payments to be made to the financial creditors of the Corporate Debtor:" Sr. No. Particulars Amount Source 1. Payment to Dissenting Financial Creditors As determined in accordance with the Resolution Plan, applicable law and the decision of the committee of creditors Assignment/transfer of the Reliance Bhutan Loan - INR 2,00,00,00,000 Such other sources - In accordance with the Resolution Plan and the decision of the committee of creditors. 2. Assenting Financial Creditors As determined in accordance with the Resolution Plan, applicable law....
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....e Approving Financial Creditor, we fail to see any justification/ validity in action of the CoC in reassigning the Reliance Bhutan Loan to the Dissenting Financial Creditors. 24. The submission that CoC in its commercial wisdom is free to decide any mechanism of distribution and commercial wisdom taken in the meeting dated 27.10.2023 cannot be questioned or agitated before the Adjudicating Authority does not commend us. Learned counsel for the appellant has relied on the judgment of the Hon'ble Supreme Court in 'K. Sashidhar' Vs. 'Indian Overseas Bank & Ors.' reported in (2019) 12 SCC 150, (paragraph 52) in support of his submission that commercial wisdom of the CoC entails what amount has to be paid to different classes or sub-classes of creditors in accordance with the provisions of the I&B Cosw. Further reliance has been placed on the judgment of the Hon'ble Supreme Court in 'India Resurgence ARC Pvt. Ltd.' Vs. 'Amit Metaliks Ltd. & Anr.' reported in (2021) 19 SCC 672 (paragraph 17). Hon'ble Supreme Court in 'K. Sashidhar' (supra) in paragraph 52 laid down following: "52. ...There is an intrinsic assumption that financial creditors are fully informed about the viabil....
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....he CoC which was taken on 27.10.2023 to permit change in distribution mechanism which was earlier approved. CoC had exercised its jurisdiction under Section 30(4) when it approved the resolution plan on 05.08.2021 which plan became binding on all stakeholders including the CoC. CoC could not have exercised any discretion to change the distribution mechanism which was once approved and had become final. 27. We, thus are of the view that above judgments relied by counsel for the Appellant does not in any manner supports the submission of the Appellant that CoC has jurisdiction to change the distribution mechanism which was once approved on 05.08.2021. 28. It is true that the CoC with commercial wisdom can take a decision regarding different aspects of the plan including manner of distribution, which is also statutory scheme under section 30(4) but once the commercial wisdom has been exercised by approving the resolution plan in meeting dated 05.08.2021, the modification of the said distribution mechanism, which is impermissible, cannot be saved in the name of commercial wisdom of the CoC. 29. Learned counsel for the Appellant has relying on Clause 3.3.20 has submitted that t....
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....27 of 2022 which was filed by the Bank of Baroda, the Dissenting Financial Creditors prayed for time to file reply to object to the application, which was not allowed by Adjudicating Authority observing that the Dissenting Financial Creditors can express their opinion in the meeting of the CoC. Thus, from the very beginning the Dissenting Financial Creditors has raised their objection against proposed alteration of distribution mechanism, which is sought to be prayed by the Bank of Baroda. Hence, submission of the Appellant that it is an afterthought cannot be accepted. 33. The Adjudicating Authority in the impugned order after considering all relevant clauses has rightly come to the conclusion that the decision of the CoC dated 27.10.2023 is contrary to the approved resolution plan and cannot bind the Dissenting Financial Creditors. It was rightly held that the Dissenting Financial Creditors are entitled to receive payment in the manner provided in the approved resolution plan and the CoC cannot alter the financial layout in respect of their entitlement under the plan. Interpretation of Clause 3.3.20 on the expression 'or such other entity' as also been correctly decided by the....