TaxTMI 
TaxTMI 
2024 (12) TMI 1720
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....MBER (JUDICIAL) AND MR. NARESH SALECHA MEMBER (TECHNICAL) For the Appellants: Ms. Priya Kumar & Mr. Shivam Goel, Advocates, Mr. Uddyam Mukherjee & Mr. Swapnil Pattanayak, Adv. For the Respondents: Dr. Abhishek Manu Singhvi, Sr. Adv. with Mr. Gyanendra Kumar, Mr. Aviral Singhal, Mr. D. Kapila, Adv. for SRA. Mr. Arun Kathpalia, Sr. Advocate with Mr. Pankaj Vivek, Advocate for R-2. PCS, Manoj Kumar Koyalkar, Adv. for R-3. Mr. Swapnil Gupta, Mr. Abhinav Mishra, Mr. Vaibhav Mendirata, Advocates for R-4. JUDGEMENT NARESH SALECHA, MEMBER (TECHNICAL) 1. There are six appeals before us arising out of common Impugned Order dated 07.02.2020 under 61(3) of the Insolvency & Bankruptcy Code, 2016 (in short 'Code') passed by National Company Law Tribunal, Hyderabad Bench, Hyderabad (in short 'Adjudicating Authority') in IA No's. 433, 447 and 448/2018 and IA Nos. 32, 61, 950, 960 and 961/2019 in CP (IB) No. 248/7/HDB/2017. 2. These six appeals have been filed against a common Impugned Order and have been tagged together, we shall deal all these six appeals in the following discussion. 3. At the initial stage, we will take note of the details of appeals mentioned herei....
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.....) No. 430 of 2020 & 432 of 2020 and Respondent No. 5 in Company Appeal (AT) (Ins.) No. 710 of 2020. 10. BREP Asia II Indian Holding Co II (NQ) PTE. Ltd. i.e., SRA is the Respondent No. 5 in in Company Appeal (AT) (Ins.) No. 426 of 2020, Respondent No 3 in in Company Appeal (AT) (Ins.) No. 430 of 2020 and 710 of 2020. 11. Subodh Kumar Agrawal is the IRP and Respondent No. 1 in in Company Appeal (AT) (Ins.) No. 430 of 2020, 432 of 2020 & 710 of 2020. 12. Counsel for the other Respondents who appeared before us generally took the same line of pleadings as taken by the Respondents noted above. Company Appeal (AT) (Ins.) No. 426 of 2020 13. NCC Ltd. is the Appellant herein and the Operational Creditor of M/s Golden Jubilee Hotels Pvt. Ltd. ('Corporate Debtor') the Respondent No. 1 herein, who submitted the claims of Rs. 51,75,95,253/- as on 14.03.2018 in form-B subsequent to public notice dated 01.03.2018 after initiation of CIRP of the Corporate Debtor on an application under Section 7 of the Code. The Committee of Creditors ('CoC') is the Respondent No. 2 herein. Telangana State Tourism Corporation Limited ('TSTCL') (earlier known as Youth Advancement Tourism and....
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.... was admitted as contingent liability. The Appellant stated that as a huge amount of Rs. 3,84,32,558/- of the claim of the Appellant was not admitted by the Respondent No.1, the Appellant filed I.A. No. 264 of 2018 before the Adjudicating Authority, inter alia, praying for a direction for Respondent No. 1 to admit the entire claim of the Appellant. Even though the Resolution Plan has been approved, the said application has not been decided. Company Appeal (AT) (Ins.) No. 432 of 2020, 18. This appeal has been filed by the Infinity Interiors Private Limited against the Impugned Order dated 07.02.2020 passed in IA. No. 961 of 2019 and IA. No. 32 of 2019 filed in CP (IB) No. 248/7/HDB/2017. Subodh Kumar Agrawal is the Respondent No. 1 herein, who was Resolution Professional of M/s Golden Jubilee Hotels Private Limited/ Corporate Debtor/ the Respondent No. 2 herein. BREP Asia II Indian Holding Co. II (NQ) Pte. Ltd. is the Respondent No. 3 herein who is the Successful Resolution Professional ('SRA') of the Corporate Debtor. Committee of Creditor ('CoC') of the Corporate Debtor is the Respondent No. 4 herein. 19. The Appellant stated that he is a registered "Small Enterp....
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....owing discussions. 25. The Appellants stated that they came to know that nil payment has been provided in respect of his claims in the Resolution Plan and aggrieved by same, the Appellant (NCC) filed an I.A. No. 9 of 2019 before the Adjudicating Authority seeking direction that the Resolution Plan as submitted should not be approved. The Appellants submitted that by a common order dated 27.09.2019 passed by the Adjudicating Authority in I.A. No. 9 of 2019 of the Applicant as well as similar applications filed by the Operational Creditors were disposed of by the Adjudicating Authority holding that the objection raised by the Operational Creditor including the Appellants herein will be considered at the stage of consideration of the Resolution Plan which was pending before the Adjudicating Authority and also held that the Appellant being an Operational Creditor had no locus to challenge the same. 26. The Appellants stated that the Appeal bearing Company Appeal (AT) (Insolvency) No. 1112 of 2019 was filed against the said order of the Adjudicating Authority dated 27.09.2019 by one of the operational Creditor i.e., Consolidated Engineering Company and this this Appellate Tribunal....
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.... has not taken into account requirement of all stakeholders especially while distributing the corpus available with the Corporate Debtor. The Appellants stated that the Resolution Plan was also not firm as further amounts, other than those provided in the resolution plan for the Special Operational Creditor, are being negotiated even now. 30. The Appellants submitted that the role assigned to CoC, due to exclusion of Operational Creditors from the CoC, cast more duties on CoC to balance the interest of all stakeholders. The Appellants stated that the preferential treatment to Special Operational Creditor, does not tantamount to exercise of commercial wisdom. 31. The Appellants submitted that on 21.12.2018, the Resolution Plan submitted by the SRA was approved by the CoC with 68.26% votes, despite being a Conditional Resolution Plan, wherein all payments under the Resolution Plan were subject to completion of the condition precedent. The Appellant stated that the CoC overlooked the fact that in the 14th CoC meeting the resolution applicants were requested to remove condition precedents from the resolution plans and submit revised plans which was overlooked. 32. The Appellan....
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....w the principles laid down by the Hon'ble Supreme Court of India in Swiss Ribbons (Supra) wherein it was held that the Regulation further strengthens the rights of operational creditors by statutorily incorporating the principle of fair and equitable dealing of operational creditors' rights, together with priority in payment over Financial Creditors. The Appellants submitted that Adjudicating Authority failed to appreciate that the Resolution Plan was in violation of Regulation 38 of the Regulations which provides that no differential treatment should be done between the Operational Creditors and the Financial Creditors, who are similarly situated and failed to look after the interests of all stakeholders including operational creditors. 37. The Appellants stated that the SRA has no right on the surplus generated by the Corporate Debtor during CIRP and such amounts have to be distributed amongst the stakeholders such as Financial Creditors, Operational Creditors, etc. but the Adjudicating Authority erroneously approved the Resolution Plan. 38. The Appellants submitted that the Adjudicating Authority has misconstrued the law laid down by this Appellate Tribunal in Jind....
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.... of the Corporate Debtor and Corporate Debtor, in all four appeals, have been represented by Mr. Suryanarayan. The CoC has been represented by Mr. Arun Kathpalia. The SRA has been represented by Dr. Abhishek Manu Singhvi. YATCL has been represented by Mr. Manoj Kumar Koyalkar and Society was represented by Mr. Swapnil Gupta. 43. Three main contesting Respondents i.e., Corporate Debtor/ Resolution Professional, CoC and SRA have pleaded in all four appeals, by and large, with common approach and common pleadings. Hence, we will take note of same in the following discussions. 44. Per contra, the Respondents denied all averments of the Appellate Tribunal and also denied following grounds of challenge to the impugned order by the appellants: - (a) There is no category as "Special Operational Creditor" in the code which also does not contemplate discrimination within the same class of creditors. (b) While the "Special Operational Creditor" had been given 100% of the claims which included admitted and disputed claims pending adjudication, all other operational creditors like the appellant, even though having adjudicated/admitted claims in their favor have been gran....
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....m of the CoC has been given paramount status without any scope for any judicial intervention for ensuring the resolution of the Corporate Debtor within the timelines prescribed in the Code. The Respondent stated that neither the Adjudicating Authority nor this Appellate Tribunal have been given any jurisdiction to reverse the decision taken in excise of commercial wisdom of the CoC. 49. The Respondent submitted that project related agreements i.e., the lease agreement and the Development Management Agreements entered by the Corporate Debtor with Society and the YATCL are the essential agreements of the BOT model who as the owner of the land has leased the premises to the Corporate Debtor. 50. The Respondent submitted that, though agreeing to the contention of the Appellants that some of them are registered as MSMED units for which certain benefits and reliefs have been provided under the MSMED Act, the Appellant's cases do not fall under protective net of provisions of MSMED Act, as the MSMED act being an act enacted in the year 2006, is subservient to the provisions of the Code which has a non-obstante clause under section 238 of the Code. 51. The Respondent submitted tha....
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.....52 Crores out of which Rs.50.07 Crores have been admitted which excludes Rs. 41.99 Crores as the Society Claim. The Respondent submitted that the claims of YATCL and Society as Special Operational Creditor, have been earmarked as amount of upto society claims forming part of Upfront Financial Commitment of the approved Resolution Plan. The Respondent submitted that a conjoint reading of the clauses 8.2.1 of the approved resolution plan and the "upfront financial commitment" denote that the SRA would engage in discussion with the special operational creditor to arrive at a negotiated settlement with respect to the "Upfront Financial Commitment" as mentioned in the approved resolution plan. The Respondent stated that the "Upfront Financial Commitment" has been defined in clause no. 1.22. It has been clarified by the SRA that in case the Actual special operational creditor amount is higher than that of the society claim then the difference between the Actual Special Operational Creditor Amount and the Society Claim would be added to Rs. 384 Crores. i.e., "Upfront Financial Commitment". 55. The Respondent stated that in addition, as a part of Corporate Debtor's contractual obligati....
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....for Adico Forge Pvt. Ltd. & Ors.- Company Appeal (AT) (Ins) No. 1642 of 2024, where it was held that Operational Creditors as the law stands now are denied any payment when the amount payable to them in the event of Liquidation is NIL and this Appellate Tribunal in this case did not find any error in the Order of the Adjudicating Authority, approving the Resolution Plan. 59. The Respondent cited to the case of this Appellate Tribunal in the matter of Paramvir Singh Tiwana & Ors V Puma Realtors thru R Pawan Kumar Garg, and Ors (NCLAT Principal Bench New Delhi- Company Appeal (INS) No. 554 of 2021) [(2022) SCC online NCLAT 1605], where it was held that :- "In approval of Business plan, the COC takes a business decision based on ground realities by majority which binds all the stakeholders including the dissenting creditors..." In the instant case cited, the GMADA being the owner of the land and a secured creditor have not filed their claim in the CIRP. However, keeping in view, the nature of business (real estate) and ground realities the COC has taken a commercial decision" (Emphasis Supplied) 60. The Respondent negated that pleadings of the Appellant regarding con....
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..... 76.13 Crores, and (ii) there is an Arbitral Award dated 25.02.2020 ("YATC Arbitral Award") for an amount of Rs. 25.95 Crores in favour of the Corporate Debtor and the GoT, has challenged the same and the monies have not been paid to the Corporate Debtor until now. By way of negotiations, the SRA is inter alia aiming to arrive at a final Actual Special Operational Creditor Amount to be paid to GoT in settlement of all past, present and future claims of GoT vis-à-vis the Corporate Debtor.] Table in Cl. 1.2.2: Upfront Financial Commitment to be paid by the SRA to inter alia GoT/ Special Operational Creditor (Actual Special Operational Creditor Amount) and Financial Creditors (Upfront FC Amount) is Rs. 384 Crores. Note: Financial Creditors, who are only entitled to receive sums forming a part of Rs. 384 Crores as per the Approved Resolution Plan, are taking haircuts of more than 60% against their admitted claims of INR 949.83 Crores. 6.1 Cl. 8.2.5: If the Actual Special Operational Creditor Amount, after negotiations with the GoT, is fixed at an amount which is greater than the Society Claim/ INR 41.99 Crores, the amount in excess of INR 41.99 Crores....
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....n indispensable and important role being lessor of the land on which hotel is situation. 65. The SRA submitted that the Hon'ble Supreme Court of India and this Appellate Tribunal have upheld several resolution plans which provide for differential treatment of creditors belonging to the same class. The SRA cited the case of Essar Steel (Supra), where an example of electricity dues (operational debt) was cited to state that a particular set of dues may be paid in full so that carrying on business of the Corporate Debtor does not become impossible. The Respondent stated that the Hon'ble Supreme Court of India consciously stated that such special dispensation, if given to electricity dues, may result in a consequent reduction of amounts payable to other financial and operational creditors, which is the commercial wisdom exercised by the CoC and resolution applicant to decide how CIRP is to take place. 66. The SRA brought to our notice to judgment of this Appellate Tribunal in case of Excel Engineering (Supra), where it was held that a particular class within the class of operational creditors, i.e., farmers, was separated and paid their dues in full, while other operational credi....
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....deration for grant of lease. The GoT is entitled to an 'Additional Development Premium' from the Corporate Debtor, which is akin to a revenue share, and is a minimum amount as specified in Schedule C of the D&M Agreement or 3% of the gross revenue earned from the Project The Corporate Debtor has provided bank guarantees to the GoT for due and punctual performance of its obligations under the Lease Agreement and D&M Agreement, and is required to furnish fresh bank guarantees upon occurrence of events of default. GoT is entitled to clear any outstanding amounts of lenders in case of default by the Corporate Debtor, terminate the lease, repossess the site along with the Project. The GoT is not required to change the land use under any circumstances. The GoT is at liberty to terminate the D&M Agreement at its absolute discretion even during subsistence of the lease period, and upon such termination, the GoT will buy-out the Project based on a business valuation by an independent valuer. At the time of expiry of the Lease Period (which expires in 2040 as of now) by efflux of time and in the normal course, the site along with all immoveable assets shall be handed over by the Corporate De....
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....t "fair and equitable". (ii) Akashganga Processors Pvt Ltd. v. Shri Ravinda Kumar Goyal & Ors., Company Appeal (AT) (Ins) No. 1148/2017, National Company Law Appellate Tribunal The SRA clarified that special treatment was sought to be given to tax authorities and the only reason why this Appellate Tribunal did not permit special treatment of the aforesaid tax authorities was because the special treatment had no nexus with the revival of the corporate debtor or to ensure its survival as a 'going concern'. Hence, there was no intelligible differentia which could justify the special treatment. The SRA stated that in the present case, special treatment of the GoT in the Resolution Plan has a direct nexus to the revival of the Corporate Debtor and to ensure its survival as a 'going concern'. 75. The SRA stated that the Resolution Plan treats the monies received under the Arbitral Award in a fair manner and there is no possibility of any windfall gain being caused to the SRA or the Corporate Debtor. The SRA submitted that the YATCL Arbitral Award of Rs. 25.95 Crores has no impact on the liquidation value of the Corporate Debtor, which remains Nil. Hence, any amounts ....
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....ndia) Ltd. & Ors., Company Appeal (AT)(Insolvency) No. 752 of 2021, where this Appellate Tribunal upheld the validity of condition precedent necessary for the implementation of the resolution plan. The aforesaid judgment of this Appellate Tribunal has been upheld by the Hon'ble Supreme Court of India vide Order dated 30.01.2023 passed in Civil Appeal No. 407/ 2023. 79. The SRA stated that this Appellate Tribunal in AJR Infra and Tolling Ltd. v. Sutanu Sinha, Company Appeal (AT) (Insolvency) No. 920 of 2022 stipulated the ratio regarding the validity of condition precedent which is necessary for implementation of the resolution plan itself, this Appellate Tribunal also distinguished the Hon'ble Supreme Court's judgment in Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited & Anr., [(2021) 14 S.C.R. 321] on the grounds that Ebix (Supra) was not concerned with a situation where the conditions precedent were critical for the implementation of the resolution plan itself. 80. The SRA submitted that the provisions of the MSMED Act do not override the provisions of the IBC as under the Code, there exist no preferential rights in the favour of operati....
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....t least their liquidation value. In this case, since the liquidation value payable to Operational Creditors is NIL, the appellants have not suffered any loss or prejudice from the payment made to the Government of Telangana/YATCL & Society. 87. The CoC negated the pleadings of the Appellants that the Resolution plan is not firm due to potential variations in payment amounts to GoT/YATCL & Society. The CoC stated that the flexibility of variations ensures the Resolution Plan's viability despite ongoing arbitration-related negotiations. As the Resolution Plan's includes provisions for full payment of society dues, there is no risk to its implementation, and GoT/YATCL & Society will have no grounds to withhold cooperation once fully compensated. 88. The CoC clarified the issue regarding availability of additional funds on account of award in arbitration proceedings and stated that the claim of additional funds from the arbitration award is unfounded, as the award is under challenge under Section 34 of the Arbitration & Conciliation Act. Furthermore, the corporate debtor's claims are smaller than those of GoT/YATCL, making it unlikely for any significant funds to accrue to th....
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....tribution without any change in Resolution Plan and not infringing upon commercial wisdom of CoC. i. The crux of the matter in these appeals relates to differential treatment given to various categories of Operational Creditors. ii. We have noted from the pleadings that different Operational Creditors in the present case have given different services or supplies to the Corporate Debtors like supplying material, construction of facade, providing furniture, providing interior decorations or even the land which has been given on lease by YATCL and the Society on two different plots owned by these government entities. iii. It is the case of the Appellants that the Resolution Plan has categorized a sub-class within the class of Operational Creditors giving special and preferential treatment to YATCL and Society (Special Operational Creditor). We note that the 100% of claims of both the entities have been provided for payment in the approved Resolution Plan and they have been classified as "special Operational Creditors"; in contrast to other Operational Creditors who have been clubbed together (other than Special Operational Creditors) and given NIL payment in....
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....tra ordinary treatment of Operational Creditors classifying into special Operational Creditors is illegal and perverse as the same is not envisaged in the Code or the Regulations. xiii. It would be worthwhile to take into account the relevant definitions as provided in the Code, having effect in the present appeal lik Section 3(6), 3(10), 5(7), 5(8), 5(20) and 5(21) of the Code, which are reproduced as under :- "3. In this Code, unless the context otherwise requires, - (6) "claim" means- (a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured; (b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured" Section 3(10) - "(10) "creditor" means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree holder" Section 5(7) - "5. In this Part, unless the conte....
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....lied various services, noted earlier. xviii. For amount to be categorised as operational debt, it should satisfy the definition of Section 3 (6) of the Code i.e., "claim" and such claims should satisfy the definition of debt as referred to under Section 3(11) of the Code and again it should satisfy the definition of Operational Debt as contained in Section 5(21) of the Code. We note that no word like "special Operational Creditor" has been defined under Section 3 or 5 of the Code or anywhere else or even in the regulations. xix. The claims payable by the Corporate Debtor who is the Central Government or State Government or other local authority to whom operational debt is owed are categorised as Operational Creditor as per Section 5(20) of the Code. Thus, the Government, for such claims, in this sense, would be an Operational Creditor. Such dues will also include the dues like electricity services and will be treated as operational debt. xx. The role of the CoC has been defined under Section 21 of the Code which in fact, is supposed to be in charge during CIRP process and continues the role during the approval of the Resolution Plan by the Adjudicating Au....
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....SCC 209; 2021 SCC OnLine SC 194 j. Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta, (2020) 8 SCC 531 k. Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh, (2020) 11 SCC 467 l. Phoenix ARC (P) Ltd. v. Spade Financial Services Ltd., (2021) 3 SCC 475 xxiii. We will now take into consideration the latest judgment of the Hon'ble Supreme Court of India passed in State Bank Of India & Ors Vs. The Consortium Of Mr. Murari Lal Jalan And Mr. Florian Fritsch & Anr in Civil Appeal Nos. 5023-5024 OF 2024 (Jet Airways case) and the relevant portion on commercial wisdom of CoC reads as under :- "Para 169- A Resolution Plan evolves through these players referred to above. However, it is the "commercial wisdom of the CoC" that assumes a position of superiority and becomes binding on all the stakeholders. The NCLT, which is the adjudicating authority and who has to approve the Resolution Plan under Section 31 of the IBC, 2016 also cannot trespass into the commercial wisdom exercised by the CoC. This decision to restrict the scope of interference on the commercial wisdom of the CoC was conscious and possibly taken bearing in mind the t....
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....in CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority. That is made non- justiciable." Para 171- Thus, there is no doubt that the commercial wisdom of the CoC cannot be subjected to judicial review. However, in order to foster a much more effective and time- bound decision making by the members of the CoC, in the interests of maximization of value of the assets of the Corporate Debtor, certain self-regulating guidelines were issued by the IBBI on 06.08.2024 with immediate effect... Para 172- The aforesaid guidelines may go a long way in streamlining the functions of the CoC. Adding to the aforesaid guidelines, we suggest that the CoC exercise their commercial wisdom and approve/reject the Resolution Plans placed before them exhibiting fairness and with good reasons. Such a reasoned decision making on their part will only serve to further enable the other key players like the Adjudicating Authorities to understand the rationale behind the....
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....authority approval. We consciously note that the above judgement was specifically w.r.t., change from Financial Creditor to the Operational Creditor and not inter-se sub-class between same class like in present case. xxx. In the present case various claims including by the Financial Creditor and the Operational Creditor were submitted. In the Resolution Plan, the SRA, classified the claims of the Operational Creditor into further two categories i.e., Operational Creditor and Special Operational Creditor. The same was examined, approval and recommended by the CoC and finally approved by the Adjudicating Authority. We have already noted these details earlier and will not repeat now. xxxi. Still the issue remains whether the CoC or for that matters the Adjudicating Authority could have approved sub-category within same class of Operational Creditor. The Code specifically and consciously stipulated provisions only for the Financial Creditor and the Operational Creditor. The Code also recognises secured and unsecured creditors, but we do not find any mention of Special Operational Creditor in the Code. xxxii. It seems that the parliament never intended to do f....
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....ved by him to confirm that each resolution plan - [(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 higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the corporate debtor. Explanation 1. - For removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors....." (Emphasis Supplied) xxxvi. This makes it clear that the amount provided in the Resoluti....
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....57 were fulfilled in entirety. Added further, the said allotment of the aforesaid sum in respect of the operational debt of the Corporate Debtor was made Bona fide by the 'Committee of Creditors' exercising their 'Commercial Wisdom' Para 69- According to the Learned Counsel for the 4th Respondent, the 'Distribution of amounts' in respect of a Resolution Plan comes within the ambit of the Committee of Creditors while exercising their 'commercial wisdom' and in short, the proceeding under the I&B Code, 2016(being summary in character) is not to be resorted to as an 'Debt Enforcement Procedure'. Also that, the Appellant's claim(s) pertain to the same being arising out of the Corporate Debtor's purported obligations to pay for goods, and obviously, the disputes are of contractual in nature. Para 71- As far as the present case is concerned, although on behalf of the 'Appellant' a plea is raised that the 'Appellant' was discriminated as an 'Operational creditor' and that the 'Equality Concept' was not adhered to by the 'Adjudicating Authority' while approving the 'Resolution Plan' (especially in the teeth of the 'Resolution Plan' 100% payment to the 'Operational Credito....
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....lant's claim is not relatable to the supply of goods or services so as to keep the Corporate Debtor as a Going Concern. xl. We find one contrarian view taken by this Appellate Tribunal, as cited by the Appellants in support of their claim. In this direction, we refer to our earlier decision in the case of Akashganga Processors (Supra), where this Appellate Tribunal has directed the Successful Resolution Applicant to allocate funds to Operational Creditors in the Resolution Plan, who were left unpaid while other Operational Creditors were proposed to be paid. The relevant part of the said judgment reads as under :- "However, when the Successful Resolution Applicant was making payment to other two Operation Creditors, there cannot be any discrimination between payment of one class of Creditors." 4. Learned counsel for the Dissenting Financial Creditor i.e. Respondent No.3 has opposed the submission of the learned counsel for the Appellant as well as learned counsel for the Resolution Professional and submits that there cannot be any discrimination between payment to Operational Creditors interse, which is a well settled law. It is submitted that th....
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....their claims before the Resolution Professional. There were statutory dues of Gujarat Industrial Development Corporation and Surat Municipal Corporation in the capacity of Operational Creditors as well. The Resolution Plan was submitted by the SRA, which was approved by the CoC with 99.84% voting share. The Resolution Plan proposed to pay Rs.32,78,102/- to Gujarat Industrial Development Corporation and Surat Municipal Corporation. However, no sums were allocated for State Tax (Government of Gujrat) and Central Excise (Government of India). The Resolution Professional filed an application under Section 30(6) of the Code before Adjudicating Authority, seeking approval of the Resolution Plan. The Adjudicating Authority refused to approve the plan on the premise that it violates Section 30(2)(e) and 30(2)(f) of the Code. However, this Appellate Tribunal placed reliance on the Supreme Court judgment in Committee of Creditors (Supra), where it was held that there can be differential payment in payment of debts of Financial Creditors and Operational Creditors, however, there can be no difference in inter se payment within a class of creditors. It was opined that the Resolution Applicant w....
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....sential element for the carrying on of such business, namely, electricity. This may, in turn, be accepted by the resolution applicant with a consequent modification as to distribution of funds, payment being provided type of operational creditor, namely, the electricity distribution company, out of upfront payment offered by the proposed resolution applicant which may also result in a consequent reduction of amounts payable to other financial and operational creditors. What is important is that it is the commercial wisdom of this majority of creditors which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place." (Emphasis Supplied) xlv. The ratio from above judgement is very clear that all aspect of the Resolution Plan, taken by majority of CoC Members, is commercial wisdom which includes distribution of funds to all creditors and the manner (including quantum of such distribution) of such distribution without any judicial intervention. xlvi. We will examine the issue of discriminatory payments among the Operational Creditor including Special Operational Cre....
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....such commercial wisdom of the CoC with requisite voting majority is non-justiciable and the discretion on Adjudicating Authority is restricted to scrutiny of resolution plan as approved by CoC and this enquiry postulated under S. 31 of the Code is limited to matters covered under S. 30(2) of the Code when the resolution plan does not confirm the stated conditions. liii. We ourselves held in catena of our earlier judgment that approval of the resolution plan is exclusively in the domain of the commercial wisdom of the CoC. The scope of judicial review is contained under Section 31 for approval of the Resolution Plan by the Adjudicating Authority and in S.32 read with S.61 as regards the scope of in S.31 as regards appeal against the order of approval. We reiterated that the powers of the Adjudicating Authority dealing with the resolution plan do not extend to examining the correctness or otherwise of the commercial wisdom exercised by the CoC. The limited judicial review available to Adjudicating Authority lies within the four corners of S. 30(2) of the Code, to examine that the resolution plan does not contravene any of the provisions of law for the time being in force and....
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....0,730.8 Crores whereas total admitted claims of Operational Creditors were Rs. 97,729.5 Crores. The Financial Creditors, could realise Rs. 3,13,461.5 Crores i.e., 34.80% of their admitted claims on the other hand, Operational Creditors could realise only Rs. 10,363.3 Crores i.e., 10.57% of their admitted claims and 5.36% of liquidation value. lviii. This tantamount that Financial Creditors are taking haircut of Rs. 65.20% and Operational Creditor are given huge haircut of 89.43% or almost 90%. lix. However, revisiting of commercial wisdom of the CoC or judging over just and equitable distribution by CoC will eventually take us in the domain of Equity. We wonder, if such equity jurisdiction is vested with the Adjudicating Authority or even with this Appellate Tribunal. lx. We note that the Adjudication Authority is within its jurisdiction in approving a resolution plan which is in conformity with Code but there is no equity-based jurisdiction with the Adjudicating Authority, under the provisions of the Code. The function of the Adjudicating Authority under Section 31 of the Code is to determine whether the resolution plan "as approved by the committee of c....
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....the same was held to be legal and in conformity to Section 30(2) of the Code. We consciously observe that present case is also similar where one claim of operational Creditor i.e., Special Operational Creditor/ GoT have been paid in full where as other Operational Creditors have been given nil. In view of Excel Engineering (Supra), the present Impugned Order cannot be treated as wrong and illegal. lxv. The relevant portion of this Appellate Tribunal judgment passed in the matter of Excel Engineering (Supra) is reproduced as under :- "12. It is the main argument of the Learned Counsel for the Appellant (an operation creditor) that the Farmers were given 100% of the dues whereas the Appellant has given only 1% of the dues and therefore the Resolution Plan is discriminatory and is in violation of Section 30(2) of the Code. 13. It is seen from the record that the 'Corporate Debtor' is a Sugar Industry and the Farmers are an integral part of the Sugar Industry. We find force in the contention of the Learned Sr. Counsel for the Respondent that more than 4500 Farmers and their families are dependent on the 'Corporate Debtor' factory for their survival and the Pl....
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....to Section 30(2) of the Code. Thus, we do not find any illegality in the Impugned Order approving the Resolution Plan having discriminatory treatment to Special Operational Creditors. lxix. In fitness of things, it will be worthwhile to clarify that there is no such category like of Special Operational Creditor as stipulated in the Code or the Regulations, however, we have noted during pleadings that the nomenclature of Special Operational Creditor was perhaps used for sake of convenience to club the claims of the YATCL and Society who were the lessor of the land on which the hotel was situated, otherwise YATCL and Society were also treated as Operational Creditors, but paid in full in commercial wisdom of CoC. lxx. Be that as it may, although the term Special Operational Creditor is not found in Code or in the Regulations, the fact remains is that it is for the SRA to allocate the funds proposed to be distributed amongst the Creditors based on his overall business Plan and strategy for revival of the Corporate Debtor and to ensure viability and feasibility of such Resolution Plan. Similarly, exercise of the commercial wisdom by CoC is undertaken to look into vari....
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....hat such approach would require legal provision by way of suitable amendments in the Regulations and Code. We request the IBBI to look into this aspect if found feasible after due examination. We would like to make it clear that this only a suggestion for consideration of IBBI and by no way it should be considered as recommendation or directives. 95. Issue (IV) Whether the condition precedents in the approved Resolution Plan violated Code and Regulations. i. It is the case of the Appellants that the Resolution Plan submitted contains the clause regarding condition precedent. The Appellants submitted that during the 14th CoC Meeting held on 24, 25 and 28.09.2018, they requested that the Resolution Plan should be clear and unambiguous and there should not be any condition precedent. ii. The Appellants pleaded that agreeing to conditional Resolution Plan, the payments under Resolution Plan were to be made by the SRA subject to completion of condition precedent, which is not in accordance with the Code and the Regulations. iii. At this stage, it will be important to understand what is a nature of condition precedent made in the Resolution Plan. iv....
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....withdraw from the Resolution Plan. The condition precedents as mentioned in Para 7.6.1 are basically condition precedents required for aviation business which are must for any company carrying on aviation business. Enumeration of condition precedent is only for purposes of noticing obligations of the Resolution Applicant to recommence the operations as an aviation company after obtaining necessary approvals. Such condition precedent cannot be said to be any hindrance in the approval of the plan by the Adjudicating Authority. We, thus, do not find any substance in the submission of the Appellant that the resolution plan ought to have rejected in view of the condition precedent contained in the resolution plan. The Resolution Applicant has also completed all necessary condition precedents to the satisfaction of the Monitoring Committee. We, thus, are of the view that the judgment of Hon'ble Supreme Court in "Ebix Singapore" does not help the Appellant to support his contention that the Resolution Plan is liable to be rejected due to condition precedents." (Emphasis Supplied) viii. We have already observed that the transfer of ownership in favour of the new management was ....
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....ng MSME/ Operational Creditors is not found convincing. 97. Issue (VI) Whether Arbitral Award which came in favour of the Corporate Debtor post CIRP will have impact in the present case. i. We observe that the Adjudicating Authority had no jurisdiction to impose such conditions with regard to amounts as may be recoverable by the corporate debtor in future. Any amount receivable by the corporate debtor, being an asset of the company, would continue to remain with the Corporate Debtor upon implementation of the resolution plan. After approval of the plan in terms of S.31 of the Code, it becomes binding on all the stakeholders, including the creditors and no party could claim any right against the corporate debtor including the right to set off. In fact, the Resolution Plan provides specifically for the debt payable to stakeholders including creditors and therefore no stakeholders including the creditors can claim any dues from the likely Arbitration Award. ii. In any case, as per Resolution Plan, the benefit or otherwise arising out of arbitration cases would go in favour of the Corporate Debtor and therefore, the Appellants have no claims for such proceeds. ....
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....pplicant. Consequently as per the Resolution Applicant's estimate: (i) the liquidation value would not be sufficient to cover the amounts owed to the Financial Creditors in full; and (ii) if the Company were to be liquidated, other than liquidation costs and CIRP Costs, it is only the Financial Creditors and workmen of the Company, who will be entitled to receive the liquidation proceeds (proportionate to the Admitted Financial Debt owing to the Financial Creditors and the workmen's dues which have been unpaid for u period of 24 (twenty four) months preceding the commencement of the CIRP of the Company respectively). 1.2 Financial Commitment As part of the Resolution Plan, the Resolution Applicant proposes to infuse the Financial Commitment into the Company, directly or indirectly, through equity, or through equity and/or dobt ("Capital Instruments"). 1.2.1 1.2.2 Please see below the amounts submitted as a bid for the Company and the break- down of various purposes for utilisation of such amounts (collectively "Financial Commitment"). BREP Asia II Indian Holding Co II Document 2 Particulars Amounts (INR crores). 1. Workmen Liquidation Dues, if any, 384 2. E....
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....e Identified Bank Guarantees 50.07 crores The financial bid has been provided on the assumptions that: (i) all Clearances required for the construction and operation of the projects which are undertaken by the Company until the date of this bid submission are in piace and are full and complete, other than as disclosed in the Shared Data; (ii) there is no information which has been withheld or which will negatively affect the status of the projects housed in the Company or otherwise in relation to this resolution process and submission of bid in this CIRP; (iii) the fixed assets of the Company ax set out in the Provisional Balance Sheet have not been alienated, disposed or transferred in any manner (and nor huy any security interest or Encumbrance been created over such assets after the commencement of CIRP in respect of the Company). For the purposes of this Resolution Plan, the List of Creditors has been relied upon to determine/arrive at the Admitted Financial Dcht. . These amounts are computed in accordance with the provisions of the Code and the Resolution Applicant is given to understand that such ousts are being met on a monthly basis out of the cash flows of the ....