AI Drafter 
TaxTMI 
TaxTMI 
2026 (4) TMI 615
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....er Section 61 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as Code), assailing the common Judgment and Order dated 05.02.2024 passed by the Ld. Adjudicating Authority (National Company Law Tribunal, Cuttack Bench) in I.A. No. 149/CB/2023, I.A. No. 150/2023 and I.A. No. 285/2023 in CP(IB) No. 111/CTB/2020. 2. The I.A. No. 149/CB/2023 was filed by State Bank of India, the dissenting Financial Creditor and Respondent No.1 herein seeking appropriate orders of Adjudicating Authority for setting aside distributions of payments to dissenting Financial Creditors decided in the 4th meeting of Monitoring Committee held on 04.05.2023 being void and contrary to the provisions of Section 30(2)(b) r/w Section 53 (1) of the Code and to direct to make payment of the amount of Rs. 64.47 crores to the applicant. The I.A. No. 150/2023 was filed by Indrani Patnaik, the Successful Resolution Applicant (SRA) and Respondent No.2 in this appeal, for a declaration that the SRA has complied with the resolution plan dated 27.05.2022 as modified by the addendum dated 29.02.2022 and that the resolution plan stands implemented. The I.A. No. 285/2023 was filed by State Bank of India se....
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....on mechanism would be placed for e-voting along with the Resolution Plan. iv. In the 19th CoC meeting held on 30.09.2022, the CoC unanimously resolved to appoint M/s K.G. Somani & Co. LLP to calculate and determine the amount payable to each creditor on the basis of the approved distribution mechanism, and it was further clarified that in the event of liquidation, proceeds attributable to secured financial creditors would be distributed as per their share in security interest, whereas in case of approval of a Resolution Plan, distribution would be in accordance with the mechanism approved in the 18th meeting. v. An Evaluation Report estimating the attributable liquidation value was submitted by M/s K.G. Somani & Co. LLP on 07.10.2022, and in the 20th CoC meeting held on the same date, further deliberations were undertaken with respect to the distribution mechanism in the event of approval of the Resolution Plan. vi. The Resolution Plan submitted by M/s Indrani Patnaik (SRA) was approved by the CoC through e-voting conducted between 25.09.2022 and 12.10.2022, receiving 88.98% majority vote. The Adjudicating Authority thereafter approved the Resolution Plan....
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....ncial creditor, be paid in proportion to its security interest in one of the Units of the Corporate Debtor, namely the Steel Unit. It is submitted that the said direction travels beyond the express terms of the Resolution Plan approved by the Committee of Creditors and is contrary to the commercial decision taken by the CoC. 6. Ld. Counsel further submits that the Committee of Creditors, in exercise of its commercial wisdom and as specifically clarified in the 20th CoC Meeting dated 07.10.2022, categorically resolved that dissenting secured financial creditors shall be paid strictly in terms of the distribution mechanism proposed under the approved Resolution Plan. It was never resolved that distribution would be linked to or proportionate to the individual security interest of a dissenting secured financial creditor. The Resolution Plan, as approved by the CoC, does not contemplate any distribution based on the extent or nature of the security interest held by any dissenting financial creditor. 7. It is submitted that the Ld. Adjudicating Authority, in the impugned order, has erroneously relied upon the decision recorded in the 19th CoC Meeting, wherein it had been discussed....
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....ble in law. 12. Ld. Counsel reiterates that the CoC, in its 20th meeting, expressly resolved that upon approval of the Resolution Plan, dissenting secured financial creditors would be paid strictly as proposed under the respective Resolution Plan and not on the basis of any independent computation linked to their security interest. 13. He further submitted that Clause 4.1.5.3 of the Resolution Plan clearly stipulates that the Auto Unit of the Corporate Debtor was proposed to be sold after implementation of the Plan and that the entire sale proceeds arising therefrom shall be distributed only among the Assenting Financial Creditors. The language of the clause is explicit and leaves no scope for any alternative interpretation. 14. However, the Ld. Adjudicating Authority, while passing the impugned order, has granted Respondent No. 1 the value of its security interest computed with reference to the liquidation value of both the Steel Unit and the Auto Unit of the Corporate Debtor. By adopting such an approach, the Ld. Adjudicating Authority has effectively permitted Respondent No. 1 to derive benefit not only from the liquidation value of the Steel Unit, but also from the liq....
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....nt it directs payment to Respondent No. 1 in proportion to its security interest, as the same is contrary to the express terms of the approved Resolution Plan, the commercial wisdom of the CoC, and the settled position of law under the Insolvency and Bankruptcy Code, 2016. Submissions of Respondent No.1/SBI 19. Shri Krishnendu Datta, Ld. Sr. Counsel appearing for Respondent No.1 / State Bank of India submits that the present Appeal filed by the assenting financial creditors is wholly misconceived and deserves to be dismissed. It is submitted that the Impugned Order dated 05.02.2024 passed by the Ld. AA correctly recognizes the legal position that the Monitoring Committee cannot alter the distribution mechanism which had already been deliberated upon and approved by the Committee of Creditors ("CoC") in exercise of its commercial wisdom during the Corporate Insolvency Resolution Process ("CIRP") of OCL Iron and Steel Ltd. ("Corporate Debtor"). 20. Learned Sr. Counsel submits that the present Appeal has been filed by the assenting financial creditors namely Indian Bank (A1), UCO Bank (A2), Bank of Baroda (A3), ICICI Bank (A4), and Union Bank of India (A5) who were members of....
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....an was lower than the liquidation value of the Corporate Debtor, the distribution of the proceeds would be carried out as per the share of liquidation value attributable to each secured financial creditor. 25. Learned Sr. Counsel further submits that during the 19th CoC meeting held on 30.09.2022, the said distribution mechanism was again taken up for discussion. During the said meeting, the CoC reaffirmed the distribution mechanism already approved in the 18th CoC meeting and further clarified that the distribution among secured financial creditors would be carried out on the basis of the share of liquidation value attributable to each creditor based on the security interest held by such creditor. 26. Learned Sr. Counsel submits that in the said 19th CoC meeting, all members of the CoC including the present Appellants unanimously agreed to appoint M/s KG Somani and Co. LLP as the evaluation advisor for the purpose of calculating and determining the amount payable to each creditor in accordance with the distribution formula approved by the CoC. 27. Pursuant to the aforesaid decision, the evaluation advisor submitted its report dated 07.10.2022 wherein the liquidation value....
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....e Monitoring Committee meetings that any attempt to modify the distribution mechanism approved by the CoC would be contrary to law. Despite these observations, the Monitoring Committee proceeded to reduce the amount payable to Respondent No.1. 34. Learned Sr. Counsel states that the question as to whether the distribution of proceeds under the resolution plan as approved by the CoC. can subsequently be modified or changed by other members of the CoC after approval of a Resolution plan by the NCLT came up for consideration before this Appellate Tribunal in the matter of 'Bank of Baroda v. IDBI Bank Limited' [2025 SCC OnLine NCLAT 2115]. In the said case one of the assenting financial creditors sought to alter the distribution mechanism approved by the CoC, after approval of Resolution plan by the NCLT and at the stage of its implementation. This Appellate Tribunal categorically held that the same is not permissible and one or more members of the CoC cannot change the distribution already approved by the majority of CoC, prior to the approval of the Resolution plan by the Hon'ble NCLT. In this regard they have highlighted para 23 and 28 of the said judgment. 35. Ld. Sr. Cou....
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.... the security interest held by such creditors in the assets of the Corporate Debtor. Based on this analysis, the liquidation value attributable to Respondent No.1, which holds security interest in the steel unit of the Corporate Debtor was determined to be Rs. 64.56 crores. 42. Learned Counsel further submits that the argument raised by the Appellants during oral submissions that Respondent No.1 has also received payment attributable to the auto division of the Corporate Debtor is completely baseless and factually incorrect. The evaluation advisor's report clearly demonstrates that the amount payable to Respondent No.1 was computed solely on the basis of the security interest held by Respondent No.1 in the steel unit. 43. Accordingly, learned Sr. Counsel submits that the payment directed by the NCLT does not grant any undue advantage or premium to Respondent No.1 and merely ensures compliance with Section 30(2)(b) of the IBC and the distribution mechanism approved by the CoC. Analysis and findings 44. We have heard the Ld. Counsels from both sides in great detail and have gone through the voluminous records of the case including the written submissions of Appellants and....
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....and approved by the CoC in its commercial wisdom during the 18th and 19th CoC meetings, is valid in law and binding upon the Monitoring Committee. 48. In this regard we take note of the relevant portions of the Resolution Plan, which are extracted below: "4.1.5.2 Resolution Applicant proposes to pay Rs. 150.00 Cr. as upfront cash payment to the Secured Financial Creditors within 45 days from the effective date, in accordance with per Section 30(2)(b) read with Section 53 of the Code. Post the payment of CIRP Costs in the manner set out above in this Resolution Plan and the Liquidation Value or the amount proposed under the Resolution Plan whichever is higher, due to Operational Creditors, Workmen and Employee and Dissenting Financial Creditors as per Section 30(2)(b) read with Section 53 of the Code, the admitted Debt of Financial Creditors shall be paid and the same shall be distributed in the proportion agreeable to the CoC, subject to the maximum consideration agreed to be paid by the Resolution Applicant. 4.1.5.3 Additionally, the RA proposes to sell the auto division of the Corporate Debtor after implementation of the Plan. The entire sale proceeds shall b....
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....alue. After due deliberation, the CoC approved a specific and structured mechanism, namely, that the distribution shall be made on the basis of the liquidation value attributable to each secured financial creditor. This was a conscious commercial decision taken after evaluating the financial implications and rights of all stakeholders. 53. The relevant extracts of the 19th CoC meeting held on 30.09.2022 are reproduced below: 54. We note that in the 19th CoC meeting held on 30.09.2022, the CoC clarified that the distribution among secured financial creditors would be based on their respective share in the security interest and the corresponding liquidation value attributable thereto. Significantly, the CoC also decided to appoint an independent evaluation advisor, M/s K.G. Somani & Co. LLP, to compute the liquidation value attributable to each creditor in accordance with the approved mechanism. The CoC also reconfirmed the distribution mechanism as approved in the 18th CoC meeting. This demonstrates that the CoC not only approved the principle of distribution, but also ensured its precise implementation through an expert determination. 55. Pursuant to this decision, the eva....
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....de, which are extracted below: "Section 30: Submission of resolution plan. *30. (1) ------ (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 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 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-secti....
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....tion plan - (a) to the operational creditors shall be paid in priority over financial creditors; and (b) to the financial creditors, who have a right to vote under sub- section (2) of section 21 and did not vote in favour of the resolution plan, shall be paid in priority over financial creditors who voted in favour of the plan: Provided that where a resolution plan provides for payment in stages, the financial creditors who did not vote in favour of the resolution plan shall be paid at least pro rata and in priority over financial creditors who voted in favour of the plan, in each stage. ***** 38. (4) (a) The committee shall consider setting up a monitoring committee for monitoring and supervising the implementation of the resolution plan. (b) The monitoring committee may consist of the resolution professional or any other insolvency professional, or any other person, including representatives of the committee and representatives of resolution applicant(s), as its members: Provided that where the resolution professional is proposed to be part of the monitoring committee, the monthly fee payable to him shall not exceed t....
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....oring Committee in its 4th meeting dated 04.05.2023, wherein it reduced the amount payable to Respondent No.1 from Rs. 64.56 crores to Rs. 35.2 crores, is clearly beyond its jurisdiction. The Monitoring Committee is not vested with any power to revisit or alter the commercial decisions of the CoC. Its role is limited to monitoring and implementing the approved Resolution Plan. Any deviation from the distribution mechanism would amount to modifying the Resolution Plan itself, which is impermissible in law. 68. In 'Bank of Baroda v. IDBI Bank Limited' [2025 SCC OnLine NCLAT 2115], decided by this Appellate Tribunal, one of the assenting financial creditors sought to alter the distribution mechanism approved by the CoC, after approval of Resolution plan by the NCLT and at the stage of its implementation. It was categorically held that the commercial wisdom of CoC regarding manner of distribution, once exercised, cannot be changed subsequently even by the CoC. In this case, such a change has been attempted by the Monitoring Committee, which is a creature of CoC itself. The relevant paras of the judgment are extracted below: "23. The further statutory scheme contemplated by ....
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....the contrary, is seeking a review of the decision of CoC and AA via a decision taken in the Monitoring Committee. Respondent No.1 is seeking enforcement of the liquidation value as determined by the evaluation advisor and accepted within the CoC framework. The amount of Rs. 64.56 crores represent the liquidation value attributable to Respondent No.1 and is therefore fully consistent with Section 30(2)(b). 71. We further note that the Impugned Order does not interfere with or alter the commercial wisdom of the CoC. It merely enforces the very distribution mechanism which was approved by the CoC and incorporated in the Resolution Plan. Hence, it cannot be said that the Impugned Order is contrary to the law laid down by the Hon'ble Supreme Court. 72. It was also contended during the course of oral submissions that Respondent No.1 holds security interest only in the steel unit of the Corporate Debtor and, therefore, ought not to receive any amount relatable to the auto unit. As we have seen earlier in para 57, that the distribution proposed by the evaluation advisor, had only considered the liquidation value of steel unit. The resolution plan clearly states that the proceeds of t....
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....upfront amount proposed under the approved resolution plan as the full and final settlement b) From the remaining resolution plan proceeds attributable to the financial creditors, the amount shall be distributed within the secured financial creditors in the following manner: Amount payable up to the liquidation value of the Corporate Debtor, as determined by the valuers, shall be distributed as per the share of liquidation value attributable to each of the secured financial creditors. K Niketan Any amounts over and above the liquidation value of the Corporate Debtor, as determined by the valuers, shall be distributed between the CoC members on the basis of the voting share in the CoC, adjusted for the voting share of the unsecured financial creditor. Vijaykumar Thanks & Regards Vijaykumar V. Iyer Resolution Professional for OCL iron and Steel Limited Insolvency Professional - Regn, No .: |BBI/IPA-001/IP-P00261/2017-2018/10490 OTAIPW/90/02/150323/103976 (valid till 15 March 2023) Authorisation for assigne PUBLIC RAJKUMAR (ADVOCATO) Extriny AOV 2027 A Document 2 Strictly private and confidential The matter was discussed and deliberated in de....
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....sly agreed to the appoint M/s de Somani and Co. LLP, to calculate and determine the amount payable to each TAK UBLIC N RAJKUMAR (ADVOCATE) Aros Del1+ Page 8 of 10 7 A * TRUE COPY Document 3 Strictly private and confidential creditor basis the distribution mechanism/formulae. On the issue of providing a clarification to the distribution mechanism, SSG sought the views of the CoC members on a clarification in the approved distribution mechanism/formulae that the amount of 1.992% that is payable to the unsecured financial creditor shall only be applicable in case of an unsecured assenting financial creditor. Further, in case any secured or unsecured financial creditor dissents to the resolution plan, they shall be paid the liquidation value attributable as per the provisions of the Code. Further, as regards the distribution mechanism already approved by the CoC in its 18th meeting held on 23" September 2022, the members of the CoC discussed, reiterated and agreed upon as follows: a) In the scenario of the Corporate Debtor going into liquidation, the liquidation proceeds attributable to the secured financial creditors shall be distributed as per ....