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2022 (4) TMI 1112 - AT - Insolvency and BankruptcyValidity of approved Resolution Plan - appellants filed their claims in form C as Unsecured Financial Creditor - appellants have not received any communication from the IRP with regard to the admission/rejection of the claim and the Resolution Plan was approved without their participation as Financial Creditor in Committee of Creditors - HELD THAT - It is unfortunate to record that IRP has responded to the Appellants vide IRP s letter dated 28th February, 2020 (in Appeal No. 352/2021) that the claim of the Appellants is to be made as Financial Creditor as they have given Unsecured Loan and not as Operational Creditor after verifying records by him and hence the Appellants claim as Operational Creditor was not accepted and he was asked to fill up Form C on 28.02.2020 and he filed the same on the same day. In spite of that the Resolution Professional (Respondent No. 1) has not considered their claim as Financial Creditor. The Courts of India have time and again held that the commercial wisdom of the CoC is paramount, and that the CoC in its commercial wisdom is empowered to take decision which is non-justiciable. It is now well settled in law as held by Hon ble Supreme Court in JAYPEE KENSINGTON BOULEVARD APARTMENTS WELFARE ASSOCIATION ORS. VERSUS NBCC (INDIA) LTD. ORS. 2021 (3) TMI 1143 - SUPREME COURT has noted that whether a resolution plan and its propositions are leading to maximization of value of assets or not, would be matter of enquiry and assessment of the Committee of Creditors alone. Consolidated reading of all provisions and objects of the Code apart from analysis/observations stated supra, it reveals that the purpose of CIRP is to provide life to organization and not to provide death knell. Death Knell/liquidation should be the last resort. Hence no need to touch the Resolution Plan so implemented by Successful Resolution Applicant (viz. M/s Bharat Forge Limited). Prima facie, there is apparent mistake by the Resolution Professional for not considering the claim of the Appellant Financial Creditor in Company Appeal(AT)(Insolvency) No. 352 of 2021 being Unsecured Loan Holder as per the written statement of his predecessor IRP is not in good taste and accordingly, Financial Creditors, who have received the major chunk from the Resolution Applicant should appropriately refund the original claim, minus any amount received, made by the Financial Creditor as Operational Creditor (as per letter of Interim Resolution Professional dated February 28, 2020 as stated) in the same percentage as these Financial Creditors have received from Resolution Applicant i.e., M/s Bharat Forge Ltd. Appeal allowed in part.
Issues Involved:
1. Non-inclusion of the Appellant's claim as Financial Creditor. 2. Expiry of the CIRP period and its implications. 3. Validity of the Resolution Plan approval process. 4. Commercial wisdom of the Committee of Creditors (CoC). Detailed Analysis: Non-inclusion of the Appellant's claim as Financial Creditor: The Appellants initially filed their claim as Operational Creditors, but the Interim Resolution Professional (IRP) directed them to refile as Financial Creditors due to their status as unsecured loan providers. Despite compliance, their claim was not considered in the Resolution Plan. The Tribunal noted that the exclusion of the Appellant's claim violated Sections 30 and 31 of the Insolvency and Bankruptcy Code (IBC), 2016, which mandate the inclusion of all verified claims. The Tribunal directed that the Financial Creditors, who received the major portion of the Resolution Plan, should refund the original claim amount to the Appellants in the same percentage as received from the Resolution Applicant, minus any amount already received. Expiry of the CIRP period and its implications: The Corporate Insolvency Resolution Process (CIRP) commenced on 30.08.2019 and was extended multiple times. The Appellant argued that the CIRP period expired on 01.02.2021, rendering the CoC and Resolution Professional functus officio (having no further authority). The Tribunal observed that there is no provision for virtual extension of the CIRP period beyond the statutory limit of 330 days, as per Section 12 of the IBC. The Tribunal found that the CoC and Resolution Professional acted beyond their authority by continuing the process after the expiry date. Validity of the Resolution Plan approval process: The Appellant contended that the Resolution Plan was approved without considering their objections and that the CoC became functus officio after the CIRP period expired. The Tribunal noted that the Resolution Plan was approved by the CoC with 100% majority and subsequently implemented. The Tribunal emphasized that the commercial wisdom of the CoC is paramount and non-justiciable, as upheld by the Supreme Court in various judgments, including K. Sashidhar v. Indian Overseas Bank and Maharashtra Seamless Limited v. Padmanabhan Venkatesh. Commercial wisdom of the Committee of Creditors (CoC): The Tribunal reiterated that the commercial decisions of the CoC are beyond judicial review, provided they comply with Sections 30 and 31 of the IBC. The Tribunal referenced multiple Supreme Court judgments affirming that the CoC's decisions, based on their commercial wisdom, are non-justiciable. The Tribunal also noted that the CoC had acted within its rights to approve the Resolution Plan, which was subsequently implemented, thereby fulfilling the objectives of the IBC to maximize asset value and ensure timely resolution. Conclusion: The Tribunal partially allowed the appeals, directing Financial Creditors to refund the original claim amount to the Appellants, minus any amount already received. The Tribunal upheld the commercial wisdom of the CoC and the validity of the Resolution Plan, emphasizing the non-justiciable nature of the CoC's decisions. The Tribunal also highlighted the need for the Insolvency and Bankruptcy Board of India (IBBI) to issue appropriate clarifications to prevent similar issues in the future. Pending interlocutory applications were disposed of with this order.
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