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Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + AT Insolvency and Bankruptcy - 2022 (4) TMI AT This

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2022 (4) TMI 1112 - AT - Insolvency and Bankruptcy


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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