2019 (6) TMI 1552 - Tri - Companies Law

Approval of Resolution Plan - direction against the RP to place its revised Resolution Plan - HELD THAT - The CoC has approved the Resolution Plan because the successful Resolution Applicant has assured payment to the stakeholders within fifteen days, to clear statutory dues within 96 hours after the approval of the Plan by simultaneously showing proof of source of funds. The Resolution Applicant tendered documents showing Fixed Deposit of ₹ 6 Crores at the time of the approval of resolution plan by CoC, now it has stepped up its Fixed Deposits to ₹ 8 Crores. Apart from this, the successful Resolution Applicant has also filed sanction letter from HDFC Bank to finance ₹ 10 Crores for infusing funds into the Corporate Debtor towards working capital. The total money that this Resolution Applicant proposed to invest in this company is around ₹ 18 Crores, out of which, ₹ 9.52 Crores to pay to various stake holders within 15 days and remaining money to be invested as working capital. In respect to this unsuccessful bidder Plan is concerned, it's a plan not supported by any material reflecting it has cash or security supported to make payments to the stake holders or to invest working capital into the company, whereby this Bench hereby partly allowed the MA filed by the RP by approving the resolution plan approved by the CoC without passing any relief to waive off various dues that are payable by the Corporate Debtor in accordance with law, however we make it clear that it is left open to the Corporate Debtor to pursue its remedies in accordance with law Application dismissed.

Summary

Issues:
Approval of Resolution Plan, Viability of Plans, Competency of CoC, Consideration of Feasibility and Viability, Rights of Resolution Applicant

1. Approval of Resolution Plan:
The judgment revolves around the approval of a Resolution Plan by the Committee of Creditors (CoC). The Resolution Professional (RP) filed MA 512/2019 seeking approval of the Resolution Plan, while an unsuccessful Resolution Applicant filed MA 527/2019 requesting a direction against the RP to present its revised plan before the CoC for evaluation. The CoC approved the Resolution Plan of the successful bidder, M/s. Linux Laboratories Private Limited, over the plan of the unsuccessful bidder, M/s. Arabella Onco Care Private Limited, based on various factors.

2. Viability of Plans:
The RP highlighted that the successful bidder's plan involved immediate payments to stakeholders, statutory dues, and infusion of working capital, supported by financial documents. In contrast, the unsuccessful bidder revised its plan multiple times without concrete evidence of financial capability. The judgment emphasized the importance of substantiating claims with material proof, especially regarding the availability of funds for payment obligations.

3. Competency of CoC:
The judgment underscored that the CoC is the competent body to assess and determine the most beneficial plan for the Corporate Debtor and the creditors. It highlighted the CoC's authority in evaluating Resolution Plans based on feasibility, viability, and adherence to legal requirements, as prescribed by the Insolvency and Bankruptcy Code.

4. Consideration of Feasibility and Viability:
The court emphasized the significance of evaluating the feasibility and viability of a Resolution Plan beyond the mere monetary value offered. It stressed the need for Resolution Applicants to demonstrate their capacity to fulfill payment obligations and invest in the Corporate Debtor effectively, rather than solely focusing on the monetary figures presented in the plan.

5. Rights of Resolution Applicant:
The judgment clarified that Resolution Applicants do not possess a vested right for automatic consideration or approval of their plans. It referenced previous Supreme Court decisions to support the CoC's discretion in selecting the most feasible and viable plan for the Corporate Debtor, emphasizing the importance of adhering to legal procedures and evaluating plans objectively.

In conclusion, the judgment approved the Resolution Plan endorsed by the CoC, highlighting the fair evaluation process followed and dismissing the unsuccessful bidder's plea for reconsideration. It affirmed the CoC's authority in decision-making, based on feasibility and viability, and directed the RP to return any materials provided by the unsuccessful Resolution Applicant.