2019 (12) TMI 1445 - AT - IBC

Approval of Resolution Plan - alleged that the 'resolution plan' which do not confirm requirements of section 30(2) and discriminates amongst the class of creditors has been approved - HELD THAT - In 'Committee of Creditors of Essar Steel India Ltd.' 2019 (11) TMI 731 - SUPREME COURT , the Hon'ble Supreme Court held that with regard to distribution method, the National Company Law Tribunal or National Company Law Appellate Tribunal cannot go beyond the commercial wisdom of the 'Committee of Creditors'. This Appellate Tribunal has also held that the commercial wisdom is a subject matter of the 'Financial Creditor (Commercial Creditors), which cannot be decided by the Adjudicating Authority (National Company Law Tribunal) or the Appellate Tribunal (National Company Law Appellate Tribunal). In the present case, there is nothing on record to suggest that the Appellant is a First Charge holder of the assets of the 'Corporate Debtor'. Further, as per the decision of the Hon'ble Supreme Court in 'Committee of Creditors of Essar Steel India Ltd.' (supra), the equitable treatment is to be accorded to each creditor depending upon the class to which it belongs i.e. 'secured' or 'unsecured', 'financial creditor' or 'operational creditor' - the Appellant has failed to show that any of the provisions of section 30(2) has been violated or there is any material irregularity in the corporate insolvency resolution process period. The question of giving benefit to First Charge holder does not arise both on the question of facts and law. The Appellant cannot derive any benefit from Sections 40 or 48 of the Transfer of the Property Act, 1882. As the Appellant has failed to make out any ground under sub-section (3) of section 61 of the I B Code, no relief can be granted - appeal dismissed.

Summary

Issues involved:
1. Approval of resolution plan under the Insolvency and Bankruptcy Code, 2016.
2. Equitability and non-discrimination among classes of creditors in the resolution plan.
3. Treatment of first charge holders and other secured creditors.
4. Application of Section 48 of the Transfer of Property Act, 1882 in resolution plans.
5. Challenge to the equitable treatment of secured financial creditors.
6. Preferential treatment of first charge holders.
7. Dissent by appellant in the Committee of Creditors meeting.
8. Commercial wisdom of the Committee of Creditors in distribution methods.
9. Equitable treatment of creditors based on class distinction.
10. Compliance with Section 30(2) of the Insolvency and Bankruptcy Code.
11. Benefit to first charge holders under Transfer of Property Act, 1882.

Detailed Analysis:

1. The appeal was filed by the 'Stressed Assets Stabilization Fund' against the approval of a resolution plan by the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016. The resolution plan was submitted by 'Gloster Limited' and approved by the Committee of Creditors, leading to the initiation of the Corporate Insolvency Resolution Process against 'Fort Gloster Industries Ltd.'

2. The appellant contended that the resolution plan did not meet the requirements of Section 30(2) of the I&B Code and discriminated among classes of creditors. The Adjudicating Authority approved a plan that did not comply with the equitable and non-discriminatory treatment of creditors.

3. Concerns were raised regarding the treatment of first charge holders and other secured creditors, highlighting issues where the security provided was valued and extinguished without proper consideration for different classes of creditors.

4. The appellant argued that the resolution plan ignored the provisions of Section 48 of the Transfer of Property Act, 1882, which should have been applied under Section 30(2) of the I&B Code, potentially granting preference to first charge holders over other secured creditors.

5. The Resolution Professional defended the equitable treatment provided to all secured financial creditors, emphasizing that the plan did not differentiate based on first charge status, citing Section 30(4) of the I&B Code.

6. Distribution details of amounts to financial creditors were presented, showing the allocation based on the settlement amount offered under the resolution plan, with specific percentages assigned to each creditor.

7. The Resolution Professional highlighted that the appellant, claiming to be the assignee of IDBI Bank, failed to demonstrate first charge status, and dissenting in the Committee of Creditors meeting did not entitle preferential treatment over other secured creditors.

8. The Resolution Professional and the successful resolution applicant argued in line with the Supreme Court's decision in 'Committee of Creditors of Essar Steel India Ltd.' regarding equitable treatment based on creditor classes and the commercial wisdom of the Committee of Creditors in distribution methods.

9. The Tribunal dismissed the appeal, stating that the appellant failed to establish any violation of Section 30(2) or irregularities in the resolution process. The decision emphasized that the appellant could not derive benefits from the Transfer of Property Act, 1882, and no relief could be granted under Section 61(3) of the I&B Code.

10. The judgment concluded by dismissing the appeal without costs, based on the lack of grounds for relief under the I&B Code.