2019 (4) TMI 1985 - Tri - Insolvency and Bankruptcy

Reconsideration of approved Resolution Plan - power to recall approved resolution plan - commercial decisions of CoC - section 30(6) read with section 31(1) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - It is a peculiar situation in the present case where a resolution applicant is before this Adjudicating Authority offering better value to the corporate debtor, but this Adjudicating Authority cannot send the approved resolution plan back to the CoC for reconsideration along with apparently better resolution plan on two counts firstly, the resolution applicant has come after the submission of the approved resolution plan to the Adjudicating Authority, and secondly, the CoC or RP has not sought any relief to recall the approved resolution plan and for allowing them to reconsider the approved resolution plan along with the new resolution plan offering better value. The power of this Bench to suo motu direct the CoC to consider the new resolution plan and reconsider the already approved resolution plan is confined by the scheme of the I and B Code and the interpretation of the same in the judgment of the hon'ble Supreme Court in K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK OTHERS 2019 (2) TMI 1043 - SUPREME COURT the role of the Adjudicating Authority in matters challenging the decision of CoC, accepting or rejecting the resolution plan is limited to the grounds mentioned in section 30(2) and the purely commercial decisions of CoC cannot be adjudicated by the Adjudicating Authority as they are non-justiciable. The successful resolution applicant shall obtain the required necessary approvals required under any law for the time being in force within a period of one year from the date of this order or within such period as provided for in such law, whichever is later - the resolution plan with modifications is approved - moratorium declared.

Issues Involved:
1. Approval of the resolution plan under Section 30(6) read with Section 31(1) of the Insolvency and Bankruptcy Code, 2016 (I and B Code).
2. Compliance with Section 29A eligibility criteria.
3. Compliance with Section 30(2) provisions.
4. Objections raised by the erstwhile promoters and directors.
5. Intervention application by Chhattisgarh Distilleries Ltd.
6. Commercial wisdom of the Committee of Creditors (CoC).
7. Implementation and supervision of the resolution plan.
8. Approval of the resolution plan with modifications.

Detailed Analysis:

1. Approval of the Resolution Plan:
The resolution professional (RP) filed M.A. No. 1363 of 2018 seeking approval of the resolution plan submitted by Dera Finvest P. Ltd. The resolution plan was approved by 98.72% of the CoC during e-voting conducted on November 1-2, 2018. The RP presented the resolution plan to the Adjudicating Authority for approval.

2. Compliance with Section 29A Eligibility Criteria:
The resolution applicant submitted an affidavit confirming eligibility under Section 29A of the I and B Code. The RP certified the affidavit as being in order in Form H dated November 2, 2018, ensuring compliance with Section 29A.

3. Compliance with Section 30(2) Provisions:
The RP confirmed that the resolution plan complied with Section 30(2) as follows:
- Section 30(2)(a) and (b): The resolution plan provided for the payment of insolvency resolution process costs and debts of operational creditors in priority over financial creditors.
- Section 30(2)(c): The plan included provisions for the management of the corporate debtor's affairs post-approval.
- Section 30(2)(d): The plan provided for implementation and supervision, including the appointment of new directors and a management team.
- Section 30(2)(e): The plan did not contravene any existing laws.

4. Objections Raised by the Erstwhile Promoters and Directors:
The erstwhile promoters and directors objected to the resolution plan, claiming the resolution applicant's ineligibility under Section 29A and other procedural issues. However, the objections were not supported by specific averments and were dismissed as they challenged the CoC's commercial wisdom, which is non-justiciable as per the Supreme Court's ruling in K. Sashidhar v. Indian Overseas Bank.

5. Intervention Application by Chhattisgarh Distilleries Ltd.:
Chhattisgarh Distilleries Ltd. filed an application to submit a resolution plan offering a higher amount than the approved plan. However, the application was dismissed as it was filed after the approved resolution plan was submitted to the Adjudicating Authority. The Supreme Court's ruling in K. Sashidhar v. Indian Overseas Bank limited the Adjudicating Authority's role to scrutinizing the approved plan without intervening in the CoC's commercial decisions.

6. Commercial Wisdom of the CoC:
The CoC approved the resolution plan by Dera Finvest P. Ltd. with a 98.72% majority. The Supreme Court's ruling emphasized that the Adjudicating Authority cannot question the CoC's commercial wisdom in approving or rejecting a resolution plan.

7. Implementation and Supervision of the Resolution Plan:
The resolution plan included provisions for a monitoring committee consisting of the current RP and a nominee from Punjab National Bank. The plan also outlined the financing structure and payment schedule for the resolution plan's implementation.

8. Approval of the Resolution Plan with Modifications:
The resolution plan was approved with modifications, including the waiver of past liabilities and the transfer of shares at a nominal value. The moratorium order under Section 14 ceased to have effect from the date of the order. The resolution professional was directed to forward all records to the Insolvency and Bankruptcy Board of India (IBBI).

Conclusion:
The resolution plan submitted by Dera Finvest P. Ltd. was approved with modifications, adhering to the provisions of the I and B Code and considering the commercial wisdom of the CoC. The intervention application by Chhattisgarh Distilleries Ltd. was dismissed, and the objections raised by the erstwhile promoters and directors were rejected. The resolution plan's implementation and supervision were ensured through a detailed monitoring mechanism.

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