2020 (6) TMI 765 - Tri - Insolvency and Bankruptcy

Seeking approval of Resolution Plan - Apparent contradictions in the Resolution Plan - Approvals from regulatory authorities - - application filed u/s 30(6) of the IBC seeking approval of this Adjudicating Authority u/s 31(1) of the IBC - HELD THAT - Section 31(1) ibid mandates that the Adjudicating Authority shall by order approve the resolution plan if it is satisfied that such resolution plan as approved by the CoC under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30. From the perusal of the plan the Resolution Applicant is planning to monetise most of the assets and will continue only with a small portion of the business operations as stated above. Therefore, the Resolution Plan is not in accordance with the provisions of Income Tax Act and the existing benefits envisaged thereunder may not be available. The plan also gives commercial logic for issuing 24% of equity to Financial Creditor as passing on the value garnered by the companies during continuous operations of five years. However, we are afraid that the Resolution Applicant may generate very negligible amount from actual business operations for three years as stated above. Therefore, this logic also appears to be flawed. Apparent contradictions in the Resolution Plan - HELD THAT - The plan does not appear to a Resolution plan but appears to be a winding up, liquidation plan while just retaining a small portion of the business operations of the corporate applicants. In K. Sashidhar v Indian Overseas Bank others, 2019 (2) TMI 1043 - SUPREME COURT , decided by Hon ble Supreme Court, the Hon'ble Supreme Court examined the situations arising in terms of section 31 of the IBC and held that the legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of CoC. Approvals from regulatory authorities - HELD THAT - Since the corporate applicants are licencees of spectrum by DoT, approval of DoT for Spectrum Transaction and AL Fibre and Business Transactions, and activities ancillary thereto or required therefor, will also be taken by the corporate applicants acting through the Monitoring Committee after the Resolution Plans are approved by this Adjudicating Authority. The Resolution Plans placed on record in respect of all the three corporate applicants, viz., (1) Aircel Limited; (2) Dishnet Wireless Limited; and (3) Aircel Cellular Limited, is hereby approved with the few modifications - moratorium shall cease to have effect. Application allowed.

Summary

Issues Involved:
1. Approval of the Resolution Plans under section 30(6) read with section 31(1) of the Insolvency & Bankruptcy Code (IBC).
2. Compliance with the requirements under section 30(2) of the IBC.
3. Evaluation of the commercial wisdom of the Committee of Creditors (CoC).
4. Reliefs, concessions, and dispensations sought by the Resolution Applicant.

Issue-wise Detailed Analysis:

1. Approval of the Resolution Plans:
The Resolution Professional (RP) filed three Interlocutory Applications (IAs) seeking approval of the Resolution Plans submitted by UV Asset Reconstruction Company Limited (UVARC) for Aircel Limited, Dishnet Wireless Limited, and Aircel Cellular Limited. The Tribunal acknowledged the substantial interweave of businesses among these companies and decided to dispose of all three IAs through a single order.

2. Compliance with the Requirements under Section 30(2) of the IBC:
The Tribunal examined whether the Resolution Plans met the requirements of section 30(2) of the IBC:

- CIRP Costs: The Resolution Plans provided for the payment of insolvency resolution process costs in priority to other debts.
- Operational Creditors: The Plans earmarked specific amounts for employees and operational creditors, ensuring that they would receive at least the liquidation value.
- Management and Implementation: The Plans included provisions for the management of the corporate debtors post-approval and detailed steps for the implementation and supervision of the Resolution Plans.
- Legal Compliance: The Plans did not contravene any provisions of the law.

3. Evaluation of the Commercial Wisdom of the CoC:
The Tribunal acknowledged the commercial wisdom of the CoC, which approved the Resolution Plans by a margin of 73.88%, more than the statutory minimum of 66%. The CoC's decision was based on the feasibility and viability of the Plans, considering the interconnected nature of the businesses and the potential for asset monetization. The Tribunal referred to the Supreme Court judgments in K. Sashidhar v. Indian Overseas Bank and Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, which emphasized the non-justiciability of the CoC’s commercial decisions.

4. Reliefs, Concessions, and Dispensations Sought by the Resolution Applicant:
The Resolution Applicant sought various reliefs, including exemptions from certain legal compliances, waivers of penalties, and continuation of business permits. The Tribunal granted several of these requests, particularly those related to tax benefits, stamp duty exemptions, and the continuation of business permits. However, it denied blanket approvals for waivers of non-compliances and emphasized the need for the Resolution Applicant to comply with legal requirements post-approval.

Conclusion:
The Tribunal approved the Resolution Plans with specific modifications, emphasizing the importance of compliance with legal requirements and the commercial wisdom of the CoC. The approval was binding on all stakeholders, and the moratorium imposed under section 14 of the IBC ceased to have effect from the date of the order. The RP was directed to forward all records to the Insolvency and Bankruptcy Board of India (IBBI) and file a copy of the order with the Registrar of Companies, Maharashtra, Mumbai.