2021 (7) TMI 1292 - AT - Insolvency and Bankruptcy

Acting as per Resolution plan or not - Resolution Plan provided that NCDs would be issued - whether instead of paying cash NCDs could be issued? - HELD THAT - Considering the exceptional facts of present matter the Impugned Order is stayed till the next date and status quo ante as before passing of the Impugned Order is directed to be maintained. Resolution Professional will continue to manage the Corporate Debtors as per provisions of IBC till the next date. Respondents in both these Appeals to file Reply-Affidavits within two weeks. Rejoinder if any may be filed within a week thereafter. Parties to file brief Written-Submissions not more than three pages and Copies of Judgments which they want to refer or rely on within three weeks - List both these Appeals For Admission (After Notice) hearing on 07th September 2021.

Summary

Issues:
Challenging the approval of a resolution plan by the Adjudicating Authority, non-compliance with Section 30(2)(b) of IBC, breach of confidentiality clause, payment modalities, adequacy of payments to creditors, concerns regarding Operational Creditors, valuation of assets, adherence to confidentiality clauses, representation of CoC members, and the stay on the Impugned Order.

Analysis:
The Appellate Tribunal heard two Appeals challenging the Impugned Order approving a resolution plan for 13 Corporate Debtors of Videocon Group undergoing a consolidated CIRP. The dissenting Financial Creditor argued non-compliance with Section 30(2)(b) of IBC, highlighting discrepancies in proposed payments compared to the Liquidation Value. The Counsel contended that the Resolution Plan's payment structure, involving NCDs, was altered without CoC approval, raising concerns about the breach of confidentiality clauses regarding the Liquidation Value.

Furthermore, it was argued that the Resolution Plan offered a significant haircut to creditors, with minimal upfront payments, especially affecting Financial Creditors. The Adjudicating Authority's observations noted the substantial haircuts proposed for creditors, particularly Operational Creditors, and urged an increase in payouts to prevent insolvency among MSMEs. The Authority also raised concerns about the adequacy of payments and the possession transfer of Corporate Debtors to the Successful Resolution Applicant.

Additionally, the Adjudicating Authority emphasized the valuation of assets, confidentiality clauses, and the representation of CoC members in the resolution process. It questioned the adequacy of payments, the valuation process, and the representation of CoC members, suggesting a thorough examination by IBBI to ensure compliance with confidentiality clauses and fair representation.

In response to the concerns raised, the Appellate Tribunal stayed the Impugned Order, directing the maintenance of the status quo ante. It required the Respondents to file Reply-Affidavits, with subsequent filings of Rejoinders and Written-Submissions, and set a hearing date for the Admission of both Appeals. The Tribunal aimed to address the raised issues comprehensively, considering the exceptional circumstances of the case and the interests of all stakeholders involved in the resolution process.