2019 (8) TMI 1785 - Tri - Insolvency and Bankruptcy

Seeking approval of Resolution Plan - One member of CoC, Canara Bank, tendered dissenting vote for approval of the plan on the ground that distribution of resolution funds is discriminatory as against them - whether the decision of CoC can be questioned by Adjudicating Authority (NCLT)? - HELD THAT - In case of K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK OTHERS 2019 (2) TMI 1043 - SUPREME COURT the Hon ble Apex Court hold that, the legislature has not endowed on the Adjudicating Authority (NCLT) with the jurisdiction or authority to analyse or evaluate commercial decision of CoC which lies to enquire into the justness of the rejection of resolution plan by descending financial creditors. This Authority cannot sit in appeal against the financial decisions that are taken by CoC, In our considered opinion, it is within commercial wisdom of the CoC as to what Financial Creditors will get what share of the resolution funds. The objection of Canara Bank is rejected and it is proceeded to check whether the resolution plan submitted for our approval complies the approval under Section 30(2) of Insolvency and Bankrutpcy Code, 2016. It is seen that there is no Operational Creditor, employees or the workmen and hence no provision made towards their payment - Para 6 of mandatory contents of the plan provides mechanism regarding management in control of affairs of the Corporate Debtor. It is also provided therein the mechanism for effective supervision and implementation of the plan. Provision is also made to pay resolution costs. The resolution fund appears to be equally distributed among all the Financial Creditors giving them equal share i.e. 23.43%. RP has certified the plan and compliance Certificate is produced as Annexure-F. The affidavit of resolution applicant is also produced stating that they are not disqualified under Section 25A of Insolvency and Bankruptcy Code, 2016 - Perusal of plan shows that it does not contravene any provision of law time being in force and it complies all requirement of Insolvency and Bankruptcy Board of India. The Resolution plan is approved - application allowed.

Summary

Issues:
1. Distribution of resolution funds among financial creditors.
2. Compliance of the resolution plan with Section 30(2) of the Insolvency and Bankruptcy Code, 2016.

Analysis:

Issue 1: Distribution of Resolution Funds Among Financial Creditors
The case involved a Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. The Committee of Creditors (CoC) considered various resolution plans and approved the plan submitted by M/s Jagannath Financial Advisory Private Limited. However, Canara Bank, a financial creditor, raised objections regarding the distribution of resolution funds. Canara Bank argued that they held a significant portion of the Corporate Debtor's assets as security and should receive a proportionate share of the resolution funds. Despite Canara Bank's dissent, the CoC approved the resolution plan with a majority vote. The Adjudicating Authority held that it cannot interfere with the commercial decisions made by the CoC regarding the distribution of funds among financial creditors. The Authority cited legal precedents to support its decision, emphasizing that the CoC's decisions are within their commercial wisdom and not subject to review by the Authority.

Issue 2: Compliance of the Resolution Plan with Section 30(2) of the Insolvency and Bankruptcy Code, 2016
The Authority examined the resolution plan submitted for approval to ensure compliance with Section 30(2) of the Insolvency and Bankruptcy Code, 2016. The plan included provisions for the payment of insolvency resolution process costs, debts of financial creditors, and mechanisms for managing the affairs of the Corporate Debtor post-approval. The plan did not contravene any existing laws and met the requirements set by the Insolvency and Bankruptcy Board of India (IBBI). The plan also outlined the distribution of resolution funds among financial creditors, certifying compliance with the necessary regulations. After thorough review, the Authority accepted and approved the resolution plan of M/s Jagannath Financial Advisory Private Limited, noting that it met all legal requirements and was in line with the IBBI guidelines.

In conclusion, the Adjudicating Authority rejected Canara Bank's objections regarding the distribution of resolution funds and approved the resolution plan submitted by M/s Jagannath Financial Advisory Private Limited. The decision highlighted the importance of CoC's commercial decisions in such matters and emphasized the need for compliance with legal provisions outlined in the Insolvency and Bankruptcy Code, 2016.