2021 (3) TMI 1366 - Tri - Insolvency and Bankruptcy

Seeking approval of the resolution plan of Adjudicating Authority - Section 31 of the IBC - HELD THAT - With regard to the objection raised by the operational Debtor, this Adjudicating Authority has observed that the plan has dealt with the interest of the stakeholders as per Section 53 of IBC, 2016. The amount available to the Operational Creditor as per Section 53 of the Code, is considered as nil in view of large due to Secured Financial Creditors. Inspite of that, some amount is provided for operational creditors, workman and employees. It is proposed in the plan that the residual amount due to the Operational Creditors and employee, if any, (After allocation of Resolution Plan fund to Financial Creditor) shall be given priority in payment over Financial Creditors and the amount proposed for Operational Creditor and employees is as per Financial Plan and if there is shortfall in amount available to operational Creditor as per the Resolution Plan when compared to what is available to the Operational Creditor considering the liquidation value, in that case shortfall amount will be paid to them by reducing amount available to the Financial Creditor. In the case in hand, this Adjudicating Authority is of the view that as the amount available to the Operational Creditor as per Section 53 of the Code, is considered as nil but Resolution Plan provided for payment @ 18.84% of claim admitted amount of the operational creditors which is more than the liquidation value and all the operational creditors has been treated equally thus the prayer of the operational creditor to modify the Resolution Plan to the extent of claim of RPPL is not sustainable. Thus it is a well settled proposition of law that the commercial wisdom of COC are not open to judicial review thus the Adjudicating Authority cannot enquire into it. It is however reiterated that the Resolution plan in question meets the requirement specified in Sec 30(2) of the Code and the reasoned commercial decision of COC is neither discriminatory nor perverse - this bench is satisfied that the requirements as per the Code and regulations have been complied with. Moreover, the Resolution Plan has been approved by 100% voting share of the members of COC and has been submitted in compliance of Sec 30 of the Code for approval. In view of the discussions and as no infirmity have been brought out upon screening of the Resolution plan, this Adjudicating Authority hereby approve the Resolution plan under sub- section (1) of Section 31 of the Code. The Resolution Applicant is allowed to remove and/or substitute the Monitoring Agency with prior approval of this Adjudicating Authority if the Monitoring Agency is unable to satisfactorily perform its responsibilities or breaches terms of its appointment - the Resolution Plan submitted by M/s NCIRCLE Exim LLP is found in conformity of Section 30 (2) of the Code and the same is approved - Application allowed.

Summary

Issues Involved:
1. Approval of the Resolution Plan under Section 30(6) and 31(1) of the Insolvency and Bankruptcy Code (IBC), 2016.
2. Compliance with the requirements of the IBC and CIRP Regulations.
3. Objections raised by the Operational Creditor regarding the Resolution Plan.
4. Commercial wisdom of the Committee of Creditors (CoC) and judicial review.

Detailed Analysis:

1. Approval of the Resolution Plan:
The application was filed under Section 30(6) and 31(1) of the IBC, 2016, seeking approval of the resolution plan submitted by "NCIRCLE EXIM LLP." The Corporate Insolvency Resolution Process (CIRP) of the corporate debtor was initiated by the Tribunal on 29.05.2018. Despite efforts, no resolution plan was initially submitted, leading to a liquidation resolution by the CoC. However, the Tribunal granted another opportunity to the suspended management. Eventually, the CoC approved the resolution plan of NCIRCLE EXIM LLP with 100% voting rights on 27th October 2020.

2. Compliance with IBC and CIRP Regulations:
The Resolution Professional (RP) confirmed that the resolution plan complied with Section 30(2) of the IBC and Regulation 38 of the CIRP Regulations. The plan was approved by the CoC by 100% voting share. The RP also submitted a compliance certificate in Form-H, certifying the eligibility of the resolution applicant under Section 29A of the Code and the feasibility and viability of the resolution plan. The resolution plan met all mandatory contents as specified in Regulation 38 and 39 of the CIRP Regulations.

3. Objections by the Operational Creditor:
The Operational Creditor raised objections, stating that the CoC approved the plan without considering the legality and providing a categorical item-wise breakup of CIRP costs amounting to Rs. 8 crores. They also argued that the plan did not align with a prior settlement agreement and failed to consider the forensic auditor's report. The Tribunal observed that the resolution plan provided for payment of 18.84% of the admitted claims of operational creditors, which was more than the liquidation value. The Tribunal held that the plan had dealt with the interests of all stakeholders as per Section 53 of the IBC, and the operational creditors were treated equitably.

4. Commercial Wisdom of the CoC and Judicial Review:
The Tribunal emphasized the principle that the commercial wisdom of the CoC is not subject to judicial review. Citing the Supreme Court's judgment in "K. Sashidhar vs. Indian Overseas Bank," the Tribunal reiterated that the decision of the CoC cannot be interfered with if it meets the requirements of Section 30(2) of the IBC. The Tribunal found that the resolution plan was neither discriminatory nor perverse and met the requirements of the Code and regulations.

Conclusion:
The Tribunal approved the resolution plan submitted by "NCIRCLE EXIM LLP," finding it in conformity with Section 30(2) of the IBC. The plan was binding on all stakeholders, and the moratorium order ceased to have effect. The RP was directed to forward all records to the Insolvency and Bankruptcy Board of India (IBBI). All pending applications were disposed of as infructuous.