2023 (7) TMI 1375 - AT - Insolvency and Bankruptcy

Approval of the Resolution Plan - Adjudicating Authority in the impugned order has refused to approve the plan on the ground that it is in violation of Section 30(2)(e) and (f) of the I B Code - HELD THAT - From the facts brought on the record, it is clear that before the Resolution Professional claims were received from two Operational Creditors i.e. State Tax, Government of Gujrat and Central Excise, Government of India. There were statutory dues of also Gujarat Industrial Development Corporation and Surat Municipal Corporation. Claims of the statutory dues were reflected in the Information Memorandum. Under the Resolution Plan payment to Gujarat Industrial Development Corporation and Surat Municipal Corporation to keep the Corporate Debtor as a going concern. There can be no dispute to the law as laid down by the Hon ble Supreme Court in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS 2019 (11) TMI 731 - SUPREME COURT where it was held that there can be differential payment in payment of debts of Financial Creditors and Operational Creditors, however, there can be no difference in interse payment within a class of creditors. Present is a case where admittedly the claims of two Operational Creditors - State Tax, Government of Gujrat and Central Excise, Government of India were filed as has been admitted by the learned counsel for the Resolution Professional. It was open for the Resolution Applicant not to allocate any amount to any of the Operational Creditor since under Section 53 no entitlement was there in accordance with the total amount available for distribution. However, when the Successful Resolution Applicant was making payment to other two Operation Creditors, there cannot be any discrimination between payment of one class of Creditors. The ends of justice be served in disposing of this appeal in directing that the amount of Rs.32,78,102/- be distributed to all the four Operational Creditors so as to save the plan from being invalidated - the Adjudicating Authority having found that there is discrimination in payment of Operational Creditors could have directed for compliance of provision of the Code by distribution of Rs.32,78,102/- without affecting the other terms and conditions of the plan. By this modification the plan shall be able to sail and implemented, which is approved by CoC with 99.84% vote share. The plan need to be implemented with modification. The application filed by the Resolution Professional being is allowed subject to modification that amount of Rs.32,78,102/- shall be distributed on prorata basis between all Operational Creditors.

Summary

Issues involved:
The judgment deals with the rejection of a Resolution Plan by the Adjudicating Authority under the I&B Code, specifically on grounds of violation of Section 30(2)(e) and (f) of the Code.

Operational Creditor's Allocation:
The Appellant challenged the rejection of the Resolution Plan based on the Operational Creditor not being allocated any amount, arguing that the creditors did not object or file appeals. Payments made to certain entities to keep the Corporate Debtor operational were defended as necessary and not in violation of the law. The Financial Creditor's admitted claims were compared to the allocated amount, highlighting the lack of entitlement for other creditors under Section 53 of the Code.

Resolution Professional's Support:
The Resolution Professional supported the Appellant's position, emphasizing that payments made were essential for the Corporate Debtor's operation and in line with the Section 53 waterfall mechanism. The Resolution Professional's application for plan approval was deemed appropriate.

Dissenting Financial Creditor's Opposition:
A Dissenting Financial Creditor opposed the Appellant and Resolution Professional's stance, arguing against discrimination in payment to Operational Creditors and citing lack of notice for a CoC meeting as a reason for rejecting the plan.

Judgment Details:
The Tribunal considered the submissions and facts presented, noting the claims of Operational Creditors and the necessity of payments to certain entities for the Corporate Debtor's operation. Referring to legal precedent, the Tribunal highlighted the need for fair treatment within classes of creditors.

Decision and Modification:
The Tribunal modified the Adjudicating Authority's order, directing the distribution of a specific amount to all Operational Creditors to rectify discrimination in payment. The plan was approved with this modification to ensure implementation without affecting other terms. The Tribunal also addressed the issue of notice for the CoC meeting, finding no fault in the proceedings.

Conclusion:
The Resolution Plan was approved with the modification of distributing a specified amount among Operational Creditors to uphold fairness and compliance with the I&B Code. The Tribunal's decision aimed to serve the ends of justice and ensure the plan's successful implementation as approved by the CoC.