2021 (10) TMI 1431 - AT - Insolvency and Bankruptcy

Approval of Resolution Plan - pivotal stand of the Appellant is that if the Appellant s interest is brushed aside in the Resolution Plan, it will affect the interests of Operational Creditors - Section 60(5) of IBC - HELD THAT - Although on behalf of the Appellant a plea is raised that the Appellant was discriminated as an Operational creditor and that the Equality Concept was not adhered to by the Adjudicating Authority while approving the Resolution Plan (especially in the teeth of the Resolution Plan 100% payment to the Operational Creditors with claim upto Rs. 3 Lakhs were admitted), this Tribunal, is of the considered opinion that the Operational Creditors were paid as per Section 30(2) (b) of the I B Code, 2016, and coupled with Regulation 38 of the CIRP Regulations the Operational Creditors are entitled to receive only such money that are payable to them as per Section 53 of Code. In reality, there is no embargo for the classification of Operational creditor(s) into separate/different classes for deciding the way in which the money is to be distributed to them by the Committee of Creditors because of the fact, undoubtedly, they do have the subjective final discretion of Collective Commercial Wisdom in relation to (1) The amount to be paid (2) The quantum of money to be paid, to a certain category or the incidental category of creditors, of course, nicely balancing the interests of the Stakeholders and the Operational Creditors, as the case may be. Suffice it for this Tribunal to pertinently make a significant mention that it cannot be lost sight of that the Appellant s claim is not relatable to the supply of goods or services so as to keep the Corporate Debtor as a Going Concern. It is to be remembered that the Appellant had commenced Arbitration proceedings in regard to its claim emanating from the Gas Sale Agreement. In fact, the Appellant s claim pertains to supposed obligation to pay for goods, even where, these were not made use of as take or pay obligation. The impugned order does not suffer from any material irregularity or patent illegality in the eye of Law - Resultantly the instant Appeal sans merits - Appeal dismissed.

Summary

Issues Involved:
1. Approval of the Resolution Plan by the Committee of Creditors (CoC).
2. Discrimination against Operational Creditors in the Resolution Plan.
3. Compliance of the Resolution Plan with the Insolvency and Bankruptcy Code (IBC) and related regulations.
4. Validity of the claims made by the Appellant under the Gas Sale Agreement.
5. Jurisdiction and authority of the Adjudicating Authority and Appellate Tribunal in evaluating the Resolution Plan.

Detailed Analysis:

1. Approval of the Resolution Plan by the Committee of Creditors (CoC):
The CoC approved the Resolution Plan submitted by JM Financial Reconstruction Company Limited and Reliance Industries Limited on 20.06.2018 with a 72.192% majority. The plan was subsequently filed for approval under Section 30(6) read with Section 31(1) of the IBC. The Adjudicating Authority observed that the Resolution Plan complied with the requirements of Section 30(2) of the Code and Regulation 38 of the CIRP Regulations. The plan included a detailed financial outlay and distribution mechanism, prioritizing insolvency resolution process costs, workmen dues, and financial creditors.

2. Discrimination against Operational Creditors in the Resolution Plan:
The Appellant argued that the Resolution Plan discriminated against operational creditors by providing 100% payment to those with claims under Rs. 3 lakhs while offering 'NIL' to those with claims over Rs. 3 lakhs. The Adjudicating Authority referred to the Supreme Court's judgment in Swiss Ribbons Pvt. Ltd. v. Union of India, which distinguished between financial and operational creditors. The plan was deemed non-discriminatory as it adhered to Section 30(2)(b) of the IBC, which mandates that operational creditors receive at least the liquidation value. In this case, the liquidation value for operational creditors was 'NIL'.

3. Compliance of the Resolution Plan with the Insolvency and Bankruptcy Code (IBC) and related regulations:
The Resolution Professional confirmed that the plan met the requirements of Section 30(2) and Regulation 38. The Adjudicating Authority emphasized that the plan should not contravene any existing laws and must be implemented in a manner specified by the Code. The plan was approved, subject to certain observations regarding legal proceedings and reliefs sought by the Resolution Applicants, which were to be addressed by competent authorities.

4. Validity of the claims made by the Appellant under the Gas Sale Agreement:
The Appellant's claim under the Gas Sale Agreement was categorized as an operational debt. The Resolution Professional rejected the claim, stating it did not pertain to goods or services used for production. The Adjudicating Authority upheld this view, noting that the claim was related to a 'take or pay' obligation, which did not qualify as an operational debt under the IBC.

5. Jurisdiction and authority of the Adjudicating Authority and Appellate Tribunal in evaluating the Resolution Plan:
The Adjudicating Authority's role is to ensure compliance with the Code and regulations, not to interfere with the commercial decisions of the CoC. The Supreme Court in K. Sashidhar v. Indian Overseas Bank emphasized that the Adjudicating Authority cannot question the CoC’s commercial wisdom. The Tribunal reiterated this principle, stating that the Adjudicating Authority's jurisdiction is limited to verifying compliance with Section 30(2) of the IBC.

Conclusion:
The appeal was dismissed, with the Tribunal affirming that the Resolution Plan complied with the IBC and related regulations. The Appellant's claims were not upheld, as they did not qualify as operational debts under the Code. The Tribunal emphasized the limited jurisdiction of the Adjudicating Authority in commercial decisions made by the CoC.