2019 (3) TMI 1287 - AT - Insolvency and Bankruptcy

Approval of resolution plan - proceeding for liquidation of the company after non-compliance of approved resolution plan - submission made on behalf of the Liberty House Group that the effective date of plan is date of approval by CCI - Liberty House Group submitted that the Resolution Plan not only contemplated corresponding obligations of the parties who were required to take necessary steps for implementation of the Resolution Plan , it also contemplated certain material assumptions on the basis of which the Appellant prepared and structured the Resolution Plan - HELD THAT - We find that the submissions as made on behalf of the Appellant- Liberty House Group is an afterthought as the Appellant being Resolution Applicant was knowing that the Resolution Plan is to fulfil all the requirements in terms of Section 30 (2) of the I&B Code . Section 30 (2) (f) mandates that the Resolution Plan should not be against any of the provisions of the existing law. Whether the Resolution Plan is against Section 6(1) of the Competition Act, 2002 can be decided only by the CCI . Pursuant to the Resolution Plan as the Liberty House Group will acquire Adhunik Metalliks Ltd. ( Corporate Debtor ) being Successful Resolution Applicant is required to intimate the CCI in terms of Section 6(2) of the Competition Act, 2002. Therefore, the submission made on behalf of the Liberty House Group that the effective date of plan is date of approval by CCI cannot be accepted. The prayer is rejected. Case of MSTC Limited - Resolution Professional disputed the claim and taken plea that MSTC Limited is a facilitator and not a vendor or owner of raw materials, MSTC Limited procure such materials from different vendors and supplies to the buyers - According to Appellant MSTC Limited , whatever payment made by the Resolution Professional has been appropriated towards the old dues - HELD THAT - Adjudicating Authority rightly held that Section 14 of the I&B Code will override any other provisions contrary to the same. Any amount due to the Operational Creditor prior to the date of Corporate Insolvency Resolution Process (Admission) cannot be appropriated during the moratorium period. In view of the aforesaid findings, we hold that no case has been made out by the MSTC Limited to treat any amount as a Resolution Cost . Having rejected the prayer, as made by both the Appellants, to give one opportunity for the purpose of compliance of this order and implementation of the plan, we allow the Appellant- Liberty House Group another 30 days to make upfront payment in terms of the Resolution Plan . On failure, it will be open to the Adjudicating Authority, Kolkata Bench to pass appropriate order in accordance with law.

Summary

Issues:
1. Approval of the Resolution Plan under the Insolvency and Bankruptcy Code, 2016.
2. Rejection of additional expenses claim by an Operational Creditor.
3. Dispute regarding upfront payment and implementation of the Resolution Plan.
4. Interpretation of clauses in the Resolution Plan.
5. Assessment of CCI approval and its impact on the effective date of the Resolution Plan.
6. Appropriation of dues to Operational Creditors during the moratorium period.

Analysis:
1. The National Company Law Tribunal approved the Resolution Plan submitted by Liberty House Group Pte. Ltd. for M/s. Adhunik Metalliks Ltd., as approved by the Committee of Creditors with 99.94% voting shares.
2. The claim of MSTC Limited to treat additional expenses as Resolution Cost was rejected by the Adjudicating Authority.
3. Liberty House Group failed to make upfront payment within the specified timeline, leading to disputes and applications before the Adjudicating Authority.
4. Liberty House Group argued that certain clauses in the Resolution Plan dictated the obligations and assumptions, while MSTC Limited claimed outstanding dues not to be Resolution Costs.
5. The issue of CCI approval was raised, with Liberty House Group seeking an extension for payment based on the approval timeline, which was rejected by the Tribunal.
6. The Tribunal held that dues to Operational Creditors prior to the Insolvency Commencement Date cannot be appropriated during the moratorium period, dismissing the claim by MSTC Limited.

In conclusion, the Tribunal disposed of the appeals, allowing Liberty House Group another 30 days for upfront payment as per the Resolution Plan, failing which appropriate legal action could be taken by the Adjudicating Authority.