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2019 (7) TMI 510 - AT - Insolvency and BankruptcyValidity of Resolution plan - HELD THAT - No ground is made out to entertain the appeal preferred by Appellant- Mr. Prashant Ruia or by the Intervenor- Essar Steel Asia Holdings Limited - shareholder of the Corporate Debtor . An issue which has been settled by the Hon ble Supreme Court i.e., eligibility of ArcelorMittal India Pvt. Ltd. as a Resolution Applicant for Essar Steel India Limited , cannot be re-agitated again and again. Any such attempt is clearly barred by the principles of res judicata - Therefore, the Application preferred by the Appellant- Mr. Prashant Ruia and Intervenor- Essar Steel Asia Holdings Limited deserves to be rejected. Whether the Committee of Creditors can delegate its power to a Sub Committee or Core Committee for negotiation with the Resolution Applicant for revision of plan? - whether the Sub Committee or the Committee of Creditors are empowered to distribute the amount amongst the Financial Creditors and the Operational Creditors and other Creditors? - HELD THAT - A Sub-Committee or Core Committee is unknown and against the provisions of the I B Code . There is no provision under I B Code which permits constitution of a Core Committee or Sub-Committee nor the I B Code or Regulations empowers the Committee of Creditors to delegate the duties of the Committee of Creditors to such Core Committee / Sub- Committee . From sub-clause (b) of sub-section (2) of Section 30, it is clear that the Resolution Professional is required to notice whether the Resolution Plan provides for the payment of the debts of the Operational Creditors in such manner as may be specified by the Board. The said provision makes it clear that the Resolution Applicant in its Resolution Plan must provide the amount it proposes to pay one or other Creditors, including the Operational Creditors and the Financial Creditors - Sub-section (3) of Section 30 suggests that the Resolution Professional is required to present before the Committee of Creditors , the Resolution Plan which confirms the conditions referred to in sub-section. Sub-section (4) of Section 30 provides that the Resolution Plan is required to be approved by a vote of not less than 66% of voting share of the Financial Creditors , after considering its feasibility and viability and such other requirements as may be specified by the Board . Thereby, all members of the Committee of Creditors who are present are required to go through the Resolution Plan to find out whether it is in accordance with sub-section (2) of Section 30; and whether it s feasible and viable and meets all the requirements as specified by the Board as also whether the Resolution Applicant is ineligible in terms of Section 29A of the I B Code or not. From Regulation 38, particularly clause (1A), it is clear that Resolution Plan must include a statement as to how it has dealt with the interests of all stakeholders, including Financial Creditors and the Operational Creditors , of the Corporate Debtor - the distribution of amount to the Operational Creditors , Financial Creditors and other stakeholders are to be made by the Resolution Applicant and required to be reflected in the Resolution Plan . The Committee of Creditors has no role to play in the matter of distribution of amount amongst the Creditors including the Financial Creditors or the Operational Creditors . The Committee of Creditors is only required to notice the viability, feasibility of the Resolution Plan , apart from other requirements as specified by the Board and ineligibility of the Resolution Applicant in terms of Section 29A. Section 53 cannot be made applicable for distribution of amount amongst the stakeholders, as proposed by the Resolution Applicant in its Resolution Plan . The Financial Creditors cannot be discriminated on the ground of Secured or Unsecured Financial Creditors for the purpose of distribution of proposed amount amongst stakeholders in the Resolution Plan by the Resolution Applicant . Where the Successful Resolution Applicant does not pay the total dues to the Creditors such as the Financial Creditors or the Operational Creditors but pays lesser amount than the claim, then in such case, the profit should be distributed amongst all the Creditors including the Financial Creditors and the Operational Creditors - after the distribution of the amount of ₹ 42,000 Crores in a manner as shown in the preceding paragraphs, if any amount is found to have been generated as profit during the Corporate Insolvency Resolution Process after due verification by the Auditors, it should be distributed amongst all the Financial Creditors and the Operational Creditors on pro-rata basis of their claims subject to the fact that it should not exceed the admitted claim.
Issues Involved:
1. Eligibility of ArcelorMittal India Pvt. Ltd. as a Resolution Applicant. 2. Distribution of assets among Financial Creditors and Operational Creditors. 3. Role and authority of the Committee of Creditors (CoC) in the distribution of assets. 4. Profit generated during the Corporate Insolvency Resolution Process (CIRP). 5. Disputed claims and remedies. Detailed Analysis: 1. Eligibility of ArcelorMittal India Pvt. Ltd. as a Resolution Applicant: The promoter of Essar Steel India Limited challenged the eligibility of ArcelorMittal India Pvt. Ltd. under Section 29A of the Insolvency and Bankruptcy Code, 2016 (I&B Code). The contention was that ArcelorMittal India Pvt. Ltd. was ineligible due to its association with certain companies. However, the Appellate Tribunal found that the issue of eligibility had already been settled by the Hon’ble Supreme Court and could not be re-agitated. The Tribunal held that any attempt to reopen the issue would amount to a review or reconsideration of the Supreme Court's order, which is barred by the principles of res judicata. 2. Distribution of Assets Among Financial Creditors and Operational Creditors: The Tribunal found that the distribution proposed by the Committee of Creditors (CoC) was discriminatory. The Financial Creditors were categorized into four groups: Secured Financial Creditors with charge on project assets, Secured Financial Creditors without charge on project assets, Unsecured Financial Creditors with claims less than ?10,00,000, and Unsecured Financial Creditors with claims equal to or above ?10,00,000. The Operational Creditors were also categorized, and those with claims less than ?1 crore were paid 100%, while others were proposed to receive nothing. The Tribunal held that the CoC has no authority to decide the manner of distribution among creditors. The distribution must be proposed by the Resolution Applicant in the Resolution Plan and should be non-discriminatory. The Tribunal modified the distribution plan to ensure equitable treatment of similarly situated creditors. 3. Role and Authority of the Committee of Creditors (CoC): The Tribunal emphasized that the CoC's role is limited to assessing the viability and feasibility of the Resolution Plan and ensuring compliance with the I&B Code and regulations. The CoC cannot delegate its authority to a Sub-Committee or Core Committee for negotiating with the Resolution Applicant. Any such delegation and the resulting decisions are against the provisions of the I&B Code. 4. Profit Generated During the Corporate Insolvency Resolution Process (CIRP): The Tribunal addressed the issue of profit generated during the CIRP, which was approximately ?3,495 crores. It held that this profit should not be given to the Successful Resolution Applicant, as they had not invested any money during the CIRP. Instead, the profit should be distributed among all creditors, both Financial and Operational, on a pro-rata basis of their claims, subject to the admitted claim amounts. 5. Disputed Claims and Remedies: The Tribunal clarified that disputed claims unresolved during the CIRP could be pursued under Section 60(6) of the I&B Code after the moratorium period ends. This provision allows creditors to file suits or applications against the Corporate Debtor for disputed claims. The Tribunal also noted that the Resolution Professional has no jurisdiction to decide the claims of creditors; their role is limited to collating claims. Conclusion: The Tribunal modified the Resolution Plan to ensure equitable treatment of all creditors, emphasizing that the distribution of assets must be proposed by the Resolution Applicant and not decided by the CoC. It also directed that profits generated during the CIRP be distributed among creditors and clarified the remedies available for disputed claims. The judgment highlights the importance of non-discriminatory treatment of creditors and the limited role of the CoC in the distribution of assets.
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