2019 (8) TMI 267 - Tri - Insolvency and Bankruptcy

Validity of Resolution Plan - initiation of Corporate Insolvency Resolution Process - Corporate Debtor - default in paying the operational debt towards professional charges - whether the plan is in conformity of provisions of section 30(2) of I B Code or any other law for the time being in force? HELD THAT - In this case, no provision of upfront payment is made towards any operational creditors' claim. There is no discrimination made in between operational creditors inter se. Hence, above order does not have binding precedent. The plan is approved by CoC by 100% votes. The CoC took commercial decisions in their wisdom, while approving the plan. Now this authority cannot sit in appeal against the CoC's decision - the objection raised by one of the operational creditors against the approval of this plan is rejected. Clause (c) and (d) of section 30(2) of I B Code requires the plan should provide mechanism of its effective implementation and mechanism for management of affairs of the corporate debtor. Part-B, sub-para (c) and (d) in the plan, it is mentioned that after approval of the plan, the resolution applicant will appoint Board of Directors to take over the affairs of the corporate debtor from the RP. The Monitoring Committee is also confirmed to oversee effective implementation of the plan - It is seen from the perual of the plan that it does not contravene any provisions of law for the time being in force. It also meets all other requirements as specified by the IBBI. The Resolution Plan which is approved by the CoC with 100% voting percentage, is hereby approved under provisions of section 31(1) of the Insolvency Bankruptcy Code, 2016 - the revival plan of the company in accordance with approved Resolution Plan shall come into force with immediate effect - moratorium order passed under Section 14 shall cease to have effect.

Issues:
1. Application under section 9 of Insolvency & Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process (CIRP) due to default in payment of operational debt.
2. Admission of corporate debtor in CIRP, appointment of Interim Resolution Professional, and issuance of moratorium.
3. Formation of Committee of Creditors (CoC) and voting percentages allotted to financial creditors.
4. Confirmation of appointment of Resolution Professional (RP) and preparation of information memorandum.
5. Extension of CIRP period, re-publication of notice for submission of resolution plan, and receipt of resolution plan from proposed applicants.
6. Approval of resolution plan by CoC and submission for approval to the Adjudicating Authority.
7. Legal analysis of the resolution plan in conformity with section 30(2) of I&B Code.
8. Rejection of objection by operational creditor regarding the plan's non-compliance with operational debt payment provision.
9. Examination of the plan's mechanism for effective implementation and management of corporate debtor's affairs.
10. Compliance with IBBI regulations, submission of required certificates, and approval of resolution plan by the Adjudicating Authority.

Issue 1: Application under section 9 of IBC for CIRP
The application was filed by an Operational Creditor against the Corporate Debtor for default in payment of operational debt, leading to the initiation of the Corporate Insolvency Resolution Process (CIRP). The Corporate Debtor was admitted into CIRP, an Interim Resolution Professional was appointed, and a moratorium was issued under section 14 of the I&B Code.

Issue 2: Formation of Committee of Creditors and Confirmation of Resolution Professional
The Interim Resolution Professional took possession of the corporate debtor's assets and management. The Committee of Creditors (CoC) was formed, consisting of financial creditors with allotted voting percentages. The first CoC meeting confirmed the appointment of the Resolution Professional and instructed to proceed with the CIRP, leading to the preparation of an information memorandum based on asset valuation reports.

Issue 3: Extension of CIRP Period and Submission of Resolution Plan
The CIRP period was extended upon CoC's request, and the deadline for submission of resolution plans was extended. Despite receiving multiple expressions of interest, only one resolution plan was submitted jointly by two entities. The plan was approved by CoC and submitted for the Adjudicating Authority's approval under section 31(a) of the I&B Code.

Issue 4: Legal Analysis of Resolution Plan
The Adjudicating Authority analyzed the resolution plan's compliance with section 30(2) of the I&B Code, focusing on provisions related to resolution process cost payment priority and operational debt payment. The plan's provisions were examined, including the mechanism for effective implementation and management of the corporate debtor's affairs.

Issue 5: Rejection of Operational Creditor's Objection
An operational creditor objected to the plan, citing the lack of provision for operational debt payment. The Adjudicating Authority rejected the objection, emphasizing that the plan did not discriminate among operational creditors and was approved by CoC unanimously.

Issue 6: Compliance with IBBI Regulations and Approval of Resolution Plan
The resolution plan was found to comply with all legal requirements, including provisions of section 30(2) of the I&B Code and IBBI regulations. The Adjudicating Authority approved the plan, making it binding on all stakeholders involved and reviving the company with immediate effect.

This detailed analysis covers the key issues addressed in the judgment, providing a comprehensive overview of the legal proceedings and decision-making process involved in the Corporate Insolvency Resolution Process.

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