2019 (11) TMI 903 - Tri - Insolvency and Bankruptcy

Initiation of CIRP - Approval of Resolution Plan - Section 30 (6) of Insolvency and Bankruptcy Code 2016 read with Regulation 39(4) of The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process of Corporate Persons) Regulations 2016 - whether the plan approved by CoC meets the requirements as referred to in sub-section (2) of Section 30 of the Code or not? - eligibility conditions of proposed resolution applicant are fulfilled or not? - HELD THAT - Section 31(1) (2) of the Code deals with the approval or rejection of the resolution plan by the Adjudicating Authority as approved by the CoC. Before approving the Resolution Plan the Code mandates the Adjudicating Authority to ensure that (A) the Resolution Plan meets the requirements of Section 30(2) of the Code and (B) the resolution plan has provisions for its effective implementation as laid down in proviso to Section 31(1) - In respect of compliance of Section 30(2)(a) there is provision in the resolution plan as at Clause 5.4(a) which provides for payment of CIRP costs in priority over payments to any other creditors. The clause inter alia provides that each holder of such priority claim shall be unimpaired under the Resolution Plan and would be paid CIRP Costs (estimated at INR 2.0 Crores) in full as per the prevailing Code and CIRP Regulations from the Effective Date prior to payments to all other Creditors. The Resolution Professional has confirmed in the compliance certificate given in Form H that the Resolution Plan provides for the payment of Insolvency Resolution Process costs. Section 30(2)(a) stands satisfied and it is made clear that Insolvency Resolution Process cost shall be paid in its entirety by the resolution applicant in priority to other debts of the corporate debtor. As per Section 30(2)(b) of the Code the Resolution Plan must provide for the payment of the debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under Section 53. In this connection Regulation 38(1) of CIRP Regulations provides for payment to the operational creditor in priority to the financial creditors. The requirements as per the Code and regulations have been complied with. Moreover the Resolution Plan has been approved by the requisite majority of the members of CoC and has been submitted in compliance of Section 30 of the Code for approval. Resolution Professional has confirmed that the Resolution Plan is compliant to sub-section (a) to (f) of Section 30(2) of the Code and also comply Regulation 38 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016. In absence of any discrimination or perverse decision it is beyond purview of the Adjudicating Authority to modify the Plan. As per the provisions of the Code the CoC with the requisite super majority is the competent authority to decide on the rights of various stakeholders by approving a resolution Plan. Adjudicating Authority is not expected to substitute its view with the unanimous commercial wisdom of the CoC nor should deal with technicality and merits of Resolution Plan unless it is found contrary to the express Provisions of law and goes against the public interest - Admittedly the revival of the corporate debtor company would certainly enhance the interest of all the stakeholders in view of the plan offering higher value than liquidation the maximization of assets is endeavoured to be achieved which falls in the line to achieve the object of the Code. Approval of Resolution Plan shall confer change in management and ownership of the corporate debtor and the entire control of the Corporate Debtor shall vest with the new management. The RP is directed to hand over all records assets paper proceedings and all other belongings of Corporate Debtor to the Resolution applicant within 7 days without any demur - the period spent under adjudication and it is declared that the moratorium order passed by this Bench under Section 14 of the Code shall cease to have effect from the date of this order.

Summary

Issues Involved:
1. Approval of the Resolution Plan under Section 30(6) of the Insolvency and Bankruptcy Code, 2016.
2. Compliance with the requirements of Section 30(2) of the Code.
3. Commercial wisdom of the Committee of Creditors (CoC).
4. Eligibility of the Resolution Applicant under Section 29A of the Code.
5. Binding nature of the approved Resolution Plan on stakeholders.
6. Appointment of a Monitoring Agency for the implementation of the Resolution Plan.
7. Adherence to applicable laws and obtaining necessary approvals.

Issue-wise Detailed Analysis:

1. Approval of the Resolution Plan under Section 30(6) of the Insolvency and Bankruptcy Code, 2016:
The application was filed by the Resolution Professional seeking approval of the Resolution Plan, which was duly approved by the Committee of Creditors (CoC) with a 100% majority. The Resolution Plan submitted by M/s. BCH Electric Limited was deemed commercially superior and approved by the CoC.

2. Compliance with the requirements of Section 30(2) of the Code:
The Resolution Professional verified that the Resolution Plan met all the requirements under Section 30(2) of the Code. The plan provided for the payment of insolvency resolution process costs, debts of operational creditors, management of the corporate debtor's affairs, and did not contravene any provisions of the law. The compliance certificate in Form H confirmed these details.

3. Commercial wisdom of the Committee of Creditors (CoC):
The Adjudicating Authority emphasized that it is not expected to delve into the commercial wisdom and decision of the CoC. The CoC's decision is based on the facts and circumstances of each case and should not be interfered with unless it is contrary to the law or public interest. The CoC approved the Resolution Plan with a 100% majority, indicating their unanimous commercial decision.

4. Eligibility of the Resolution Applicant under Section 29A of the Code:
The Resolution Applicant, M/s. BCH Electric Limited, submitted an affidavit confirming its eligibility under Section 29A of the Code. The Resolution Professional also certified that the applicant and related persons did not fall under any disqualification categories as per Section 29A.

5. Binding nature of the approved Resolution Plan on stakeholders:
The approved Resolution Plan is binding on the corporate debtor, its members, employees, workmen, creditors, and other stakeholders. The plan ensures the maximization of the corporate debtor's assets and promotes entrepreneurship, aligning with the objectives of the Code.

6. Appointment of a Monitoring Agency for the implementation of the Resolution Plan:
The Resolution Professional was appointed as the Monitoring Agency to supervise and ensure the effective implementation of the Resolution Plan. The Monitoring Agency is granted liberty to seek further directions from the Tribunal if necessary.

7. Adherence to applicable laws and obtaining necessary approvals:
The Resolution Applicant is required to obtain necessary approvals under any applicable laws within one year from the date of the order or as provided by law. The Resolution Plan includes provisions for compliance with all applicable laws.

Conclusion:
The Tribunal approved the Resolution Plan submitted by M/s. BCH Electric Limited, as it met all the requirements of Section 30(2) and Section 31 of the Code. The plan was found to be compliant with the Code and CIRP Regulations, and it provided for the interests of all stakeholders. The Tribunal emphasized that the commercial decisions of the CoC should not be interfered with unless they are contrary to the law or public interest. The order declared the Resolution Plan binding on all stakeholders and directed the Resolution Professional to hand over all records to the Resolution Applicant within seven days. The moratorium order ceased to have effect from the date of the order, and the approved Resolution Plan became effective immediately.