2020 (3) TMI 1055 - Tri - Insolvency and Bankruptcy

Approval of Resolution Plan - insolvency resolution of the corporate debtor as a going concern - section 30(6) read with section 31 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - On perusal of the records, it is found that the resolution plan conforms to the criteria as provided under clauses (a) to (f) in section 30(2) of the Code and the CoC approved the resolution plan by 92.44 per cent. majority of voting share. The resolution plan also conforms to such other requirements as may be specified by the Board - On perusal of the resolution plan, it is found that it meets the requirement of section 31 read with section 30(2) of the Code. Therefore, the present application I. A. No. 664 of 2019 is allowed subject to certain observations. Thus, approval of the resolution plan does not mean automatic waiver or abatement of legal proceedings, if any, which are pending by or against the company/corporate debtor as those are the subject-matter of the concerned competent authorities having their proper/own jurisdiction to pass any appropriate order as the case may be. The resolution applicant(s) on approval of the plan may approach those competent authorities/courts/legal forums/offices-Government or Semi-Government/State or Central Government, for appropriate relief(s) sought for in Clause No. (e) of Chapter IV of the resolution plan - Thus, not allowing the clause No. (e) of Chapter IV of the resolution plan, is not going to make any hindrance for proper implementation of the resolution plan as those are the subject-matter of the concerned/appropriate competent authorities. The resolution applicant(s) has/ have liberty to approach competent authorities for any concession, relief or dispensation as the case may be. The Adjudicating Authority, are of the considered opinion and also being satisfied that the resolution plan along with final addendum dated September 11, 2019 as approved by the committee of creditors (CoC) meets the requirements as referred to under section 30(2) of the Code - Application allowed.

Summary

Issues Involved:

1. Approval of the resolution plan under section 30(6) read with section 31 of the Insolvency and Bankruptcy Code, 2016.
2. Compliance of the resolution plan with mandatory requirements under the Code and CIRP Regulations.
3. Distribution of funds as per section 53 of the Code.
4. Role and decisions of the Committee of Creditors (CoC).
5. Jurisdiction and authority of the Adjudicating Authority in approving the resolution plan.
6. Legal proceedings and waivers post-approval of the resolution plan.

Issue-wise Detailed Analysis:

1. Approval of the Resolution Plan:
The resolution professional (RP) filed an application seeking approval of the resolution plan dated June 20, 2019, along with its final addendum dated September 11, 2019, submitted by Chamaria Fashions P. Ltd. The plan aimed at the insolvency resolution of M/s. V. S. Texmills P. Ltd. as a going concern. The RP rectified clerical mistakes in their petition through affidavits dated December 12, 2019, and December 31, 2019.

2. Compliance with Mandatory Requirements:
The RP submitted a detailed table showing the compliance of the resolution plan with the mandatory requirements under the Code and CIRP Regulations. The table confirmed that the resolution plan met criteria such as eligibility of the resolution applicant, payment of insolvency resolution process costs, payment of debts, management of the corporate debtor, and others as specified under sections 25(2)(h), 29A, 30(1), 30(2), 30(4), 31(1), and various regulations.

3. Distribution of Funds:
The RP provided a compliance certificate in Form H, showing the liquidation value of the corporate debtor as ?4,63,89,800. The resolution plan proposed the distribution of funds as per section 53(1) of the Code, prioritizing insolvency resolution process costs, secured creditors, and operational creditors among others. A detailed payment schedule for financial creditors was provided, outlining the principal and interest payments over specified quarters.

4. Role and Decisions of the CoC:
The CoC played a crucial role in the resolution process. The IRP constituted the CoC, which held multiple meetings to discuss and approve the resolution plan. The CoC approved the resolution plan with a majority voting share of 92.44%. The CoC's approval was based on the feasibility and viability of the plan, and the RP affirmed that the plan complied with the requirements of section 30 and regulation 38.

5. Jurisdiction and Authority of the Adjudicating Authority:
The Adjudicating Authority reviewed the resolution plan and confirmed that it conformed to the criteria under section 30(2) and section 31 of the Code. The Authority emphasized that its role was not to interfere with the commercial wisdom of the CoC, as affirmed by the Supreme Court in K. Sashidhar v. Indian Overseas Bank. The Authority approved the resolution plan subject to certain observations, particularly regarding legal proceedings and waivers.

6. Legal Proceedings and Waivers Post-Approval:
The resolution plan included a clause regarding the automatic waiver or abatement of legal proceedings, which the Adjudicating Authority did not allow. The Authority clarified that approval of the resolution plan does not mean automatic waiver of pending legal proceedings. The resolution applicant(s) must approach competent authorities for any relief sought. The approval of the resolution plan was made subject to compliance with existing laws and obtaining necessary approvals within a specified period.

Conclusion:
The Adjudicating Authority approved the resolution plan along with the final addendum dated September 11, 2019, as it met the requirements under section 30(2) and section 31 of the Code. The approval was subject to certain observations and directions, ensuring compliance with existing laws and obtaining necessary approvals from competent authorities. Any pending interlocutory applications were disposed of as infructuous.