2020 (10) TMI 682 - Tri - Insolvency and Bankruptcy

Approval of the Resolution Plan - Section 31 of the Code read with Regulation 39 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - HELD THAT - Adjudicating Authority is not expected to substitute its view with the commercial wisdom of the CoC nor should it deal with the technical complexity and merits of Resolution Plan, unless it is found contrary to express provision of law and goes against the public interest. The object of the Code is to promote resolution and every effort must be made to try and see that resolution is made possible. Accepting the Resolution Plan is advantageous to all the stake holders and amounts to maximisation of the assets of the Corporate Debtor and promotes entrepreneurship and to ensure that the Company continue to function as a going concern. The right of rejection or approval of a plan is with the CoC. In a particular case, what should be the percentage of claim amount payable to one or other 'Financial Creditor' or 'Operational Creditor' or 'Secured Creditor' or 'Unsecured Creditor' can be decided by the Committee of Creditors based on facts and circumstances of each case. What can be screened by this Bench is that whether the plan approved by Committee of Creditors meets the requirements as referred to in sub-section (2) of Section 30 of the Code. In the present case the resolution plan has been approved with 66.13 % voting share well above the statutory requirement of 66 % in terms of Section 30(4) of the Code and has the requisite statutory voting share. Besides the decision of Committee of Creditors is a reasoned and self-speaking one as required under proviso to Regulation 39(3) of the CIRP Regulations, 2016 - It is well settled proposition of law that commercial and business decisions of Committee of Creditors are not open to judicial review. Adjudicating Authority cannot enquire into the commercial wisdom of Committee of Creditors. The ground for rejection is limited to the matter specified under Section 30(2). It is however reiterated that the resolution plan in question meets the requirements specified in Section 30(2) of the Code and the commercial majority decision of the Committee of Creditors appears to be neither discriminatory nor perverse. Insolvency and Bankruptcy Code, 2016 is a complete Code in itself and is exhaustive of the matters dealt with therein. The Code is a comprehensive legislation including both the procedural as well as substantive law. In this regard Hon'ble Supreme Court in the case of M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK ANR. 2017 (9) TMI 58 - SUPREME COURT has observed that it is an exhaustive code on the subject matter of insolvency in relation to corporate entities and others. It is also true that IBC, 2016 is a single unified Umbrella Code, covering the entire gamut of the law relating to insolvency resolution of corporate persons and others in a time bound manner. - In the present case with the admission order, CIRP has commenced in respect of the corporate debtor and Moratorium as provided under Section 14 of the Code has been declared prohibiting the institution of suits, or continuation of pending suits or proceedings against the corporate debtor, including execution of any judgment, decree, or order in any court of law, Tribunal, arbitration panel, or any other authority. The spirit of the Code encourages resolution. Resolution is the rule and the object of the Code is to promote resolution. Every effort must be made to try and see that resolution is made possible. Commercial collective decision of Committee of Creditors with requisite majority has to be respected. The commercial or business decisions of the financial creditors are not open to any judicial review by the adjudicating authority or the appellate authority - The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of the Committee of Creditors. Adjudicating Authority has no jurisdiction to question the actions of the Committee of Creditors. Tribunal cannot sit in appeal over the expert business decision of the 'Committee of Creditors'. After a resolution plan is approved by the requisite majority of the Committee of Creditors, the aforesaid plan must then pass muster of the Adjudicating Authority under Section 31(1) of the Code. The Adjudicating Authority's jurisdiction is circumscribed by Section 30(2) of the Code. The requirements as per the Code and regulations have been complied with. Moreover, the Resolution Plan has been approved by 66.13 % voting share of the members of Committee of Creditors and has been submitted in compliance of Section 30 of the Code for approval - Resolution plan is approved.

Summary

Issues Involved:
1. Approval of the Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code, 2016.
2. Compliance with Section 30(2) of the Insolvency and Bankruptcy Code, 2016.
3. Objections raised by the dissenting member of the Committee of Creditors (APSFC).
4. Implementation and supervision of the Resolution Plan.
5. Performance Guarantee by the Resolution Applicant.
6. Jurisdiction and authority of the Adjudicating Authority (NCLT).

Issue-wise Detailed Analysis:

1. Approval of the Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code, 2016:
The application was filed by the Resolution Professional seeking approval of the Resolution Plan under Section 31 of the Code. The plan was submitted by M/s. Shiva Ferric Private Ltd. and approved by the Committee of Creditors (CoC) with a voting share of 66.13%, meeting the threshold requirement. The Tribunal examined the plan to ensure it met the requirements of Section 30(2) and had provisions for effective implementation.

2. Compliance with Section 30(2) of the Insolvency and Bankruptcy Code, 2016:
The Resolution Professional confirmed compliance with Section 30(2), which includes:
- Payment of insolvency resolution process costs in priority.
- Payment of debts to operational and financial creditors as specified.
- Management of the corporate debtor’s affairs post-approval.
- Implementation and supervision of the resolution plan.
- Non-contravention of any law and adherence to other requirements specified by the Board.
The Tribunal noted that the plan provided for the payment of CIRP costs, debts of operational creditors, and management of the corporate debtor. The plan did not contravene any provisions of the law.

3. Objections raised by the dissenting member of the Committee of Creditors (APSFC):
APSFC objected, claiming their secured property could not be included in the resolution plan as they had taken possession before the Code's enactment. The Tribunal noted that the Code, being a later Central Act, overrides other laws as per Section 238. The moratorium under Section 14 prohibits recovery actions against the corporate debtor’s assets. The Tribunal found that the objections could not sustain as the approved plan binds all creditors under Section 31.

4. Implementation and supervision of the Resolution Plan:
The plan provided for the management of the corporate debtor as a going concern and included provisions for a Monitoring Committee to supervise implementation. The Tribunal directed the formation of a Monitoring Committee comprising the resolution professional and two representatives of the resolution applicant, to ensure effective implementation.

5. Performance Guarantee by the Resolution Applicant:
The Resolution Applicant was directed to submit a Performance Guarantee of ?5 Crores in compliance with Regulation 36B(4A) of the CIRP Regulations within a week from the receipt of the order.

6. Jurisdiction and authority of the Adjudicating Authority (NCLT):
The Tribunal emphasized that it cannot substitute its view for the commercial wisdom of the CoC nor review the technical merits of the resolution plan unless it contravenes the law or public interest. The Tribunal’s role is to ensure the plan meets the requirements of Section 30(2). The Tribunal approved the plan, noting it maximized the assets of the corporate debtor and promoted entrepreneurship.

Conclusion:
The Tribunal approved the Resolution Plan submitted by M/s. Shiva Ferric Private Ltd., directing the submission of a Performance Guarantee and the formation of a Monitoring Committee. The moratorium ceased to have effect from the date of the order, and the Resolution Professional was to forward all records to the IBBI. The approved plan became effective from the date of the order, and the application was disposed of accordingly.