2022 (1) TMI 667 - Tri - Insolvency and Bankruptcy

Seeking approval of Resolution Plan - Seeking consideration of its application on priority before approval of resolution plan - resolution professional has failed to discharge his obligation to assess the applicability of section 29A of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - For secured financial creditors, unsecured financial creditors and employees, 100 per cent. payment is given whereas to operational creditors, only 2 per cent. of the admitted amount is given. The fair value and liquidation value of the corporate debtor are ₹ 5,643.26 lakhs and ₹ 4,561.66 lakhs respectively. The amount given to the operational creditor is more than liquidation value. In form H in column No. 2 of clause 7, payment to unsecured financial creditors who voted in favour of the resolution plan has been mentioned as ₹ 4,17,70,701 whereas in the same column amount of unsecured financial creditors stands at ₹ 10,02,28,812 and in percentage terms has also been mentioned as 100 per cent. Thus the figure of ₹ 9,18,24,508 is inadvertently mentioned wrong - This factual position gets clarified from resolution plan itself wherein total payment to unsecured financial creditor stated as ₹ 10.02 crores which is the total of unsecured financial creditor not having a right to vote and who voted in favour of the resolution plan. There are no preferential undervalued or extortionate transaction. On perusal of contents of the resolution plan and it is found that the requirement of regulations 36 to 39 of the CIRP Regulations, 2016 have been complied with. Further it is noted that resolution applicant complies with the requirement under section 30(2)(b) of the IBC, 2016. Also, the resolution plan addresses the cause for failure and also contains measures to run the corporate debtor in future. The resolution plan is both feasible and viable as held by the CoC and it also contains provision for its effective implementation. The Resolution plan is approved.

Summary

Issues Involved:
1. Priority consideration of application before approval of resolution plan.
2. Ineligibility of erstwhile promoters/suspended management under section 29A of the IBC, 2016.
3. Approval of the resolution plan.

Issue-wise Detailed Analysis:

1. Priority consideration of application before approval of resolution plan:
The applicant sought priority consideration of its application before the approval of the resolution plan and prayed for its rejection, alleging the resolution professional failed to assess the applicability of section 29A of the Insolvency and Bankruptcy Code, 2016. The tribunal noted that the corporate debtor was admitted into CIRP on January 22, 2020, and during the process, it was claimed that the erstwhile promoters were ineligible under section 29A of the IBC, 2016. The resolution professional informed that the corporate debtor had been converted into an MSME, making section 29A inapplicable by virtue of section 240A of the IBC, 2016. However, an order dated January 6, 2021, held that the erstwhile promoters were ineligible. The tribunal dismissed the application, stating that the issue had been settled by the National Company Law Appellate Tribunal (NCLAT) and that the applicant failed to prove the ineligibility under section 29A of the IBC, 2016.

2. Ineligibility of erstwhile promoters/suspended management under section 29A of the IBC, 2016:
The applicant alleged that the resolution professional did not properly assess the ineligibility of the erstwhile promoters under section 29A of the IBC, 2016. The resolution professional contended that due diligence was conducted as per the IBC, 2016, and regulations, and the suspended management was not ineligible under section 29A(c) since the corporate debtor's account had not been classified as a non-performing asset as of the insolvency commencement date. The tribunal found that the applicant did not bring sufficient material to prove the ineligibility under section 29A and dismissed the claim.

3. Approval of the resolution plan:
The tribunal considered the application for the approval of the resolution plan. The corporate debtor was admitted into CIRP on January 22, 2020, and the IRP conducted the CIRP as per the IBC, 2016. The CoC approved the modified resolution plan by 100% vote. The tribunal noted that the resolution plan was feasible and viable, with provisions for paying off creditors and infusing ?15 crores as working capital. The tribunal approved the resolution plan, stating that it complied with the requirements of the IBC, 2016, and regulations, and addressed the causes for failure and measures to run the corporate debtor in the future.

Judgment:
The tribunal dismissed I. A. No. 145 of 2021, stating that the applicant failed to prove the ineligibility under section 29A of the IBC, 2016. The tribunal approved the resolution plan in I. A. No. 58 of 2021, granting specific reliefs and concessions while directing the resolution professional to complete the necessary formalities and hand over the management to the nominated board of directors. The tribunal also directed the resolution professional to forward all records to the Insolvency and Bankruptcy Board of India.