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2022 (2) TMI 674 - AT - Insolvency and BankruptcyApproval of the Resolution Plan approved by the Committee of Creditors (CoC) - Sections 31(1) and 60(5) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - In the present case as recorded by the Adjudicating Authority, the liquidation value of the Corporate Debtor as per the valuation report is 4.25 crores and the amount proposed in the Resolution Plan is ₹ 4.50 crores which is more than the liquidation value. We address to the contention raised by the Learned Counsel for the Appellant that the valuation itself is erroneous and therefore allotting ₹ 50 lacs when the claim is ₹ 6,29,18,121/- is unjustified. The Hon ble Supreme Court in Duncan Industries Pvt Ltd. Vs. State of U.P. Ors. 1999 (12) TMI 857 - SUPREME COURT has held that the question of valuation is basically question of facts and this Court is normally reluctant to interfere with the finding on such a question of fact if it is based on relevant material on record . Be that as it may, the record shows that the average of two closest estimates given by the valuers was taken into consideration as a fair value and the liquidation value. It is an admitted fact that the Plan has successfully been implemented and all payments due under the said Resolution Plan have been paid. It is a well settled preposition of law by the Hon ble Supreme Court in a catena of Judgments that the commercial wisdom of CoC is non-justiciable except on the grounds of Section 30(2). In the instant case, we do not find any material on record to substantiate that the approval of the Resolution Plan is in contravention of any law for the time being in force - It is well settled that Insolvency and Bankruptcy Code overrides other law and under Section 31 of the Code, the Resolution Plan approved by the CoC and meeting the requirements under Section 30(2) has to be approved by the Adjudicating Authority. Commercial Wisdom of the CoC with respect to viability and financial decision taken while evaluating the Resolution Plan has to prevail, unless the Plan approved by the CoC is in conflict with any provision of the law and the distribution mechanisation suppressed the interest of the stakeholders besides taking care of the maximisation of the value of the assets of the corporate debtor, judicial intervention would not be warranted. Appeal dismissed.
Issues Involved:
1. Whether the approval of the Resolution Plan was in contravention of Section 30(2)(e) of the Insolvency and Bankruptcy Code, 2016. 2. Whether the valuation of the Corporate Debtor's assets was conducted properly. 3. Whether the Resolution Plan was in violation of the Special Economic Zone Act, 2018. 4. Whether the commercial wisdom of the Committee of Creditors (CoC) can be judicially reviewed. Detailed Analysis: Issue 1: Approval of the Resolution Plan and Section 30(2)(e) Contravention The appellant, an Operational Creditor, challenged the approval of the Resolution Plan on the grounds that the admitted claim of ?6,29,18,121/- was inadequately addressed by an allocation of only ?50 Lacs. The appellant argued that this was in direct contravention of Section 30(2)(e) of the Insolvency and Bankruptcy Code, 2016. The Adjudicating Authority dismissed the appellant’s application, stating that post-approval, the only recourse available was to file an appeal under Section 61 of the Code. Issue 2: Valuation of the Corporate Debtor's Assets The appellant contended that the valuation of the Corporate Debtor's assets was flawed, citing that the valuer did not physically inspect the site and relied solely on documents. The appellant highlighted discrepancies in the valuation reports, which showed significant depreciation in asset value within a short period. The average fair value was determined to be ?6.10 crores, and the liquidation value was ?4.25 crores. The appellant argued that this undervaluation led to unjust enrichment of the Resolution Applicant. The respondents countered that the valuation was conducted in compliance with Regulation 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. They emphasized that the total amount offered by the Resolution Applicant was ?4.5 crores, which was more than the liquidation value, justifying the approval of the Resolution Plan. Issue 3: Violation of the Special Economic Zone Act, 2018 The appellant argued that the Resolution Plan's provision for exemptions from Noida Special Economic Zone (NSEZ) fees and penalties contradicted the established rules and principles of NSEZ. The appellant claimed that this provision attempted to bypass statutory fees, leading to unjust enrichment of the Resolution Applicant and contravening Section 34(2)(d) of the Special Economic Zone Act, 2018. The Tribunal noted that under Section 238 of the Insolvency and Bankruptcy Code, the provisions of the Code override other laws. The Tribunal found no material evidence to substantiate that the Resolution Plan was in contravention of any law, including the Special Economic Zone Act. Issue 4: Judicial Review of the Commercial Wisdom of CoC The respondents argued that the commercial wisdom of the CoC is non-justiciable, as established in several Supreme Court judgments, including 'K. Shashidhar Vs. Indian Overseas Bank & Ors.' and 'Maharashtra Seamless Limited Vs. Padmanabhan Venkatesh & Ors.' The Tribunal concurred, stating that the CoC's decision on the viability and financial aspects of the Resolution Plan must prevail unless it conflicts with legal provisions or suppresses stakeholders' interests. The Tribunal emphasized that the approved Resolution Plan, which met the requirements under Section 30(2), was binding on all stakeholders, including statutory authorities. The Tribunal also noted that the Resolution Plan had already been implemented for a year, and reversing it would not be feasible. Conclusion: The Tribunal dismissed the appeal, upholding the approval of the Resolution Plan. It reiterated that the commercial wisdom of the CoC is paramount and non-justiciable, provided the Resolution Plan complies with legal requirements and maximizes the value of the Corporate Debtor's assets. The Tribunal found no contravention of any law, including the Special Economic Zone Act, and confirmed that all statutory dues not part of the Resolution Plan stood extinguished upon its approval.
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