2022 (4) TMI 478 - AT - Insolvency and Bankruptcy

Validity of approved Resolution Plan - claims of the Operational Creditors not appreciated - security and housekeeping services for the projects undertaken by the Corporate Debtor - Resolution Plan is in conformity with Section 30 (1) of the I B Code, 2016 or not - HELD THAT - The Resolution Plan has been submitted in accordance with Section 30 of the I B Code, 2016. However, Sub-clause b of Sub- Section (2) of Section 30 provides for the payments of debt of Operational Creditors in such manner as may be specified by the Board which shall not be less than (i) the amount to be paid to such creditors in the event of a liquidation of the Corporate Debtor under Section 53 or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the Resolution Plan had been distributed in accordance with the order of priority in Sub Section (1) of Section 53. Further, Section 31 of the I B Code, 2016 deal with approval of Resolution Plan. As per Sub Section (1) if the Adjudicating Authority is satisfied that the Resolution Plan as approved by the Committee of Creditors under Sub-Section (4) of Section 30 meets the requirements as referred to in Sub-Section (2) of Section 30, it shall by order approve the Resolution Plan which shall be binding on the Corporate Debtor and its employees, members, creditors (including the central Government, any State Government or any Local authority to whom a debt in respect of the payment of dues arising under any law for the time being enforced, such as Authorities to whom Statutory dues are owed,) guarantors and other stakeholders involved in the Resolution Plan. Due procedure as contemplated under I B Code, 2016 is to be followed to submit a Resolution Plan. Accordingly, the Resolution Applicant shall submit a Plan before the Resolution Professional and it should contain the requirements as per the said provision including the payments of debts to the Operational Creditors etc. After submission of the Resolution Plan the Committee of Creditors may approve a Resolution Plan by a vote of not less than 66% of voting share of Financial Creditors. After approval of the plan by the Committee of Creditors, the Adjudicating Authority under Sub-Section (1) of Section 31 may approve the Resolution Plan if it is satisfied that the Plan meets the requirements as per Sub-Section (2) (4) of Section 30 of the Code and the same shall be binding on the Corporate Debtor, its employees, members, creditors and other stakeholders - Once the Plan is approved by the Adjudicating Authority under Sub- Section (1) of Section 31 it shall be binding on the Creditors including the Operational Creditors i.e. the Appellants herein. There is no infirmity or illegality in the Plan as approved by the Committee of Creditors by majority vote of 95.07% and approved by the Adjudicating Authority and the same shall be binding on the Appellants apart from other stakeholders. This Tribunal comes to a resultant conclusion that the approval of Resolution Plan is legal and valid - Appeal dismissed.

Summary

Issues Involved:
1. Whether the Resolution Plan is in violation of any provision of law.
2. Whether there has been any discriminatory treatment towards the Appellants and similarly situated operational creditors.

Issue-wise Detailed Analysis:

1. Whether the Resolution Plan is in violation of any provision of law:

The Appellants, both operational creditors, contended that the Adjudicating Authority (NCLT, Bengaluru Bench) approved the Resolution Plan without appreciating the claims of the operational creditors. They argued that their claims were deliberately excluded from the Resolution Plan, which is not in conformity with Section 30(1) of the IBC, 2016. The Appellants submitted their claims to the Resolution Professional, which were duly admitted but not considered in the Resolution Plan. They argued that the Adjudicating Authority should have liquidated the Corporate Debtor since the Resolution Plan did not conform to Section 30(1) of the IBC, 2016.

The 1st Respondent (Resolution Professional) countered that the Appeal is not maintainable and that the Appellants' understanding of the IBC provisions is flawed. Section 30(2)(b) mandates that the payment of debts to operational creditors in the Resolution Plan should not be less than the amount payable in the event of liquidation under Section 53. Since the liquidation value of the Corporate Debtor is insufficient to satisfy even the secured financial creditors, no payment is proposed for operational creditors.

The 2nd Respondent (Successful Resolution Applicant) also argued that the Appeal is time-barred. They reiterated that the liquidation value is insufficient to pay operational creditors and that the Resolution Plan, approved by a 95.07% majority of the Committee of Creditors (CoC), does not propose any payment to operational creditors due to the insufficiency of the liquidation value.

2. Whether there has been any discriminatory treatment towards the Appellants and similarly situated operational creditors:

The Tribunal analyzed whether the Resolution Plan discriminated against the Appellants and similarly situated operational creditors. It was noted that the Resolution Plan, approved by the CoC and the Adjudicating Authority, provided for payments only to financial creditors, employees, and CIRP costs, with nil payments proposed for operational creditors, including government dues and taxes.

The Tribunal found that the Plan did not discriminate against operational creditors, as no payments were earmarked for any operational creditors. The commercial wisdom of the CoC, which approved the Plan by a 95.07% majority, cannot be interfered with. The Tribunal emphasized that the Resolution Plan was submitted in accordance with Section 30 of the IBC, 2016, and approved by the Adjudicating Authority under Section 31, making it binding on all stakeholders, including operational creditors.

Conclusion:

The Tribunal concluded that there was no infirmity or illegality in the Resolution Plan approved by the CoC and the Adjudicating Authority. The Plan did not discriminate against operational creditors as no payments were proposed for any of them. The Tribunal dismissed both Appeals, affirming that the approval of the Resolution Plan was legal and valid.

Final Judgment:

Both Company Appeals, CA (AT) (Ins) No. 110 of 2021 and CA (AT) (Ins) No. 225 of 2021, were dismissed with no orders as to cost, and any pending applications were closed.