2023 (2) TMI 441 - AT - Insolvency and Bankruptcy

Remission of Resolution Plan back to the CoC for reconsideration at the request of Financial Creditors - appellant contends that Resolution Plan having been approved by the Adjudicating Authority there is no jurisdiction in the Adjudicating Authority to send back the Resolution Plan for reconsideration at the request of Financial Creditor - whether the approved Resolution Plan is binding on the CoC which can neither be withdrawn nor sent back for modification? - HELD THAT - The Judgement of the Hon ble Supreme Court in EBIX SINGAPORE PRIVATE LIMITED VERSUS COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS LIMITED ANR. KUNDAN CARE PRODUCTS LIMITED VERSUS MR AMIT GUPTA AND ORS. AND SEROCO LIGHTING INDUSTRIES PRIVATE LIMITED VERSUS RAVI KAPOOR RP FOR ARYA FILAMENTS PRIVATE LIMTIED ORS. 2021 (9) TMI 672 - SUPREME COURT categorically lays down that Resolution Plan approved by CoC is binding between the Successful Resolution Applicant and the CoC. The law is thus well settled that Resolution Plan is approved by the CoC is binding between the CoC and SRA. The question to be considered in this Appeal is as to whether there are any circumstances and conditions where Resolution Plan can be sent back for carrying out any changes - In this context the Judgement of the Hon ble Supreme Court in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS 2019 (11) TMI 731 - SUPREME COURT is referred. The Hon ble Supreme Court in the above judgement had occasion to consider the scope of judicial review of the Adjudicating Authority in the context of Resolution Plan approved by the CoC. It was held by the Supreme Court that The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view and once it is satisfied that the Committee of Creditors has paid attention to these key features it must then pass the resolution plan other things being equal. Thus in view of the Judgment of the Hon ble Supreme Court laid down above the Adjudicating Authority if finds on given set of facts that parameters under Section 30(2)(e) have not been kept in view the Resolution Plan can be sent back to the CoC to review such plan after satisfying the parameters. The above is the only situation provided by Hon ble Supreme Court where the plan can be sent back. The present is a case where Application was filed by the Financial Creditors where they prayed to delete the clause in the Resolution Plan which provided for release of the personal guarantee of the promoters. The submissions which were pressed before us by Learned Counsel for the Financial Creditors that said clause which violates the provision of Section 128 of Contract Act has to be treated to be violation of Section 30(2)(e) of the Code - The present is a case where CoC is not asking to withdraw from the Plan or asking for reviewing the entire Resolution Plan rather CoC has asked for leave of the Court for deleting clause in the plan which sought to release the promoters from personal guarantee given to the Financial Creditors. Thus no grounds have been made out to interfere with the Impugned Order. However the CoC as per the Order dated 30th March 2022 may expeditiously taka a decision and Resolution Professional may submit the modified Resolution Plan if any before the Adjudicating Authority - appeal disposed off.

Summary

Issues Involved:
1. Jurisdiction of the Adjudicating Authority to remit the Resolution Plan back to the Committee of Creditors (CoC) for reconsideration.
2. Validity of the clause in the Resolution Plan providing for the release of personal guarantees of the promoters.
3. Binding nature of the approved Resolution Plan between the CoC and the Successful Resolution Applicant (SRA).

Issue-wise Detailed Analysis:

1. Jurisdiction of the Adjudicating Authority:
The primary issue is whether the Adjudicating Authority had the jurisdiction to remit the Resolution Plan back to the CoC for reconsideration. The appellant argued that once the Resolution Plan is approved by the Adjudicating Authority, it cannot be sent back for reconsideration. This argument was supported by the judgment in "Ebix Singapore Private Limited & Ors. Vs. Committee of Creditors of Educomp Solutions Limited & Ors.," which stated that an approved Resolution Plan is binding and cannot be modified or withdrawn. However, the Adjudicating Authority, referring to the judgment in "Committee of Creditors of Essar Steel India Ltd. Vs. Satish Kumar Gupta & Ors.," noted that it could remand the plan back to the CoC if it finds that the parameters under Section 30(2)(e) of the IBC have not been met.

2. Validity of the Clause on Personal Guarantees:
The contentious clause in the Resolution Plan provided for the release of personal guarantees of the promoters. The Financial Creditors, particularly Kotak Mahindra Bank, argued that this clause was contrary to Section 128 of the Contract Act and thus violated Section 30(2)(e) of the IBC. The IDBI Bank, despite initially approving the plan, later sought the deletion of this clause. The Adjudicating Authority observed that this issue was debated extensively and noted that the CoC could reconsider the plan in light of these concerns. The Adjudicating Authority did not express an opinion on the merits of the clause but allowed the CoC to deliberate on it again.

3. Binding Nature of the Approved Resolution Plan:
The appellant contended that the approved Resolution Plan is binding between the CoC and the SRA, as established in "Ebix Singapore Pvt. Ltd." The Adjudicating Authority acknowledged this principle but highlighted that the plan could be reconsidered if it did not comply with the legal requirements. The Adjudicating Authority's decision to remit the plan back was influenced by the fact that the SRA's counsel consented to this course of action during the proceedings.

Conclusion:
The appeal was dismissed, with the tribunal upholding the Adjudicating Authority's decision to remit the Resolution Plan back to the CoC for reconsideration of the clause on personal guarantees. The tribunal emphasized that the CoC should expedite its decision-making process and submit any modified plan to the Adjudicating Authority within specified timeframes. The judgment underscores the importance of compliance with legal parameters in Resolution Plans and the limited but significant scope of judicial review in such matters.