2024 (1) TMI 338 - AT - Insolvency and Bankruptcy

Approval of Resolution Plan - whether the Adjudicating Authority went into the details of the deliberations of the 6th CoC meeting to find out whether there was sufficient substance in the plea of the Appellant in IA 2304 of 2022 to seek more time to consider the resolution plan? - HELD THAT - There was no modification in the resolution plan of DK except on the BSP issue and exclusion of wooden flooring in the Master bedroom and this modification was communicated to all CoC members well before the 6th CoC meeting. In any case, both these modifications, at best, would have had a direct bearing on the interests of the home-buyers and not of the Appellant. Further it is noticed that resolution applicant categorically submitted that their plan is final and members may vote on that plan only. The RP infact allowed more time to the Financial Creditors other than the Home-buyers for voting by keeping it open for them for 72 hours instead of 24 hours. In this backdrop, it is not found that the RP committed any error in concluding that the Appellant had failed to substantiate that there was sufficient ground for claiming additional time to study the modified plan. Present is not a case where the Appellant has been able to successfully point out any breach of procedure or manifest error in the conduct of the CIRP proceedings which deserve rolling back of the e- voting results. It needs no emphasis that unwarranted delays in resolution lead to depletion in the value of the assets of the Corporate Debtor. This is neither in the interest of CIRP nor in the interest of the Corporate Debtor. In the present case, extension of CIRP was already granted by the Adjudicating Authority on 24.05.2022 on the expiry of 180 days. The maximization of the value of the Corporate Debtor is admittedly an object of the CIRP and the said maximization has to be achieved within the timeline provided in the scheme. Thus, when a resolution plan is approved by the CoC with more than 66% vote share and submitted before the Adjudicating Authority for approval, it follows therefore that this process cannot be allowed to be frustrated on flimsy grounds. Hence, further delay in CIRP cannot be countenanced. The RP and the CoC cannot be faulted for disallowing further time to the Appellant to study the resolution plan of DK. The Adjudicating Authority cannot interfere on merits with the commercial decision taken by the CoC unless it is found not to conform to Section 30(2) of the IBC - there are no error in the decision of the Adjudicating Authority to approve the resolution plan. Appeal dismissed.

Summary

Issues Involved:

1. Whether the Resolution Professional (RP) conducted the Corporate Insolvency Resolution Process (CIRP) in an arbitrary manner.
2. Whether the Adjudicating Authority erred in approving the resolution plan.
3. Whether the assignment of securities in the resolution plan is tenable and compliant with the law.

Summary:

1. Allegation of Arbitrary Conduct by RP:
The Appellant, Punjab National Bank (PNB), contended that the RP did not provide sufficient time or necessary documents to analyze the resolution plan submitted by D. Konda (DK). The RP published Form G and invited Expressions of Interest (EoI), receiving five EoIs. The RP extended the last date for submission of the resolution plan and sought a 90-day extension for the CIRP period, which was granted. DK submitted the resolution plan, which was approved by the Committee of Creditors (CoC) with a 71.75% vote share. The Appellant sought more time to analyze the plan, which was denied. The RP proceeded with the voting, and the plan was approved. The Appellant filed IA 2304/2022 seeking recall of the e-voting results, alleging that the plan was modified and required fresh consideration. This IA was dismissed by the Adjudicating Authority.

2. Approval of the Resolution Plan by Adjudicating Authority:
The Appellant argued that the resolution plan was approved in an arbitrary manner and violated Section 30(2) of the Insolvency and Bankruptcy Code (IBC). The Adjudicating Authority noted that the homebuyers, holding a majority vote share, did not want any further delay. The RP had communicated the minor modifications in the resolution plan to all CoC members before the 6th CoC meeting. The RP allowed more time for voting by financial creditors other than homebuyers. The Adjudicating Authority found no irregularity in the RP's conduct and approved the resolution plan, noting that it conformed to Section 30(2) of the IBC and Regulations 37 and 38 of the CIRP Regulations.

3. Tenability of Assignment of Securities in the Resolution Plan:
The Appellant contended that the assignment of securities in the resolution plan was contrary to Section 128 of the Indian Contract Act, 1872, and would adversely affect recovery proceedings from guarantors. Clause 6.5(ii) and (vii) of the resolution plan provided for the unconditional release and transfer of all securities to the Corporate Debtor. The Tribunal referred to the statutory construct of the IBC and Regulation 37 of the CIRP Regulations, which allows for the modification or satisfaction of any security interest in the resolution plan. The Tribunal found that the assignment of securities did not suffer from any infirmity or arbitrariness and was compliant with Section 30(2)(e) of the IBC. The Tribunal dismissed the appeal, finding no error in the Adjudicating Authority's decision to approve the resolution plan.