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2024 (4) TMI 1096 - AT - Insolvency and BankruptcyCorrectness of Resolution plan - fair and equitable distribution or not - resolution plan failed to make any provision for the operational creditors - Nil Payment to Operational Creditors - waterfall mechanism - HELD THAT - The resolution plan has been approved by 100% voting by the CoC. It is well settled that the commercial wisdom of the CoC is unjusticiable. Moreover, the liquidation value of the operational creditors is NIL and the amount which has been distributed to the CD in accordance with Section 53(1) shall have to be Nil as well, therefore, the resolution plan is not in violation of Section 30(2)(b) of the Code. Moreover, admitted claim regarding the financial creditors is to the tune of Rs. 12067,57,69,383 and amount provided under the plan is Rs. 2500 Cr. which is to the tune of 20.098%, therefore, all the other creditors including unsecured financial creditors and operational creditors have been provided NIL. There are no error in the impugned order having been passed in respect of the applications filed by the Appellants, therefore, the appeal is found to be without any merit and the same is hereby dismissed.
Issues:
The judgment involves issues related to the dismissal of applications by the Adjudicating Authority, the fairness of the resolution plan in terms of payment to operational creditors, compliance with Section 30(2)(b) of the Insolvency and Bankruptcy Code, 2016, and the commercial wisdom of the Committee of Creditors (CoC). Dismissal of Applications by Adjudicating Authority: The appeal was filed by four Appellants against the order of the Adjudicating Authority dismissing their applications. The Authority observed that as per Section 30(2)(b) of the IBC, the amount to be paid to operational creditors must be the higher of the amount in case of liquidation or the amount under the resolution plan. Since the liquidation value of the operational creditors was 'Nil' and the amount under the plan would also be 'Nil,' the Authority held that the Resolution Plan did not violate Section 30(2)(b) of IBC. The Authority also noted that the plan was approved by 100% votes by the CoC, and therefore, it could not interfere in the commercial wisdom of the CoC. Consequently, the Authority dismissed the applications filed by the Operational Creditors. Fairness of Resolution Plan and Compliance with IBC: The Appellants raised concerns about the provision of NIL payment to operational creditors in the resolution plan, arguing that it was unfair and not equitable. However, the Respondent contended that the plan was compliant with Section 30(2) of the Code, as the liquidation value due to operational creditors was 'NIL.' The Respondent further argued that when the liquidation value due to operational creditors is 'NIL,' a resolution plan proposing NIL payment is in compliance with the Code. Citing legal precedents, the Respondent emphasized that the commercial wisdom of the CoC in approving the plan was non-justiciable. The Respondent also highlighted that the plan offered NIL payment to various creditors in accordance with the Code. Commercial Wisdom of CoC: It was emphasized that the resolution plan was unanimously approved by the CoC, exercising its commercial wisdom, which is not subject to judicial review. The plan offered an overall payout towards stakeholders, with additional commitments for investments in the Corporate Debtor. The CoC was credited with making efforts to protect the interests of all stakeholders. The approved plan provided for payments to stakeholders, and the CoC's decisions were aimed at safeguarding the interests of all parties involved. Conclusion: After considering the arguments and examining the record, the Tribunal found no error in the Adjudicating Authority's order. The Tribunal held that the Resolution Plan did not violate the provisions of the Code, as the liquidation value of the operational creditors was 'NIL,' and the plan had been approved by the CoC with 100% votes. The Tribunal concluded that the appeal lacked merit and dismissed it without imposing any costs.
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