2024 (9) TMI 329 - AT - Insolvency and Bankruptcy

Approval of Resolution Plan - allegation is that the RP had failed in his duty to examine and scrutinize the resolution plans submitted by the PRAs and fell short of his statutory obligations to ensure that the interests of all stakeholders are protected before placing the same before the CoC for its approval - failure on the part of CoC to apply its commercial wisdom in a proper manner - error on the part of Adjudicating Authority in approving the resolution plan of the SRA or not. HELD THAT - The democratic principles of a determinative role of majority opinion in the decision making process of CoC is well established. When the resolution plan has been approved by the CoC with requisite majority and after holding due deliberations, the decision becomes a collective business decision. There are no hesitation in holding that in facts of the present case, when the CoC stood properly constituted and it approved the resolution plan after holding due deliberations and with prescribed requisite majority, there is no foundational basis to agree with the bald assertion made by the Appellant that the principles of corporate democracy has not been upheld. Regardless of the composition of CoC, the IBC places the CoC in control of the insolvency resolution process. For this purpose it has provided for different threshold levels of voting percentages for CoC to take decisions. As regards approval of resolution plan is concerned, the IBC provides for 66% vote share and once this threshold is met, the decision of the CoC, irrespective of whether it is a single-member or multi-member, the decision of the CoC becomes sacrosanct and binding on all stakeholders. The decision of the CoC on the validity of a resolution plan is essentially a business decision and hence should be left to the CoC so long as it musters more than 66% vote share. There can be no fetters on the commercial wisdom of the CoC. The Adjudicating Authority has limited jurisdiction in the approval of the resolution plan. It is not for the Adjudicating Authority to evaluate on merits the rationale underlying only commercial decision of the CoC. When the CoC has approved a Resolution Plan by requisite voting share after considering its feasibility and viability, such decision of CoC cannot be interfered in the exercise of judicial review either by the Adjudicating Authority or by this Tribunal in the exercise of its appellate powers. The scope of judicial review being strictly circumscribed within the boundaries of Section 30(2) of the IBC for the Adjudicating Authority and this discipline having been emphasised time and again by the Hon ble Supreme Court in several judgments, the powers of the Adjudicating Authority dealing with the resolution plan does not extend to examining the correctness or otherwise of the commercial wisdom exercised by the CoC. Merely because there is a reduction in the claim of any creditor does not make the resolution plan fall foul of law. Any clause in the resolution plan which requires creditors to take a hair-cut cannot be construed as being violative of Section 30(2) of the IBC. Under such circumstances there is nothing to show that there has been transgression of the bounds of rules and regulations which have caused any serious miscarriage of justice to the Appellants. The Adjudicating Authority did not err in approving the resolution plan - the impugned order does not warrant any interference - Appeal dismissed.

Summary

Issues Involved:
1. Whether the RP failed in his duties in steering the CIRP in a procedurally correct manner.
2. Whether the CoC failed to apply its commercial wisdom in a proper manner.
3. Whether the Adjudicating Authority erred in approving the resolution plan of the SRA.

Issue-Wise Detailed Analysis:

1. Whether the RP failed in his duties in steering the CIRP in a procedurally correct manner:
The Appellants argued that the RP did not ensure that the interests of all stakeholders were protected before placing the resolution plan of the SRA to the CoC for approval. They contended that the RP failed to inform the CoC that the resolution plan did not pass on the benefit of FSI and TDR to the home buyers and that the plan only maximized the benefits of Respondents No. 2 and 3, burdening the home-buyers with additional payments. However, the tribunal found that the RP had given sufficient opportunity to resolution applicants and had published Form G five times. The minutes of the 15th CoC meeting showed that the CoC was apprised of the change in FSI availability, and the PRAs had the opportunity to factor in this increase while formulating their plans. Thus, the tribunal concluded that there was no requirement for the RP to specifically instruct the PRAs to consider this factor, and the RP had discharged his duties appropriately.

2. Whether the CoC failed to apply its commercial wisdom in a proper manner:
The Appellants contended that the CoC ignored the plea of the home-buyers and that the scheme of Aanya Real Estate Pvt. Ltd. offered better returns. They argued that the CoC's decision was influenced by Respondent No. 2, who had a dominant vote share, and that the decision was not collective but rather unilateral. The tribunal noted that the CoC meetings were held timely, and all three PRAs were given equal opportunity to present their plans. The CoC's decision to approve the plan of the SRA was preceded by extensive negotiations, a thorough comparative analysis of all plans, and satisfaction that the plans were compliant with the IBC provisions. The tribunal found no evidence of collusion or unfair treatment of the home-buyers and upheld the CoC's decision as a collective business decision made with the requisite majority.

3. Whether the Adjudicating Authority erred in approving the resolution plan of the SRA:
The Appellants argued that the Adjudicating Authority failed to consider their objections and that the plan did not address the interests of all stakeholders. They contended that the plan provided only a lumpsum amount to unsecured financial creditors, causing prejudice to their interests. The tribunal emphasized that the commercial wisdom of the CoC is paramount and not subject to judicial review, as long as the mandatory statutory requirements are met. The tribunal found that the resolution plan met all the mandatory requirements under Section 30(2) of the IBC and that the Adjudicating Authority had limited jurisdiction to interfere with the CoC's commercial decisions. The tribunal concluded that there was no contravention of law or material irregularity in the approval of the resolution plan and dismissed the appeals.

Conclusion:
The tribunal held that the RP had discharged his duties appropriately, the CoC had applied its commercial wisdom judiciously, and the Adjudicating Authority did not err in approving the resolution plan. The appeals were dismissed, and the impugned order was upheld.