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2025 (1) TMI 81 - AT - IBCNon-admission of the claim by the Resolution Professional - direction to IRP to get the Resolution Plan modified so as to comply with Regulation 42 and 44 of the Liquidation Process Regulations, 2016 - deduction of amount from the final payment to be made to Applicant as per the scheme of distribution of amount under Resolution Plan - direction to Respondent Resolution Professional to further include amounts towards LC payments and towards Bank Guarantee (BG) payments in the total admitted claim of Applicant - HELD THAT - The Resolution Plan came to be approved by the CoC with vote share of 70.07%. The appellant has voting share of 6.64% and Appellant voted against the Resolution Plan and thus, was a dissenting financial creditor. The Resolution Plan which is approved in commercial wisdom of the CoC binds all stakeholders including the dissenting financial creditor. The commercial wisdom of the CoC approving the Resolution Plan is binding on all, which is law laid down by the Hon ble Supreme Court in K. Sashidhar vs. Indian Overseas Bank Ors. 2019 (2) TMI 1043 - SUPREME COURT and the Hon ble Supreme Court decision in Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta and Ors. 2019 (11) TMI 731 - SUPREME COURT where it was held that ' The NCLAT judgment which substitutes its wisdom for the commercial wisdom of the Committee of Creditors and which also directs the admission of a number of claims which was done by the resolution applicant, without prejudice to its right to appeal against the aforesaid judgment, must therefore be set aside.' One of the subject on which CoC is to approve a Resolution Plan is the manner of distribution proposed . As noted above, the manner of distribution which was approved by the CoC in 31st CoC meeting contained an approval of deduction of Rs.33.34 Crores from payout of the Appellant. Appellant-Financial Creditor by IA No.222 of 2020 had challenged in effect the decision of the CoC taken in 31st CoC meeting held on 07.02.2020 approving the distribution and opting for second option i.e. deduction of Rs.34 Crores from payout of the Appellant. Appellant- Dissenting Financial Creditor is fully bound by the decision of the CoC and cannot be allowed to challenge the same - It is relevant to notice that by order of the same date 09.07.2020 when IA No.222 of 2020 was decided Resolution Plan was also approved. Conclusion - No grounds have been made out to interfere with the order passed by the Adjudicating Authority - The CoC's decision to deduct Rs.34 Crores from the Appellant's payout was deemed valid, based on its commercial wisdom and the binding nature of the Resolution Plan. The Appellant, as a dissenting financial creditor, was bound by the CoC's decision, and no grounds were found to interfere with the adjudicating authority's order. Appeal dismissed.
Issues Involved:
1. Non-admission of the claim by the Resolution Professional. 2. Deduction of Rs.34 Crores from the payout of the Appellant. 3. Treatment of the amount deducted as interim finance or recovery. 4. Commercial wisdom of the Committee of Creditors (CoC). 5. Binding nature of the Resolution Plan on dissenting financial creditors. 6. Jurisdiction and authority of the CoC and Resolution Professional. Detailed Analysis: 1. Non-admission of the claim by the Resolution Professional: The Appellant, Union Bank of India, filed a claim for Rs.876,42,09,926, which included Rs.39,61,54,488 under Non-Fund Based (Letter of Credit/Bank Guarantee Facility). The Resolution Professional did not admit the claim for Rs.39,61,54,488 as it had not crystallized by the Insolvency Commencement Date. The Appellant did not challenge this decision initially, indicating acceptance of the Resolution Professional's verification process. 2. Deduction of Rs.34 Crores from the payout of the Appellant: The CoC decided to deduct Rs.34 Crores from the Appellant's payout under the Resolution Plan, arguing that this amount was recovered from the corporate debtor's account during the CIRP period. The Appellant contended that this recovery should be treated as interim finance. However, the CoC, exercising its commercial wisdom, resolved to deduct this amount from the Appellant's payout, as it was deemed a recovery of pre-CIRP dues. 3. Treatment of the amount deducted as interim finance or recovery: The CoC was presented with two options: to treat the Rs.34 Crores as interim finance or to deduct it from the Appellant's payout. The CoC opted for the latter, concluding that the amount was not interim finance as it related to LCs/BGs issued pre-CIRP. The Appellant's request to treat the amount as interim finance was rejected, as it was not approved by the CoC. 4. Commercial wisdom of the Committee of Creditors (CoC): The CoC's decision to deduct Rs.34 Crores was based on its commercial wisdom, which is binding on all stakeholders, including dissenting financial creditors. The CoC's decision-making process involved deliberations and voting, where the Appellant, with a 6.64% voting share, was a dissenting member. The commercial wisdom of the CoC is protected under the Insolvency and Bankruptcy Code (IBC) and has been upheld by the Supreme Court in several judgments. 5. Binding nature of the Resolution Plan on dissenting financial creditors: The Resolution Plan, approved by a 70.07% vote share of the CoC, is binding on all creditors, including dissenting ones like the Appellant. The Appellant's challenge to the CoC's decision was dismissed as it was bound by the approved Resolution Plan, which included the deduction of Rs.34 Crores from its payout. 6. Jurisdiction and authority of the CoC and Resolution Professional: The CoC has the authority to decide on the distribution of funds and the treatment of claims during the CIRP. The Resolution Professional's role is to verify claims and facilitate the CoC's decision-making. The Appellant's challenge to the CoC's decision was dismissed as the CoC acted within its jurisdiction under the IBC. Conclusion: The appeal was dismissed, and the order of the Adjudicating Authority rejecting IA No.222 of 2020 was upheld. The CoC's decision to deduct Rs.34 Crores from the Appellant's payout was deemed valid, based on its commercial wisdom and the binding nature of the Resolution Plan. The Appellant, as a dissenting financial creditor, was bound by the CoC's decision, and no grounds were found to interfere with the adjudicating authority's order.
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