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2019 (1) TMI 1505 - Tri - Insolvency and BankruptcyInitiation of Corporate Insolvency Resolution Process against Corporate Debtor - time limitation - filing of the application within the period of CIRP - disbursement of payments to financial creditors approved and passed by Committee of Creditors (CoC) - validity of Resolution Plan. Whether C.A. (IB) No. 1092/KB/2O18 is maintainable? - Held that - Methodology approved is the distribution of upfront payment not based on voting share but based on the security interest held by each creditors and on the basis of voting shares of the respective financial creditors. It is not exclusively based on security interest as alleged. It appears to me that the law, settled subsequent to the voting that assenting and dissenting creditors to be treated equally, doesn t affect the methodology for distribution passed by the CoC since it was passed by majority vote share considering security interest as well as voting shares. The Judgment in Binani Industries Limited 2018 (11) TMI 803 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI was passed on 14th November, 2018 and Sirpur Paper Mills Ltd. was disposed of on 19/09/2018. So they are aware that upon dissent, they would not lose their share prior to their date of voting against the Resolution Plan. They had enough time to challenge the methodology, decided on 21/04/2018. However, they have not opted to challenge the methodology in time. They have not opted to file the objection even at the time of filing application for approval of the first approved Plan. IFCI rushed to the AA after two days of filing the application for approval of the restated resolution plan - the objection of the objectors in that regard is found not at all sustainable - thus, the CA (IB) No. 1092/KB/2018 challenging the distribution methodology is not maintainable. Whether the distribution methodology for disbursing payments to financial creditors approved and passed by Committee of Creditors (CoC) in the meeting held on 21/4/2018 is unjust, and creates unreasonable distinction among the financial creditors as alleged? If so whether the distribution is to be made in accordance with the voting share of the financial creditors as alleged? - Held that - Creation of class amongst the financial creditors is known to law and being applied in cases in which successful resolution plan was approved. Ld. Senior Counsel for IFCI was unable to bring to my notice any of the provision of the Code or Regulation so as to enable me to hold that distribution methodology contained in the re-stated final resolution plan dated 22/11/2018 under consideration for approval is contrary to the provisions of the Code or Regulation - the secured creditors claims are distinct with that of the claim of unsecured creditors. The submissions that the secured and unsecured creditors are to be classified as one group of financial creditors is found devoid of any merit. Whether the resolution plan was approved by the CoC in violation of any of the provisions of the Code as alleged? - Reliefs and costs - Held that - It has meted out all the requirements to be meted out as per Section 30(2) of the I&B Code. So also the requirements to be meted out as per Regulation 39(4) of IBBI (IRP For Corporate Persons) Regulations, 2016 are also meted out by the RP. A certificate in Form H as provided, is enclosed with the Plan. So also an affidavit of resolution applicant u/s. 29A is also submitted along with the original plan. Therefore, the plan has been prepared in accordance with the provisions of the Code, Regulations and as per the directions and the advice from the financial creditors - The plan approved by the CoC is fair, equitable and does not discriminate against the objectors i.e. IFCI and SREI. Under these circumstances, I do not find any justifiable reason to disturb the distribution methodology, the very basis used by the resolution applicant for payment of upfront amount. The appeal filed by SREI and the Clarification application filed by the RP before the NCLAT was between 28th April, 2018 to 13th November, 2018. The total days truly come to 199 days as submitted on behalf of the RP. Therefore, for the purpose of counting period of expiry of CIRP period, the above mentioned days are hereby excluded. The extended period of CIRP is therefore, expired on 4th December, 2018. The resolution plan of BPSL is therefore, filed within time. The Resolution Plan of Bhagwati Power and Steel Limited, which is approved by the CoC with 77.20% voting percentage, is hereby approved under provisions of Section 31(1) of the Insolvency and Bankruptcy Code, 2016, which will be binding on the Corporate Debtor, its employees, members, creditors, guarantors and other stakeholders involved in the Resolution Plan - The revival plan of the company in accordance with the approved Resolution Plan shall come into force with immediate effect - The moratorium order passed under Section 14 shall cease to have effect.
Issues Involved:
1. Maintainability of CA (IB) No. 1092/KB/2018. 2. Justification of the distribution methodology for disbursing payments to financial creditors. 3. Alleged violation of provisions of the Insolvency and Bankruptcy Code (IBC) in the approval of the resolution plan. 4. Reliefs and costs. Detailed Analysis: 1. Maintainability of CA (IB) No. 1092/KB/2018: The application filed by IFCI Limited challenged the distribution methodology of payments to financial creditors, alleging it created classes among creditors based on the nature of security interest, which was discriminatory. The Tribunal noted that the methodology was approved by a significant majority (89.71%) of the Committee of Creditors (CoC) and that IFCI had voted in favor of it. The Tribunal held that IFCI's objection was barred by the principle of estoppel, as they had previously consented to the methodology. The Tribunal concluded that CA (IB) No. 1092/KB/2018 was not maintainable. 2. Justification of the Distribution Methodology: The Tribunal examined whether the distribution methodology, which created classes among financial creditors based on the nature of security interest, was contrary to the IBC or any regulations. It was noted that the methodology was discussed and approved by the CoC, considering both security interest and voting shares. The Tribunal found that the methodology did not discriminate against similarly situated creditors and was not contrary to any law or regulations. It was highlighted that the methodology was in the best interest of secured creditors and was based on sound reasoning and logic. 3. Alleged Violation of Provisions of the IBC: The Tribunal reviewed the resolution plan and found that it met all the requirements of Section 30(2) of the IBC and Regulation 39(4) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The plan was prepared in accordance with the provisions of the Code, regulations, and directions from financial creditors. The Tribunal noted that the plan was fair, equitable, and did not discriminate against the objectors (IFCI and SREI). The Tribunal also excluded the period of litigation (199 days) for counting the 270-day CIRP period, concluding that the resolution plan was filed within time. 4. Reliefs and Costs: The Tribunal approved the resolution plan of Bhagwati Power and Steel Limited, which was approved by the CoC with a 77.20% voting share. The Tribunal ordered that the resolution plan would be binding on the corporate debtor, its employees, members, creditors, guarantors, and other stakeholders. The moratorium order passed under Section 14 ceased to have effect, and the Resolution Professional was directed to forward all records to the Insolvency and Bankruptcy Board of India. The Tribunal appreciated the work of the Resolution Professional, Mr. Sumit Binani, and disposed of CA (IB) No. 1086/KB/2018 accordingly. CA (IB) No. 1092/KB/2018 was dismissed with no order as to costs. Orders: 1. Approval of the resolution plan of Bhagwati Power and Steel Limited. 2. Immediate implementation of the revival plan. 3. Cessation of the moratorium order. 4. Forwarding of all records by the Resolution Professional to the Insolvency and Bankruptcy Board of India. 5. Appreciation of the work done by the Resolution Professional, Mr. Sumit Binani. 6. Disposal of CA (IB) No. 1086/KB/2018. 7. Dismissal of CA (IB) No. 1092/KB/2018 with no order as to costs. 8. Disposal of CP (IB) No. 387/KB/2017 along with all related CAs.
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