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2019 (5) TMI 387 - AT - Insolvency and BankruptcyInitiation of Corporate Insolvency Resolution Process - confirmation of resolution plan - change of voting as made by some of the members of the Committee of Creditors - Regulation 26 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 . HELD THAT - Under sub-section (3) of Section 30, the Resolution Professional is required to present to the Committee of Creditors for its approval such Resolution Plans which confirm the conditions referred to in sub-section (2). It is the Committee of Creditors which fix the date of voting and may approve the Resolution Plan by vote of not less than 75% (now it is 66%) of voting shares of the Financial Creditors , after considering its viability and feasibility and such other requirements as may be specified by the Board - As per sub-section (5) of Section 30, the Resolution Applicant is required to attend the meeting of the Committee of Creditors in which the Resolution Plan of the Applicant is considered. The Committee of Creditors is required to notice the Resolution Plan to find out its viability and feasibility apart from the financial matrix and in appropriate cases may ask the Resolution Applicant to improve the plan. The date of approval for Resolution Plan is fixed by the Committee of Creditors . They may fix the date of voting and in appropriate case they may extend the period of voting. There is no provision that once a voting is made, after the final result, if it comes to the conclusion finally in absence of approval of the plan, the Corporate Debtor may be ordered for liquidation. It is always open to the Committee of Creditors to change their opinion. The Resolution Process took place within 270 days and the Committee of Creditors had the jurisdiction to change its opinion in favour of the Resolution Plan to make it a success and Regulation 26(2) being directory which also stands deleted - impugned order set aside - the Resolution Plan being in conformity with Section 30(2) warranted approval by the Adjudicating Authority. The case is remitted to the Adjudicating Authority, Mumbai Bench, Mumbai to approve the plan in terms of Section 31 of the Insolvency and Bankruptcy Code, 2016 with modification i.e. that the plan is to be implemented within the period of 12 years as offered by the Successful Resolution Applicant - Appeal allowed.
Issues Involved:
1. Approval of the Resolution Plan within the stipulated 270 days. 2. Change of voting by members of the Committee of Creditors (CoC). 3. Treatment of first charge holders versus second charge holders. 4. Viability and feasibility of the Resolution Plan. 5. Exclusion of certain periods from the 270-day timeline. Issue-wise Detailed Analysis: 1. Approval of the Resolution Plan within the stipulated 270 days: The Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor on 12th July 2017. The Resolution Plan was improved and approved by the CoC with 81.31% voting shares on 6th April 2018. The Adjudicating Authority rejected the plan on the grounds that the total period of 270 days had lapsed by the time the last voting took place. The Appellate Tribunal, however, held that the period from 4th July 2017 to 12th July 2017, when the order was signed and uploaded, should be excluded. Excluding this period, the Resolution Plan was approved within the 270 days. 2. Change of voting by members of the Committee of Creditors (CoC): The CoC initially had 62.66% votes in favor on 27th March 2018, which was less than the required 75%. However, some members changed their votes in favor, increasing the percentage to 81.31%. Regulation 26(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which disallowed changing votes, was deemed directory and subsequently deleted. The Tribunal held that the CoC has the authority to extend the voting period and change its opinion to ensure the success of the Resolution Plan. 3. Treatment of first charge holders versus second charge holders: DBS Bank Ltd. opposed the appeal, claiming its first charge over certain assets of the Corporate Debtor should prevail over second charge holders. The Tribunal referenced the Supreme Court's decision in "ICICI Bank Ltd. vs. Sidco Leathers Ltd. & Ors." and international principles, but concluded that under the I&B Code, all Financial Creditors are treated similarly if they are similarly situated. 4. Viability and feasibility of the Resolution Plan: The Adjudicating Authority had noted the viability and feasibility of the Resolution Plan, which involved a significant haircut and staggered payments over 15 years. The Tribunal observed that the CoC is empowered to decide on the reasonableness, viability, and feasibility of the plan. The Resolution Applicant agreed to reduce the payment period from 15 years to 12 years, making the plan more viable. 5. Exclusion of certain periods from the 270-day timeline: The Tribunal cited its decision in "Quinn Logistics India Pvt. Ltd. vs. Mack Soft Tech Pvt. Ltd." and affirmed by the Supreme Court, to exclude the period during which the Interim Resolution Professional did not join. This exclusion justified that the Resolution Plan was approved within the 270 days. Conclusion: The Tribunal set aside the Adjudicating Authority's order and held that the Resolution Plan was in conformity with Section 30(2) of the Insolvency and Bankruptcy Code, 2016, and warranted approval. The case was remitted to the Adjudicating Authority to approve the plan with the modification that it be implemented within 12 years. The Tribunal clarified that while the CoC can change its opinion to favor a plan, once it has voted in favor, it cannot change its views. All appeals were allowed with no costs.
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