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2019 (5) TMI 518 - Tri - Insolvency and BankruptcyInitiation of Corporate Insolvency Resolution Process - Submission and approval of the Resolution Plan - Corporate Debtor - HELD THAT - On perusal of the entire Resolution Plan, we, hereby notice that though there are/were heavy haircut, however, the Resolution Plan provides for payment of insolvency resolution process costs in the manner specified by the Code, in priority to the repayment of the other debts of the Corporate Debtor and also provided for the payment of debts of operational creditors as per the waterfall mechanism mentioned under section 53 of the Code. The present application i.e. IA No 259 of 2018 has been filed for approval of the Resolution Plan under section 30(6) read with section 31(1) of the Code (as amended) read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (as amended for submission and approval of Resolution Plan submitted by JM Financial Reconstruction Company Limited, JMFARAC - March, 2018 - Trust and Reliance Industries Limited in respect of the Corporate Debtor - Section 53 of the Code lists the priorities to be given to the beneficiaries, of liquidation value of the assets of the Corporate Debtor. The provisions of Section 53 make it amply clear that Operational Creditors are at the end of the list of beneficiaries as the Secured Financial Creditors have an edge over the others. The preamble of the I B Code aims to promote resolution over liquidation. The purpose of resolution is maximization of value of assets of the 'Corporate Debtor' and thereby for all creditors. It is not maximization of value for a 'stakeholder' or 'assets of a stakeholder' such as creditors and to promote entrepreneurship, availability of credit and balance the interests. The first objective is 'resolution'. The second objective is 'maximization of the value of assets of the 'Corporate Debtor' and third objective is 'promoting entrepreneurship, availability of credit and balancing the interests'. This objective of the I B Code is sacrosanct - The 'I B Code' defines 'Resolution Plan' as a plan for insolvency resolution of the 'Corporate Debtor' as a going concern. It does not spell out the shape, colour and texture of 'Resolution Plan', which is left to imagination of stakeholders. Read with long title of the 'I B Code', functionally, the 'Resolution Plan' must resolve insolvency (rescue a failing, but viable business); should maximize the value of assets of the 'Corporate Debtor', and should promote entrepreneurship, availability of credit and balance the interests of all the stakeholders. On perusal of the Resolution Plan, it is found that it meets the requirement of Section 31 r/w Section 30(2) of the Code. Therefore, the present application IA 259 of 2018 is allowed subject to certain observation with regard to the Clause No. 3.2.3(iii) and clause No. 11 of Resolution Plan and sub-para (n) of paragraph 33 along with the prayers (f) of paragraph 35 of IA 259 of 2018 which cannot be allowed as these are the subject matter of the various Competent Authorities having their own jurisdiction - Approval of the Resolution Plan does not mean automatic waiver or abetment of any legal proceedings which are pending by or against the Company/Corporate Debtor as those are the subject matter of the concerned Competent authorities having their proper/own jurisdiction to pass any appropriate order as the case maybe. The Resolution Applicants on approval of the Plan may approach the Competent Authorities/Courts/Legal Forums/Offices - Govt, or Semi. Govt./State or Central Govt, for appropriate relief(s) sought for in Clause No. 3.2.3 (iii) of the Resolution Plan at Page No. 19. Not allowing the above said Clause No. 3.2.3 (iii) and Clause No. 11.1, 11.1.1 to 11.1.20 of the Resolution Plan, along with the prayers vide sub-para (f) of Paragraph No. 35 and pleadings made thereon in sub-clause (n) of Paragraph No. 33 of application being IA No. 259 of 2018, is not going to make any hindrance for proper implementation of the Resolution Plan as those are the subject matter of the concerned/appropriate Competent Authorities.
Issues Involved:
1. Approval of the Resolution Plan. 2. Continuation of the Resolution Professional’s role. 3. Continuation of the moratorium. 4. Implementation of the Resolution Plan. 5. Appointment of the Monitoring Committee. 6. Grant of concessions, reliefs, and dispensations. 7. Cooperation of stakeholders. 8. Suspension of the powers of the suspended board of directors. 9. Various Interlocutory Applications (IAs) filed during the pendency of the main application. Detailed Analysis: 1. Approval of the Resolution Plan: The application for approval of the Resolution Plan was filed under Section 30(6) read with Section 31(1) of the Insolvency and Bankruptcy Code, 2016 (IBC). The Resolution Plan was submitted by JM Financial Asset Reconstruction Company Limited and Reliance Industries Limited. The plan was initially not approved by the Committee of Creditors (CoC) as it did not receive the requisite 75% voting share. However, after the amendment to Section 30(4) of the IBC, reducing the voting threshold to 66%, the plan received 72.192% of the voting share and was subsequently approved by the CoC. The Tribunal found that the Resolution Plan met the requirements of Section 31 read with Section 30(2) of the IBC and approved it with certain observations regarding specific clauses. 2. Continuation of the Resolution Professional’s Role: The Tribunal ordered that the Resolution Professional (RP) should continue to conduct its role until the Resolution Applicants acquire control of the Corporate Debtor. This continuation ensures that the RP has all powers, duties, and protections available under the IBC and related regulations. 3. Continuation of the Moratorium: The Tribunal directed that the moratorium declared under Section 14 of the IBC should continue until the Resolution Applicants acquire control of the Corporate Debtor. This measure is to ensure that the Corporate Debtor remains a going concern during the transition period. 4. Implementation of the Resolution Plan: The Tribunal directed the Resolution Applicants to implement the Resolution Plan as set out. The plan includes payment of insolvency resolution process costs, management of the Corporate Debtor, and dealing with the interests of all stakeholders. 5. Appointment of the Monitoring Committee: The Tribunal approved the appointment of a Monitoring Committee (MC) to oversee the Corporate Debtor from the date of the approval of the Resolution Plan until the Resolution Applicants acquire control. The MC is to be protected against any suits, legal proceedings, or liabilities in good faith compliance with the IBC and other applicable laws. 6. Grant of Concessions, Reliefs, and Dispensations: The Tribunal did not grant the reliefs and concessions sought under Clause 11 of the Resolution Plan, stating that these are subject to the jurisdiction of various competent authorities. The Resolution Applicants may approach the appropriate authorities for necessary approvals. 7. Cooperation of Stakeholders: The Tribunal directed all stakeholders to cooperate with the Resolution Applicants and the MC to keep the Corporate Debtor a going concern and to implement the Resolution Plan as approved. 8. Suspension of the Powers of the Suspended Board of Directors: The Tribunal ordered that the powers of the suspended board of directors of the Corporate Debtor shall remain suspended until the Resolution Applicants acquire control of the Corporate Debtor. 9. Various Interlocutory Applications (IAs): Several IAs were filed during the pendency of the main application, raising various grievances. The Tribunal dismissed these IAs, stating that they were not maintainable and were filed at a belated stage. The Tribunal emphasized the primacy of the CoC’s commercial decision and noted that the IAs did not present any valid grounds to interfere with the approved Resolution Plan. Conclusion: The Tribunal approved the Resolution Plan submitted by JM Financial Asset Reconstruction Company Limited and Reliance Industries Limited, subject to certain observations. The Resolution Professional was directed to continue in their role, the moratorium was extended, and the Monitoring Committee was appointed. The Tribunal dismissed various IAs filed during the pendency of the main application, reaffirming the primacy of the CoC’s commercial decision.
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