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2019 (5) TMI 1633 - AT - Insolvency and BankruptcyValidity of Resolution Plan - grievance of the Appellant- Indian Bank is that the claim of the Bank has not been properly decided and the Resolution Plan did not take care of the report of the valuers - contravention of the provisions of Section 30(2) of the I B Code - HELD THAT - We find that Mr. K. Vijay Bhaskar Reddy and Mr. P. Madhu, who were appointed as the valuers to determine the value of the Corporate Debtor , valued it as ₹ 681 Crores and ₹ 513 Crores, respectively. However, Mr. K. Vijay Bhaskar Reddy admitted that he had prepared the valuation Report at the behest of Indian Bank . A third Valuer, Duff and Phelps who valued the Corporate Debtor at ₹ 352 Crores, therefore, the definite conclusion about the liquidation value of the Corporate Debtor cannot be derived except by taking average of the three valuation. The Committee of Creditors has also accepted the average of the liquidation value which comes to ₹ 597.54 Crores and on the basis of which the Resolution Plan was considered. If the Resolution Plan is considered, then it will be evident that 25% of the admitted dues of the Financial Creditors have been allowed in the Resolution Plan . On the other hand, the Operational Creditors have been discriminated. The liquidation value being ₹ 597.54 Crores, the upfront payment suggested by the Resolution Applicant being less i.e., ₹ 477 Crores, the payment to the Operational Creditors is lower than the proportionate liquidation value, therefore, the Resolution Plan , as approved by the Adjudicating Authority is against Section 30(2) (b) of the I B Code . In Binani Industries Limited vs. Bank of Baroda Anr. 2018 (3) TMI 1604 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI this Appellate Tribunal taking into consideration the viability and feasibility of the Resolution Plan , held that there cannot be any discrimination amongst the same set of group such as Financial Creditors or Operational Creditors and the Operational Creditors must get roughly the same treatment as Financial Creditors , and if they are not, such plans are to be rejected or modified so that the Operational Creditor s rights are safeguarded - In the present case, as we find that the Operational Creditors have been discriminated and not given the same treatment as Financial Creditors , the impugned order approving the Resolution Plan cannot be upheld. Whether the order approving the Resolution Plan should be set aside or the said plan should be substituted with certain modification to ensure successful Resolution? - HELD THAT - It is open to the Committee of Creditors to negotiate and ask the Resolution Applicant to revise its plan, if it does not confront with the I B Code . Such power being vested with the Committee of Creditors , it is also open to the Adjudicating Authority and this Appellant Tribunal to ask the Resolution Applicant to appropriate modification in the plan to make it in consonance with the provisions of the I B Code and thereby to substitute the plan with modification - In the present case, as we noticed that the upfront amount of ₹ 477 Crores is much less than the average liquidation value of ₹ 597.54 Crores, we find that the Resolution Applicant wants to take the assets of the Corporate Debtor at a lessor value than the value which may be received on liquidation. M/s. Maharashtra Seamless Ltd. should increase upfront payment of ₹ 477 Crores as proposed to the Financial Creditors , Operational Creditors and other Creditors to ₹ 597.54 Crores by paying additional ₹ 120.54 Crores approximately to make it at par with the average liquidation value of ₹ 597.54 Crores. If the upfront amount is increased to ₹ 597.54 Crores, the total amount should be distributed amongst the Financial Creditors and the Operational Creditors at same ratio as suggested. As per suggestion of the Resolution Applicant , the Operational Creditors can be given same percentage of amount as allocated to the Financial Creditors - If the Resolution Applicant fails to undertake the payment of additional amount of ₹ 120.54 Crores in addition to ₹ 477 Crores thereby raising it to ₹ 597.54 Crores (total) and deposit the amount in the Escrow Account within 30 days in such case, the impugned order of approval of the Resolution Plan be treated to be set aside. Thereafter, the Adjudicating Authority will pass appropriate order in accordance with law. Appeal disposed off.
Issues Involved:
1. Approval of the Resolution Plan. 2. Objections regarding the Resolution Plan's compliance with the Insolvency and Bankruptcy Code (I&B Code). 3. Valuation and liquidation value concerns. 4. Treatment of Operational Creditors. 5. Implementation of the Resolution Plan and possession of the Corporate Debtor's assets. Detailed Analysis: 1. Approval of the Resolution Plan: The appeals were filed against the order approving the Resolution Plan submitted by 'M/s. Maharashtra Seamless Ltd.' by the Adjudicating Authority (National Company Law Tribunal), Hyderabad Bench. The Resolution Plan was approved by the Committee of Creditors (CoC) with a majority of 87.10% voting shares. Despite the approval, objections from various parties delayed the final approval by the Adjudicating Authority. 2. Objections regarding the Resolution Plan's compliance with the Insolvency and Bankruptcy Code (I&B Code): The Resolution Professional argued that the Resolution Plan met all requirements of the I&B Code and Corporate Insolvency Resolution Process Regulations, 2016. However, objections were raised that the plan was below the liquidation value and did not maximize the value of the Corporate Debtor's assets. Additionally, it was argued that the plan did not balance the interests of all stakeholders. 3. Valuation and liquidation value concerns: The liquidation value of the Corporate Debtor was a contentious issue. The Resolution Professional presented a liquidation value of ?597.54 Crores, but the upfront amount proposed in the Resolution Plan was ?477 Crores. The CoC accepted the average liquidation value calculated from different valuers, but the plan's upfront payment was still below this value. The Tribunal found this discrepancy against Section 30(2)(b) of the I&B Code. 4. Treatment of Operational Creditors: The Tribunal noted that the Operational Creditors were discriminated against in the Resolution Plan, receiving less favorable treatment compared to Financial Creditors. The Hon’ble Supreme Court's decision in "Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors." emphasized that Operational Creditors should receive roughly the same treatment as Financial Creditors, and any deviation from this principle would render the plan non-compliant with the I&B Code. 5. Implementation of the Resolution Plan and possession of the Corporate Debtor's assets: The Tribunal directed 'M/s. Maharashtra Seamless Ltd.' to increase the upfront payment to ?597.54 Crores to align with the liquidation value. The Tribunal also addressed the issue of possession of the Corporate Debtor's assets, directing the Resolution Professional to take over the assets to ensure their integrity until the plan was modified. The Adjudicating Authority was instructed to facilitate this process with the help of local authorities if necessary. Conclusion: The Tribunal concluded that the Resolution Plan could not be upheld in its current form due to its non-compliance with the I&B Code, particularly in the treatment of Operational Creditors and the discrepancy in the liquidation value. The Tribunal provided 'M/s. Maharashtra Seamless Ltd.' an opportunity to modify the plan by increasing the upfront payment. If the modifications were not made within 30 days, the approval of the Resolution Plan would be set aside, and the Adjudicating Authority would pass appropriate orders. The appeals were disposed of with these directions, ensuring no costs were imposed.
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