2019 (6) TMI 639 - AT - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - proceedings against Corporate Debtor - approval of resolution plan - grievance of the Appellant is that the claim of the Appellant was not taken into consideration by the Resolution Professional because of non-invocation of the Corporate Guarantee, and was neither invited or made a member of the Committee of Creditors despite it being a Financial Creditor of the Corporate Debtor on the basis of its claim against the Corporate Guarantee given by the Corporate Debtor . HELD THAT - It is true that the Corporate Debtor had taken guarantee but the said guarantee was not invoked in favour of the Appellant- Edelweiss Asset Reconstruction Limited . However, the said guarantee was not invoked by the Appellant- Edelweiss Asset Reconstruction Limited as on the date of admission or filing of the claim - On declaration of Moratorium , it was not open to the Appellant- Edelweiss Asset Reconstruction Limited to invoke the guarantee (Corporate Guarantee). The Resolution Professional has rightly not accepted the claim of the Appellant- Edelweiss Asset Reconstruction Limited and the Adjudicating Authority has rightly rejected the application filed by the Appellant- Edelweiss Asset Reconstruction Limited for accepting its claim. The rejection of the claim for the purpose of collating the claim and making it part of the Resolution Plan will not affect the right of the Appellant- Edelweiss Asset Reconstruction Limited to invoke the Bank Guarantee against the Corporate Debtor in case the Principal Borrower failed to pay the debt amount, the Moratorium period having come to an end. Appeal dismissed.

Issues Involved:

1. Non-inclusion of Edelweiss Asset Reconstruction Company Limited as a Financial Creditor.
2. Rejection of Edelweiss Asset Reconstruction Company Limited's Resolution Plan.
3. Claims of Sundargarh Mines & Transport Workers Union regarding workers' dues.
4. Dues of the State of Jharkhand.

Issue-Wise Detailed Analysis:

1. Non-inclusion of Edelweiss Asset Reconstruction Company Limited as a Financial Creditor:

The Appellant, Edelweiss Asset Reconstruction Company Limited, claimed to be a Financial Creditor based on a Corporate Guarantee provided by Orissa Manganese & Minerals Limited. The Corporate Debtor had guaranteed a loan availed by Adhunik Power and Natural Resources Limited from a consortium of banks. The debt was assigned to Edelweiss, which argued that it should be considered a Financial Creditor under Section 5(7) and Section 5(8)(h) of the Insolvency and Bankruptcy Code (I&B Code). However, the guarantee was not invoked before the initiation of the Corporate Insolvency Resolution Process (CIRP), and thus, the claim was not recognized. The Tribunal upheld the Resolution Professional's decision, stating that the claim had not matured due to non-invocation of the guarantee before the CIRP initiation.

2. Rejection of Edelweiss Asset Reconstruction Company Limited's Resolution Plan:

Edelweiss contended that its Resolution Plan was unfairly ranked lower than that of Ghanashyam Mishra & Sons Private Limited. The Tribunal emphasized that the Committee of Creditors (CoC) has the expertise to evaluate the viability and feasibility of Resolution Plans. The comparative chart showed that Ghanashyam Mishra & Sons Private Limited's plan offered better terms, including higher payments to creditors and a more favorable equity stake. The Tribunal found no illegality in the CoC's decision and upheld the approval of Ghanashyam Mishra & Sons Private Limited's plan.

3. Claims of Sundargarh Mines & Transport Workers Union regarding workers' dues:

The Union, representing 1476 workers, claimed that their dues were ignored in the CIRP. The Tribunal noted that the claim was filed after the 270-day resolution period and that the workers were aware of the CIRP proceedings. The Tribunal acknowledged the workers' right to pursue their claims in a Civil Court or Labour Court post-moratorium, as it was not feasible to determine the validity of all claims within the CIRP framework. The Tribunal suggested that the workers seek appropriate relief through other legal avenues.

4. Dues of the State of Jharkhand:

The State of Jharkhand challenged the non-admission of its claim, arguing that it should be treated as a secured creditor. The Tribunal referred to the statutory provisions defining operational debt and held that the dues were operational in nature. The Tribunal did not pass any specific order regarding the State's claim due to the absence of an appeal by the State of Jharkhand.

Conclusion:

The Tribunal dismissed the appeals by Edelweiss Asset Reconstruction Company Limited and Sundargarh Mines & Transport Workers Union, while providing observations on the workers' right to seek relief through other legal forums. The Tribunal also clarified the nature of the State of Jharkhand's dues as operational debt. No costs were imposed.

← Previous Next →