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2020 (4) TMI 513 - AT - Insolvency and BankruptcyApproval of Resolution Plan - the contention of the Appellant is that the Resolution Plan approved is not in compliance with the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC); that the provision of paying NIL amount to the Operational Creditors is not as per provisions of IBC and also that the Operational Creditors deserved a similar treatment as Financial Creditors; that it is wrong on the part of Committee of Creditors (COC) to approve a Resolution Plan which provided for payment only to members of the Committee and no other stakeholders. HELD THAT - We have already reproduced portion from Part B - Financial Proposal with regard to what the approved Resolution Plan states regarding dues to the Operational Creditors. The proposal is based on the assessment that there is no liquidation value due to Operational Creditors. Although it is not stated but there is reason to doubt that the Resolution Applicants were aware of the liquidation value. There is no dispute that so many of the Operational Creditors have been left high and dry giving them nil amount which Hon'ble Supreme Court has observed that giving NIL to Operational Creditors would certainly not balance the interest of all stakeholders or maximise the value of assets of the Corporate Debtor if it becomes impossible to continue running its business as a going concern. The Impugned Order accepting the Resolution Plan cannot be upheld. The Resolution Plan does not appear to have taken care of interest of all stakeholders including Operational Creditors and the decision of the COC also does not reflect that it has taken into account the fact that the Corporate Debtor needs to be kept as a going concern and that there is need to maximise the value of the assets and that the interest of all the stakeholders including Operational Creditor has to be taken care of - matter remitted back to the Adjudicating Authority with a direction to send back the Resolution Plan to the Committee of Creditors to resubmit the Plan - appeal disposed off.
Issues Involved:
1. Compliance of the Resolution Plan with the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC). 2. Treatment of Operational Creditors in the Resolution Plan. 3. Commercial decision-making by the Committee of Creditors (COC). 4. Judicial review of the Resolution Plan by the Adjudicating Authority and the Appellate Tribunal. Issue-wise Detailed Analysis: 1. Compliance of the Resolution Plan with the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC): The Appellant, an Operational Creditor, contended that the approved Resolution Plan was not in compliance with the IBC provisions. Specifically, the plan proposed a NIL amount for Operational Creditors, which was argued to be contrary to the IBC and precedent judgments. The Tribunal highlighted that the IBC mandates a fair treatment of all stakeholders, including Operational Creditors, and requires that their interests be adequately balanced. 2. Treatment of Operational Creditors in the Resolution Plan: The Tribunal noted that the initial Resolution Plan proposed to pay Operational Creditors ?2.668 Crores, but the revised plan reduced this amount to zero. This was viewed as a significant issue, as it did not reflect the balancing of interests of all stakeholders, which is a key requirement under the IBC. The Tribunal referred to the Supreme Court's judgment in the Essar Steel case, emphasizing that the interests of Operational Creditors must be considered to ensure the corporate debtor can continue as a going concern. 3. Commercial decision-making by the Committee of Creditors (COC): The Respondents argued that the COC's decision to approve the Resolution Plan was a commercial decision, which should not be interfered with by the Tribunal. However, the Tribunal pointed out that while the COC has the discretion to make commercial decisions, these decisions must reflect the consideration of key features such as maximizing the value of the corporate debtor's assets and balancing the interests of all stakeholders, including Operational Creditors. 4. Judicial review of the Resolution Plan by the Adjudicating Authority and the Appellate Tribunal: The Tribunal underscored the limited scope of judicial review, as laid down by the Supreme Court in the Essar Steel case. The review is confined to ensuring that the Resolution Plan complies with Section 30(2) of the IBC and that the COC has considered the necessary parameters. The Tribunal found that the COC's minutes did not provide sufficient reasons to demonstrate that the interests of all stakeholders, particularly Operational Creditors, were taken into account. Consequently, the Tribunal set aside the Impugned Order approving the Resolution Plan and remitted the matter back to the Adjudicating Authority. The Adjudicating Authority was directed to send the Resolution Plan back to the COC for resubmission after ensuring compliance with the Supreme Court's guidelines and the IBC. Conclusion: The Tribunal concluded that the Resolution Plan did not adequately balance the interests of all stakeholders, specifically the Operational Creditors, and failed to reflect that the COC had considered the necessary parameters. The matter was remitted back to the Adjudicating Authority for further action in accordance with the Supreme Court's judgment and the IBC. The appeal was disposed of with no costs.
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