2020 (10) TMI 337 - Tri - Companies Law

Approval of Resolution Plan - Section 31(1) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The parameters for approval of Resolution Plan are set out in Sections 30(2) and 31 of the IBC, 2016. The Resolution Plan under consideration has met with mandatory compliances. The Resolution Plan is hereby approved which shall be binding on the Corporate Debtor and its employees, members, creditors, guarantors and other stakeholders involved in the Resolution Plan including the Resolution Applicants - While approving the Resolution Plan, as mentioned above, it is clarified that the Resolution Applicants shall pursuant to the Resolution Plan approved under Section 31(1) of the I B Code, 2016, obtain all the necessary approval as may be required under any law for the time being in force within a period of one year from the date of approval of the Resolution Plan by this authority or within such period as provided for in such law. Order of Moratorium shall cease to have effect - Resolution Plan approved.

Summary

Issues Involved:
1. Approval of the Resolution Plan under Section 31(1) of the Insolvency and Bankruptcy Code, 2016.
2. Objection by Operational Creditor regarding related parties and contravention of IBC provisions.
3. Compliance with mandatory requirements under Sections 30(2) and 31 of the IBC, 2016.

Issue-wise Detailed Analysis:

1. Approval of the Resolution Plan under Section 31(1) of the Insolvency and Bankruptcy Code, 2016:
The Resolution Professional submitted the Resolution Plan approved by the Committee of Creditors (CoC) for approval under Section 31(1) of the IBC, 2016. The CoC, after evaluating the plan's viability and feasibility, approved it with a significant majority. The Resolution Plan proposed by the Joint Resolution Applicants, Mr. Mukesh Gupta and Mr. Krishan Bansal, included settling all admitted claims of Operational Creditors at 100% value and outlined the mode of repayment through stock/materials procured from M/s. Bhagwati Product Limited (BPL).

2. Objection by Operational Creditor regarding related parties and contravention of IBC provisions:
An Operational Creditor, Jay Ace Technologies Limited, raised objections against the Resolution Plan, alleging that the Resolution Applicants were related parties under Section 5(24) of IBC, 2016, and thus barred under Section 29A. The creditor also claimed the plan was sham and collusive, reducing their voting share unjustly and contravening Section 30(2)(e) of IBC, 2016. They sought compensation under Section 73 of the Contract Act. In response, the Counsel for the Resolution Professional cited the Supreme Court ruling in K. Sashidhar Vs. Indian Overseas Bank & Ors., emphasizing the paramount status of the CoC's commercial wisdom, which is non-justiciable. The Tribunal rejected the Operational Creditor's objections, noting that the provision for Operational Creditors in the Resolution Plan exceeded what they would receive in liquidation.

3. Compliance with mandatory requirements under Sections 30(2) and 31 of the IBC, 2016:
The Tribunal examined the Resolution Plan's compliance with the mandatory requirements set out in Sections 30(2) and 31 of the IBC, 2016. Key compliances included:
- Section 30(1): The Resolution Applicant submitted an affidavit confirming no disqualification under Section 29A.
- Section 30(2)(a) and Regulation 38(1A): The plan prioritized CIRP costs over other debts.
- Section 30(2)(b) and Regulation 38(1): The plan provided for 100% payment of admitted claims of Operational Creditors, exceeding liquidation value.
- Section 30(2)(c) and (d) and Regulation 38(2): The plan maintained the current management and capital structure, with Mr. Krishan Bansal to be appointed to the Board within 60 days.
- Section 30(2)(e): The plan did not contravene any existing laws.
- Section 30(4) and Regulation 38(3): The CoC approved the plan with 100% voting after considering its feasibility and viability.

The Tribunal approved the Resolution Plan, making it binding on all stakeholders and directing the Resolution Applicants to obtain necessary approvals within one year. The moratorium order ceased, and the Resolution Professional was instructed to forward all records to the IBBI.

Conclusion:
The Tribunal approved the Resolution Plan submitted by the Resolution Professional, rejecting the objections raised by the Operational Creditor. The plan met all compliance requirements under the IBC, 2016, and was deemed binding on all involved parties. The order of moratorium ceased, and the Resolution Professional was directed to forward records to the IBBI.