2021 (3) TMI 64 - Tri - Insolvency and Bankruptcy

Seeking approval of resolution plan - section 30(6) read with section 31 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - Looking to the entire facts of the case, it is found that the CoC has approved the plan with 100 per cent. voting in favour of the approval of the plan. More so, the resolution applicant fulfils the mandatory contents of the resolution plan as provided under regulation 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Further, from the object of the IBC, it is amply clear that the resolution is rule and the liquidation is an exception . Liquidation brings the life of a corporate to an end. It destroys organizational capital and renders resources idle till reallocation to alternate uses. Further, it is inequitable as it considers the claims of a set of stakeholders only, if there is any surplus after satisfying the claims of a prior set of stakeholders fully. The IB Code, therefore, does not allow liquidation of a corporate debtor directly. It allows liquidation only on failure of corporate insolvency resolution process. It rather facilitates and encourages resolution in several ways - Keeping in view such object behind the enactment of the Code, intention of the Legislature, that the priority is to be given to the resolution than liquidation in the larger interests of the public, workmen, stakeholders and the other employees of the corporate debtors in the interest of justice and in order to achieve the object of the Code and liquidation of a company can be only as a last resort, wherein, all efforts for bringing resolution plan were failed or it cannot be found workable in the larger public interest. The hon'ble Supreme Court in its recent judgment in K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK OTHERS 2019 (2) TMI 1043 - SUPREME COURT comprising of the hon'ble Justice A. M. Khanwilkar and hon'ble Justice Ajay Rastogi observed that the Adjudicating Authority has no jurisdiction to interfere with the commercial wisdom of the CoC. On the backdrop of the decision taken by the hon'ble Supreme Court, it is pertinent to note that commercial wisdom of the CoC cannot be interfered into by the Adjudicating Authority. The Adjudicating Authority, is of the considered opinion and also being satisfied that the resolution plan as approved by the committee of creditors (CoC) meets the requirements as referred to under section 30(2) of the Code - Application allowed.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Replacement of Interim Resolution Professional (IRP)
3. Expression of Interest (EoI) and Submission of Resolution Plan
4. Approval of Resolution Plan by Committee of Creditors (CoC)
5. Compliance with Section 30 and Regulation 38 of the Insolvency and Bankruptcy Code (IB Code)
6. Financial Proposals and Revival Expenses
7. Source of Funds for Resolution Plan
8. Jurisdiction and Authority of Adjudicating Authority
9. Extinguishment of Claims and Reliefs
10. Implementation of Resolution Plan

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The operational creditor filed C.P. (IB) No. 536 of 2020 under Section 9 of the IB Code, seeking initiation of CIRP against the corporate debtor, which was admitted on January 16, 2020. An Interim Resolution Professional (IRP) was appointed to oversee the process.

2. Replacement of Interim Resolution Professional (IRP):
The Committee of Creditors (CoC) decided to replace the IRP in its second meeting held on February 25, 2019. An application was filed, and the order was passed on March 16, 2020, appointing a new Resolution Professional (RP).

3. Expression of Interest (EoI) and Submission of Resolution Plan:
The RP called for EoI on March 24, 2020. Due to the Covid-19 situation, the timeline was extended. Only one resolution plan was received from M/s. Suryadeep Alloys Steel Castings P. Ltd. The CoC requested a revised plan, which was submitted and found satisfactory.

4. Approval of Resolution Plan by Committee of Creditors (CoC):
The CoC approved the resolution plan with 100% voting in favor during the seventh meeting held on August 28, 2020. The RP then filed the application under Section 31 of the IB Code for approval of the resolution plan by the Adjudicating Authority.

5. Compliance with Section 30 and Regulation 38 of the Insolvency and Bankruptcy Code (IB Code):
The resolution plan complied with the requirements under Regulation 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, and Section 30 of the IB Code. The plan accounted for the interests of all stakeholders.

6. Financial Proposals and Revival Expenses:
The financial proposal included an upfront payment of 100% of the bid value within 90 days and revival expenses of approximately one crore rupees within one year. The bid value would be appropriated among the creditors.

7. Source of Funds for Resolution Plan:
The resolution applicant and its promoters had sufficient financial resources, with a collective net worth of around ?18 crores. IDFC First Bank had sanctioned financial assistance of ?3.50 crores.

8. Jurisdiction and Authority of Adjudicating Authority:
The Adjudicating Authority has no jurisdiction to interfere with the commercial wisdom of the CoC, as affirmed by the Supreme Court in K. Sashidhar v. Indian Overseas Bank. The authority's role is limited to ensuring compliance with the IB Code.

9. Extinguishment of Claims and Reliefs:
Claims not dealt with during the CIRP period cannot be re-agitated after the approval of the plan. Resolution applicants may seek concessions from competent authorities. Pending legal proceedings are not automatically waived or abated.

10. Implementation of Resolution Plan:
The approved resolution plan shall come into force immediately and be subject to existing laws. Necessary approvals must be obtained within one year. The resolution professional shall forward all records to the Insolvency and Bankruptcy Board of India.

Conclusion:
The Adjudicating Authority, satisfied that the resolution plan meets the requirements under Section 30(2) of the IB Code, approved the plan with immediate effect. The application, I.A. No. 591 of 2020, was allowed and disposed of accordingly.