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2021 (4) TMI 594 - AT - Insolvency and BankruptcyApproval of resolution plan - main objection of the Applicants is that the Resolution Applicant intends to change the main business of the Corporate Debtor form printing business to running Data Centers - change in the nature of the business of the Corporate Debtor is permitted or not. Whether the Resolution Plan approved under Section 31 by the Learned Adjudicating Authority is in contravention with the scope and objective of the Code which is Resolution , maximization of value of assets of the Corporate Debtor and promoting entrepreneurship , availability of credit and balancing interest of all stakeholders ? HELD THAT - The Jurisdiction of NCLAT being in continuation of the proceedings envisages that any Appeal against an Order approving the Resolution Plan shall be in the manner and on the grounds specified in Section 61(3) of the IBC. Pertinently, the grounds, be it under Section 30(2) or under Section 61(3) are regarding testing the validity of the Resolution Plan approved by the CoC. The enquiry in such an Appeal would be limited to the power authorized to the RP under Section 30(2) of the IBC, or at best, by the Adjudicating Authority under Section 31(2) read with Section 31(1). This Tribunal can examine the challenge only in relation to the grounds specified in Section 61(3), which is limited. The Hon ble Supreme Court in K. Sashidhar 2019 (2) TMI 1043 - SUPREME COURT has laid down the role of the CoC in accepting or rejecting the Resolution Plan as well as the role of the Adjudicating Authority while considering the Application from approval or rejection of the Resolution Plan. There is an intrinsic assumption that the Financial Creditors are fully informed about the viability of the Corporate Debtor and the feasibility of the Resolution Plan. The opinion expressed after due deliberations in the CoC meeting through voting, is a collective business decision. The legislature, consciously, has provided only limited grounds to challenge the commercial wisdom or their collective decision by the Adjudicating Authority. The submission of the Appellant that interest of all stakeholders is ignored, is not sustainable, keeping in view, the substantial amounts earmarked for workmen and employees in the aforenoted table and also what Schedule V of the Plan has envisaged to balance the interests of all stakeholders. Thus, it can be seen from the Sections 30(2) 31 and Regulations 37, 38 and 39 that there is nothing in the Code which prevents a Resolution Applicant from changing the present line of business to adding value or creating Synergy to the existing assets and converting an obsolete line of business to a more viable and feasible option. Appeal dismissed.
Issues Involved:
1. Approval of the Resolution Plan. 2. Change in the nature of the business of the Corporate Debtor. 3. Compliance with the Insolvency and Bankruptcy Code (IBC) and related regulations. 4. Consideration of stakeholders' interests. 5. Commercial wisdom of the Committee of Creditors (CoC). Issue-wise Detailed Analysis: 1. Approval of the Resolution Plan: The challenge in the appeal was against the approval of the Resolution Plan by the Adjudicating Authority (NCLT). The Resolution Professional filed MA 2972/2019 for the approval of the Resolution Plan under Section 30(6) of the Insolvency and Bankruptcy Code, 2016, read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Adjudicating Authority approved the Resolution Plan submitted by Sify Technology Limited, which was contested by the appellant. 2. Change in the Nature of the Business of the Corporate Debtor: The main objection raised by the appellant was that the Resolution Applicant intended to change the business of the Corporate Debtor from printing to running Data Centers. The Adjudicating Authority observed that there is nothing in the Code that prevents a Resolution Applicant from pursuing a different line of business. The Code only contemplates that the Corporate Debtor shall continue to be run as a going concern, which does not bind the Resolution Applicant to the erstwhile business, especially when the existing business is obsolete. 3. Compliance with the Insolvency and Bankruptcy Code (IBC) and Related Regulations: The appellant argued that the Resolution Plan did not comply with the intent, object, and purpose of the Code. The Adjudicating Authority, however, found that the Resolution Plan was compliant with Section 30(2) of the Code and that the commercial wisdom of the CoC should be respected. The CoC had approved the Resolution Plan with a majority of 70.5%. The Tribunal emphasized that the limited judicial review available is to ensure that the CoC has taken into account the need to keep the Corporate Debtor as a going concern, maximize the value of its assets, and consider the interests of all stakeholders. 4. Consideration of Stakeholders' Interests: The appellant contended that the Resolution Plan did not protect the interests of all stakeholders, particularly the workmen and employees. The Tribunal noted that the Resolution Plan provided for the continuation of services for approximately 70 active employees and workmen and made provisions for their training and upskilling. The Plan also earmarked substantial amounts for workmen and employees, addressing their interests adequately. 5. Commercial Wisdom of the Committee of Creditors (CoC): The Tribunal reiterated that the commercial wisdom of the CoC is paramount and not subject to judicial review, except on limited grounds specified in Section 61(3) of the IBC. The CoC's decision to approve the Resolution Plan submitted by Sify was based on a thorough evaluation of the feasibility and viability of the Plan. The Tribunal emphasized that the CoC's decision, taken by a majority vote, reflects a collective business decision that should not be interfered with by the Adjudicating Authority. Conclusion: The Tribunal concluded that the Resolution Plan approved by the CoC met the requirements specified under Section 61(3) of the IBC. The Plan was found to be feasible and viable, balancing the interests of all stakeholders, and not in contravention of any law. The Tribunal dismissed the appeal, upholding the Adjudicating Authority's approval of the Resolution Plan.
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