2021 (7) TMI 435 - Tri - Insolvency and Bankruptcy

Avoidance transactions - seeking to reject Resolution plan or to modify it - HELD THAT - CoC has consciously decided that the money realised through these avoidance transactions would accrue to the members of the CoC and at the same time they have also consciously decided after lot of deliberations, negotiations that the monies realised if any under Section 66 of IBC i.e Fraudulent Transactions, CoC has ascribed the value of ₹ 1 and if any positive money recovery the same would go to the Resolution Applicant/future Corporate Debtor. CoC is comprised of 77 Financial Creditors and deliberations they have protected their interest and ascribed the value based on their Commercial Wisdom and Adjudicating Authority has limited jurisdiction to interfere with the same - The CoC by exercising its Commercial Wisdom have accepted, approved the resolution plan including the monies to be recovered if any from the Fraudulent Transactions - thus, Adjudicating Authority are reluctant to substitute our wisdom at this stage as against their Commercial Wisdom of the CoC. The Adjudicating Authority is of the confirmed view that CoC has already taken a conscious decision comprising of 77 members, therefore we restrain from making any comments and sending the plan back to CoC as pleaded by the applicant - Application dismissed.

Summary

Issues:
1. Approval of Resolution Plan and avoidance transactions.

Analysis:
The judgment involved the consideration of an application seeking dismissal of an Interlocutory Application and rejection of a Resolution Plan, or alternatively, approval of the Resolution Plan with modifications regarding the treatment of recoveries from avoidance applications. The Adjudicating Authority deliberated on the CoC's decision regarding the distribution of funds from avoidance transactions, noting that the CoC had consciously decided that such funds would benefit the CoC members. The CoC had also determined that recoveries from Fraudulent Transactions under Section 66 of the IBC would go to the Resolution Applicant. The Authority acknowledged the CoC's commercial wisdom and limited jurisdiction to interfere with their decisions, citing various judgments supporting this stance.

The Authority emphasized that the CoC, comprising 77 Financial Creditors, had safeguarded their interests through thorough deliberations and negotiations, ultimately approving the Resolution Plan, including provisions for recoveries from Fraudulent Transactions. Despite arguments to send the matter back to the CoC for reconsideration, the Authority upheld the CoC's decision, respecting their commercial judgment and citing legal precedents that discourage interference with CoC decisions. The judgment highlighted the CoC's comprehensive evaluation of various factors, including Net Present Value, risk considerations, and the transfer of recovery risks to the Resolution Applicant.

Additionally, the judgment referenced legal arguments presented by counsels for both the Applicant and Respondents, citing a judgment from the Hon'ble Delhi High Court and a decision from the Hon'ble NCLAT. The Authority differentiated between these judgments and concluded that the CoC's decision, supported by a majority vote, should not be overturned based on the arguments presented. Ultimately, the Adjudicating Authority dismissed the application seeking to challenge the CoC's decision, emphasizing the CoC's authority in approving the Resolution Plan and determining the treatment of recoveries from avoidance applications.