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2021 (11) TMI 871 - AT - Insolvency and BankruptcyApproval of Resolution plan - procedural breach in consideration of the Resolution Plan of the Appellant or not - HELD THAT - It has been noted in the order of the Adjudicating Authority that by order passed on 04.04.2019, the Adjudicating Authority permitted Kals Distilleries Private Limited to submit a Resolution Plan, hence the same was duly accepted by the Resolution Professional. On 11.04.2019, the Appellant sent a protest to the Resolution Professional regarding Resolution Plan of Kals Distilleries Private Limited which protest was immediately replied by Resolution Professional on 12.04.2019 informing that the plan has been accepted by the order dated 04.04.2019 of the Adjudicating Authority. The Hon ble Supreme Court in K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK OTHERS 2019 (2) TMI 1043 - SUPREME COURT had occasion to consider the relevant provisions of the I B Code , including the provisions of Section 30. With regard to commercial wisdom of the Financial Creditor, the Hon ble Supreme Court laid down that there is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed Resolution Plan. There can be no doubt that any fraud in process may vitiate the entire process but it is easy to allege fraud and collusion but difficult to prove the same. Apart from the bald allegation of the Appellant that M/s. Mahalaxmi Traders colluded with the Successful Resolution Applicant , there is no other material to come to a finding that actually any fraud was played. The commercial wisdom of the Financial Creditors cannot be disregarded on bald allegation of fraud and collusion as raised by the Appellant. The Adjudicating Authority has in detail considered the submissions of the Appellant and has rightly come to the conclusion that the decision of the CoC rejecting the Resolution Plan of the Appellant does not require any interference. None of the grounds to challenge the Resolution Plan had been made out. Hence the Adjudicating Authority rightly approved the Resolution Plan. No ground has been made out to interfere with the order dated 13.10.2021 of the Adjudicating Authority. Appeal dismissed.
Issues:
- Challenge to order rejecting Appellant's Resolution Plan - Approval of Resolution Plan of 'Kals Distilleries Private Limited' - Allegations of collusion and fraud - Compliance with Insolvency and Bankruptcy Code, 2016 Analysis: 1. Challenge to order rejecting Appellant's Resolution Plan: The Appellant filed two Appeals challenging different orders passed by the Adjudicating Authority. The first Appeal (AT) (Ins.) No. 910 of 2021 contested the rejection of the Appellant's Resolution Plan by the Committee of Creditors (CoC) in a meeting on 04.06.2019. The Appellant alleged collusion and fraud by a CoC member, 'M/s. Mahalaxmi Traders,' claiming that this led to the rejection of their plan. However, the Adjudicating Authority rejected the Appellant's challenge on 16.07.2021, stating that even without 'M/s. Mahalaxmi Traders' votes, the Appellant's plan would have been rejected by 77.76%. The Resolution Plan of 'Kals Distilleries Private Limited' was also approved in the same meeting, which the Appellant argued was not compliant with the Insolvency and Bankruptcy Code, 2016. 2. Approval of Resolution Plan of 'Kals Distilleries Private Limited': The second Appeal (AT) (Ins.) No. 909 of 2021 was filed by the Appellant questioning the approval of the Resolution Plan of 'Kals Distilleries Private Limited' by the Adjudicating Authority. The CoC had approved this plan with 100% votes after rejecting the Appellant's plan. The Adjudicating Authority, in its order dated 13.10.2021, found that the CoC's rejection of the Appellant's plan was mainly based on the creditworthiness of 'Som Distilleries Pvt. Ltd.' The Authority thoroughly assessed the compliance of 'Kals Distilleries Private Limited's' plan with the relevant provisions of the Insolvency and Bankruptcy Code, 2016, and the CIRP Regulations, ultimately approving the plan as it met all requirements. 3. Allegations of collusion and fraud: The Appellant alleged collusion and fraud between 'M/s. Mahalaxmi Traders' and the 'Successful Resolution Applicant.' However, the Adjudicating Authority found no substantial evidence to support these claims beyond the Appellant's allegations. The Authority emphasized that proving fraud and collusion requires more than mere allegations and that the commercial wisdom of the Financial Creditors, who rejected the Appellant's plan with 100% votes, should not be disregarded based on unsubstantiated claims. 4. Compliance with Insolvency and Bankruptcy Code, 2016: The Adjudicating Authority, guided by the Hon'ble Supreme Court's decision in 'K. Sashidhar v. Indian Overseas Bank,' recognized the importance of the CoC's commercial wisdom in the insolvency resolution process. The Court highlighted that the Financial Creditors' decisions are assumed to be well-informed and made after thorough examination. The Authority concluded that the CoC's rejection of the Appellant's plan did not require intervention, as it was a collective business decision based on the plan's viability and feasibility. In conclusion, both Appeals were dismissed as the Adjudicating Authority's decisions regarding the rejection of the Appellant's plan and the approval of 'Kals Distilleries Private Limited's' plan were found to be justified and compliant with the relevant legal provisions.
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