2022 (1) TMI 110 - AT - Insolvency and Bankruptcy

Validity of Resolution Plan - Fair and Equitable distribution under the Resolution Plan - compliance with the ingredients of Section 30 of the I B Code or not - HELD THAT - It is brought to the fore that in the 11th Meeting of the Committee of Creditors held 24..04.2019 the decided to accord approval to the Resolution Plan furnished by M/s Jagannath Financial Advisory Pvt. Ltd. Because of the fact that the required period for CIRP was to come to an end, the Committee of Creditors had turned down the contentions of the Appellant and approved the Resolution Plan in its meeting that took place on 21.05.2019. In short, the distribution of Resolution Fund was decided as (a) Canara Bank- 24-30% (b) North Eastern Development Financial Corporation- 47.77% (c) Punjab National Bank 27.93% - Although, the Appellant/Canara Bank gave a dissenting Vote for the approval of the Plan, based on the reason that Distribution of Resolution Fund was discriminatory as against them and despite its plea that it was entitled to the equal and share in regard to the distribution of the Resolution Fund on the footing that the Bank held more than 80% of the assents of the Corporate Debtor as security, the fact of the matter is that the Committee of Creditors had approved the Resolution Plan of Jagannth Financial Advisory Pvt. Ltd by 75.70% of votes. It cannot be gainsaid that the Resolution Fund was equally distributed among all the Financial Creditors showring them equal share i.e., 23.43 % and that the 1st Respondent/Resolution Professional had certified the plan and the compliance certificate was furnished. There is no illegality in the Resolution Plan as opined by this Tribunal, it comes to be known that the Successful Resolution Applicant/Respondent No. 4 had implemented the Resolution Plan in part and made part payments quite in tune with the Approved Resolution Plan . The distribution of the amount between the Creditors provide the equal treatment to all of them. Also that the Appellant was provided with a fair value as per decision of the Committee of Creditors and the value proportionate to the dues was allotted same as that of other Financial Creditors - Undoubtedly, the commercial decision and matters pertaining to it solely comes within the ambit of the Committee of Creditors who in the present case had approved the Resolution Plan with a majority of 75.70% affirmative votes. In effect, the acceptance and approval of Resolution Plan of 4th Respondent/M/s Jagannath Financial and Advisory Pvt. Ltd. by the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench) does not suffer from any vice of material irregularities or patent illegalities in the eye of law, as opined by this Tribunal. Appeal dismissed.

Issues Involved:
1. Equal treatment of Financial Creditors under the Resolution Plan.
2. Compliance of the Resolution Plan with Section 30 of the I&B Code.
3. Distribution of resolution funds based on security interest.
4. Adjustment of subsidy amount by NEDFI.
5. Valuation of the Corporate Debtor’s securities.
6. Commercial wisdom of the Committee of Creditors (CoC).
7. Duties and powers of the Resolution Professional.
8. Approval and implementation of the Resolution Plan.
9. Limitation period for filing the appeal.

Detailed Analysis:

1. Equal Treatment of Financial Creditors under the Resolution Plan:
The Appellant, Canara Bank, argued that the Resolution Plan did not ensure equal treatment among Financial Creditors. The Adjudicating Authority observed that all Financial Creditors were treated equally while distributing funds, and no provision was made for Operational Creditors due to Section 53 of the I&B Code. The CoC's commercial wisdom was upheld, and it was concluded that the distribution pattern was within their discretion.

2. Compliance of the Resolution Plan with Section 30 of the I&B Code:
The Appellant contended that the Resolution Plan did not comply with Section 30 of the I&B Code. The Adjudicating Authority verified that the Resolution Plan met all the requirements under Section 30(2) of the I&B Code, including the payment of insolvency resolution process costs, debts of Operational Creditors, and provisions for management and implementation of the plan. The plan was found to be compliant with all legal provisions.

3. Distribution of Resolution Funds Based on Security Interest:
Canara Bank argued that the distribution of funds should be based on the security interest held by each Financial Creditor. The Adjudicating Authority noted that the CoC decided the distribution based on voting shares, and the commercial wisdom of the CoC should not be interfered with. The distribution was deemed fair and equitable as per the CoC's decision.

4. Adjustment of Subsidy Amount by NEDFI:
The Appellant objected to NEDFI's adjustment of a subsidy amount towards the Corporate Debtor's liability. The Adjudicating Authority found that the Resolution Professional did not raise any objections to NEDFI's claim, and the adjustment was accepted as part of the CIRP process.

5. Valuation of the Corporate Debtor’s Securities:
Canara Bank contested the low valuation of the Corporate Debtor’s securities. The Adjudicating Authority upheld the valuation done by approved valuers, noting that the difference between realizable value and liquidation value was acknowledged and accepted by the CoC.

6. Commercial Wisdom of the Committee of Creditors (CoC):
The Appellant argued that the CoC did not properly deliberate on the distribution of funds. The Adjudicating Authority emphasized that the CoC's commercial decisions are not subject to judicial review unless there is a violation of law. The CoC's decision to approve the Resolution Plan with a 75.70% majority was upheld.

7. Duties and Powers of the Resolution Professional:
The Resolution Professional's role was scrutinized to ensure compliance with Section 30(2) of the I&B Code. The Adjudicating Authority confirmed that the Resolution Professional had fulfilled all duties, including ensuring the Resolution Plan's compliance with legal provisions before presenting it to the CoC.

8. Approval and Implementation of the Resolution Plan:
The Resolution Plan submitted by Jagannath Financial Advisory Pvt. Ltd. was approved by the CoC and the Adjudicating Authority. The plan was found to be fair and equitable, and part payments had already been made in accordance with the approved plan. The implementation of the plan was in line with the objectives of the I&B Code.

9. Limitation Period for Filing the Appeal:
The Adjudicating Authority noted that the appeal was filed beyond the statutory period of 30 days, as well as the extended period of 45 days. The appeal was therefore barred by limitation.

Conclusion:
The Appellate Tribunal dismissed the appeal, upholding the Resolution Plan approved by the CoC and the Adjudicating Authority. The Tribunal found no material irregularities or illegalities in the approval and implementation of the Resolution Plan, and the commercial wisdom of the CoC was respected. The appeal was dismissed on merits, and the associated contempt application was closed.

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