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2022 (5) TMI 490 - AT - Insolvency and BankruptcyValidity of approved Resolution Plan - correctness of computation and disbursal of liquidation value - it is alleged that wrong liquidation value has been provided to dissenting shareholders - Whether the decision of the CoC taken in 32nd CoC meeting held on 27.08.2020 to obtain a more recent valuation report and reliance on such valuation report as on 31.07.2020 is contrary to the provisions of the Code and Regulations framed thereunder? - Whether the liquidation value ascribed by Resolution Professional and CoC to the Appellant as per Section 53 of the Code violates any provisions of the Code or Regulations? - Whether the allocation of the amount to the Appellant, a Dissenting Financial Creditor is not in accordance with Section 30(2)(b) of the Code? HELD THAT - Under the CIRP Regulations, no power has been given to CoC to call for any valuation of fair and liquidation value though we don t think that there is any bar under IBC provisions for the CoC to call for a fresh valuation report. We, thus, do not find any substance in the submission of the Counsel for the Appellant that fresh liquidation value could not have been obtained by CoC and we further do not accept the submission of the Counsel for the Appellant that distribution consequent to liquidation value as on 31.07.2020 is not in accordance with law. Whether liquidation value ascribed to the Appellant in the Resolution Plan as well as by the CoC. Submission is that the value ascribed is in accordance with Section 30(2)(b) r/w Section 23 or not? - HELD THAT - All dissenting creditors have been allotted amount of 19% of their admitted amount without there being any discrimination in the dissenting creditors. It is relevant to notice that the Appellant is not the only dissenting creditor. The Appellant himself has brought on the record minutes of 39th meeting of the CoC held on 01.01.2021 which indicate that apart from Indian Bank, Bank of India, Union Bank of India, Punjab National Bank, Karur Vyasa Bank and Canara Bank were also dissenting creditors. All dissenting creditors have been provided same percentage as against the admitted claim. In the 39th CoC meeting held on 01.01.2021, where the voting result of the Agenda on 38th meeting of the CoC came for consideration. The final indicative lender wise distribution presented were noticed in the minutes. The proposed plan value distribution to the Appellant was INR 40.39 Crores whereas indicative plan value distribution was INR 42 Crores. Suffice it to note that distribution to dissenting Financial Creditors and other Financial Creditors have been discussed, deliberated and approved by the CoC, the distribution which has been approved for payment to the dissenting Financial Creditors was discussed and deliberated by CoC. What the Financial Creditors shall be paid was the query raised and discussed and in the meeting of the joint lenders held on 07.12.2020, the revised distribution after considering increase of Rs.6 Crores by Resolution Applicant was noticed. In the joint lenders forum meeting, Indian Bank expressed its agreement to distribution as per revised scenario-1 under which the Indian Bank was proposed INR 40.39 Crores. In the CoC meeting held on same date i.e. 07.12.2020, Agenda Item No.6 which was to finalise the Resolution Plan for distribution where details of allocation as per each lenders liquidation value was placed. When the distribution is ultimately approved by e-voting by the CoC, the approved distribution value to each lender s including the dissenting Financial Creditors, is taken by the CoC in its commercial wisdom, which cannot be interfered with by the Adjudicating Authority or by this Appellate Tribunal since it has not been placed before us that the approval of the Resolution Plan by the CoC and the Adjudicating Authority violates any statutory provision - the allocation to the Appellant, a dissenting Financial Creditor, is not in contravention of Section 30(2)(b) (ii) r/w Section 23. Appeal dismissed.
Issues Involved:
1. Legality of fresh valuation report obtained by the CoC. 2. Compliance of liquidation value distribution with Section 53 of the Code. 3. Allocation of amount to the dissenting financial creditor as per Section 30(2)(b) of the Code. Detailed Analysis: 1. Legality of Fresh Valuation Report: The Appellant challenged the decision of the Committee of Creditors (CoC) to obtain a fresh valuation report as on 31.07.2020, arguing that the liquidation value should be based on the initial valuation dated 29.09.2017. The CoC decided to obtain a more recent valuation due to significant changes in the Corporate Debtor's circumstances, including the failure of the previous Resolution Applicant to implement the plan and the adverse impact of the COVID-19 pandemic on the business. The Appellant did not object to this decision during the CoC meetings. The Tribunal held that there is no prohibition in the Code or Regulations against obtaining a fresh valuation if necessitated by substantial changes. The decision to obtain a fresh valuation was within the CoC's commercial wisdom and did not contravene any provisions of the Code or Regulations. 2. Compliance of Liquidation Value Distribution with Section 53 of the Code: The Appellant contended that the liquidation value assigned to it was improperly reduced by deducting CIRP costs and estimated liquidation costs. The Tribunal noted that the CoC had discussed and approved the distribution mechanism, which included these deductions. The CoC's decision to deduct CIRP and estimated liquidation costs was based on its commercial wisdom and was communicated to all members, including the Appellant, who did not object at the time. The Tribunal found no violation of Section 53 of the Code, as the distribution mechanism was agreed upon by the requisite majority of the CoC. 3. Allocation of Amount to the Dissenting Financial Creditor as per Section 30(2)(b) of the Code: The Appellant argued that the amount allocated to it as a dissenting financial creditor was not in accordance with Section 30(2)(b) of the Code. The Tribunal referred to the Supreme Court's judgment in "Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta," which clarified that dissenting financial creditors are entitled to a minimum amount as specified under Section 30(2)(b). The Tribunal observed that the allocation to the Appellant was in line with the distribution approved by the CoC, which was based on the commercial wisdom of the CoC and did not contravene any statutory provisions. The Appellant, along with other dissenting creditors, received 19% of their admitted claims, which was consistent across all dissenting creditors. Conclusion: The Tribunal dismissed the Appeal, upholding the CoC's decision to obtain a fresh valuation and the distribution mechanism approved by the CoC. The allocation to the Appellant as a dissenting financial creditor was found to be in compliance with the relevant provisions of the Code, and the Tribunal emphasized the limited scope of judicial review over the commercial decisions of the CoC.
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