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2022 (5) TMI 1365 - AT - Insolvency and BankruptcyClaim of electricity dues - Approval of Resolution Plan - whether consideration of Resolution Plan of Respondent No.3 by the CoC after expiry of 330 days vitiate the approval of the Resolution Plan? - entitlement to claim its unpaid CIRP dues as per West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations 2013 even after approval of the Plan by order dated 08.10.2021 - violation of Section 30 sub-section (2) sub-clause (e) in view of West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations 2013 - Resolution Plan is in accordance with Section 30 sub-section (2) sub-clause (b) and the distribution to the Appellant Operational Creditor is fair and equitable or not? Whether the consideration of Resolution Plan of Respondent No.3 by the CoC after expiry of 330 days vitiate the approval of the Resolution Plan? - HELD THAT - This Tribunal in the same very judgment while relying on judgment of the Hon ble Supreme Court in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS 2019 (11) TMI 731 - SUPREME COURT held that time-line provided in Section 12 is not mandatory and in certain cases time-line can be extended. The Appeal filed by WBFC on the aforesaid ground was dismissed. The same very ground which were raised by WBFC unsuccessfully before the Adjudicating Authority as well as before this Tribunal are being pressed by the learned Senior Counsel for the Appellant - there are no error in extension of 330 days time by the Adjudicating Authority the consideration of the Resolution Plan was also approved by this Tribunal and cannot be permitted to be reagitated in the instant Appeal. Whether the Appellant is entitled to claim its unpaid CIRP dues as per West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations 2013 even after approval of the Plan by order dated 08.10.2021? - Whether Resolution Plan violates Section 30 sub-section (2) sub-clause (e) in view of West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations 2013 since it contravenes Regulation 4.6.4 as well as Regulation 4.6.1 of the Statutory Regulations? - HELD THAT - Hon ble Supreme Court in LALIT KUMAR JAIN VERSUS UNION OF INDIA AND ORS. 2021 (5) TMI 743 - SUPREME COURT had reiterated the principals laid down in STATE BANK OF INDIA VERSUS V. RAMAKRISHNAN AND ANR. 2018 (8) TMI 837 - SUPREME COURT where it was held that The object of the Code is not to allow such guarantors to escape from an independent and coextensive liability to pay off the entire outstanding debt which is why Section 14 is not applied to them. However insofar as firms and individuals are concerned guarantees are given in respect of individual debts by persons who have unlimited liability to pay them. And such guarantors may be complete strangers to the debtor often it could be a personal friend. It is for this reason that the moratorium mentioned in Section 101 would cover such persons as such moratorium is in relation to the debt and not the debtor. Above pronouncement by Hon ble Supreme Court makes it clear that under Section 133 of the Contract Act guarantor/ surety/ liability is not discharged even on variance of terms of contract by Resolution Plan. Thus the submission of learned Senior Counsel for the Appellant that if any variance in Resolution Plan is not in conformity of Section 30 sub-section (2) (e) it would be in contravention of West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations 2013 cannot be accepted. The Statutory Regulations shall stand overridden by virtue of approval of Resolution Plan. Under the Plan the Appellant electricity supply provider is obliged to reconnect the electricity which is provision of the Resolution Plan and Appellant cannot be heard in saying that since the Statutory Regulation 4.6.1 and 4.6.4 are not complied the Appellant is not obliged to reconnect the electricity without payment of outstanding electricity dues. Whether the Resolution Plan is in accordance with Section 30 sub-section (2) sub-clause (b) and the distribution to the Appellant Operational Creditor is fair and equitable? - HELD THAT - The present is not a case where the Appellant is contending that payment of debt to the Appellant/ Operational Creditor is not as per provisions of Section 30 sub-section (2) sub-clause (b) (i) and (ii). It is not a case that Appellant could not have been entitled to receive any higher amount in event of liquidation of the Corporate Debtor under Section 53 in event amount to be distributed under the Plan is distributed in accordance with priority of sub-section (1) of Section 53 - Law being now settled that mere fact that Operational Creditors and Financial Creditors are not paid same amount and same percentage cannot be said to be inequitable. It is settled that the Code and the Regulations does not contemplates that there could be equal treatment to all creditors. The Insolvency Law Committee Report 2018 deliberated upon the objection to Section 30 sub-section (2) sub-clause (b) insofar as it provides for minimum payment of liquidation value. It was also noticed that public comments were received by the Committee stating that the liquidation value which is guaranteed to the Operational Creditors may be negligible as they fall under the residual category of creditors under Section 53 of the Code - The Committee in the 2018 Report ultimately decided against any amendment to be made in the existing scheme of the Code and the minimum value to be paid to the Operational Creditors was retained. More than three years have elapsed from the said report. The question that Operational Creditors are getting negligible value have been raised before the Committee and other Forms from time to time. The Operational Creditors normally had claims pertaining to supply made to the Corporate Debtor which amounts normally as compared to the Financial Creditors claim are less. Operational Creditors consist of various type of industries including MSMEs public sector organization and small entities. Altogether denying their claim or receiving ineligible amount in the Resolution Plan causes hardship and misery to the Operational Creditors. Even the statutory dues which by virtue of law as it exists today are dealt in the same manner resulting in no payment or negligible payment and some time even less than 1% of the claim. The Operational Creditors are not part of CoC like Financial Creditors and they have no control over the CIRP - In the present case the Operational Creditors have been given only miniscule of their admitted claim to the extent of only 0.19%. As the law stand today no exception can be taken to such Plans which provide payment to Operational Creditor in accordance with Section 30(2)(b) of the Code. However the time has come when it should be examined by the Government and the Board to find out as to whether there are any grounds for considering change in the legislative scheme towards the payment to the Operational Creditors which also consist of Government dues and other statutory dues. There are no good ground to interfere with the impugned order approving the Resolution Plan - there is no merit in the Appeal the Appeal is dismissed.
Issues Involved:
1. Whether the consideration of the Resolution Plan of Respondent No.3 by the CoC after the expiry of 330 days vitiates the approval of the Resolution Plan. 2. Whether the Appellant is entitled to claim its unpaid CIRP dues as per West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013 even after the approval of the Plan by order dated 08.10.2021. 3. Whether the Resolution Plan violates Section 30, sub-section (2), sub-clause (e) in view of West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013 since it contravenes Regulation 4.6.4 as well as Regulation 4.6.1 of the Statutory Regulations. 4. Whether the Resolution Plan is in accordance with Section 30, sub-section (2), sub-clause (b) and the distribution to the Appellant – Operational Creditor is fair and equitable. Detailed Analysis: Issue 1: Consideration of Resolution Plan After 330 Days The CIRP against the Corporate Debtor was initiated on 18.10.2019. The Resolution Plan submitted by Respondent No.3 was considered after the expiry of the 330 days' timeline. The Adjudicating Authority condoned the delay of 43 days and directed the Resolution Plan to be placed before the CoC. The Financial Creditor WBFC's objections regarding the timeline were dismissed by the Adjudicating Authority and upheld by the Appellate Tribunal. The Tribunal emphasized that the timeline provided in Section 12 is not mandatory and can be extended in certain cases. Consequently, the extension of 330 days by the Adjudicating Authority was deemed valid, and the consideration of the Resolution Plan was upheld. Issue 2: Claim of Unpaid CIRP Dues The Appellant's claim of Rs.36,35,64,214/- was admitted, and an amount of Rs.7,45,608/- was allocated under the Resolution Plan. The Supreme Court in Ghanashyam Mishra and Sons Private Limited vs. Edelweiss Asset Reconstruction Company Limited held that all dues, including statutory dues, are extinguished upon the approval of the Resolution Plan. Therefore, the Appellant's claim for unpaid CIRP dues does not survive post-approval of the Resolution Plan. Issue 3: Contravention of Statutory Regulations The Appellant argued that under the West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013, new electricity connections cannot be provided unless outstanding dues are cleared. However, the Tribunal noted that the Code has an overriding effect under Section 238, and any statutory provision inconsistent with the Code is overridden. Thus, the Resolution Plan does not contravene Section 30, sub-section (2), sub-clause (e), and the Appellant is obliged to restore electricity as directed by the Adjudicating Authority. Issue 4: Fair and Equitable Distribution to Operational Creditors The Appellant contended that the distribution to Operational Creditors was neither fair nor equitable. The Tribunal referred to the Supreme Court's judgment in Committee of Creditors of Essar Steel India Ltd., which clarified that equitable treatment applies only within the same class of creditors. The Tribunal found that the distribution under the Resolution Plan complied with Section 30, sub-section (2), sub-clause (b), as the Operational Creditors received at least the liquidation value. The Tribunal acknowledged the disparity in payments but noted that the law allows for differential treatment based on the priority of claims. Conclusion: The Tribunal upheld the approval of the Resolution Plan, dismissing the Appellant's claims on all grounds. The Tribunal also suggested that the Government and relevant authorities consider legislative changes to address the equitable treatment of Operational Creditors. The appeal was dismissed, and the order was communicated to the Ministry of Corporate Affairs and the Board for further consideration.
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