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2022 (9) TMI 1128 - AT - Insolvency and BankruptcyValidity of Resolution Plan - only 2% of their Claims has been admitted, while the workman and other statutory dues have been paid 100% - HELD THAT - Section 24(3)(c) specifies that Operational Creditors or their representatives if the amount of their aggregate dues is not less than 10% of the dues are to be given Notice of each CoC Meeting, Section 24(4) of the Code specifies that the representative of the Operational Creditors , may attend the Meeting of CoC but shall not have any right to vote in these Meetings - it cannot be stated that there was any prejudice caused to the Appellants herein in terms of Section 24(3) not having been complied with. Also, there is no documentary evidence on record to establish that a name of a representative of the Operational Creditors was indeed given to the RP and the RP had chosen to ignore the same, as it is the specific case of the RP that no such information was ever tendered to him. There is no material irregularity warranting any interference as it is compliant with Section 30(2) of the Code. Having regard to the fact that the Resolution Plan was approved on 17.01.2021 by the CoC and subsequently by the Adjudicating Authority on 08.04.2021 and more than a year has lapsed, and also keeping in view that the Operational Creditors do not have any Voting Right in the CoC and that the Commercial Wisdom of the CoC is non-justiciable and when there is no material irregularity on the face of the record, there are no illegality or infirmity in the Order of the Adjudicating Authority. Appeal dismissed.
Issues Involved:
1. Admittance of only 2% of the Operational Creditors' claims. 2. Compliance with Section 24(3) of the Insolvency and Bankruptcy Code (IBC), 2016. 3. Distribution of assets under the Resolution Plan. 4. Alleged discrimination against Operational Creditors. 5. Commercial Wisdom of the Committee of Creditors (CoC). 6. Disclosure of Liquidation Value and Fair Value. 7. Validity of the Resolution Plan approval process. Detailed Analysis: 1. Admittance of only 2% of the Operational Creditors' claims: The Appellants challenged the Resolution Plan approved by the Adjudicating Authority, arguing that only 2% of their claims were admitted, while workmen and other statutory dues were paid 100%. The Tribunal noted that the Resolution Applicant offered Rs. 655.21 lakhs against the liquidation value of Rs. 308.14 lakhs. Under Section 30(2)(b) of the IBC, the amount payable to Operational Creditors in liquidation was NIL in both situations considered. Therefore, the provision of 2% payment to Operational Creditors was deemed compliant with the IBC and relevant regulations. 2. Compliance with Section 24(3) of the Insolvency and Bankruptcy Code (IBC), 2016: The Appellants argued that Section 24(3) of the IBC was not complied with, as they were not given notice of the CoC meetings. The Tribunal found that while Section 24(3)(c) specifies that Operational Creditors with aggregate dues of at least 10% must be notified, Section 24(4) clarifies that their absence does not invalidate the proceedings. Moreover, there was no evidence that the Appellants had provided a representative's name to the Resolution Professional (RP). Hence, no prejudice was caused to the Appellants. 3. Distribution of assets under the Resolution Plan: The Tribunal observed that the distribution of assets under the Resolution Plan was fair and equitable. The Resolution Plan's value was significantly higher than the liquidation value, and the payment to Operational Creditors, though only 2%, was in accordance with Section 30(2)(b) of the IBC. The Tribunal rejected the Appellants' contention that they were entitled to more in liquidation. 4. Alleged discrimination against Operational Creditors: The Appellants claimed that the Resolution Plan was discriminatory as it provided only 2% to Operational Creditors while paying 100% to other stakeholders. The Tribunal noted that the distribution was in line with the priority order in Section 53 of the IBC, where Operational Creditors rank lower than employees. The Tribunal found no discrimination or deficiency in service by the RP. 5. Commercial Wisdom of the Committee of Creditors (CoC): The Tribunal emphasized that the commercial wisdom of the CoC is non-justiciable. The CoC had approved the Resolution Plan with 100% voting, and the Tribunal cited Supreme Court judgments affirming that neither the Adjudicating Authority nor the Appellate Tribunal can interfere with the CoC's commercial decisions. The Tribunal found no material irregularity in the CoC's approval process. 6. Disclosure of Liquidation Value and Fair Value: The Appellants argued that they were not informed of the Liquidation Value. The Tribunal referred to Regulation 35 of the IBBI Regulations, 2016, which mandates that only CoC members are entitled to know the Fair Value and Liquidation Value. The Tribunal held that the Appellants were not required to know these values and that confidentiality must be maintained to prevent undue claims. 7. Validity of the Resolution Plan approval process: The Tribunal found that the Resolution Plan approval process was valid. The CoC had discussed the Adjudicating Authority's directions, and the 82% Voting Right Member, who had earlier raised objections, had approved the Plan. The Tribunal concluded that there was no illegality or infirmity in the Adjudicating Authority's order approving the Resolution Plan. Conclusion: The Tribunal dismissed the Appeal, affirming that the Resolution Plan complied with the IBC and relevant regulations. The commercial wisdom of the CoC was upheld, and no material irregularity was found in the approval process. The objections raised by the Operational Creditors were deemed unsustainable.
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