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2023 (1) TMI 996 - AT - Insolvency and BankruptcyValidity, Viability and Feasibility of Resolution Plan - Liquidation Value - Section 30 (6) (c) and 31 of the I B Code, 2016 - main grievance of the Appellant is that, the mere glance of the Resolution Plan, makes it clear that the Resolution Applicant, had hijacked the Substantial Assets of the Corporate Debtor, at a Price, substantially below the Liquidated Value of the Corporate Debtor, as defined in Regulation 2 (k) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016. HELD THAT - In the present case, it is quite evident that the 2nd Respondent through a Resolution Plan, had offered Rs.50.70 Crores as Full and Final Settlement of all the Liabilities of the 1st Respondent / Corporate Debtor, which was duly approved with requisite majority of the Committee of Creditors, in its commercial wisdom, ofcourse, after numerous rounds of discussions and negotiations. In this connection, this Tribunal, pertinently points out that in respect of the dues of the Workmen, initially only Rs.17 Lakhs was provided and at the behest of the Adjudicating Authority, the 2nd Respondent had revised the Resolution Plan and earmarked Rs. 34 Lakhs, towards the Workmen dues. Also that, a Sum of Rs.50.70 Crores was fully used in the payment of (a) CIRP Costs (b) the dues of the Financial Creditors and the Workmen. As such, no amount remains to be allotted in respect of the other Creditors. Therefore, the Liquidation Value, payable to the Operational Creditors, is Nil. Besides this, all the Creditors, had a significant haircut in the Corporate Insolvency Resolution Process of the 1st Respondent / Corporate Debtor. Thus, keeping in mind the payment to all the Operational Creditors, is Nil, there is no aspect of discrimination between the Operational Creditors, in the considered opinion of this Tribunal. Further, when the ingredients of Section 30 (2) (b) of the I B Code, 2016, are satisfied, the distribution is to be treated as Fair and Equitable one. After all, the Plea of the Fair and Equitable treatment is not between the different classes of Creditors, and the same is between the Operational Creditors, as a Class, as opined by this Tribunal . In the instant case on hand, the 2nd Respondent, had undertaken to infuse approximately a Sum of Rs.20 Crores in the 1st Respondent / Corporate Debtor, when required for its revival, through its Group Companies, Promoters, Investors and Associates. Suffice it, for this Tribunal, to make a relevant mention that whether a certain Resolution Plan, leads to the maximisation of Value of the Assets or not is within the subjective realm of assessment of the Committee of Creditors, and the same cannot be a matter of enquiry - One cannot brush aside a vital fact that a Resolution Plan, as approved by the Committee of Creditors, in exercise of its subjective commercial wisdom, cannot be tinkered and tampered with, when the Resolution Plan, was approved with a Requisite Majority of 69.04%, after indulging in due discussions / deliberations, as regards the feasibility and viability of the Resolution Plan. Be it noted, that the I B Code, 2016, is not a Debt Enforcement Procedure, and the same cannot be used as a mechanism for the Recovery of Dues, for the Creditors. It is an axiomatic principle in Law, there is not rule for substituting any commercial term(s) of the Resolution Plan, approved by the Committee of Creditors, especially, in the teeth of the Resolution Plan, satisfying the requirements of the ingredients of the I B Code, 2016. An Adjudicating Authority (NCLT) or an Appellate Tribunal (NCLAT), cannot sit in an Appeal, to find out the Viability and Feasibility of Financial Matrix of such Resolution Plan, as opined by this Tribunal. Thus, the Resolution Plan dated 07.01.2019, submitted by the 2nd Respondent / SPG Macrocosm Limited, through SPV Vision Textile (Resolution Applicant), was rightly approved by the Adjudicating Authority (Tribunal), which is free from any Legal Flaws, Resultantly, the instant Appeal sans merits and it fails. Appeal dismissed.
Issues Involved:
1. Approval of the Resolution Plan. 2. Treatment of Operational Creditors. 3. Compliance with I&B Code, 2016. 4. Commercial Wisdom of the Committee of Creditors. 5. Jurisdiction of the Adjudicating Authority. Issue-wise Detailed Analysis: Approval of the Resolution Plan: The Appellant, an Operational Creditor, challenged the approval of the Resolution Plan dated 07.01.2019, which was approved by the Committee of Creditors (CoC) with 69.04% votes and subsequently by the Adjudicating Authority (National Company Law Tribunal, Bengaluru Bench) on 10.05.2019. The Appellant argued that the Resolution Plan did not provide for any payment to Operational Creditors and failed to meet the requirements of the I&B Code, 2016, particularly regarding the maximization of the value of the Corporate Debtor's assets and equitable treatment of creditors. Treatment of Operational Creditors: The Appellant contended that the Resolution Plan was inequitable as it provided no payment to Operational Creditors, citing that the liquidation value due to them was NIL. The Appellant emphasized that the Resolution Plan should ensure equitable treatment and non-discriminatory provisions for Operational Creditors. The Appellant argued that the assets of the Corporate Debtor were valued at Rs. 80.75 Crores, but the Resolution Plan provided for a takeover at Rs. 50.50 Crores, significantly below the asset value. The Appellant also highlighted that the Resolution Applicant only needed to bring in Rs. 5 Crores initially, with the remaining Rs. 45.50 Crores to be raised from the sale of non-core assets of the Corporate Debtor. Compliance with I&B Code, 2016: The Appellant asserted that the Resolution Plan did not comply with the I&B Code, 2016, as it failed to maximize the value of the Corporate Debtor's assets and did not provide equitable treatment to Operational Creditors. The Appellant referred to various judgments, including Binani Industries Limited v. Bank of Baroda and Swiss Ribbons Pvt. Ltd. v. Union of India, to support their argument that the Resolution Plan should balance the interests of all stakeholders and ensure fair treatment of Operational Creditors. Commercial Wisdom of the Committee of Creditors: The 2nd Respondent and the 4th Respondent argued that the Resolution Plan was approved by the CoC in its commercial wisdom after thorough discussions and negotiations. They emphasized that the CoC's decision should not be interfered with by the Adjudicating Authority or the Appellate Tribunal. The 2nd Respondent pointed out that the Resolution Plan was in compliance with Section 30(2)(b) of the I&B Code, 2016, as the liquidation value for Operational Creditors was NIL, and thus, no amount was assigned to them. Jurisdiction of the Adjudicating Authority: The 4th Respondent contended that the Appellant's challenge was not maintainable as it sought to question the commercial decision of the CoC. They argued that the jurisdiction of the Adjudicating Authority under the I&B Code, 2016, does not extend to altering the commercial wisdom of the CoC. The Adjudicating Authority's role is limited to ensuring that the Resolution Plan complies with the requirements of Section 30(2) of the I&B Code, 2016. Conclusion: The Tribunal concluded that the Resolution Plan dated 07.01.2019, submitted by the 2nd Respondent and approved by the CoC and the Adjudicating Authority, was in compliance with the I&B Code, 2016. The Tribunal emphasized that the commercial wisdom of the CoC, which approved the Resolution Plan with a requisite majority, should not be interfered with. The Tribunal also noted that the Resolution Plan provided for the full and final settlement of all liabilities of the Corporate Debtor and that the liquidation value for Operational Creditors was NIL, thus satisfying the requirements of the I&B Code, 2016. Consequently, the Tribunal dismissed the appeal, finding no merit in the Appellant's contentions.
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