2023 (8) TMI 480 - AT - Insolvency and Bankruptcy

Approval of Resolution Plan (at second round) - it is alleged that the payments to the Operational Creditors have decreased in the revised payments proposal - HELD THAT - The direction of this Tribunal in M/S. RANA SARIA POLY PACK PVT. LTD. VERSUS UNIWORLD SUGARS PVT. LTD. NCIRCLE EXIM LLP AND SIMBHAOLI SUGARS LIMITED VERSUS PRAMOD KUMAR SHARMA RESOLUTION PROFESSIONAL OF UNIWORLD SUGARS PRIVATE LIMITED (USPL) COMMITTEE OF CREDITORS OF UNIWORLD SUGARS PRIVATE LIMITED (USPL) IDBI BANK LTD. THROUGH ITS AUTHORIZED REPRESENTATIVE ORIENTAL BANK OF COMMERCE THROUGH ITS AUTHORIZED REPRESENTATIVE UNION BANK OF INDIA M/S. NCIRCLE EXIM LLP 2022 (5) TMI 460 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI indicate that the Resolution Plan was set aside only to the extent it relates to allocation of payment to stakeholders and creditors and directed that revision of payments and subsequent approval of the revised resolution plan was to be completed within a period of two months. Subsequent to order of this Tribunal the revised proposal for distribution was placed before the Committee of Creditors which came to be approved on 11.05.2022. The revised plan which has been approved indicate that payments to workmen and employees has been increased as well as payment to Financial Creditors. There is little decrease in payment to Operational Creditors earlier Rs.1.69 Crores were allocated which is now at Rs.1.57 Crores (which has been actually paid). It is now well settled that distribution to the creditors in accordance with provisions of Section 30(2) is in the discretion of the Committee of Creditors and with regard to distribution the scope of judicial review by the Adjudicating Authority and this Tribunal is very little. From the facts brought on the record it does appear that liquidation value of the Operational Creditors is nil. When payment of Rs.1.57 Crore has been proposed in the plan it cannot be said that there is violation of any provisions of law especially Section 30(2) of the Code. The present is a case where the Corporate Debtor is not being liquidated rather resolution plan has been approved as per the Insolvency and Bankruptcy Board of India. (Insolvency Resolution Process for Corporate Persons) Regulations 2016 - there is no applicability of Regulation 29 while approving the resolution plan - such submission of the Appellant cannot be appreciated. There is no infirmity in the impugned order of the Adjudicating Authority approving the Resolution Plan. There is no merit in the Appeal. Appeal is dismissed.

Summary

Issues involved:
The judgment involves the approval of a Resolution Plan by the Adjudicating Authority, challenges to the plan's approval, redistribution of payments to stakeholders and creditors, compliance with regulations, and the role of the Committee of Creditors in the insolvency resolution process.

Resolution Plan Approval:
The Appellant, a Promoter and Shareholder of the Corporate Debtor, challenged the approval of the Resolution Plan by the Adjudicating Authority in the second round. The Tribunal previously set aside the plan for reconsideration of the liquidation value and directed revision of payments to stakeholders and creditors. The Resolution Applicant revised the payments, which were subsequently approved by the Committee of Creditors with 100% vote share. The Adjudicating Authority then approved the Resolution Plan.

Challenges to Approval:
The Appellant contended that the approval of the Resolution Plan was not in accordance with the law. The Appellant argued that the payments to Operational Creditors decreased in the revised proposal, and Regulation 29 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 was not followed. The Appellant emphasized the need for maximization under the I&B Code and questioned the adequacy of the increase in the plan value based on the average liquidation value.

Redistribution of Payments:
The Resolution Professional defended the revised plan, stating that the redistribution of payments was in line with the Tribunal's directions. The Resolution Professional highlighted that the plan value was enhanced following the liquidation value consideration. The Operational Creditor's objection was addressed, noting that the proposed payment was despite a nil liquidation value. The Resolution Applicant and its counsel supported the Resolution Professional's arguments.

Compliance with Regulations:
The Tribunal analyzed the submissions and record, noting that the revised plan increased payments to workmen, employees, and Financial Creditors while slightly decreasing payments to Operational Creditors. It emphasized the discretion of the Committee of Creditors in distribution, with limited scope for judicial review. The Tribunal found no violation of law, especially regarding Section 30(2) of the Code.

Role of Committee of Creditors:
The Tribunal clarified that the distribution to creditors falls within the Committee of Creditors' discretion, with minimal judicial review scope. It highlighted that the liquidation value of Operational Creditors was nil, justifying the proposed payment. The Tribunal dismissed the Appeal, finding no infirmity in the Adjudicating Authority's approval of the Resolution Plan, given the circumstances of the case.