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2023 (10) TMI 750 - AT - Insolvency and BankruptcyApproval of Resolution Plan - no proposal of distribution mechanism for consideration of the CoC - delegation of task of proposing the manner of distribution of funds to the CoC - whether the Adjudicating Authority was justified in approving a Resolution Plan where the manner of distribution was proposed, and decided by the CoC? HELD THAT - It is not in dispute that the Resolution Plan of Vedanta was approved by the CoC by a majority of 94.96 % - The Hon ble Supreme Court in a catena of Judgments has held that the Adjudicating Authority and the Appellate Tribunal cannot enter into the merits of a Business Decision of the requisite majority of the CoC, unless it is violative of the provisions of Section 30 (2) of the Code. An approved Resolution Plan cannot be subject to judicial review in terms of carrying out a quantitative analysis qua each Stakeholder. The Hon ble Supreme Court has observed so in India Resurgence ARC private Limited Vs. Amit Metaliks Limited 2021 (6) TMI 684 - SUPREME COURT , that the commercial wisdom of CoC and the scope of judicial review remains limited within the four corners of Section 30 (2) of the Code for the Adjudicating Authority and Section 30 (2) read with Section 61 (3) for the Appellate Authority. Whether the CoC is empowered to decide the distribution methodology? - HELD THAT - The Hon ble Supreme Court in the matter of Amit Metaliks has held that thus, what amount is to be paid to different classes or subclasses of creditors in accordance with provisions of the Code and the related Regulations, is essentially the commercial wisdom of the Committee of Creditors; and a dissenting secured creditor like the appellant cannot suggest a higher amount to be paid to it with reference to the value of the security interest . Though the IBC does not have a specific Provision that uses the term Business Decision of the CoC, the Code contains several provisions that detail the powers and functions of the CoC, which encompass various decision-making responsibilities relating to the Insolvency Resolution Process, which definitely includes distribution methodology of the Resolution Plan - This Tribunal is of the earnest view that the Appellant having taken part in these Meetings and not having raised any substantial objections at that point of time, is estopped from questioning the commercial wisdom of the CoC in proposing, considering and approving the distribution methodology of the Resolution Plan. Keeping in view the catena of Judgments of the Hon ble Apex Court regarding the commercial wisdom of the CoC in approving the Plan and the limited jurisdiction therein, this Tribunal is of the considered view that the CoC in its commercial wisdom can propose, consider and decide on the distribution mechanism under the Resolution Plan , as long as it is within the domain of Section 30(2) of the Code. Appeal dismissed.
Issues Involved:
1. Jurisdiction and powers of the Committee of Creditors (CoC) under Section 30(4) of the Insolvency and Bankruptcy Code (IBC). 2. The validity of the distribution mechanism decided by the CoC. 3. The role of the Adjudicating Authority in reviewing the CoC's decisions. 4. Compliance of the Resolution Plan with the IBC and related regulations. Summary: Jurisdiction and Powers of the CoC: The Appellant challenged the Resolution Plan approved by the CoC of M/s. Meenakshi Energy Ltd., arguing that the CoC acted beyond its jurisdiction by determining the distribution mechanism for funds among stakeholders. The Appellant contended that under Section 30(4) of the IBC, the CoC is only empowered to "consider" the distribution mechanism proposed by the Resolution Applicant, not to decide it. The Appellant relied on several judgments, including 'Tata Chemicals Ltd. Vs. Commissioner of Customs' and 'K. Sashidhar v. Indian Overseas Bank,' to support their argument that the CoC overstepped its mandate. Validity of the Distribution Mechanism: The CoC, during its 41st Meeting, decided the distribution mechanism based on the ratio of admitted claims or as per Section 53 of the IBC. The Appellant did not object to this mechanism during the meeting. The CoC approved the distribution as per Section 53 of the IBC by a majority of 93.43%. The Appellant argued that the CoC is not empowered to propose and consider its own distribution mechanism. However, the Tribunal noted that the CoC's decision on distribution is within its commercial wisdom and domain, as long as it complies with Section 30(2) of the IBC. Role of the Adjudicating Authority: The Tribunal emphasized that the Adjudicating Authority and the Appellate Tribunal cannot enter into the merits of a business decision of the CoC unless it violates Section 30(2) of the IBC. The Tribunal referred to the judgment in 'India Resurgence ARC private Limited Vs. Amit Metaliks Limited,' which states that the financial proposal in the resolution plan forms the core of the business decision of the CoC, and judicial review cannot extend to a quantitative analysis of each stakeholder's satisfaction. Compliance with IBC and Regulations: The Appellant argued that the Resolution Plan submitted to the Adjudicating Authority was not the same as the one approved by the CoC, violating Section 30(6) of the IBC. The Tribunal found that the CoC had deliberated and approved the consolidated plan, including all addendums, in its 44th Meeting. The Tribunal held that the CoC's decision, including the distribution mechanism, was within its commercial wisdom and complied with the IBC and related regulations. Conclusion: The Tribunal dismissed the appeal, upholding the CoC's decision to approve the Resolution Plan and the distribution mechanism. The Tribunal reiterated that the CoC, in its commercial wisdom, can propose, consider, and decide on the distribution mechanism under the Resolution Plan, as long as it is within the domain of Section 30(2) of the IBC.
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