2024 (1) TMI 585 - AT - Insolvency and Bankruptcy

Approval of the Resolution Plan - Difference between resolution plan value and liquidation value - locus standi of appellant to challenge the Order of the approval of the Resolution Plan - Appellant is the suspended Director whose locus ends once the affairs of the Corporate Debtor are handed over to the IRP - HELD THAT - It is seen from the record that Federal Bank had transferred its debt to Edelweiss but did not chose to file any Claim pursuant to the public announcement in Form A in accordance with Regulation 6 of CIRP Regulations, 2016. Having not exercised its right in the form of filing a Claim, the Appellant cannot have any grievance that Edelweiss was not included in the CoC. It is pertinent to mention that the Appellant / Promotor did not raise any objections regarding the constitution of the CoC, having had the Notice and the opportunity to do so as he had the locus to attend the CoC meetings. The only reason given by the Learned Counsel for the Appellant for not raising the objection regarding the constitution of CoC at the appropriate time is that the Appellant was unwell. This cannot be a substantial ground as it is an admitted fact that the Appellant had sufficient opportunities to attend the meetings and raise his grievances. The Hon ble Supreme Court in a catena of Judgements, most recent being Kalparaj Dharamshi Anr. vs. Kotak Investment Advisors Ltd. Anr 2021 (3) TMI 496 - SUPREME COURT has observed that the commercial wisdom of CoC must be adhered to unless the Adjudicating Authority is not satisfied that the requirement of sub-section (2) of Section 30 of the Code has been complied with. In the instant case, the approval of the Resolution Plan below the Liquidation value is within the commercial wisdom of the CoC as the Code does not expressly bar that the Resolution Plan value should be over and above the Liquidation value. Hence, there is no material irregularity. As regarding the contention of the Learned Counsel for the Appellant that the Operational Creditor Kerala Ayurvedic Limited was getting an amount lower than the Liquidation value and hence the Plan is discriminatory is untenable, keeping in view that the very same Operational Creditor had voluntarily agreed to accept an amount lower than the Liquidation value. Locus of the Appellant challenging the approval of the Resolution Plan - HELD THAT - It has been held in Ravi Shankar Vedam vs. Tiffins Barytes Asbestos and Paints Limited and Others 2023 (6) TMI 1250 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , CHENNAI that the Promoter / Shareholder of the Corporate Debtor Company has no locus to challenge the Plan, after its approval. There are no considerable grounds to entertain this Appeal and hence, this Appeal is dismissed

Summary

Issues Involved:
1. Approval of the Resolution Plan by the Adjudicating Authority.
2. Constitution of the Committee of Creditors (CoC).
3. Valuation of the Corporate Debtor's assets.
4. Discrimination among creditors in the Resolution Plan.
5. Locus of the Appellant to challenge the Resolution Plan.

Summary:

Issue 1: Approval of the Resolution Plan by the Adjudicating Authority
The Appellant challenged the Order dated 13.10.2023, which approved the Resolution Plan under Sections 30 & 31 of the Insolvency and Bankruptcy Code, 2016 (the Code), and complied with Regulations 38 & 39 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Issue 2: Constitution of the Committee of Creditors (CoC)
The Appellant contended that the CoC was illegally constituted without including Edelweiss Asset Reconstruction Company (EARCL). However, the Tribunal observed that since Edelweiss did not file a claim, the Appellant could not have any grievance about its exclusion from the CoC. The Tribunal noted that the Appellant had the opportunity to raise objections but failed to do so at the appropriate time.

Issue 3: Valuation of the Corporate Debtor's assets
The Appellant argued that the Corporate Debtor was improperly valued as certain assets were not included in the valuation report. However, the Tribunal found no material irregularity in the valuation process and upheld the commercial wisdom of the CoC.

Issue 4: Discrimination among creditors in the Resolution Plan
The Appellant claimed that the Resolution Plan was discriminatory as it did not provide Operational Creditors with the minimum Liquidation value. The Tribunal noted that the Operational Creditor had voluntarily agreed to accept an amount lower than the Liquidation value, and there was no contravention of Section 30(2) of the Code.

Issue 5: Locus of the Appellant to challenge the Resolution Plan
The Tribunal held that the Appellant, being a suspended Director, had no locus to challenge the Resolution Plan once the affairs of the Corporate Debtor were handed over to the IRP. The Tribunal referred to the judgment in 'Ravi Shankar Vedam vs. Tiffins Barytes Asbestos and Paints Limited and Others,' which clarified that shareholders have a limited role and cannot challenge the Resolution Plan.

Conclusion:
The Tribunal dismissed the Appeal, finding no considerable grounds to entertain it. The commercial wisdom of the CoC was upheld, and the Resolution Plan was deemed compliant with the Code. The issue of the Appellant's locus to challenge the Plan was conclusively settled, affirming that shareholders have no standing to contest the approval of the Resolution Plan.