2024 (2) TMI 913 - AT - Insolvency and Bankruptcy

Rejection of approval Plan - CIRP - One of the reasons given by the Adjudicating Authority for rejection is that the claim of Income Tax Department of dues to be paid has not been proposed - HELD THAT - In the facts of the present case, the Resolution Professional may convene a meeting of the CoC for consideration of the proposal as contained in paragraphs 5 and 6 of the Affidavit of SRA as extracted above, as an Addendum to the resolution plan which was approved by the CoC. The Resolution Professional may place the Addendum for approval and make a fresh application for approval of the plan along with the Addendum, if any, in accordance with the law. The order is set aside - appeal disposed off.

Summary

Issues Involved:
The judgment involves the rejection of a Resolution Plan by the Adjudicating Authority due to various deficiencies, including inadequate addressing of cash flows, asset valuation, and operational debt claims. The Respondent's subsequent proposal to consider the claim of the Income Tax Department and the compliance of the Resolution Plan with Section 30(2) of the Insolvency and Bankruptcy Code, 2016 are also key issues.

Adjudicating Authority's Rejection of the Plan:
The Adjudicating Authority rejected the Resolution Plan due to deficiencies, including failure to address cash flows, asset valuation, and operational debt claims adequately. The valuation report of assets was deemed unsatisfactory, and the plan ignored the claim from the Income Tax Department. Additionally, the proposed payment to employees was considered insufficient, leading to non-satisfaction of Section 31(2) of the IBC 2016 and Regulations 36 of the Code.

Subsequent Court Order and Respondent's Affidavit:
Following the appeal, the Court issued an order for the Respondent to file a Reply Affidavit, including details of an offer submitted subsequently on clarification. The Respondent's Affidavit highlighted that despite no claim being filed by the Income Tax Department during the Corporate Insolvency Resolution Process (CIRP), the Resolution Applicant proposed to pay statutory dues in accordance with the Resolution Plan terms. The Respondent asserted that the Resolution Plan was in compliance with Section 30(2) of the Code and should be approved.

Court's Decision and Directions:
The Court, after considering the Respondent's submissions, directed the Resolution Professional to convene a meeting of the Committee of Creditors (CoC) to consider the proposal contained in the Affidavit as an Addendum to the approved resolution plan. The Resolution Professional was instructed to seek approval for the Addendum and submit a fresh application for plan approval within the specified timeline. The Court set aside the Adjudicating Authority's order and disposed of the appeal with the aforementioned directions, emphasizing completion within 30 days and filing of a fresh application promptly.