9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (4) TMI 866 - AT - Insolvency and BankruptcyApproval of Resolution plan - Propriety of the valuation exercise conducted by the RP - lenders of the Corporate Debtor are allowed to pursue the personal guarantees given by the Appellant - Corporate Debtor intended to be kept as a going concern or not - resolution plan was within the contours of Section 30(2) of the IBC or not. Propriety of the valuation exercise conducted by the RP - HELD THAT - The RP did not violate the CIRP Regulations in the conduct of the valuation exercise. The RP had followed Regulation 27 to disclose the estimated fair and liquidation value of the Corporate Debtor. Further, we find that the CoC had duly considered and deliberated upon the valuation reports before deciding not to have any report from a third valuer. That being the considered business decision of the CoC, the supremacy of the commercial wisdom cannot be questioned by the Appellants. In fine, there are no infirmity in the conduct of the valuation exercise. Tenability of the contention of the Appellants that the resolution plan by allowing the lenders of the Corporate Debtor to pursue the personal guarantees given by the Appellant was in violation of law as after the transfer of debts, the liability of the Corporate Debtor would stand extinguished - HELD THAT - The Appellant was never discharged from its liability qua the personal guarantees under the resolution plan. Moreover, under Section 128 of the Contract Act, the liability of the borrower and guarantor are coextensive and the lender can choose to recover the outstanding shortfall amount from either of them. The contract of guarantee is an independent contract from the Loan Agreement and hence the contract of guarantee does not end if the borrower has failed to discharge the entire liability. Now when we apply the ratio of the judgement of the Hon ble Supreme Court in Lalit Kumar Jain Vs UOI and Ors 2021 (5) TMI 743 - SUPREME COURT to the present resolution plan, the personal guarantor is not discharged of his liabilities under the contract of guarantee. The release or discharge of a principal borrower from the debt owed by it to its creditor by operation of law or due to insolvency proceedings or liquidation does not absolve the guarantor of his liability which arises out of an independent contract. There is no specific bar under the IBC that a creditor cannot claim its remaining debt from the guarantor which has not been recovered from the Corporate Debtor - when the CoC in its wisdom has approved the resolution plan which provided for the continued rights of the Financial Creditor against the personal guarantor and did away with the subrogation rights of the personal guarantors, the contention of the Appellant that the liability of the personal guarantors should stand extinguished, not being in sync with the commercial wisdom of the CoC, is clearly devoid of merit. Allegation that the SRA did not intend to keep the Corporate Debtor as a going concern - HELD THAT - The SRA did not conceal the fact that he was submitting his plan along with his associates and since there is no bar in bringing other associates as co-applicants, there was nothing irregular in the submission of resolution plan by the SRA along with associates. All that the RP was required to do in such circumstances was to check the eligibility of the associates and this prescriptive requirement of Section 29A of IBC was complied with by the RP. To field response to the third issue raised by the Appellant, it is held that there is no irregularity in the conclusion of the Adjudicating Authority that the RP had carried out the verification exercise in terms of Section 29A of the IBC. Whether the resolution plan was within the contours of Section 30(2) of the IBC in that it did not contravene the provisions of any law for the time being in force and that no material irregularity was committed by the RP in the CIRP process? - HELD THAT - The law is thus well settled that commercial wisdom of the CoC approving the Plan cannot be interfered and it can be interfered only when there is statutory non-compliance, i.e., noncompliance of Section 30(2). The Adjudicating Authority has duly analysed the contents of the resolution plan of the SRA which has been approved by the CoC on 26.02.2020 with 99.69% vote share. Furthermore, in the present case, no grounds have been made that resolution plan approved by the CoC and the Adjudicating Authority violates any of the provisions of Section 30(2). Hence the resolution plan passes the muster - Given that the CoC has considered the resolution plan and passed the same with requisite majority and given the well settled legal position that the Adjudicating Authority has limited scope of judicial review available to it and cannot interfere on merits with the commercial wisdom of the CoC, there was no error committed on the part of the Adjudicating Authority in approving the resolution plan. There are no ground in this appeal to interfere with the impugned order of the Adjudicating Authority approving the Resolution Plan. There is no merit in the Appeal - appeal dismissed.
Issues Involved:
1. Propriety of the valuation exercise conducted by the Resolution Professional (RP). 2. Tenability of the contention regarding personal guarantees. 3. Allegation that the Successful Resolution Applicant (SRA) did not intend to keep the Corporate Debtor as a going concern. 4. Compliance of the resolution plan with Section 30(2) of the Insolvency and Bankruptcy Code (IBC). Summary: 1. Propriety of the Valuation Exercise: The appellants contended that the RP did not provide the valuation report to the suspended board of the Corporate Debtor, citing the Supreme Court's judgment in Vijay Kumar Jain Vs Standard Chartered Bank and Ors (2019) 20 SCC 455, which held that members of the erstwhile Board of Directors must have access to such documents. They also argued that the resolution plan was approved at a highly undervalued price and that significant variations in the valuation reports were ignored. The respondents countered that the RP conducted the valuation exercise per Regulations 27 and 35 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The CoC decided not to appoint a third valuer after considering the valuation reports. The Tribunal found no infirmity in the conduct of the valuation exercise and upheld the RP's actions. 2. Tenability of the Contention Regarding Personal Guarantees: The appellants argued that the resolution plan violated the law by allowing lenders to pursue personal guarantees after the transfer of debts, citing the Tribunal's judgment in KV Jayprakash vs SBI in CA (AT)(Ins) No. 362 of 2022. The respondents cited the Supreme Court's judgment in Lalit Kumar Jain Vs UOI and Ors (2021) 9 SCC 321, which held that the approval of a resolution plan does not discharge a personal guarantor's liabilities. The Tribunal found that the resolution plan did not discharge the personal guarantors from their liability and upheld the CoC's commercial wisdom in approving the plan. 3. Allegation that the SRA Did Not Intend to Keep the Corporate Debtor as a Going Concern: The appellants alleged that the SRA lacked the capability to run the Corporate Debtor and intended to sell its assets rather than revive it. The respondents pointed out that the resolution plan outlined a future business plan and that the SRA had successfully implemented the plan. The Tribunal found no irregularity in the submission of the resolution plan by the SRA and upheld the RP's compliance with Section 29A of the IBC. 4. Compliance of the Resolution Plan with Section 30(2) of the IBC: The appellants contended that the resolution plan violated Section 30(2) of the IBC. The respondents argued that the CoC had approved the plan with 99.69% voting share and that the Adjudicating Authority had limited scope for judicial review. The Tribunal found that the resolution plan complied with Section 30(2) and upheld the Adjudicating Authority's approval of the plan. Conclusion: The Tribunal dismissed the appeal, finding no merit in the appellants' contentions and upholding the Adjudicating Authority's approval of the resolution plan. The appeal was dismissed, and parties were directed to bear their own costs.
|
