2025 (3) TMI 339 - AT - IBC

Approval of resolution plan of the Corporate Debtor as submitted by the Resolution Professional - whether there were material irregularities in the exercise of powers by the RP in the CIRP proceedings? - whether the claims of the Operational Creditors did not receive their dues or whether there was any contravention of the provisions of law? - HELD THAT - There is no doubt that in terms of Section 24(3)(c) of the IBC it is the duty of the RP to give notice to the Operational Creditors or their representatives regarding the CoC meetings if the amount of their aggregate due is not less than 10% of the debt. It is also well settled that such Operational Creditors whose aggregate due is not less than 10% of the debt have a right to watch the proceedings of the CoC and express their views in the meetings without however any right to vote. In the present case there is no denial of the fact that the Appellant received notice of the CoC meetings from the RP. As the Appellant was kept informed of the CoC meetings and records show their regular participation in such meetings they had full knowledge of the CIRP proceedings. It is an undisputed fact that the resolution plan in the present case was approved by the Adjudicating Authority beyond 330 days. Be that as it may we also notice that the Adjudicating Authority had already approved the extension of CIRP period on 08.01.2024 which date was before 29.01.2024 when the plan was approved. In the present case the 23rd CoC meeting on 04.12.2023 had taken note of the fact that it was in an advanced stage of considering the resolution plans before it and since the extended CIRP period was getting expired on 10.12.2023 the CoC approved seeking further extension of CIRP period. Clearly enough CoC having taken a considered decision in this regard this constituted sufficient grounds for the Adjudicating Authority to extend further time beyond 330 days for completion of the CIRP process. Section 30 of the IBC which deals with submission of Resolution Plan and sub-section (6) thereto states that the resolution professional shall submit the Resolution Plan as approved by the Committee of Creditors to the Adjudicating Authority . In the present case the RP after approval of the plan by the CoC with 97.36% vote share filed an application before the Adjudicating Authority seeking approval of the Resolution Plan under Section 31 of the Code. Section 31 deals with approval of Resolution Plan. Section 31(1) provides that if the Adjudicating Authority is satisfied that the Resolution Plan as approved by the CoC under Section 30(4) meets the requirements as referred to in Section 30(2) it shall by order approve the resolution plan which shall be binding on the Corporate Debtor and other stakeholders involved in the Resolution Plan. Law is now well settled that the jurisdiction of the Adjudicating and Appellate Authorities to interfere with approval of the resolution plan is limited. The scope of judicial review is confined to the provisions contained in Section 30(2) of the IBC for the Adjudicating Authority and Section 30(2) read with Section 61(3) for the Appellate Authority. There is only limited review which can be exercised by the Adjudicating Authority or the Appellate Authority. There can be no fetters on the commercial wisdom of CoC. Conclusion - The Adjudicating Authority cannot substitute its views with the commercial wisdom of the CoC nor deal with the merits of Resolution Plan unless it is found it to be contrary to the express provisions of law and against the public interest. There is neither any material irregularity nor contravention of any provisions of law by the CoC which has been justifiably substantiated by the Appellant. In the present case when no valid grounds have been made out to challenge the approval of the resolution plan the legislative fiat of the IBC that the Adjudicating Authority cannot trespass upon the business decision of the CoC holds ground. There are no good ground to interfere with the impugned order approving the resolution plan - appeal dismissed.

ISSUES PRESENTED and CONSIDERED

The primary issues considered in this judgment are:

Whether the resolution plan was approved in violation of the prescribed time limits under Section 12 of the IBC.
Whether there were material irregularities in the exercise of powers by the Resolution Professional (RP) during the Corporate Insolvency Resolution Process (CIRP).
Whether the claims of the Operational Creditors were prejudiced, and if the resolution plan complied with Section 30(2)(b) of the IBC.
Whether the procedural requirements, such as the publication of Form-G and sharing of valuation reports, were adhered to.
Whether the Adjudicating Authority erred in approving the resolution plan, given the alleged procedural and substantive irregularities.

ISSUE-WISE DETAILED ANALYSIS

Violation of Time Limits under Section 12 of the IBC

Legal Framework: Section 12 of the IBC mandates the completion of the CIRP within 330 days, including any extensions. The Supreme Court in the Essar Steel case emphasized this time limit.
Court's Interpretation: The Tribunal acknowledged that the resolution plan was approved beyond 330 days. However, it noted that the Adjudicating Authority had extended the CIRP period before the expiration of the 330 days, based on the CoC's decision.
Key Findings: The Tribunal found that the CoC had taken a considered decision to seek an extension, and the Adjudicating Authority was justified in granting it.
Application of Law: The Tribunal concluded that the Essar Steel judgment does not entirely preclude extensions beyond 330 days, especially when the CIRP is near completion.
Conclusion: The Tribunal rejected the Appellant's contention that the resolution plan could not have been approved due to the exhaustion of the CIRP timeline.

Material Irregularities in the Exercise of Powers by the RP

Legal Framework: Sections 24(3)(c) and 30(2) of the IBC, along with CIRP Regulations, outline the RP's duties, including providing notices and valuation reports to the CoC.
Court's Interpretation: The Tribunal noted that the Appellant was informed of the CoC meetings and participated in them, indicating no procedural denial.
Key Findings: The Tribunal found that the RP had shared the fair and liquidation values with the CoC, and the decision to not share detailed valuation reports was deliberated upon and agreed by the CoC.
Conclusion: The Tribunal found no material irregularity in the RP's conduct regarding the sharing of valuation reports.

Claims of Operational Creditors and Compliance with Section 30(2)(b) of the IBC

Legal Framework: Section 30(2)(b) requires that the resolution plan provides for the payment of debts of operational creditors, which should not be less than the amount in a liquidation scenario.
Court's Interpretation: The Tribunal observed that the plan provided Rs 60 lakhs to Operational Creditors, which was more than their liquidation entitlement.
Key Findings: The Tribunal found that the liquidation value for Operational Creditors was nil, and thus, the plan's provision exceeded the statutory requirement.
Conclusion: The Tribunal held that the resolution plan was compliant with Section 30(2)(b) of the IBC.

Procedural Requirements: Publication of Form-G and Sharing of Valuation Reports

Legal Framework: Regulation 36-A(2) of the CIRP Regulations requires the publication of Form-G in specified manners.
Court's Interpretation: The Tribunal noted that the Appellant's objection regarding Form-G publication was belated and not raised at the appropriate time.
Key Findings: The Tribunal found that the issue of Form-G publication did not prejudice the Appellant's interests.
Conclusion: The Tribunal dismissed the Appellant's procedural objections as untimely and inconsequential.

Approval of the Resolution Plan by the Adjudicating Authority

Legal Framework: Sections 30 and 31 of the IBC outline the approval process for resolution plans by the Adjudicating Authority.
Court's Interpretation: The Tribunal emphasized the limited scope of judicial review and the supremacy of the CoC's commercial wisdom.
Key Findings: The Tribunal noted that the resolution plan was approved by 97.36% of the CoC vote, indicating strong backing.
Conclusion: The Tribunal upheld the Adjudicating Authority's approval, finding no contravention of statutory provisions.

SIGNIFICANT HOLDINGS

The Tribunal reaffirmed the limited scope of judicial review concerning CoC decisions, emphasizing that the commercial wisdom of the CoC should not be interfered with unless there is a clear contravention of law.
The Tribunal held that extensions beyond 330 days are permissible under certain circumstances, particularly when the CIRP is near completion.
The Tribunal concluded that the resolution plan complied with Section 30(2)(b) of the IBC, as the payment to Operational Creditors exceeded their liquidation entitlement.
The Tribunal dismissed the appeal, finding no merit in the Appellant's arguments and upholding the Adjudicating Authority's decision to approve the resolution plan.

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