Resolution plan [ Section 30 ] - Insolvency Resolution And Liquidation For Corporate Persons - IBC

Resolution Plan Meaning of Resolution Plan As provided in Section 5(26) of the Code, resolution plan means a plan proposed by resolution applicant for insolvency resolution of corporate debtor as a going concern in accordance with Part II of the Code. I t h a s to be approved by the CoC by a vote of not less than sixty-six per cent of voting share of the financial creditors, before being presented to the Adjudicating Authority. The sections 30 and section 31 of the Code deal with resolution plan. Submission of resolution plan [ Section 30 of IBC, 2016 ] Resolution Applicant to submit Resolution Plan to RP [ Section 30(1) ] A resolution applicant may submit a resolution plan along with an affidavit stating that he is eligible under section 29A to the resolution professional prepared on the basis of the information memorandum. As per regulation 39(1) of the CIRP Regulations, a PRA in the Final List may submit resolution plan or plans prepared in accordance with the IBC and CIRP Regulations to the RP electronically within the time given in the RFRP along with section 29A affidavit as well as an undertaking that every information and records provided in connection with or in the resolution plan is true and correct and discovery of false information and record at any time will render the applicant ineligible to continue in the CIRP, forfeit any refundable deposit, and attract penal action under the IBC. As per regulation 39 (1A) , a resolution plan which does not comply with these requirements shall be rejected. Duty of resolution professional on submission of Resolution plan [ Section 30(2) ] Once resolution plans are received, the RP shall examine each one to confirm compliance with the requirements of section 30(2) of the IBC and the CIRP Regulations. Thereafter, as per section 30(3) of the IBC, the RP shall present to the CoC for its approval the resolution plans that conform with the conditions referred to in section 30(1) . As per regulation 39(2) of the CIRP Regulations, all complying resolution plans should be placed by the RP before the CoC for its consideration, along with the details of any avoidance transactions observed, found, or determined by him and the orders, if any, of the AA in respect of such transactions. These avoidance transactions are preferential transactions, undervalued transactions, extortionate credit transactions, and fraudulent transactions. Regulation 38 sets out the mandatory contents of the resolution plan. Regulation 37 of the CIRP Regulations provides that a resolution plan shall provide for the measures, as may be necessary, for insolvency resolution of the CD for maximization of value of its assets. Section 30(2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; (b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than- (i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in section 53(1) , whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with section 53(1) in the event of a liquidation of the corporate debtor. Explanation 1.- For the removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors. Explanation 2.- For the purposes of this clause, it is hereby declared that on and from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate insolvency resolution process of a corporate debtor- (i) where a resolution plan has not been approved or rejected by the Adjudicating Authority; (ii) where an appeal has been preferred under section 61 or section 62 or such an appeal is not time barred under any provision of law for the time being in force; or (iii) where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan; (c) provides for the management of the affairs of the Corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; (e) does not contravene any of the provisions of the law for the time being in force. Explanation.- For the purposes of clause (e) , if any approval of shareholders is required under the Companies Act, 2013 or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law. (f) conforms to such other requirements as may be specified by the Board. Present of resolution plans by Resolution professional for approval [ Section 30(3) ] The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in section 30(2). Approval by CoC [ Section 30(4) ] The committee of creditors may approve a resolution plan by a vote of not less than 66% . of voting share of the financial creditors, after considering its feasibility and viability, the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in section 53(1) , including the priority and value of the security interest of a secured creditor and such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017(Ord. 7 of 2017), where the resolution applicant is ineligible under section 29A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it: Provided further that where the resolution applicant referred to in the first proviso is ineligible under clause (c) of section 29A , the resolution applicant shall be allowed by the committee of creditors such period, not exceeding thirty days, to make payment of overdue amounts in accordance with the proviso to clause (c) of section 29A : Provided also that nothing in the second proviso shall be construed as extension of period for the purposes of the section 12(3) , and the corporate insolvency resolution process shall be completed within the period specified in that sub-section. Provided also that the eligibility criteria in section 29A as amended by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 shall apply to the resolution applicant who has not submitted resolution plan as on the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 (ord. 6 of 2018). resolution applicant attend the meeting of the committee of creditors [ Section 30(5) ] The resolution applicant may attend the meeting of the committee of creditors in which the resolution plan of the applicant is considered: Provided that the resolution applicant shall not have a right to vote at the meeting of the committee of creditors unless such resolution applicant is also a financial creditor. Submission of Resolution Plan its Approval by the Adjudicating authority[ Section 30(6) ] The resolution professional shall submit the resolution plan as approved by the committee of creditors to the Adjudicating Authority. As per regulation 39(4) of CIRP Regulations, if the plan is approved by the CoC, the RP shall endeavor to submit it to the AA at least 15 days before the maximum period for completing a CIRP, along with a compliance certificate (Form H of the Schedule) and the evidence of receipt of performance security required under regulation 36B(4A) . Form H is a comprehensive compliance certificate that sets out the key timelines in the CIRP, the liquidation and the fair value, the distribution of the resolution plan amount among various stakeholders, the compliance of the resolution plan with various provisions of the IBC and CIRP Regulations, the contingencies and approvals required under the plan, and a certification by the RP that the resolution plan is in compliance with the IBC and CIRP Regulations. Relevant Case Law T h e Karad Urban Cooperative Bank Ltd. Vs. Swwapnil Bhingardevay Ors. [2 020 (9) TMI 172 - SC] , Dated 04.09.2020 The Supreme Court observed that the RP, CoC and successful resolution applicant already took note of the facts and yet took a conscious decision to go ahead with the resolution plan, as such it cannot be stated that the question of viability and feasibility was not examined in the proper perspective. Arcelormittal India Pvt. Ltd. Vs. Satish Kumar Gupta and Ors . [ 2018 (10) TMI 312 - SC] , Dated 04.10.2018 Th e Supreme Court held that Section 30(2)(e) does not empower the RP to decide whether the resolution plan does or does not contravene the provisions of law. It is the CoC which will approve or disapprove a resolution plan , given the statutory parameters of section 30 . Chitra Sharma and Ors. Vs. Union of India and Ors. [ 2018 (8) TMI 661 - SC ] Dated 09.08.2018 Th e Supreme Court held that primacy is given in the process to commercial decisions . The success of the process is contingent upon the competence of the IRP and the CoC. Swiss Ribbons Pvt. Ltd. Anr. Vs. Union of India Ors . [ 2019 (1) TMI 1508 - SC ] Dated 25.01.2019 The Supreme Court held that the CoC has the primary responsibility of financial restructuring . They are required to assess theviability of a CD by taking into account all available information as well as to evaluate all alternative investment opportunities that are available. The CoC is required to evaluate the resolution plan on the basis of feasibility and viability . K. Sashidhar Vs. Indian Overseas Bank Ors. [ 2019 (2) TMI 1043 - SC ] D ated 05.02.2019 Th e Supreme Court held that the word may in section 30(4) is ascribable to the discretion of the CoC to approve the resolution plan or not to approve the same. Maharashtra Seamless Ltd. Vs. Padmanabhan Venkatesh Ors. [2020 (1) TMI 903 - SC ] Dated 22.01.2020 Th e Supreme Court held that once the resolution plan has been approved by the CoC, the AA ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan itself. SICOM Ltd. Vs. Alok Employees Benefit and Welfare Trust Ors. [ 2019 (1) TMI 841 - NCLAT ] Dated 29.11.2018 Even though amended section 30(4) came into force from 06.06.2018, it is applicable to all resolution plans which were not approved by the CoC or by the AA. DBS Bank Ltd., Singapore Vs. Shailendra Ajmera Anr. [ 2020 (2) TMI 388 - NCLAT ] Dated 18.11.2019 No FC, including a secured creditor, can dissent on the ground that if it dissents against the resolution plan, in spite of plan being feasible and viable and in accordance with section 30(2), just to get more amount than the other secured creditor, can take advantage of the amended section 30(2)(b)(ii) .