Approval of resolution plan [ Section 31 ] - Insolvency Resolution And Liquidation For Corporate Persons - IBC

Approval of resolution plan Approval of resolution plan [ Section 31 ] Binding of the resolution plan on the following person [ Section 31(1) ] If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors 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 its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force , such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan. The Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation. Rejection of the resolution plan [ Section 31(2) ] Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in section 31(1), it may, by an order, reject the resolution plan. Consequences of approval [ Section 31(3) ] After the order of approval under section 31(1),- (a) the moratorium order passed by the Adjudicating Authority under section 14 of the IBC shall cease to have effect; and (b) the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database. When an order is issued to dissolve a corporate debtor, under section 54 of the IBC, a copy of the dissolution order must be forwarded to the authority with which the corporate debtor is registered within seven days from the date of the order . Further, under section 208(2)(d) of the IBC, the IRP/RP shall provide a copy of the records of every proceeding before the adjudicating authority to the IBBI and the IPA of which he is a member. Obtaining of necessary approval by the Resolution Applicant [ Section 31(4) ] The resolution applicant shall, pursuant to the resolution plan approved under section 31(1) , obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under section 31(1) or within such period as provided for in such law, whichever is later Provided that where the resolution plan contains a provision for combination, as referred to in section 5 of the Competition Act, 2002 , the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors. Relevant Case Law K. Sashidhar Vs. Indian Overseas Bank Ors. - SC Dated 05.02.2019 The legislature has not endowed the AA with the jurisdiction or authority to analyse or evaluate the commercial decision of the CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting FCs. The discretion of the AA is circumscribed by section 31 to scrutiny of resolution plan as approved by the requisite percent of voting share of FCs. Committee of Creditors of AMTEK Auto Limited through Corporation Bank Vs. Dinkar T Venkatasubramanian Ors. - SC Dated 23.02.2021 To assert that there is any scope for negotiations and discussions after the approval of the resolution plan by the CoC, would be plainly contrary to the terms of the Code. Kalpraj Dharamshi Anr. Vs. Kotak Investment Advisors Ltd. Anr. - SC Dated 10.03.2021 i. The commercial wisdom of CoC has been given paramount status without any judicial intervention for ensuring completion of the stated processes within the timelines prescribed by the Code. ii. There is an intrinsic assumption, that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. The opinion expressed by CoC after due deliberations in the meetings through voting, as per voting shares, is a collective business decision. iii. The legislature has consciously not provided any ground to challenge the commercial wisdom of the individual financial creditors or their collective decision before the AA and that the decision of CoC s commercial wisdom is made non justiciable. iv. Appeal is a creature of statute and that the statute has not invested jurisdiction and authority either with NCLT or NCLAT, to review the commercial decision exercised by CoC of approving the resolution plan or rejecting the same v. The commercial wisdom of CoC is not to be interfered with, excepting the limited scope as provided under Section 30 and section 31 of the IBC, 2016. Jaypee Kensington Boulevard Apartments Welfare Association Ors. Vs. NBCC (India) Ltd. Ors. - SC Dated 24.03.2021 i. The role of CoC is akin to that of a protagonist, giving finality to the process (subject to approval by the AA), who takes the key decisions in its commercial wisdom and the consequences thereof. The power of judicial review in section 31 of the Code is not akin to the power of a superior authority to deal with the merits of the decision of any inferior or subordinate authority. The AA has limited jurisdiction in the matter of approval of a resolution plan, which is well defined and circumscribed by sections 30(2) and section 31 read with the parameters delineated by the SC in its various judgments. Within its limited jurisdiction, if the AA finds any shortcoming in the resolution plan vis- -vis the specified parameters, it would only send the resolution plan back -to the CoC for resubmission after satisfying the parameters delineated by Code and exposited by the SC. ii. The process of simultaneous voting over two plans for electing one of them cannot be faulted. The legislature itself has made the position clear by way of a later amendment with effect from August 7, 2020, by specifically making stipulations for simultaneous voting over more than one resolution plan by the CoC, particularly with amendment of sub-regulation (3) of regulation 39 of CIRP Regulations and insertion of sub-regulations (3A) and (3B) thereto. iii. The dissenting financial creditor is entitled to receive the amount payable in monetary terms and not in any other term. It cannot be forced to remain attached to the CD by way of equities or securities. iv. The homebuyers as a class having assented to the resolution plan of the resolution applicant, any individual homebuyer or any association of homebuyers cannot maintain a challenge to the resolution plan and cannot be treated as a dissenting FC or an aggrieved person. Ghanashyam Mishra and Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company Ltd. Ors. - SC Dated 13.04.2021 Once a resolution plan is approved by the AA under section 31(1) , the claims as provided in the resolution plan shall stand frozen and will be binding on the CD and its employees, members, creditors, including the central government, any state government or any local authority, guarantors, and other stakeholders. On the date of approval of resolution plan by the AA, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan. Lalit Kumar Jain Vs. Union of India Ors. - SC Dated 21.05.2021 The sanction of a resolution plan and finality imparted to It by section 31 does not per se operate as a discharge of the guarantor s liability. Ebix Singapore Pvt. Ltd. Vs. Committee of Creditors of Educomp Solutions Ltd. Anr. - SC Dated 13.09.2021 The existing insolvency framework in India provides no scope for effecting further modifications or withdrawals of CoC approved resolution plans, at the behest of the successful resolution applicant once the plan has been submitted to the adjudicating authority. A submitted resolution plan is binding and irrevocable as between the CoC and the successful resolution applicant. Arcelormittal India Pvt. Ltd. Vs. Satish Kumar Gupta and Ors. - SC Dated 04.10.2018 There is no vested right or fundamental right in the resolution applicant to have its resolution plan approved. Kundan Care Products Ltd. Vs. Amit Gupta and Ors. - NCLAT Dated 30.09.2020 A resolution applicant whose resolution plan stands approved by CoC, cannot be permitted to alter his position to the detriment of various stake holders after pushing out all potential rivals during the bidding process, and the same fraught with disastrous consequences for the CD which may be pushed into liquidation, as the CIRP period may by then be over thereby setting at naught all possibilities of insolvency resolution and protection of a CD, more so, when it is a going concern. Sunil Jain Vs. Punjab National Bank Ors. - NCLAT dated 24.04.2019 Where the AA has approved a resolution plan that provides for taking over the shares of the promoters, it is not required to comply with the provisions of section 56 and section 57 of the Companies Act, 2013 . The same can be completed at the stage of implementation of the resolution plan. Arcelormittal India Pvt. Ltd. Vs. Abhijit Guhathakurta Ors. - NCLAT order dt. 16.12.2019 The proviso to sub-section 31(4) of Code which relates to obtaining the approval from the CCI under the Competition Act, 2002 , prior to the approval of such resolution plan by the CoC, is directory and not mandatory. Standard Chartered Bank Vs. Satish Kumar Gupta, R.P. of Essar Steel Ltd. Ors. [CA (AT) (Ins.) No. 242 of 2019 and other appeals] NCLAT order dt. 04.07.2019 The FCs and OCs whose claims have been decided by the AA or the NCLAT, such decision being final is binding on all such FCs and OCs in terms of section 31 of the Code. Their total claims stand satisfied and, therefore, they cannot avail any remedy under section 60(6) of the Code. MSTC Ltd. Vs. Adhunik Metalliks Ltd. Ors. - NCLAT Dated 15.03.2019 The resolution applicant is bound by the mandate under section 30(2)(f) and shall ensure that the resolution plan shall not be against any of the provisions of the existing law. Facor Alloys Ltd. and Anr. Vs. Bhuvan Madan Ors. [CA (AT) (Ins.) No. 340 of 2020] NCLAT order dt. 25.11.2020 i. The RA after taking over the CD is entitled to exercise its right over its subsidiary company. Appellant s objection regarding the inclusion of the subsidiary company of the CD in the resolution plan is not sustainable. ii. An approved resolution plan can deal with the related party claim and extinguish the same which will ensure that the successful resolution applicant can take over the CD on clean slate. iii. The amendment to regulation 38(1) of CIRP Regulations which mandated priority in payment to dissenting FCs. This amendment came into effect on November 27, 2019, i.e., post the approval of resolution plan by the erstwhile CoC of the CD. iv. The approved resolution plan is not discriminatory as it does not give differential treatment among the same class of FCs merely based on assenting or dissenting FCs. Singh Raj Singh Vs. SRS Meditech Ltd. Ors. - NCLAT Dated 07.10.2020 The law does not enjoin any right or power to challenge the commercial wisdom of the CoC regarding approval of the resolution plan which is undergoing implementation Seroco Lighting Industries Pvt. Ltd. Vs. Ravi Kapoor, RP for Arya Filaments Pvt. Ltd. Ors. - NCLAT Dated 10.12.2020 A successful resolution applicant cannot be permitted to withdraw the approved resolution plan, coupled with the fact in the instant case being the sole RA in the CIRP, which is an MSME and having knowledge of the financial health of the CD as a promoter or as a connected person cannot be permitted to seek revision of the approved plan, on the ground which would not be a material irregularity within the ambit of section 61(3) of the Code. Deputy Commissioner, CGST Kalol, Gujrat Vs. Gopala Polyplast Ltd. [CA (AT) (Ins.) No. 477 of 2021] NCLAT Dated 16.07.2021 Sufficiency or insufficiency of the amount in a resolution plan is a matter of commercial decision of the CoC and it would not be appropriate on the part of NCLAT to interfere with the same. BRS Ventures Investment Ltd. Vs. Registrar of Companies, Guwahati [CA (AT) (Ins.) No. 1028 1042 of 2020] NCLAT order dt. 09.08.2021 Successful resolution applicant filed an application to increase the authorised share capital without paying any fees/stamp duty to the Registrar of Companies. It was observed that when a new company takes over and starts on a new slate and take certain management decision then everything cannot be exempted at a later stage. Jayesh N. Sanghrajka Vs. The Monitoring Agency nominated by the Committee of Creditors of Ariisto Developers Pvt. Ltd. - NCLAT Dated 20.09.2021 Success fees which is more in the nature of contingency and speculative is not part of the provisions of the Code and the Regulations, and the same is not chargeable by IP. Nitin Chandrakant Naik Anr. Vs. Sanidhya Industries LLP Ors. [CA (AT) (Ins.) No. 257 of 2020] NCLAT order dt. 26.08.2021 After portion of Part III has been applied to personal guarantors of CDs, one would have to resort to those provisions under Code if personal guarantors of CDs are to be proceeded against.