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TMI Blog2019 (11) TMI 731X X X X Extracts X X X X X X X X Extracts X X X X ..... Another very important function of the resolution professional is to collect, collate and finally admit claims of all creditors, which must then be examined for payment, in full or in part or not at all, by the resolution applicant and be finally negotiated and decided by the Committee of Creditors. Role of the prospective resolution applicant - HELD THAT:- Under the Code, the prospective resolution applicant has a right to receive complete information as to the corporate debtor, debts owed by it, and its activities as a going concern, prior to the admission of an application under section 7, 9 or 10 of the Code. For this purpose, it has a right to receive information contained in the information memorandum as well as the evaluation matrix mentioned in Regulation 36-B. Regulation 38 then deals with the mandatory contents of a resolution plan, making it clear that such plan must contain a provision that the amount due to operational creditors shall be given priority in payment over financial creditors - Such plan must also include provisions as to how to deal with the interests of all stakeholders including financial creditors and operational creditors of the corporate debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ode, by the investment of some discretionary or equity jurisdiction in the Adjudicating Authority outside Section 30(2) of the Code, when it comes to a resolution plan being adjudicated upon by the Adjudicating Authority. This argument also must needs be rejected. The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal. Secured and unsecured creditors; the equality principle - HELD THAT:- The Code and the Regulations, read as a whole, together with the observations of expert bodies and this Court s judgment, all lead to the conclusion that the equality principle cannot be stretched to treating unequals equally, as that will destroy the very objective of the Code - to resolve stressed assets. Equitable treatment is to be accorded to each creditor depending upon the class to which it belongs: secured or unsecured, financial or operational. The constitution of a sub-committee by the Committee of Creditors - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by ArcelorMittal and the Committee of Creditors had provided that distribution of profits made during the corporate insolvency process will not go towards payment of debts of any creditor - On this short ground, this part of the judgment of the NCLAT is also incorrect. Constitutional Validity of Section 4 and 6 of the Amending Act, 2019 - HELD THAT:- Given the fact that timely resolution of stressed assets is a key factor in the successful working of the Code, the only real argument against the amendment is that the time taken in legal proceedings cannot ever be put against the parties before the NCLT and NCLAT based upon a Latin maxim which sub-serves the cause of justice namely, actus curiae neminem gravabit. - even under the newly added proviso to Section 12, if by reason of all the aforesaid factors the grace period of 90 days from the date of commencement of the Amending Act of 2019 is exceeded, there again a discretion can be exercised by the Adjudicating Authority and/or Appellate Tribunal to further extend time keeping the aforesaid parameters in mind. It is only in such exceptional cases that time can be extended, the general rule being that 330 days is the outer lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IVIL APPEAL NO.5996 OF 2019 CIVIL APPEAL NO.6266 OF 2019 CIVIL APPEAL NO.6269 OF 2019 WRIT PETITION (CIVIL) NO.1055 OF 2019 WRIT PETITION (CIVIL) NO.1064 OF 2019 WRIT PETITION (CIVIL) NO.1049 OF 2019 WRIT PETITION (CIVIL) NO.1050 OF 2019 WRIT PETITION (CIVIL) NO.1057 OF 2019 WRIT PETITION (CIVIL) NO.1058 OF 2019 WRIT PETITION (CIVIL) NO.1061 OF 2019 WRIT PETITION (CIVIL) NO.1060 OF 2019 WRIT PETITION (CIVIL) NO.1056 OF 2019 CIVIL APPEAL NO.6409 OF 2019 WRIT PETITION (CIVIL) NO.1063 OF 2019 CIVIL APPEAL NOS.6433-6434 OF 2019 WRIT PETITION (CIVIL) NO.1066 OF 2019 WRIT PETITION (CIVIL) NO.1087 OF 2019 WRIT PETITION (CIVIL) NO.1110 OF 2019 WRIT PETITION (CIVIL) NO.1113 OF 2019 WRIT PETITION (CIVIL) NO.1121 OF 2019 CIVIL APPEAL NO._8768_OF 2019 DIARY NO.31409 OF 2019 CIVIL APPEAL NO.7266 OF 2019 CIVIL APPEAL NO.7260 OF 2019 WRIT PETITION (CIVIL) NO.1246 OF 2019CIVIL APPEAL NO._8769_OF 2019 DIARY NO.36838 OF 2019 WRIT PETITION (CIVIL) NO.1296 OF 2019 Justice R. F. Nariman, Justice Surya Kant And Justice V. Ramasubramanian For the Parties : Mr. K.K.Venugopal, Attorney General for India Mr. Tushar Mehta, SG Mr. Arvind Kr. Sharma, AOR Mr. Tushar Mehta, SG M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p Misra, AOR Ms. Pallavi Pratap, Adv. For M/s Pratap and Co., AOR Mr. Manish K. Bishnoi, AOR Mr. Gaurav Juneja, Adv. Mr. Aditya Ganju, Adv. Ms. Preetika Mehrotra, Adv. For Khaitan Co., AOR Ms. Garima Bajaj, AOR Mr. Akshay Girish Ringe, AOR Ms. Megha Mukerjee, Adv. M/s. D.S.K. Legal, AOR JUDGMENT R. F. Nariman, J. Delay Condoned in Civil Appeal Diary No. 31409 of 2019 and Civil Appeal Diary No. 36838 of 2019. I.A. No. 102638 of 2019 in Civil Appeal Diary No. 24417 of 2019 for Permission to File Appeal allowed. Appeal Admitted. 1. This group of appeals and writ petitions raises important questions as to the role of resolution applicants, resolution professionals, the Committee of Creditors that are constituted under the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the Code ), and last, but by no means the least, the jurisdiction of the National Company Law Tribunal (hereinafter referred to as NCLT / Adjudicating Authority ) and the National Company Law Appellate Tribunal (hereinafter referred to as NCLAT / Appellate Tribunal ), qua resolution plans that have been approved by the Committee of Creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corporate debtor, amounting to INR 18 crores. Importantly, the resolution applicant empowered the Committee of Creditors to decide the manner in which the financial package being offered would be distributed among the secured financial creditors. Standard Chartered Bank, which was stated to be an unsecured creditor, was to be paid an aggregate amount of 5% of its admitted claims. On 19.04.2018, the Adjudicating Authority directed the Committee of Creditors of the corporate debtor, which by then had been set up by the interim resolution professional, to consider the eligibility of the aforesaid resolution applicants. 3. On 10.09.2018, Standard Chartered Bank was classified as a secured financial creditor of the corporate debtor by the resolution professional. On 04.10.2018, this Court declared both ArcelorMittal and Numetal ineligible by virtue of their resolution plans being hit by Section 29-A of the Code. However, an order was passed under Article 142 of the Constitution, stating that one more opportunity be granted to both ArcelorMittal and Numetal to pay off the NPAs of their related corporate debtors within two weeks of the Supreme Court judgment, failing which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponent to the extent possible by providing provision for 15% amount for the other operational creditors and stakeholders, we are of the view that debts of the entire operational creditors can be satisfied in a reasonable and fair manner and then such I.A.s preferred by the operational creditors would also become infructuous and this Adjudicating Authority would not be required to deal with the merits of each and every I.A. Thus, this would be beneficial to avoid multiplicity of legal proceedings and to remove any impediment for effective implementation of the resolution plan and to achieve the main theme and object of the present I B Code. 4. By an interim order dated 20.03.2019 in the appeals that were filed before NCLAT, the NCLAT directed the Committee of Creditors to take a decision on certain suggestions that were made. Pursuant to this, on 27.03.2019 the Committee of Creditors decided - voting having concluded on 30.03.2019 - to appeal against the NCLAT s order, and, by a majority of 70.73% approved making an ex gratia payment of INR 1,000 crores to operational creditors above INR 1 crore. Appeals filed against the interlocutory orders of the NCLAT were then hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in which the distribution is to be made between one or other creditors, as there would be a conflict of interest between financial and operational creditors, financial creditors favouring themselves to the detriment of operational creditors. (viii) Section 53 of the Code cannot be applied during the corporate resolution process but will apply only at the stage of liquidation. (ix) Claims that have been decided by the resolution professional and affirmed by the Adjudicating Authority or the Appellate Tribunal are final and binding on all creditors. However, claims which have not been decided by the Adjudicating Authority or the Appellate Tribunal on merits may be decided by an appropriate forum in terms of Section 60(6) of the Code. (x) Financial Creditors in whose favour guarantees were executed, as their total claim stands satisfied to the extent of the guarantee, cannot re-agitate such claims as against the principal borrower. 6. We have heard detailed arguments made by Shri Gopal Subramanium and Shri Rakesh Dwivedi, learned senior counsel, on behalf of the Committee of Creditors of Essar Steel India Limited. They have argued that the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... health and growth of the economy, which would otherwise be subverted, if the impugned judgment were to be given effect. They relied strongly upon paragraphs 27 and 28 of Swiss Ribbons (supra), in particular, which differentiated between secured and unsecured creditors, most financial creditors being secured creditors and most operational creditors being unsecured. They also argued that the law laid down in K. Sashidhar v. Indian Overseas Bank 2019 SCCOnline SC 257, had made it clear that there is a judicial hands-off when it comes to the commercial wisdom of the Committee of Creditors, which has been directly infracted by the impugned judgment, which has held that the Committee of Creditors has nothing to do with the distribution of amounts which are infused by the resolution applicant for payment of the corporate debtor s erstwhile debts. They relied heavily upon the Bankruptcy Law Reforms Committee Report, 2015 (hereinafter referred to as the BLRC Report ) to buttress this submission, as well as the UNCITRAL Legislative Guide. They then submitted that a resolution plan is a consent-based plan proposed by the resolution applicant for a corporate debtor. The counterparty to such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right of creditors against individual guarantees extended by the promoters/promoter group of the corporate debtor was wholly illegal being contrary to several judgments of this Court and contrary to the terms of the guarantees themselves. They further argued that the profits that were made during the CIRP can obviously not be used for payment of the debts of the corporate debtor, as has been ordered by the NCLAT. Ultimately, according to the learned counsel, the impugned NCLAT judgment deserves to be set aside because it has curtailed the authority of the Committee of Creditors; expanded the jurisdiction of the Adjudicating Authority as well as the NCLAT beyond the bounds contained in the Code; and has transgressed the most basic tenet of the Committee of Creditors commercial wisdom being reflected by an over 66% majority vote, which has been nullified by the NCLAT by completely modifying and substituting the resolution plan approved by the Committee of Creditors. 7. Shri Shyam Divan, learned senior advocate appearing on behalf of the State Bank of India, has supported the submission made on behalf of the Committee of Creditors of Essar Steel India Limited. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this sum could be the minimum value of payment with a scope for further negotiations. However, what ultimately turned out is a payment of a lesser value, namely INR 39,500 crores as upfront, INR 2,500 crores being added as an eyewash towards Guaranteed Working Capital Adjustment. The reason this was an eyewash is because Odisha Slurry Pipeline Infrastructure Limited (hereinafter referred to as OSPIL ), a wholly owned subsidiary of the corporate debtor, owned a slurry pipeline. ArcelorMittal, in order to ensure unhindered usage of the said slurry pipeline, agreed that it would acquire the debts of OSPIL. In order to achieve such acquisition of the debts of OSPIL, the Core Committee of Creditors relieved ArcelorMittal from the solemn offer made to the Supreme Court of India to pay upfront a sum of INR 42,000 crores, and reduced from this said amount, a sum of INR 2,500 crores. Thus, the Core Committee s decision, as ratified by the Committee of Creditors, was to accept a sum lesser than that guaranteed as upfront payment by ArcelorMittal. Shri Sibal then trained his guns against the very formation of a Core Committee/Sub-Committee, stating that it is against the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debts; and importance is given to the value of debt, as opposed to, the value of security which is given importance only when the liquidation process is to take place. He argued that Section 53 of the Code would apply only during liquidation and not at the stage of resolving insolvency as is clear from the fact that secured creditor as defined by Section 3(30) of the Code is used only in Section 53 of the Code which is contained in Chapter III entitled Liquidation Process and not at all in Chapter II of the Code which is entitled Corporate Insolvency Resolution Process . In Chapter II, only financial and operational creditors, as defined, are spoken about. In point of fact, in the 17th meeting of the Committee of Creditors held on 09.08.2018, the Committee of Creditors had earlier decided that the upfront payment made shall be divided amongst financial creditors on the basis of their voting shares, which in turn is fixed on the basis of the debt that is owed to each one of them. He further argued that the Committee of Creditors could not possibly decide the manner of distribution as it would give rise to a serious conflict of interest, as the majority may get together to ride ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble, which can only be decided by the Adjudicating Authority and not by Parliament. Also, the amendment made to Section 30(4) cannot possibly include value of security interest of a secured creditor within the expression feasibility and viability which has been done only in order that it be applied to the present case. 10. Shri Arvind Datar supplemented the arguments of Shri Sibal and also appeared on behalf of the Standard Chartered Bank. He argued that the loan by Standard Chartered Bank to the wholly owned subsidiary of the corporate debtor is also a loan towards the project asset of the corporate debtor and that the State Bank of India was fully aware of such lending that was availed of by the corporate debtor. The wholly owned subsidiary is a Special Purpose Vehicle in order to ensure availability of coal for the corporate debtor to cater to enhanced production capacity. 11. He elaborated on the meaning of the expression modifications contained in Regulation 39(3) of the 2016 Regulations, arguing that the power to make modifications does not include the power to discriminate among creditors who are equally situated. Also, the Committee of Creditors cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt be neutralised by law. This is clear from the fact that the NCLAT judgment is dated 04.07.2019 and the Amending Act of 2019 was passed only one month later i.e. on 06.08.2019. No Standing Committee was consulted, as was the case of all previous amendments made to the Code, resulting in completely arbitrary provisions being inserted. He trained his guns against Section 4 of the Amending Act of 2019, arguing that timelines cannot be imposed or stipulated for the adjudication of disputes by any court, least of all the Supreme Court of India. The period of time taken in court proceedings cannot possibly be included within a timeframe as it would then nullify the role of the Adjudicating Authority and the Appellate Tribunal, and would defeat the primary object and purpose of the Code, which is resolution rather than liquidation. 13. Shri Harin P. Raval, learned senior advocate appearing on behalf of Kamaljit Singh Ahluwalia in Writ Petition (Civil) No.1058 of 2019 also assailed the Amending Act of 2019. Apart from the arguments made by Shri Sibal and Shri Ranjit Kumar, he also argued that the amendments made in Section 30 would be contrary to the rationale and design of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of such right by the said guarantor. 16. Shri Harish Salve, learned senior advocate appearing on behalf of ArcelorMittal, referred to the appeal filed by the Standard Chartered Bank, being Civil Appeal No. 6433 of 2019, and stated that the remedy sought therein was restricted to quashing the impugned judgment to the extent of paragraph 221 thereof which had held that financial creditors in whose favour guarantees were executed, could not re-agitate their claims against the principal borrower, as their total claim stands satisfied to the extent of the guarantee, and that therefore all the arguments made by Shri Sibal on behalf of Standard Chartered Bank, being outside the scope of the appeal, ought not to be considered at all. He further argued that since most of the arguments of Shri Sibal would go to the validity of the resolution plan, which Shri Sibal himself has stated that he is not assailing, should therefore be rejected on this ground alone. He also argued that it was wholly incorrect to say that only INR 39,500 crores would be an upfront payment. He read to us certain documents which would show that the guaranteed upfront payment INR 42,000 crores which his clien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as SICA ) and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as Recovery of Debts Act ) were due to enormous delays in disposal of cases. It is this loophole that was sought to be plugged in accordance with the original conception for the framework of the Insolvency Code that is to be found in the BLRC Report of 2015. She also referred to Regulation 39-C of the 2016 Regulations and 32(e) and (f) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (hereinafter referred to as Liquidation Process Regulations ) together with Regulation 32-A(4) of Liquidation Process Regulations, to state that a longer period than was originally given by Section 12 of the Code is now given so that, taking into account court proceedings, there must now be an outer limit within which either resolution takes place or the company goes into liquidation. The Regulations pointed out also show that even if the corporate debtor goes into liquidation, 90 days is given to sell the undertaking of the corporate debtor as a going concern so that 90 days over and above 330 days are also available to dispose of the corporate debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llate Tribunal in this very case stating that sub-classification among different classes of creditors may be done by the Committee of Creditors also on the basis of the value of the security interest of a secured creditor. She also read in copious detail, the Rajya Sabha Debate held on 29.07.2019 in which the Hon ble Minister piloted this amendment. According to her, the Federation of Indian Chambers of Commerce and Industry (hereinafter referred to as FICCI ) gave a representation dated 17.07.2019 to the Secretary, Ministry of Corporate Affairs pointing out the flawed judgment of the NCLAT in this very case and asking the Government to swiftly amend the Code so as to reinstate the law as it originally stood, to which the Government and Parliament responded by enacting the Amending Act of 2019. 19. Shri Tushar Mehta, learned Solicitor General of India, has supplemented the submissions of the learned Additional Solicitor General by written arguments. He has argued that it is well settled that the legislature can always take away the basis of a judicial decision without directly interfering with the judgment of the Court, and has cited several decisions to buttress this poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitution, the Committee, by majority vote of not less than 66% of the voting share of financial creditors, must immediately resolve to appoint the interim resolution professional as a resolution professional, or to replace the interim resolution professional by another resolution professional see Section 22(1) and (2) of the Code. Under Section 23(1), the resolution professional shall conduct the entire CIRP and manage the operations of the corporate debtor during the same. Importantly, all meetings of the Committee of Creditors are to be conducted by the resolution professional, who shall give notice of such meetings to the members of the Committee of Creditors, the members of the suspended board of directors, and operational creditors, provided the amount of their aggregate dues is not less than 10% of the entire debt owed. Like the duties of the interim resolution professional under Section 18 of the Code, it shall be the duty of the resolution professional to preserve and protect assets of the corporate debtor including the continued business operations of the corporate debtor see Section 25(1) of the Code. For this purpose, he is to maintain an updated list of claims; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Code and the Regulations, the resolution professional shall then provide the fair value and liquidation value to every member of the Committee of Creditors see Regulation 35(2). Regulation 36 is important as it forms the basis for the submission of a resolution plan. The information memorandum, spoken of by this regulation, must contain the following: (a) assets and liabilities with such description, as on the insolvency commencement date, as are generally necessary for ascertaining their values. Explanation: Description includes the details such as date of acquisition, cost of acquisition, remaining useful life, identification number, depreciation charged, book value, and any other relevant details. (b) the latest annual financial statements; (c) audited financial statements of the corporate debtor for the last two financial years and provisional financial statements for the current financial year made up to a date not earlier than fourteen days from the date of the application; (d) a list of creditors containing the names of creditors, the amounts claimed by them, the amount of their claims admitted and the security inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stated. Importantly, the resolution professional shall endeavour to submit the resolution plan approved by the Committee of Creditors to the Adjudicating Authority, at least 15 days before the maximum period for completion of CIRP, along with a compliance certificate in Form H of the Schedule. 27. The detailed provisions that have been stated hereinabove make it clear that the resolution professional is a person who is not only to manage the affairs of the corporate debtor as a going concern from the stage of admission of an application under Sections 7, 9 or 10 of the Code till a resolution plan is approved by the Adjudicating Authority, but is also a key person who is to appoint and convene meetings of the Committee of Creditors, so that they may decide upon resolution plans that are submitted in accordance with the detailed information given to resolution applicants by the resolution professional. Another very important function of the resolution professional is to collect, collate and finally admit claims of all creditors, which must then be examined for payment, in full or in part or not at all, by the resolution applicant and be finally negotiated and decided by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfy that the prospective resolution applicant complies with- (a) the provisions of clause (h) of sub-section (2) of Section 25; (b) the applicable provisions of Section 29-A, and (c) other requirements, as specified in the invitation for expression of interest. (9) The resolution professional may seek any clarification or additional information or document from the prospective resolution applicant for conducting due diligence under sub-regulation (8). (10) The resolution professional shall issue a provisional list of eligible prospective resolution applicants within ten days of the last date for submission of expression of interest to the committee and to all prospective resolution applicants who submitted the expression of interest. (11) Any objection to inclusion or exclusion of a prospective resolution applicant in the provisional list referred to in sub- regulation (10) may be made with supporting documents within five days from the date of issue of the provisional list. (12) On considering the objections received under sub- regulation (11), the resolution professional shall issue the final list o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset and liability statements; cash flow statements; and information relating to the causes or reasons for the financial situation of the debtor. Information relating to what is proposed by the plan could include, depending upon the objective of the plan and the circumstances of a particular debtor, details of classes of claims; claims modified or affected under the plan and the treatment to be accorded to each class under the plan; the continuation or rejection of contracts that are not fully executed; the treatment of unexpired leases; measures and arrangements for dealing with the debtor s assets (e.g. transfer, liquidation or retention); the sale or other treatment of encumbered assets; the disclosure and acceptance procedure; the rights of disputed claims to take part in the voting and provisions for disputed claims to be resolved; arrangements concerning personnel of the debtor; remuneration of management of the debtor; financing implementation of the plan; extension of the maturity date or a change in the interest rate or other term of outstanding security interests; the role to be played by the debtor in implementation of the plan and identification of those to be responsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (2) of section 25; (b) relevant records in evidence of meeting the criteria under clause (a); (c) an undertaking by the prospective resolution applicant that it does not suffer from any ineligibility under section 29A to the extent applicable; (d) relevant information and records to enable an assessment of ineligibility under clause (c); (e) an undertaking by the prospective resolution applicant that it shall intimate the resolution professional forthwith if it becomes ineligible at any time during the corporate insolvency resolution process; (f) an undertaking by the prospective resolution applicant that every information and records provided in expression of interest is true and correct and discovery of any false information or record at any time will render the applicant ineligible to submit resolution plan, forfeit any refundable deposit, and attract penal action under the Code; and (g) an undertaking by the prospective resolution applicant to the effect that it shall maintain confidentiality of the information and shall not use such information to cause an undue gain or undue loss to itself or any other perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions for approvals required and the timeline for the same; and (e) the resolution applicant has the capability to implement the resolution plan. Role of the committee of creditors in the corporate resolution process 31. Since it is the commercial wisdom of the Committee of Creditors that is to decide on whether or not to rehabilitate the corporate debtor by means of acceptance of a particular resolution plan, the provisions of the Code and the Regulations outline in detail the importance of setting up of such Committee, and leaving decisions to be made by the requisite majority of the members of the aforesaid Committee in its discretion. Thus, Section 21(2) of the Code mandates that the Committee of Creditors shall comprise all financial creditors of the corporate debtor. Financial creditors are defined in Section 5(7) of the Code as meaning persons to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred. Financial debt is then defined in Section 5(8) of the Code as meaning a debt along with interest, if any, which is disbursed against the consideration for the time value of money. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the financial creditors. This includes evaluating proposals to keep the entity as a going concern, including decisions about the sale of business or units, retiring or restructuring debt. The debtor will be a non- voting member on the creditors committee, and will be invited to all meetings. The voting of the creditors committee will be by majority, where the majority requires more than 75 percent of the vote by weight. xxx xxx xxx No prescriptions on solutions to resolve the insolvency The choice of the solution to keep the entity as a going concern will be voted on by the creditors committee. There are no constraints on the proposals that the Resolution Professional can present to the creditors committee. Other than the majority vote of the creditors committee, the Resolution Professional needs to confirm to the Adjudicator that the final solution complies with three additional requirements. The first is that the solution must explicitly require the repayment of any interim finance and costs of the insolvency resolution process will be paid in priority to other payments. Secondly, the plan must explicitly include payment to all creditors not on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the debt is to be restructured, or the entity is to be liquidated. This decision will come from the deliberations of the creditors committee in response to the solutions proposed by the market. (emphasis supplied) 34. The aforesaid extracts follow what is stated in the UNCITRAL Legislative Guide which prescribes as follows: 2. Nature or form of a plan 3. The purpose of reorganization is to maximize the possible eventual return to creditors, providing a better result than if the debtor were to be liquidated and to preserve viable businesses as a means of preserving jobs for employees and trade for suppliers. With different constituents involved in reorganization proceedings, each may have different views of how the various objectives can best be achieved. Some creditors, such as major customers or suppliers, may prefer continued business with the debtor to rapid repayment of their debt. Some creditors may favour taking an equity stake in the business, while others will not. Typically, therefore, there is a range of options from which to select in a given case. If an insolvency law adopts a prescriptive approach to the range of options av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without the prior approval of at least 66% of the votes of the Committee of Creditors. Section 28 of the Code is important and is set out hereinbelow: 28. Approval of committee of creditors for certain actions (1) Notwithstanding anything contained in any other law for the time being in force, the resolution professional, during the corporate insolvency resolution process, shall not take any of the following actions without the prior approval of the committee of creditors namely:- (a) raise any interim finance in excess of the amount as may be decided by the committee of creditors in their meeting; (b) create any security interest over the assets of the corporate debtor; (c) change the capital structure of the corporate debtor, including by way of issuance of additional securities, creating a new class of securities or buying back or redemption of issued securities in case the corporate debtor is a company; (d) record any change in the ownership interest of the corporate debtor; (e) give instructions to financial institutions maintaining accounts of the corporate debtor for a debit transaction from any suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity, and various other requirements as may be prescribed by the Regulations. 37. Regulation 18 to 26 of the 2016 Regulations deal with meetings to be conducted by the Committee of Creditors. The quorum at the meeting is fixed by Regulation 22, and the conduct of the meeting is to take place as under Regulation 24. Voting takes place under Regulation 25 and 26. Most importantly, Regulation 39(3) states: 39. Approval of resolution plan xxx xxx xxx (3) The committee shall evaluate the resolution plans received under sub-regulation (1) strictly as per the evaluation matrix to identify the best resolution plan and may approve it with such modifications as it deems fit Provided that the committee may approve any resolution plan with such modifications as it deems fit. 38. This Regulation fleshes out Section 30(4) of the Code, making it clear that ultimately it is the commercial wisdom of the Committee of Creditors which operates to approve what is deemed by a majority of such creditors to be the best resolution plan, which is finally accepted after negotiation of its terms by such Committee with prospective resolution applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub- section(2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan. (3) After the order of approval under sub-section (1),- (a) the moratorium order passed by the Adjudicating Authority under section 14 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. xxx xxx xxx 39. As aforesaid, upon receipt of a rejected resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members, creditors, guarantors and other stakeholders involved in the resolution plan. Thus, what is left to the majority decision of the Committee of Creditors is the feasibility and viability of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution applicant to the effect that such dues ought to be paid in full, so that the carrying on of the business of the corporate debtor does not become impossible for want of a most basic and essential element for the carrying on of such business, namely, electricity. This may, in turn, be accepted by the resolution applicant with a consequent modification as to distribution of funds, payment being provided to a certain type of operational creditor, namely, the electricity distribution company, out of upfront payment offered by the proposed resolution applicant which may also result in a consequent reduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion applicant and the stakeholders supporting the resolution plan, may be relevant? xxx xxx xxx 25. The Court, however, was not called upon to deal with the specific issue that is being considered in the present cases namely, the scope of judicial review by the adjudicatory authority in relation to the opinion expressed by the CoC on the proposal for approval of the resolution plan. After adverting to the 2016 Regulations, the Court set out the jurisdiction of the Adjudicating Authority as well as the Appellate Tribunal as follows: 42. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan as approved by the requisite percent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated requirements. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides: (i) the payment of insolvency resolution process costs in a specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed on the following grounds, namely:- (i) the approved resolution plan is in contravention of the provisions of any law for the time being in force; (ii) there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period; (iii) the debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified by the Board; (iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or (v) the resolution plan does not comply with any other criteria specified by the Board. xxxxxxxxx. 44. On a bare reading of the provisions of the I B Code, it would appear that the remedy of appeal under Section 61(1) is against an order passed by the adjudicating authority (NCLT) - which we will assume may also pertain to recording of the fact that the proposed resolution plan has been rejected or not approved by a vote of not less than 75% of voting share of the financial creditors. Indubitably, the remedy of appeal including the widt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verse the commercial wisdom of the dissenting financial creditors and that too on the specious ground that it is only an opinion of the minority financial creditors. The fact that substantial or majority percent of financial creditors have accorded approval to the resolution plan would be of no avail, unless the approval is by a vote of not less than 75% (after amendment of 2018 w.e.f. 06.06.2018, 66%) of voting share of the financial creditors. To put it differently, the action of liquidation process postulated in Chapter-III of the I B Code, is avoidable, only if approval of the resolution plan is by a vote of not less than 75% (as in October, 2017) of voting share of the financial creditors. Conversely, the legislative intent is to uphold the opinion or hypothesis of the minority dissenting financial creditors. That must prevail, if it is not less than the specified percent (25% in October, 2017; and now after the amendment w.e.f. 06.06.2018, 44%). The inevitable outcome of voting by not less than requisite percent of voting share of financial creditors to disapprove the proposed resolution plan, de jure, entails in its deemed rejection. xxx xxx xxx 49. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the domain of the financial creditor(s), to approve or reject the resolution plan, under Section 30(4) of the I B Code. At best, the Adjudicating Authority (NCLT) may cause an enquiry into the approved resolution plan on limited grounds referred to in Section 30(2) read with Section 31(1) of the I B Code. It cannot make any other inquiry nor is competent to issue any direction in relation to the exercise of commercial wisdom of the financial creditors - be it for approving, rejecting or abstaining, as the case may be. Even the inquiry before the Appellate Authority (NCLAT) is limited to the grounds under Section 61(3) of the I B Code. It does not postulate jurisdiction to undertake scrutiny of the justness of the opinion expressed by financial creditors at the time of voting. To take any other view would enable even the minority dissenting financial creditors to question the logic or justness of the commercial opinion expressed by the majority of the financial creditors albeit by requisite percent of voting share to approve the resolution plan; and in the process authorize the adjudicating authority to reject the approved resolution plan upon accepting such a challenge. That is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residual jurisdiction of the NCLT under Section 60(5)(c) cannot, in any manner, whittle down Section 31(1) of the Code, by the investment of some discretionary or equity jurisdiction in the Adjudicating Authority outside Section 30(2) of the Code, when it comes to a resolution plan being adjudicated upon by the Adjudicating Authority. This argument also must needs be rejected. 44. The minimum value that is required to be paid to operational creditors under a resolution plan is set out under Section 30(2)(b) of the Code as being the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under Section 53. The Insolvency Committee constituted by the Government in 2018 was tasked with studying the major issues that arise in the working of the Code and to recommend changes, if any, required to be made to the Code. The Insolvency Committee Report, 2018 (hereinafter referred to as The Committee Report, 2018 ), inter alia, deliberated upon the objections to Section 30(2)(b) of the Code, inasmuch as it provided for a minimum payment of a liquidation value to the operational creditors and nothing more, and concluded as follows: 18. V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erational creditors and particularly Micro, Small and Medium Enterprises ( MSMEs ). In this regard, the Committee observed that in practice most of the operational creditors that are critical to the business of the corporate debtor are paid out as part of the resolution plan as they have the power to choke the corporate debtor by cutting off supplies. Illustratively, in the case of Synergies- Dooray Automative Ltd. (Company Appeal No. 123/2017, NCLT Hyderabad, Date of decision 02 August, 2017), the original resolution plan provided for payment to operational creditors above the liquidation value but contemplated that it would be made in a staggered manner after payment to financial creditors, easing the burden of the 30-day mandate provided under regulation 38 of the CIRP Regulations. However, the same was modified by the NCLT and operational creditors were required to be paid prior in time, due to the quantum of debt and nature of the creditors. Similarly, the approved resolution plan in the case of Hotel Gaudavan Pvt. Ltd. (Company Appeal No. 37/2017, NCLT Principal Bench, Date of decision 13 December, 2017) provided for payment of all existing dues of the operational credito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erests of all the stakeholders including alteration in the order of priority of payment of government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto. 27. As is discernible, the Preamble gives an insight into what is sought to be achieved by the Code. The Code is first and foremost, a Code for reorganisation and insolvency resolution of corporate debtors. Unless such reorganisation is effected in a time-bound manner, the value of the assets of such persons will deplete. Therefore, maximisation of value of the assets of such persons so that they are efficiently run as going concerns is another very important objective of the Code. This, in turn, will promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When, therefore, a resolution plan takes off and the corporate debtor is brought back into the economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the hands of banks and financial institutions. Above all, ultimately, the interests of all stakeholders are looked after as the corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corporate debtor and the fact that it has adequately balanced the interests of all stakeholders including operational creditors. This being the case, judicial review of the Adjudicating Authority that the resolution plan as approved by the Committee of Creditors has met the requirements referred to in Section 30(2) would include judicial review that is mentioned in Section 30(2)(e), as the provisions of the Code are also provisions of law for the time being in force. Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. If the Adjudicating Authority finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the Committee of Creditors to re-submit such plan after satisfyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the stay or suspension, provisions to set aside acts and transactions and recapture value for the insolvency estate, classification of claims, voting procedures in reorganization and distribution mechanisms. An insolvency law should address problems of fraud and favouritism that may arise in cases of financial distress by providing, for example, that acts and transactions detrimental to equitable treatment of creditors can be avoided. xxx xxx xxx 5. Approval of a plan xxx xxx xxx (i) Classification of claims 27. The primary purpose of classifying claims is to satisfy the requirements to provide fair and equitable treatment to creditors, treating similarly situated claims in the same manner and ensuring that all creditors in a particular class are offered the same menu of terms by the reorganization plan. It is one way to ensure that priority claims are treated in accordance with the priority established under the insolvency law. It may also make it easier to treat the claims of major creditors who can be persuaded to receive different treatment from the general class of unsecured creditors, where that treatment may be necessary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xxx xxx xxx (c) Approval by secured and priority creditors (i) The need for secured and priority creditors to vote 34. In many cases of insolvency, secured claims will represent a significant portion of the value of the debt owed by the debtor. Different approaches can be taken to approval of the plan by secured and priority creditors. As a general principle, however, the extent to which a secured creditor is entitled to vote will depend upon the manner in which the insolvency regime treats secured creditors, the extent to which a reorganization plan can affect the security interest of the secured creditor and the extent to which the value of encumbered assets will satisfy the secured creditor s claim. 35. Under one approach, where the insolvency law does not affect secured creditors and, in particular, does not preclude them from enforcing their rights against the encumbered assets, there is no need to give these creditors the right to vote since their security interests will not be affected by the plan. Priority creditors are in a similar position under this approach-the plan cannot impair the value of their claims and they are e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h secured creditors rights are to be affected by the plan (e.g. one law provides that a three-quarter majority is required where the maturity date is to be extended and a four-fifths majority where the rights are to be otherwise impaired). Similarly, each rank of priority claims would be a separate class under those laws. xxx xxx xxx (iii) Where secured creditors are not fully secured 38. To the extent that the value of the encumbered asset will not satisfy the full amount of the secured creditor s claim, a number of insolvency laws provide that those secured creditors should vote with ordinary unsecured creditors in respect of the unsatisfied portion of the claim. This may raise difficult questions of valuation in order to determine whether, and to what extent, a secured creditor is in fact secured. For example, where three creditors hold security interests over the same asset, the value of that asset may only support the claim first in priority and part of the second in priority. The second creditor therefore may have a right to vote only in respect of the unsecured portion of its claim, while the third creditor will be totally unsecured. The valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust incentivise collective action in resolving bankruptcy, there must be a greater flexibility to allow individual action in resolution and recovery during bankruptcy compared with the phase of insolvency resolution. (emphasis supplied) 49. That equitable treatment of creditors is equitable treatment only within the same class is echoed in American Jurisprudence, 2d, Volume 9 (hereinafter referred to as American Jurisprudence ) as follows: 6. Distribution Equality of distribution is the theme of a bankruptcy act and a prime bankruptcy policy. The bankruptcy system is designed to distribute an estate as equally as possible among similarly situated creditors. Thus, creditors of equal status must be treated equally and equitably. One of the conditions placed upon the debtor s use of the Bankruptcy Code to obtain a fresh start is that the debtor treat all creditors fairly. The bankruptcy process is the process by which a res, under the constructive possession of the bankruptcy court, is administered for the purpose of allowing, disallowing, organizing, and prioritizing claims of creditors in, to, and upon the res. Alt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal Department. The learned authors state: I.VALUE OF SECURITY INTERESTS In developing standards for the legal framework of security interests, it is important to recognize that security interests serve discernable economic goals. Security interests reduce credit risk by increasing the creditor s likelihood to be repaid, not only when payment is due, but also in the event of a default by its debtor. This increased likelihood of repayment produces wider economic benefits. First, the availability of credit is enhanced; borrowers obtain credit in cases where they would have otherwise failed absent a security interest. Second, credit is also made available on better terms involving, for instance, lower interest rates and longer maturities. The relative cost of secured credit under that of unsecured credit reflects the commercial recognition of the advantages of secured credit in connection with the recovery of the debt. The efficiency of the legal framework for secured credit is a critical factor in the strengthening of financial systems. In the face of financial sector crises, an effective legal framework of security interests enables banks and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssary to promote other compelling policies, such as the policy supporting reorganization, or to maximize the insolvency estate s value. Rules of priority should enable creditors to manage credit efficiently, consistent with the following additional principles: C12.2 The priority of secured creditors in their collateral should be upheld and, absent the secured creditor s consent, its interest in the collateral should not be subordinated to other priorities granted in the course of the insolvency proceeding. Distributions to secured creditors should be made as promptly as possible. C12.3 Following distributions to secured creditors from their collateral and the payment of claims related to the costs and expenses of administration, proceeds available for distribution should be distributed pari passu to the remaining general unsecured creditors, unless there are compelling reasons to justify giving priority status to a particular class of claims. Public interests generally should not be given precedence over private rights. The number of priority classes should be kept to a minimum. C12.4 Workers are a vital part of an enterprise, and careful considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. margin collateral in markets; he who pays for the asset should have the right to the asset; security encourages the private rescue since the bank feels safer; security is defensive control, especially in the case of project finance; security is a fair exchange for the credit. Main Objections to security The objections to security are mainly historical, but they resurrect and live on. The hostility may stem from: debtor-protection stirred by the ancient hostility to usurers and money-lending and now expressed in consumer protection statutes; the prevention of false wealth, i.e. the debtor has many possessions but few assets this is usually met by a requirement for possession (inefficient because not public) or public registration; unsecured creditors get less on insolvency and this is seen as a violation of bankruptcy equality, although more often it is motivated by desire to protect unpaid employees and small creditors; security disturbs the safety of commercial transactions because of priority risks, e.g. the purchaser of goods; the secured creditor can disrupt a rescue by selling an essential asset. 54. Indeed, if an equality for all approach recognis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as non-performing assets but also involves restructuring such loans which often results in foregoing unpaid amounts of interest either wholly or partially. All these differences between financial and operational creditors have been reflected, albeit differently, in the judgment of Swiss Ribbons (supra). Thus, this Court in dealing with some of the differences has held: 50. According to us, it is clear that most financial creditors, particularly banks and financial institutions, are secured creditors whereas most operational creditors are unsecured, payments for goods and services as well as payments to workers not being secured by mortgaged documents and the like. The distinction between secured and unsecured creditors is a distinction which has obtained since the earliest of the Companies Acts both in the United Kingdom and in this country. Apart from the above, the nature of loan agreements with financial creditors is different from contracts with operational creditors for supplying goods and services. Financial creditors generally lend finance on a term loan or for working capital that enables the corporate debtor to either set up and/or operate its business. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese banks and financial institutions undertake a detailed market study which includes a techno-economic valuation report, evaluation of business, financial projection, etc. Since this detailed study has already been undertaken before sanctioning a loan, and since financial creditors have trained employees to assess viability and feasibility, they are in a good position to evaluate the contents of a resolution plan. On the other hand, operational creditors, who provide goods and services, are involved only in recovering amounts that are paid for such goods and services, and are typically unable to assess viability and feasibility of business. The BLRC Report, already quoted above, makes this abundantly clear. xxx xxx xxx 76. Quite apart from this, the United Nations Commission on International Trade Law, in its Legislative Guide on Insolvency Law (the UNCITRAL Guidelines) recognises the importance of ensuring equitable treatment to similarly placed creditors and states as follows: Ensuring equitable treatment of similarly situated creditors 7. The objective of equitable treatment is based on the notion that, in collective proceedings, cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insolvency resolution process costs, to the extent unpaid, will be paid in priority to any other creditor; (b) liquidation value due to operational creditors and provide for such payment in priority to any financial creditor which shall in any event be made before the expiry of thirty days after the approval of a resolution plan by the adjudicating authority; and (c) liquidation value due to dissenting financial creditors and provide that such payment is made before any recoveries are made by the financial creditors who voted in favour of the resolution plan. Post amendment, Regulation 38 reads as follows: 38. Mandatory contents of the resolution plan.-(1) The amount due to the operational creditors under a resolution plan shall be given priority in payment over financial creditors. (1-A) A resolution plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the corporate debtor. The aforesaid Regulation further strengthens the rights of operational creditors by statutorily incorporating the principle of fair and equita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he two types of creditors for the reasons given above. Further, as has been reflected in Swiss Ribbons (supra), most financial creditors are secured creditors, whose security interests must be protected in order that they do not go ahead and realise their security in legal proceedings, but instead are incentivised to act within the framework of the Code as persons who will resolve stressed assets and bring a corporate debtor back to its feet. Shri Sibal s argument that the expression secured creditor does not find mention in Chapter II of the Code, which deals with the resolution process, and is only found in Chapter III, which deals with liquidation, is for the reason that secured creditors as a class are subsumed in the class of financial creditors, as has been held in Swiss Ribbons (supra). Indeed, Regulation 13(1) of the 2016 Regulations mandates that when the resolution professional verifies claims, the security interest of secured creditors is also looked at and gets taken care of. Similarly, Regulation 36(2)(d) when it provides for a list of creditors and the amounts claimed by them in the information memorandum (which is to be submitted to prospective resolution applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured financial creditors in S.No.5 of paragraph 7 of statutory Form H. Thus, it can be seen that the Code and the Regulations, read as a whole, together with the observations of expert bodies and this Court s judgment, all lead to the conclusion that the equality principle cannot be stretched to treating unequals equally, as that will destroy the very objective of the Code - to resolve stressed assets. Equitable treatment is to be accorded to each creditor depending upon the class to which it belongs: secured or unsecured, financial or operational. 58. However, Shri Sibal relied strongly upon a judgment of this Court being Mihir R. Mafatlal v. Mafatlal Industries Ltd. (1997) 1 SCC 579, and in particular paragraph 28 thereof, which stated as follows: 28. On a conjoint reading of the relevant provisions of Sections 391 and 393 it becomes at once clear that the Company Court which is called upon to sanction such a scheme has not merely to go by the ipse dixit of the majority of the shareholders or creditors or their respective classes who might have voted in favour of the scheme by requisite majority but the Court has to consider the pros and cons of the scheme wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the scheme and to arrive at an independent conclusion whether the scheme should be permitted to go through or not when the majority of the creditors or members or their respective classes have approved the scheme as required by Section 391 sub-section (2). On this aspect the nature of compromise or arrangement between the company and the creditors and members has to be kept in view. It is the commercial wisdom of the parties to the scheme who have taken an informed decision about the usefulness and propriety of the scheme by supporting it by the requisite majority vote that has to be kept in view by the Court. The Court certainly would not act as a court of appeal and sit in judgment over the informed view of the parties concerned to the compromise as the same would be in the realm of corporate and commercial wisdom of the parties concerned. The Court has neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the Scheme by the requisite majority. Consequently the Company Court's jurisdiction to that extent is peripheral and supervisory and not appellate. The Court acts like a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered Bank, though a financial creditor, was only paid 1.74% of its admitted claim of INR 3487 crores as opposed to other financial creditors who were paid 74.8% of what was claimed by them. 60. Under Section 21(8) of the Code, all decisions by the Committee of Creditors can be taken by a 51% majority vote, unless, a higher percentage is required under other specific provisions of the Code. 61. In Pradyat Kumar Bhose v. The Hon ble the Chief Justice of Calcutta High Court (1955) 2 SCR 1331 at page 1345-1346, this Court, when dealing with the Chief Justice of the High Court of Calcutta s administrative powers held: The further subordinate objections that have been raised remain to be considered. The first objection that has been urged is that even if the Chief Justice had the power to dismiss, he was not, in exercise of that power, competent to delegate to another Judge the enquiry into the charges but should have made the enquiry himself. This contention proceeds on a misapprehension of the nature of the power. As pointed out in Barnard v. National Dock Labour Board [(1953) 2 QB 18, 40] at p. 40, it is true that no judicial tribunal can dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court he is not only at liberty but is compelled to rely on the assistance of his staff. In view of the above clear statement of the law the objection to the validity of the dismissal on the ground that the delegation of the enquiry amounts to the delegation of the power itself is without any substance and must be rejected. Likewise, in High Court of Judicature at Bombay through its Registrar v. Shirishkumar Rangrao Patil Anr. (1997) 6 SCC 339, this Court, in dealing with the constitution of various committees for the administration of the High Court, when dealing with question of delegation held: 10. It would thus be settled law that the control of the subordinate judiciary under Article 235 is vested in the High Court. After the appointment of the judicial officers by the Governor, the power to transfer, maintain discipline and keep control over them vests in the High Court. The Chief Justice of the High Court is first among the Judges of the High Court. The action taken is by the High Court and not by the Chief Justice in his individual capacity, nor by the Committee of Judges. For the convenient transaction of administrative business in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry single administrative decision qua approving and administering the resolution plan submitted by ArcelorMittal was in fact done by the requisite majority of the Committee of Creditors itself, the sub- committee having been used only for purposes of initiating proceedings and negotiating with ArcelorMittal, which ultimately culminated in the resolution plan as finally negotiated, being passed by the requisite majority of creditors on 23.10.2018. In point of fact, Standard Chartered Bank voted in favour of the constitution of a sub- committee on the 12th committee of creditors meeting of 02.05.2018, as also, in favour of decisions of the Committee of Creditors finalizing drafts of sub-committees on eligibility of resolution applicants at the 13th Committee of Creditors meeting on 05.05.2018. Also, as a matter of fact, on 31.05.2018, at the 16th Committee of Creditors meeting, a request was made by Standard Chartered Bank to be a member of the sub-committee, which request was later withdrawn. We also find that in the authorisation to the sub-committee to negotiate with ArcelorMittal, mooted at the 20th Committee of Creditors meeting on 19.10.2018, a request was made by Standard Char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Group or their respective affiliates) shall be deemed to have been (i) assigned / novated to the Resolution applicant, or any Person nominated by the Resolution applicant, with effect from the effective Date, with no rights subsisting or accruing to the Financial Creditors for the period prior to such assignment or novation; and (ii) to the extent not legally capable of assigned or novated- terminated with effect from the effective Date, with no rights accruing or subsisting to the Financial Creditors for the period prior to termination. In relation to the loan and financial assistance provided to the Corporate Debtor; each of the Financial Creditors, as the case maybe, shall: - Assign/ novate all security given (including but not limited to Encumbrance over assets of the Corporate Debtor, pledge of shares of the Corporate Debtor (other than corporate guarantees and personal guarantees) related in any manner to the Corporate Debtor) to the Resolution Applicant and /or its Connected Persons, and /or banks or financial institutions designated by the Resolution Applicant in this regard, pursuant to the Acquisition Structure, with effect from the Effective Date; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng guarantors. This is for the reason that this provision ensures that the successful resolution applicant starts running the business of the corporate debtor on a fresh slate as it were. In State Bank of India v. V. Ramakrishnan, 2018 (9) SCALE 597, this Court relying upon Section 31 of the Code has held: 22. Section 31 of the Act was also strongly relied upon by the Respondents. This Section only states that once a Resolution Plan, as approved by the Committee of Creditors, takes effect, it shall be binding on the corporate debtor as well as the guarantor. This is for the reason that otherwise, Under Section 133 of the Indian Contract Act, 1872, any change made to the debt owed by the corporate debtor, without the surety's consent, would relieve the guarantor from payment. Section 31(1), in fact, makes it clear that the guarantor cannot escape payment as the Resolution Plan, which has been approved, may well include provisions as to payments to be made by such guarantor. This is perhaps the reason that Annexure VI(e) to Form 6 contained in the Rules and Regulation 36(2) referred to above, require information as to personal guarantees that have been given in relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first addendum to the RFP dated 08.02.2018. On this short ground, this part of the judgment of the NCLAT is also incorrect. Constitutional Validity of Section 4 and 6 of the Amending Act, 2019 69. In Swiss Ribbons (supra) this Court was at pains to point out, referring, inter alia, to various American decisions in paras 17 to 24, that the legislature must be given free play in the joints when it comes to economic legislation. Apart from the presumption of constitutionality which arises in such cases, the legislative judgment in economic choices must be given a certain degree of deference by the courts. In para 120 of the said judgment, this Court held: 120. The Insolvency Code is a legislation which deals with economic matters and, in the larger sense, deals with the economy of the country as a whole. Earlier experiments, as we have seen, in terms of legislations having failed, trial having led to repeated errors , ultimately led to the enactment of the Code. The experiment contained in the Code, judged by the generality of its provisions and not by so-called crudities and inequities that have been pointed out by the petitioners, passes cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have the benefit of higher share in the plan value, at the expense of secured creditors. In fact the ruling puts in question the very concept of security what is the use of a charge/security if it is meaningless in insolvency? Even other statutes, including the Companies Act, 2013 clearly lay down a distinction between secured and unsecured creditors and if both are treated at par it will be a huge disincentive for secured creditors In fact, in its judgement on the constitutionality of the IBC earlier this year, the Supreme Court had justified the difference between financial and operational creditors. The NCLAT order effectively negates that distinction, which is against the fundamental theme of the IBC. If the distinction between secured and unsecured financial creditors and between financial and operational creditors is not maintained, bankers would be reluctant to use the IBC provisions for resolution of stressed assets, and would prefer for the companies to enter liquidation, which is certainly not the intent of the Code. The decision may also open the flood- gates for reopening of previously concluded cases as well as filing of fresh applications and appeals by operational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In section 12 of the principal Act, in sub-section (3), after the proviso, the following provisos shall be inserted, namely: Provided further that the corporate insolvency resolution process shall mandatorily be completed within a period of three hundred and thirty days from the insolvency commencement date, including any extension of the period of corporate insolvency resolution process granted under this section and the time taken in legal proceedings in relation to such resolution process of the corporate debtor: Provided also that where the insolvency resolution process of a corporate debtor is pending and has not been completed within the period referred to in the second proviso, such resolution process shall be completed within a period of ninety days from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019. xxx xxx xxx 6. Amendment to section 30. In section 30 of the principal Act, (a) in sub-section (2), for clause (b), the following shall be substituted, namely:- (b) provides for the payment of debts of operational creditors in such manner as may be sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular judgment and set it aside. 73. There is no doubt that the Amending Act of 2019 consists of several Sections which have been enacted/amended as difficulties have arisen in the working of the Code. While it is true that it may well be that the law laid down by the NCLAT in this very case forms the basis for some of these amendments, it cannot be said that the legislature has directly set aside the judgment of the NCLAT. Since an appeal against the judgment of the NCLAT lies to the Supreme Court, the legislature is well within its bounds to lay down laws of general application to all persons affected, bearing in mind what it considers to be a curing of a defective reading of the law by an Appellate Tribunal. There can be no doubt whatsoever that apart from the present case the amendments made by the Amending Act of 2019 apply down the board to all persons who are affected by its provisions. Also, it is settled law that bad faith, in the sense of improper motives, cannot be ascribed to a legislature making laws. This is settled law ever since the celebrated judgment of B.K. Mukherjea,J. In K.C. Gajapati Narayan Deo and Others v. State of Orissa 1954 SCR 1. This was felici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge except in absolutely plain cases and pause to understand the import of the doctrine of colourable exercise of public power, especially legislative power. In this branch of law, colourable is not tainted with bad faith or evil motive' ; it is not pejorative or crooked. Conceptually, colourability is bound up with incompetency. Colour', according to Black's Legal Dictionary, is an appearance, semblance or simulacrum, as distinguished from that which is real ... a deceptive appearance ... a lack of reality'. A thing is colourable which is, in appearance only and not in reality, what it purports to be. In Indian terms, it is maya. In the jurisprudence of power, colourable exercise of or fraud on legislative power or, more frightfully, fraud on the Constitution, are expressions which merely mean that the legislature is incompetent to enact a particular law although the label of competency is stuck on it, and then it is colourable legislation. It is very important to notice that if the legislature is competent to pass the particular law, the motives which impel it to pass the law are really irrelevant. To put it more relevantly to the case on hand, if a legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to as SARFAESI Act ) all provided for expeditious determination and timely detection of sickness in industrial companies, yet, legal proceedings under the same dragged on for years as a result of which all these statutory measures proved to be abject failures in resolving stressed assets. It is for this reason that the BLRC Report of 2015 stated: In limited circumstances, if 75 % of the creditors committee decides that the complexity of a case requires more time for a resolution plan to be finalised, a onetime extension of the 180 day period for up to 90 days is possible with the prior approval of the adjudicator. This is starkly different from certain present arrangements which permit the debtor / promoter to seek extensions beyond any limit. This approach has many strengths: Asset stripping by promoters is controlled after and before default. The promoters can make a proposal that involves buying back the company for a certain price, alongside a certain debt restructuring. Others in the economy can make proposals to buy the company at a certain price, alongside a certain debt restructuring. All partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a day, undisputed and complete information would become available to all persons involved in the IRP and thus address this source of delay. The second important source of delays lies in the adjudicatory mechanisms. In order to address this, the Committee recommends that the National Company Law Tribunals (for corporate debtors) and Debt Recovery Tribunals (for individuals and partnership firms) be provided with all the necessary resources to help them in realising the objectives of the Code. xxx xxx xxx Conclusion The failure of some business plans is integral to the process of the market economy. When business failure takes place, the best outcome for society is to have a rapid renegotiation between the financiers, to finance the going concern using a new arrangement of liabilities and with a new management team. If this cannot be done, the best outcome for society is a rapid liquidation. When such arrangements can be put into place, the market process of creative destruction will work smoothly, with greater competitive vigor and greater competition. 76. The speech of the Hon ble Minister on the floor of the House of the Rajy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nister and cited K.P. Varghese v. ITO (1982) 1 SCR 629 and K.S. Paripoornan v. State of Kerala (1994) 5 SCC 593. In Varghese (supra) this Court held, at page 645, as follows: Now it is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the Mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted. This is in accord with the recent trend in juristic thought not only in western countries but also in India that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible. In fact there are at least three decisions of this Court, one in Loka Shikshana Trust v. CIT [(1976) 1 SCC 254 : 1976 SCC (Tax) 14 : 101 ITR 234 : 1976 LR 1] , the other in Indian Chamber of Commerce v. Commissioner of Income Tax [(1976) 1 SCC 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC 366] and Aswini Kumar v. Arabinda Bose [1953 SCR 1, 28 : AIR 1952 SC 369] .) On a perusal of the Bills of 1982 and 1984 we find that they did not contain the provisions found in Section 23(1-A) of the principal Act and Section 30(1) of the amending Act. These provisions were inserted when the 1984 Bill was under consideration before Parliament. The Statement of Objects and Reasons does not, therefore, throw any light on the circumstances in which these provisions were introduced. As the speech of the Hon ble Minister on the floor of the House only indicates the object for which the amendment was made and as it contains certain data which it is useful to advert to, we take aid from the speech not in order to construe the amended Section 12, but only in order to explain why the Amending Act of 2019 was brought about. 78. Given the fact that timely resolution of stressed assets is a key factor in the successful working of the Code, the only real argument against the amendment is that the time taken in legal proceedings cannot ever be put against the parties before the NCLT and NCLAT based upon a Latin maxim which sub-serves the cause of justice namely, actus cur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er XXXVI CrPC which provides limitation period for certain types of offences for which lesser sentence is provided draws support from this maxim. But, even certain offences such as Section 384 or 465 IPC, which have lesser punishment may have serious social consequences. The provision is, therefore, made for condonation of delay. Treating date of filing of complaint or date of initiation of proceedings as the relevant date for computing limitation under Section 468 of the Code is supported by the legal maxim actus curiae neminem gravabit which means that the act of court shall prejudice no man. It bears repetition to state that the court's inaction in taking cognizance i.e. court's inaction in applying mind to the suspected offence should not be allowed to cause prejudice to a diligent complainant. Chapter XXXVI thus presents the interplay of these three legal maxims. The provisions of this Chapter, however, are not interpreted solely on the basis of these maxims. They only serve as guiding principles. Both these judgments have been followed in Neeraj Kumar Sainy v. State of Uttar Pradesh (2017) 14 SCC 136 at paragraphs 29 and 32. Given the fact that the time tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viso to Section 12, if by reason of all the aforesaid factors the grace period of 90 days from the date of commencement of the Amending Act of 2019 is exceeded, there again a discretion can be exercised by the Adjudicating Authority and/or Appellate Tribunal to further extend time keeping the aforesaid parameters in mind. It is only in such exceptional cases that time can be extended, the general rule being that 330 days is the outer limit within which resolution of the stressed assets of the corporate debtor must take place beyond which the corporate debtor is to be driven into liquidation. 80. When it comes to the validity of the substitution of Section 30(2) (b) by Section 6 of the Amending Act of 2019, it is clear that the substituted Section 30(2)(b) gives operational creditors something more than was given earlier as it is the higher of the figures mentioned in sub-clauses (i) and (ii) of sub-clause (b) that is now to be paid as a minimum amount to operational creditors. The same goes for the latter part of sub-clause (b) which refers to dissentient financial creditors. Mrs. Madhavi Divan is correct in her argument that Section 30(2)(b) is in fact a beneficial provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd paragraph 82, 84 of ArcelorMittal India (supra)), no vested right inheres in any resolution applicant to have its plan approved under the Code. Also, the Federal Court in Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri AIR 1941 FC 5 and later, this Court in Shiv Shakti Coop. Housing Society, Nagpur v. Swaraj Developers Ors. (2003) 6 SCC 659 (at paragraphs 16 and 17) have held that an appellate proceeding is a continuation of an original proceeding. This being so, a change in law can always be applied to an original or appellate proceeding. For this reason also, Explanation 2 is constitutionally valid, not having any retrospective operation so as to impair vested rights. 83. The challenge to sub-clause (b) of Section 6 of the Amending Act of 2019, again goes to the flexibility that the Code gives to the Committee of Creditors to approve or not to approve a resolution plan and which may take into account different classes of creditors as is mentioned in Section 53, and different priorities and values of security interests of a secured creditor. This flexibility is referred to in the BLRC report, 2015 (see paragraph 33 of this judgment). Also, the discretion given to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng attempts by the Financial Creditors have failed in the past. The Resolution Applicant is proposing to pay the Secured Financial Creditors, the amounts stated under Section V which is significantly higher than the reconvenes that the Secured Financial Creditors as a class would realize in case of liquidation. The payments proposed to be made by the Resolution Applicant to the unsecured Financial Creditors is also higher than the recoveries that the unsecured Financial Creditors as a class would realize in case of liquidation, since the Liquidation Value realizable by unsecured Financial Creditors is nil. The Resolution Applicant has empowered the Committee of Creditors to decide the manner in which the financial package being offered by the Resolution Applicant to the Financial Creditors will be distributed to the Secured Financial Creditors. All such allocations to the Financial Creditors will be binding on all stakeholders. The unsecured Financial Creditors (including those Secured Financial Creditors who may have claims admitted against unsecured instruments) i.e. Standard Chartered Bank. The Bank of New York Mellon, London Branch, AXIS bank, ICICI Bank. Bank of Baroda, SBI Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... croeconomic and financial shocks. The identified Trade Creditors are being paid out on the assumption that they will continue their arrangements with the Corporate Debtor and shall in no manner commit any acts or omissions which would adversely impact the business of the Corporate Debtor. Acceptance of payments by the Trade Creditors shall be considered as an acceptance of the above condition. The Resolution Applicant recognizes and understands that additional payment to certain Operational Creditors may have to be made as a part of revitalising the business and is prepared to do so, on a case by case basis. Governmental Operational Creditors The Resolution Applicant aims at establishing a good working relationship between the Governmental Authorities and the Corporate Debtor and will cause the Corporate Debtor to duly pay the statutory dues that will be incurred by the Corporate Debtor going forward from the Plan Approval Date in a timely manner. The revival of the Corporate Debtor will also enhance the tax collection by the Governmental Authorities in the geographies where the Corporate Debtor operates. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and quality of security. Based on a comparison of the two suggested options based on fair value and liquidation value, in the interest of all stake holders and with the objective of the Code it is proposed to the COC to accept the sharing ratio as per the Liquidation Valuation Report and also to Secured Financial Creditors having Charge on Project Asset of ESIL for taking a sacrifice of ₹ 37.76 Crores (for adopting the sharing ratio as per the Liquidation Valuation Report instead of fair value) which shall be allocated to Secured Financial Creditors having Charge on Pledge of Shares of ESOL. While allocation of the Resolution Amount it is pertinent to note that the Committee of creditors has the widest discretion to determine the terms of the resolution plan. A. At the outset it is important to be noted that the legislature in their wisdom under the provisions of the Insolvency and Bankruptcy Code, 2016 (Code) have left the decision-making in respect of commercial matters completely in the domain of the Committee of Creditors (COC). In fact even the Bankruptcy Law Reforms Committee report (which formed the basis for the enactment of the Code) specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power is conferred or a duty is imposed by a statute, and there is nothing expressly inhibiting the exercise of the power or the performance of the duty by any limitations or restrictions it is reasonable to hold that it carries with it all power of doing all such acts or employing all such means as are reasonably necessary for its execution. The below mentioned provisions of the Code and the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons). Regulation 2016 (CIR Regulations) set out the powers of the COC in this regard: Section 31 of the Code (Approval of Resolution Plan): (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. Regulation 39 of the CIR Regulations, 2016; (2) The resolution professional shall present all resolution p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olders would also be a decision which the COC would be permitted to take, especially in the absence of any express provision in the Code prohibiting such a decision by the COC. As long as such decisions are not contrary to the provisions of the Code. 86. The final resolution plan as approved on 23.10.2018 was as follows - in the place of INR 35,000 crores to be paid on the effective date as an upfront amount, INR 39,500 crores and INR 2500 crores, aggregating INR 42,000 crores was to be paid. The resolution applicant agreed that the Committee of Creditors will decide the manner in which the financial package being offered by the resolution applicant to financial creditors will be distributed to secured financial creditors. The payment of INR 17.4 crore was to be made to unsecured financial creditors with a claim amount of more than INR 10 lakhs, and INR 30.55 lakhs to such creditors with a claim amount of less than INR 10 lakhs, with the fresh capital infusion for improving operations and enhancing revival prospects of the corporate debtor remaining at INR 8,000 crores. So far as operational creditors were concerned, there was no change made. 87. At the 22nd mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the amounts payable to them in the best manner which is considered reasonable. I might add here that irrespective of what the RP considers as reasonable, it is always open to the COC to adjudge the commercial wisdom of the resolution plan while approving it. As pointed out by the Supreme Court in K. Sashidhar vs Indian Overseas Bank Ors. (Civil Appeal No. 10673 of 2018) such commercial decision of the COC is not subject to appeal under the Code. In the premises, I am of the opinion that SCB was differently placed than other financial creditors in view of the fact it did not have any charge or security on the project assets but had advanced a large amount of loan amounting to ₹ 3000 crores on the basis of the pledge over the shares of an offshore company and a corporate guarantee extended by the Corporate Debtor. The resolution plan as finally approved by COC was fully justified in treating SCB as differently placed based on the cogent and intelligible differentia that is apparent from the facts of the case. I see nothing in the provisions of the Code of the Regulations which would militate against the decision taken by the COC. I might add here that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Canara Bank stated that he requires clarity on the following questions before he can consider the revised apportionment to SCB: (a) Whether any NOCs were taken from the lenders before taking corporate guarantee, as it is a financial covenant in the sanctions of the lenders? (b) When SCB had funded Essar Steel Offshore Ltd. (ESOL), whether SCB had not taken security of Trinity coal mines as collateral, and the cash flows and credentials from the assets as security? (c) What is the end-use of the loan and was that end-use ensured? At what stage is the project? Were the funds really invested in the project? xxx xxx xxx The representatives of SCB raised issue of valuation and mentioned that value of above INR 24 crores of ESOL shares has not been estimated appropriately and is erroneous. The value has been estimated based on desktop valuation and the valuer has not considered valuation of underlying assets. A valuation report of equity of Trinity was shared by RP after receipt of same from Corporate Debtor which shows value in excess of USD 600 mn. xxx xxx xxx Further, the representatives of EARC added that they required clarify as to whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nwards. We cannot arrive at the conclusion that the acceptance of the resolution plan by the majority of the Committee of Creditors should be set aside on this score, inter alia, for the reason that Shri Sibal assured us that he was not attacking the acceptance of the revised plan but only distribution of amounts payable under the said plan. This being so, it is also not possible to accept the submission of Shri Sibal, that feasibility and viability of a resolution plan will not include distribution of the amount of debt under the said plan. It is also not possible to accept Shri Sibal s submission that the resolution plan must itself provide for distribution inter se between secured financial creditors. It is enough that under the Code and the Regulations, the resolution plan provides for distribution of amounts payable towards debts based upon a classification of various types of creditors. This both the original plan as well as the negotiated plan of ArcelorMittal have already done, as has been seen by us hereinabove, both plans containing the amount to be paid to workmen separately, operational creditors of INR 1 crore and less separately, operational creditors of INR 1 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 838 crores paid over to the secured financial creditors according to the value of their security and the balance amount of INR 26,162 crores would then have to be distributed amongst all financial creditors on a pro-rata basis. 91. What is important to note is that when one reads the abovementioned judgment, it is a majority of 66% of the Committee of Creditors who has exercised the discretion vested in it under the Code in this particular manner, which has then correctly not been disturbed by the NCLT and NCLAT. Far from helping Shri Sibal s client, the principle that is applied in such a case is that ultimately it is the commercial wisdom of the requisite majority of the Committee of Creditors that must prevail on the facts of any given case, which would include distribution in the manner suggested in Orissa Manganese (supra). It is, therefore, not possible to accept the argument that the Adjudicatory Authority and consequently the Appellate Authority would be vested with the discretion to apply what was applied by the Committee of Creditors in the Orissa Manganese case (supra). This submission is also devoid of merit and is, therefore, rejected. 92. The other a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the aforesaid judgment, must therefore be set aside. 95. So far as Civil Appeal No. 6409 of 2019 is concerned, we have perused paragraphs 70 to 76 of the impugned NCLAT judgment to the effect that the cheques issued by the corporate debtor due to its payment obligation towards Bhandar Power Limited were not issued with a view to secure any payment obligation of the principal borrower i.e. EPGL, is a finding of fact which dislodges the claim of this appellant to be regarded as a financial creditor. We find no infirmity in the aforesaid finding. This appeal is consequently dismissed. 96. So far as Civil Appeal Diary No. 36838 is concerned, we have perused the relevant documents and paragraphs 63 and 64 of the impugned NCLAT judgment and find that the NCLAT has erred inasmuch as it has added the claim of this Appellant to the tune of INR 861.19 crore despite the fact that the claim had already been admitted by the resolution professional thereby resulting in a double counting of the debt of this Appellant. This being the position, we find it necessary to set aside this part of the impugned NCLAT judgment as well. 97. So far as Civil Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n filed by the Appellants before the NCLT came to be dismissed by an order dated 14.02.2019 on the ground of non-prosecution. The subsequent restoration application filed by the appellants then came to be rejected by the NCLT through judgment dated 08.03.2019 on two grounds: one, that the applications could not be entertained at such a belated stage; and two, that notwithstanding the aforementioned reason, the claim had no merit in view of the failure to produce duly stamped agreements. The impugned NCLAT judgment, at paragraphs 93 and 94, upheld the finding of the NCLT and the resolution professional. In view of these concurrent findings, the claim of the Appellants therefore requires no interference. Further, the submission of the Appellants that they have now paid the requisite stamp duty, after the impugned NCLAT judgment, would not assist the case of the Appellants at this belated stage. These appeals are therefore dismissed. 100. So far as Writ Petition (Civil) No. 1064 of 2019 is concerned, we have perused the relevant documents and paragraph 36 of the impugned NCLAT judgment and find force in the contention of the Writ Petitioner that the NCLAT has wrongly noted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to these claims. 103. The appeals filed by the Committee of Creditors of Essar Steel Limited and other Civil Appeals are allowed. The impugned NCLAT judgment is set aside, except insofar as Civil Appeal No. 6409 of 2019, Civil Appeal No. 7266 of 2019, Civil Appeal No. 7260 of 2019 are concerned, which are dismissed. Insofar as Civil Appeal No. 6266 of 2019 and Civil Appeal No. 6269 of 2019 is concerned, the Appeals are partly allowed in terms of this judgment. The Writ Petitions are disposed of in terms of the judgment. It is made clear that the CIRP of the corporate debtor in this case will take place in accordance with the resolution plan of ArcelorMittal dated 23.10.2018, as amended and accepted by the Committee of Creditors on 27.03.2019, as it has provided for amounts to be paid to different classes of creditors by following Section 30(2) and Regulation 38 of the Code. Notes: 1 Under Regulation 2(hb), Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - fair value means the estimated realizable value of the assets of the corporate debtor, if they were to be exchanged on the inso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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