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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 ..... 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 Mr. Niraj Kumar, Adv. Mr. Kirat Singh Nagra, Adv. Mr. Satyender Rai, Adv. Mr. Chander Prakash, AOR Mr. Aniruddha P. Mayee, AOR Mr. A. Rajarajan, Adv. Mr. Sanjeev Kr. Choudhary, Adv. Mr. A. Selvin Raja, Adv. Mr. Sapan Gupta, Adv. Ms. Misha, Adv. Mr. Siddhant Kant, Adv. Ms. Mrida Lakhmani, Adv. Ms. Jasveen Kaur, Adv. Ms. Moushmi Mehta, Adv. Mr. S. S. Shroff, AOR Ms. Anannya Ghosh, AOR Mr. Dushyant Manocha, Adv. Mr. Hitesh Saini, Adv. Mr. Brian Moses, Adv. Mr. Pavan Bhushan, Adv. Ms. Ujjwala, Adv. Mr. Pranav, Adv. Ms. Anindita Mitra, AOR Mr. Neeraj Kishan Kaul, Sr. Adv. Ms. Ruby Singh Ahuja, Adv. Mr. Sudhir Sharma, Adv. Mr. Vishal Gehrana, Adv. Mr. Anupam Prakash, Adv. Mr. Utkarsh Maria, Adv. Mr. Naman B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Creditors. The constitutional validity of Sections 4 and 6 of the Insolvency and Bankruptcy Code (Amendment) Act, 2019 (hereinafter referred to as the "Amending Act of 2019") have also been challenged. These appeals and writ petitions are an aftermath of this Court's judgment dated 04.10.2018, reported as ArcelorMittal India Private Limited v. Satish Kumar Gupta (2019) 2 SCC 1. 2. On 02.08.2017, the NCLT, Ahmedabad admitted Company Petition (I.B.) No. 39 of 2017 filed by Standard Chartered Bank together with a Petition filed by the State Bank of India under Section 7 of the Code. One Satish Kumar Gupta was appointed as the interim resolution professional, who was later confirmed as resolution professional. On 06.10.2017, the resolution professional by way of an advertisement in the Economic Times, invited expressions of interest from all interested resolution applicants to present resolution plans for rehabilitating the corporate d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 the corporate debtor would go into liquidation. On 18.10.2018, ArcelorMittal informed the resolution professional and the Committee of Creditors that it had made payments as per the Supreme Court's judgment dated 04.10.2018. However, Numetal did not make any such payment. As a result, on 19.10.2018, ArcelorMittal resubmitted its resolution plan of 02.04.2018, which was then evaluated by the Committee of Creditors on the same date - ArcelorMittal being declared as the highest evaluated resolution applicant vis-a-vis Vedanta. On 25.10.2018, the final negotiated resolution plan of ArcelorMittal was approved by the Committee of Creditors by a 92.24% majority. After several proceedings before the NCLT and the NCLAT, the NCLT, by its judgment dated 08.03.2019 disposed of the application to allow the resolution plan filed by ArcelorMittal as follows: "...we are of the view that the dues of the operational creditors must get at least similar treatm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 heard by this Court, which by its order dated 12.04.2019, inter alia, directed non-implementation of the judgment dated 08.03.2019 of the NCLT and expeditious disposal of the appeal before the NCLAT. 5. By its final judgment dated 04.07.2019, the NCLAT held that: (i) In a resolution plan there can be no difference between a financial creditor and an operational creditor in the matter of payment of dues, and that therefore, financial creditors and operational creditors deserve equal treatment under a resolution plan. Accordingly, the NCLAT has re-distributed the proceeds payable under the approved resolution plan as per the method of calculation adopted by it so that all financial creditors and operational creditors be paid 60.7% of their admitted claims; (ii) Securities and security interest is irrelevant at the stage of resolution for the purposes of allocation of payments, thereby directing that each financial creditor (whether secured or unsecured) with a claim e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned senior counsel, on behalf of the Committee of Creditors of Essar Steel India Limited. They have argued that the provisions of the Code provide for a broad classification of creditors as financial creditors and operational creditors on the basis of the nature of the transaction between creditors and a corporate debtor. They have further argued that the Code does not mandate identical treatment of differently situated creditors either inter se within financial creditors, who may be secured or unsecured, and/or financial creditors vis-a-vis operational creditors. The Code only posits equitable treatment of different classes of creditors recognising that different classes deserve differential treatment. According to them, financial creditors as a class have a superior status as against operational creditors, the same being the case with secured creditors vis-a-vis unsecured creditors. For this purpose, they relied upon certain provisions of the Code. They further argued that the general law of the land as contained in Section 48 of the Transfer of the Property Act, 1882 and Section 77 of the Companies Act, 2013 would not have been taken away sub-silentio by the Code and have reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolution plan is a consent-based plan proposed by the resolution applicant for a corporate debtor. The counterparty to such a plan is the Committee of Creditors, which is required to give a minimum consent of 66% voting share, which consent then becomes the basis for the Adjudicating Authority to approve a resolution plan for the corporate debtor. Once approved by the Adjudicating Authority, such plan becomes binding on all stakeholders as is mentioned by Section 31 of the Code. Therefore, any modification, as has been done by the NCLAT, of such plan is illegal. They then argued that the Committee of Creditors has both the power and the jurisdiction to deal with all commercial aspects of a resolution plan, including distribution of proceeds under such plan, and also referred to and relied upon the recent amendments made to Section 30 of the Code. They stated that the ArcelorMittal plan, as amended, looked after all stakeholders including operational creditors, and stated that a staggering amount of INR 55,000 crores qua operational creditors was paid during the 600 odd days of CIRP being carried out, operational creditors whose claims were above INR 1 crore, now being paid approxi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has supported the submission made on behalf of the Committee of Creditors of Essar Steel India Limited. According to the learned senior advocate, whereas his client and other secured creditors are secured to the extent of 99.66% of their outstanding dues, the only security of Standard Chartered Bank is a pledge of the shares held by the corporate debtor in an offshore Mauritian subsidiary, namely Essar Steel Offshore Limited (hereinafter referred to as "ESOL"), and the fair value of ESOL pledged shares has been determined at only INR 24.86 crores as against the total outstanding admitted dues of INR 3487.10 crores (being 0.7% of the total admitted debt of Standard Chartered Bank). Thus, according to him, Standard Chartered Bank is an unsecured creditor to the extent of INR 3462.14 crores, and as against a sum of INR 60.71 crores which was payable under the resolution plan as approved by the Committee of Creditors, the NCLAT has now upped this figure to approximately INR 2160 crores completely beyond its limited jurisdiction under the Code. Apart from the above, he also argued that Standard Chartered Bank is precluded from raising any challenge to the constitution of a sub-committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s against the very formation of a Core Committee/Sub-Committee, stating that it is against the provisions of the Code, and that as originally conceived, it was only to facilitate representation before the Adjudicating Authority, which was over, in any case, by 31.05.2018. The Core Committee however went on conducting secret negotiations with ArcelorMittal by which it buried Standard Chartered Bank's debt almost completely. This was done by reducing Standard Chartered Bank's entitlement of INR 2585 crores (INR 2646 crores minus INR 61 crores), if it were to have outstanding payments made on the basis of value of debt instead of value of security. In any case, it was further argued that the resolution plan of ArcelorMittal was itself flawed in that it would be contrary to Regulation 38(1A) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as the "2016 Regulations"), as it did not deal with the interests of all stakeholders. It would also be contrary to the RFP that was issued on 24.12.2017, clause 4.6.1(d) of which stated that the resolution plan should have contained a statement as to how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istribution as it would give rise to a serious conflict of interest, as the majority may get together to ride roughshod over the minority. He further argued that no categorisation can be made based on the security interest of financial creditors, which security interest may itself vary from first charge holders to second charge holders and then to subservient and residual charge holders. The fact that Standard Chartered Bank has been recognised, albeit only on 10.09.2018, as a secured financial creditor by the resolution applicant, is not challenged by any of the other financial creditors. Further, the valuation of pledged shares at INR 24.86 crores is itself a flawed evaluation, the actual value of the shares being in excess of US $600 million. 9. Shri Sibal then took us to the Amending Act of 2019 and Section 6 of the Amending Act of 2019 in particular, which amended Section 30 of the Code, shortly after the judgment of NCLAT in the present case. This amendment was made in the Code with effect from 16.08.2019. Shri Sibal's first argument is that the aforesaid amendment would not apply to the facts of the present case, in as much as the amendment made is prospective in nature. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate among creditors who are equally situated. Also, the Committee of Creditors cannot make rankings among financial creditors or otherwise create a class within a class. He reiterated that the status of Standard Chartered Bank as a secured financial creditor has not been disputed by any member of the Committee of Creditors. 12. Shri Ranjit Kumar, learned senior advocate appearing on behalf of Ideal Movers Limited, an operational creditor of the corporate debtor, stated that the admitted claim by the resolution professional was INR 178,50,51,792, and the original resolution plan contained nothing by way of repayment to his client. It is only after the NCLT judgment when INR 1,000 crores extra was paid by ArcelorMittal for operational creditors generally, that his client would now receive 20.5% of the admitted claim. Of course under the NCLAT judgment, he would stand to gain much more. He argued from a reading of the preamble of the Code and some of its provisions that a key objective of the Code is to ensure that the corporate debtor goes on doing its business as a going concern during the CIRP as a result of which a large number of operational creditors have to be paid their dues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in Section 30 would be contrary to the rationale and design of the BLRC Report, 2015. He also added that the Amending Act of 2019, insofar as it applied retrospectively, would be constitutionally infirm as it cannot be said that the amendments made thereto are in any manner clarificatory but are new substantive amendments. 14. Shri A.K. Gupta, learned advocate appearing for L&T Infrastructure Finance Co. Limited in Civil Appeal No.6409 of 2019, assailed the classification of his client as an operational creditor and stated that, on facts, the appellant had entered into a facility agreement, sanctioning a term loan of INR 75 crores to Essar Power Gujarat Limited, a subsidiary of the corporate debtor. The borrower then entered into a Promoter Obligation Agreement by which one Essar Power Limited undertook an obligation to arrange for cheques from the corporate debtor. INR 62 crores of such post-dated cheques were issued in favour of this appellant, as a result of which this appellant is also entitled to be classified as a financial creditor and not an operational creditor. He thus assailed the finding of the resolution professional, the NCLT and the NCLAT on this aspect of his cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ont payment INR 42,000 crores which his client had committed very much continued and that INR 2,500 crores which formed part of this figure was allowed by the Committee of Creditors while negotiating with his client for very good reason. 17. Shri Neeraj Kishan Kaul, learned senior counsel also appearing on behalf of ArcelorMittal, stressed the fact that the importance of the insolvency resolution process is that not only is the corporate debtor to be put back on its feet, but that the resolution applicant whose plan is accepted must be able to start on a fresh slate. This being the case, obviously Shri Rohatgi's argument, that the personal guarantees of the erstwhile promoters do not stand extinguished and that, at the very least, the right of subrogation cannot be taken away, would boomerang upon the successful resolution applicant if such right of subrogation were to be allowed to continue. Shri Salman Khurshid and Shri P. Tripathi, learned senior advocates appearing on behalf of Deutsche Bank, stressed that it was important to recognise separate classes of creditors and reiterated the arguments made on behalf of a number of their forbears as to how it is important to make a sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spose of the corporate debtor as a going concern. So far as the challenge to Section 6 of the Amending Act of 2019 is concerned, she argued that there is a symbiotic relationship between a resolution applicant and the Committee of Creditors, who alone are to take a commercial decision by the requisite majority whether or not to put the corporate debtor back on its feet. The reason for Explanation 1 to Section 30(2)(b) is that, what is fair and equitable must be determined within the framework of the Code, which is the commercial wisdom of the Committee of Creditors, subject to certain minimum guidelines to be observed. Thus, operational creditors who were originally to be paid only a minimum calculated on the basis of what they would be paid in the event of liquidation of a corporate debtor, are now to be paid the higher of two amounts, thereby raising the threshold of what is to be paid by a resolution applicant by way of a minimum to operational creditors, being enhanced under the amended provision. Further, even dissentient financial creditors are now to be paid a minimum guaranteed amount for the first time, as 66% of the financial creditors may give a certain class of financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to buttress this point. He also argued that Shri Sibal's assault on the constitutional validity of Sections 4 and 6 of the Amending Act of 2019 on the ground that the Amendment was tailor-made to do away with the judgment in this very matter, so that his client may walk away without anything, is answered by the well settled principle that an Act of the legislature cannot be attacked on the ground of improper or bad motive, and cited certain judgments of this Court in support of the same. Role of the resolution professional 20. The role of the resolution professional in the revival of the corporate debtor is stated in detail in several Sections of the Code read with the 2016 Regulations. 21. The ball starts rolling with the Adjudicating Authority, after admitting an application under either Sections 7, 9 or 10, ordering that a public announcement of the initiation of the CIRP together with calling for the submission of claims under Section 15 shall be made -see Section 13(1)(b) of the Code. For this purpose, the Adjudicating Authority appoints an interim resolution professional in the manner laid down in Section 16 - see Section 13(1)(c) of the Code. In the public announcement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end all meetings of the Committee of Creditors; prepare the information memorandum in accordance with Section 29 of the Code; invite prospective resolution applicants; and present all resolution plans at the meetings of the Committee of Creditors - see Section 25(2)(e) to (i) of the Code. Under Section 29(1) of the Code, the resolution professional shall prepare an information memorandum containing all relevant information, as may be specified, so that a resolution plan may then be formulated by a prospective resolution applicant. Under Section 30 of the Code, the resolution applicant must then submit a resolution plan to the resolution professional, prepared on the basis of the information memorandum. After this, the resolution professional must present to the Committee of Creditors, for its approval, such resolution plans which conform to the conditions referred to in Section 30(2) of the Code - see Section 30(3) of the Code. If the resolution plan is approved by the requisite majority of the Committee of Creditors, it is then the duty of the resolution professional to submit the resolution plan as approved by the Committee of Creditors to the Adjudicating Authority - see Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporate debtor with respect to related parties; (f) details of guarantees that have been given in relation to the debts of the corporate debtor by other persons, specifying which of the guarantors is a related party; (g) the names and addresses of the members or partners holding at least one per cent stake in the corporate debtor along with the size of stake; (h) details of all material litigation and an ongoing investigation or proceeding initiated by Government and statutory authorities; (i) the number of workers and employees and liabilities of the corporate debtor towards them; (j) *** (k) *** (l) other information, which the resolution professional deems relevant to the committee." 26. Under Regulation 36-A, the resolution professional shall then publish brief particulars of the invitation for expression of interest in Form G of the Schedule. This document must also, inter alia, provide for such basic information about the corporate debtor as may be required by a prospective resolution applicant for its expression of interest - see Regulation 36-A (4)(c). The resolution professional, once he receives a proposed resolution plan, must then conduct due diligence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing it clear that the said role is not adjudicatory but administrative, in the following terms: "80. However, it must not be forgotten that a Resolution Professional is only to "examine" and "confirm" that each resolution plan conforms to what is provided by Section 30(2). Under Section 25(2)(i), the Resolution Professional shall undertake to present all resolution plans at the meetings of the Committee of Creditors. This is followed by Section 30(3), which states that the Resolution Professional shall present to the Committee of Creditors, for its approval, such resolution plans which confirm the conditions referred to in sub-section (2). This provision has to be read in conjunction with Section 25(2)(i), and with the second proviso to Section 30(4), which provides that where a resolution applicant is found to be ineligible under Section 29-A(c), the resolution applicant shall be allowed by the Committee of Creditors such period, not exceeding 30 days, to make payment of overdue amounts in accordance with the proviso to Section 29-A(c). A conspectus of all these provisions would show that the Resolution Professional is required to examine that the resolution plan submitted by va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diligence in order to report to the Committee of Creditors whether or not it is in order. Even though it is not necessary for the Resolution Professional to give reasons while submitting a resolution plan to the Committee of Creditors, it would be in the fitness of things if he appends the due diligence report carried out by him with respect to each of the resolution plans under consideration, and to state briefly as to why it does or does not conform to the law." Role of the prospective resolution applicant 28. The UNCITRAL Legislative Guide discusses what ought to be the contents of a resolution plan in an Insolvency Code in the following terms: "4. The plan xxx xxx xxx 18. The question of what is to be included in the plan is closely related to the procedure for approval of the plan, that is, which creditors are required to approve the plan and the level of support required for approval, the effect of the plan once approved, that is, will it bind dissenting creditors and secured creditors and who will be responsible for implementation of the plan and for ongoing management of the debtor, and whether or not there is a requirement for court confirmation. Many insolvency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossible changes to the instrument or organic document constituting the debtor (e.g. changes to by-laws or articles of association) or the capital structure of the debtor or merger or consolidation of the debtor with one or more persons; the basis upon which the business will be able to keep trading and can be successfully reorganized; supervision of the implementation of the plan; and the period of implementation of the plan, including in some cases a statutory maximum period. 20. Rather than specifying a wide range of detailed information to be included in a plan, it may be desirable for the insolvency law to identify the minimum content of a plan, focusing upon the key objectives of the plan and procedures for implementation. For example, the insolvency law may require the plan to detail the classes of creditors and the treatment each is to be accorded in the plan; the terms and conditions of the plan (such as treatment of contracts and the ongoing role of the debtor); and what is required for implementation of the plan (such as sale of assets or parts of the business, extension of maturity dates, changes to capital structure of the business and supervision of implementation)." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or either satisfaction or modification of any security interest of a secured creditor and may also provide for reduction in the amount payable to different classes of creditors - see Regulation 37. 30. Accordingly, 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 - see Regulation 38(1). 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 debtor - Regulation 38 (1A). It must then provide for the term of the plan, management and control of the business of the corporate debtor during such term, and its implementation. It must also demonstrate that it is feasible and viable, and that the resolution applicant has the capability to implement the said plan. Regulation 38, being important, is set out hereinbelow: "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 credito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other agreement or arrangement securing payment or performance of any obligation of any person: Provided that security interest shall not include a performance guarantee;" 32. It is settled by several judgments of this Court that in order to trigger application of the Code, a neat division has been made between financial creditors and operational creditors. It has also been noticed in some of our judgments that most financial creditors are secured creditors and most operational creditors are unsecured creditors. The rationale for only financial creditors handling the affairs of the corporate debtor and resolving them is for reasons that have been deliberated upon by the BLRC Report of 2015, which formed the basis for the enactment of the Insolvency Code. 33. At this juncture, it is important to set out the relevant extracts from the aforementioned report: "2. Executive Summary xxx xxx xxx The key economic question in the bankruptcy process xxx xxx xxx The Committee believes that there is only one correct forum for evaluating such possibilities, and making a decision: a creditors committee, where all financial creditors have votes in proportion to the magnitude of deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the creditors committee to ultimately keep the entity as a going concern or liquidate it. The Committee reasoned that members of the creditors committee have to be creditors both with the capability to assess viability, as well as to be willing to modify terms of existing liabilities in negotiations. Typically, operational creditors are neither able to decide on matters regarding the insolvency of the entity, nor willing to take the risk of postponing payments for better future prospects for the entity. The Committee concluded that, for the process to be rapid and efficient, the Code will provide that the creditors committee should be restricted to only the financial creditors. 5.3.3 Obtaining the resolution to insolvency in the IRP The Committee is of the opinion that there should be freedom permitted to the overall market to propose solutions on keeping the entity as a going concern. Since the manner and the type of possible solutions are specific to the time and environment in which the insolvency becomes visible, it is expected to evolve over time, and with the development of the market. The Code will be open to all forms of solutions for keeping the entity going without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocedures for implementation. For example, the insolvency law may require the plan to detail the classes of creditors and the treatment each is to be accorded in the plan; the terms and conditions of the plan (such as treatment of contracts and the ongoing role of the debtor); and what is required for implementation of the plan (such as sale of assets or parts of the business, extension of maturity dates, changes to capital structure of the business and supervision of implementation)." (emphasis supplied) 35. Section 24 of the Code deals with meetings of the Committee of Creditors. Though voting on the approval of a resolution plan is only with the financial creditors who form the Committee of Creditors, yet the resolution professional is to conduct the aforesaid meeting at which members of the suspended board of directors may be present, together with one representative of operational creditors, provided that the aggregate dues owed to all operational creditors is not less than 10% of the entire debt owed - see Sections 24(2),(3) and (4) of the Code. Voting shall be in accordance with the voting share assigned to each financial creditor, which is based on the financial debts owe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors and seek the vote of the creditors prior to taking any of the actions under sub- section (1). (3) No action under sub-section (1) shall be approved by the committee of creditors unless approved by a vote of sixty-six per cent of the voting shares. (4) Where any action under sub-section (1) is taken by the resolution professional without seeking the approval of the committee of creditors in the manner as required in this section, such action shall be void. (5) The committee of creditors may report the actions of the resolution professional under sub-section (4) to the Board for taking necessary actions against him under this Code." Thus, it is clear that since corporate resolution is ultimately in the hands of the majority vote of the Committee of Creditors, nothing can be done qua the management of the corporate debtor by the resolution professional which impacts major decisions to be made in the interregnum between the taking over of management of the corporate debtor and corporate resolution by the acceptance of a resolution plan by the requisite majority of the Committee of Creditors. Most importantly, under Section 30(4), the Committee of Creditors may approve a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the provisions, it is clear that the provisions in Part II of the Code are self- contained code, providing for the procedure for consideration of the resolution plan by the CoC. 21. The stage at which the dispute concerning the respective corporate debtors (KS&PIPL and IIL) had reached the adjudicating authority (NCLT) is ascribable to Section 30(4) of the I&B Code, which, at the relevant time in October 2017, read thus: "30(4)- The committee of creditors may approve a resolution plan by a vote of not less than seventy five per cent of voting share of the financial creditors." 22. If the CoC had approved the resolution plan by requisite percent of voting share, then as per Section 30(6) of the I&B Code, it is imperative for the resolution professional to submit the same to the adjudicating authority (NCLT). On receipt of such a proposal, the adjudicating authority (NCLT) is required to satisfy itself that the resolution plan as approved by CoC meets the requirements specified in Section 30(2). No more and no less. This is explicitly spelt out in Section 31 of the I&B Code, which read thus (as in October 2017): "31. Approval of resolution plan.-(1) If the Adjudicating Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject matter expressed by them after due deliberations in the CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority. That is made nonjusticiable." 40. The importance of the majority decision of the Committee of Creditors is then stated in Section 31(1) of the Code which is set out as follows: "31. 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 stakehol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicating Authority under Section 31(1) of the Code. The Adjudicating Authority's jurisdiction is circumscribed by Section 30(2) of the Code. In this context, the decision of this court in K. Sashidhar (supra) is of great relevance. 42. In K. Sashidhar (supra) this Court was called upon to decide upon the scope of judicial review by the Adjudicating Authority. This Court set out the questions to be determined as follows: "18. Having heard learned counsel for the parties, the moot question is about the sequel of the approval of the resolution plan by the CoC of the respective corporate debtor, namely KS&PIPL and IIL, by a vote of less than seventy five percent of voting share of the financial creditors; and about the correctness of the view taken by the NCLAT that the percentage of voting share of the financial creditors specified in Section 30(4) of the I&B Code is mandatory. Further, is it open to the adjudicating authority/appellate authority to reckon any other factor (other than specified in Sections 30(2) or 61(3) of the I&B Code as the case may be) which, according to the resolution applicant and the stakeholders supporting the resolution plan, may be relevant? xxx xxx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enting financial creditors, it would not be free from being speculative. These aspects are completely within the domain of the financial creditors who are called upon to vote on the resolution plan under Section 30(4) of the I&B Code. 43. For the same reason, even the jurisdiction of the NCLAT being in continuation of the proceedings would be circumscribed in that regard and more particularly on account of Section 32 of the I&B Code, which envisages that any appeal from an order approving the resolution plan shall be in the manner and on the grounds specified in Section 61(3) of the I&B Code. Section 61(3) of the I&B Code reads thus: "61. Appeals and Appellate Authority.-(1) Notwithstanding anything to the contrary contained under the Companies Act, 2013 (18 of 2013), any person aggrieved by the order of the Adjudicating Authority under this part may prefer an appeal to the National Company Law Appellate Tribunal. (2) xxx xxx xxx (3) An appeal against an order approving a resolution plan under section 31 may be 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) ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dubitably, the inquiry in such an appeal would be limited to the power exercisable by the resolution professional under Section 30(2) of the I&B Code or, at best, by the adjudicating authority (NCLT) under Section 31(2) read with 31(1) of the I&B Code. No other inquiry would be permissible. Further, the jurisdiction bestowed upon the appellate authority (NCLAT) is also expressly circumscribed. It can examine the challenge only in relation to the grounds specified in Section 61(3) of the I&B Code, which is limited to matters "other than" enquiry into the autonomy or commercial wisdom of the dissenting financial creditors. Thus, the prescribed authorities (NCLT/NCLAT) have been endowed with limited jurisdiction as specified in the I&B Code and not to act as a court of equity or exercise plenary powers. 46. In our view, neither the adjudicating authority (NCLT) nor the appellate authority (NCLAT) has been endowed with the jurisdiction to reverse 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 accorde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislative history there is contra indication that the commercial or business decisions of the financial creditors are not open to any judicial review by the adjudicating authority or the appellate authority. 51. Suffice it to observe that in the I&B Code and the regulations framed thereunder as applicable in October 2017, there was no need for the dissenting financial creditors to record reasons for disapproving or rejecting a resolution plan. Further, as aforementioned, there is no provision in the I&B Code which empowers the adjudicating authority (NCLT) to oversee the justness of the approach of the dissenting financial creditors in rejecting the proposed resolution plan or to engage in judicial review thereof. Concededly, the inquiry by the resolution professional precedes the consideration of the resolution plan by the CoC. The resolution professional is not required to express his opinion on matters within 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he corporate debtor or corporate person under this Code." It will be noticed that the non-obstante clause of Section 60(5) speaks of any other law for the time being in force, which obviously cannot include the provisions of the Code itself. Secondly, Section 60(5)(c) is in the nature of a residuary jurisdiction vested in the NCLT so that the NCLT may decide all questions of law or fact arising out of or in relation to insolvency resolution or liquidation under the Code. Such residual jurisdiction does not in any manner impact Section 30(2) of the Code which circumscribes the jurisdiction of the Adjudicating Authority when it comes to the confirmation of a resolution plan, as has been mandated by Section 31(1) of the Code. A harmonious reading, therefore, of Section 31(1) and Section 60(5) of the Code would lead to the result that the 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corporate debtor, if they were to be exchanged on the insolvency commencement date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had acted knowledgeably, prudently and without compulsion." However, it was felt that assessment and payment of the fair value upfront, may be difficult. The Committee also discussed the possibility of using 'resolution value' or 'bid value' as the floor to be guaranteed to operational creditors but neither of these were deemed suitable. 18.4 It was stated to the Committee that liquidation value has been provided as a floor and in practice, many operational creditors may get payments above this value. The Committee appreciated the need to protect interests of operational 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 Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 20(1), 20(2)(d) and (e) of the Code read with Regulations 37 and 38 of the 2016 Regulations all speak of the corporate debtor running as a going concern during the insolvency resolution process. Workmen need to be paid, electricity dues need to be paid, purchase of raw materials need to be made, etc. This is in fact reflected in this court's judgment in Swiss Ribbons (supra) as follows: "26. The Preamble of the Code states as follows: "An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests 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 reorgan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a corporate debtor if it becomes impossible to continue running its business as a going concern. Thus, it is clear that when the Committee of Creditors exercises its commercial wisdom to arrive at a business decision to revive the corporate debtor, it must necessarily take into account these key features of the Code before it arrives at a commercial decision to pay off the dues of financial and operational creditors. There is no doubt whatsoever that the ultimate discretion of what to pay and how much to pay each class or sub- class of creditors is with the Committee of Creditors, but, the decision of such Committee must reflect the fact that it has taken into account maximising the value of the assets of 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, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant as a defining factor where there is no specific debt contract with the debtor, such as in the case of damage claimants (e.g. for environmental damage) and tax authorities. Even though the principle of equitable treatment may be modified by social policy on priorities and give way to the prerogatives pertaining to holders of claims or interests that arise, for example, by operation of law, it retains its significance by ensuring that the priority accorded to the claims of a similar class affects all members of the class in the same manner. The policy of equitable treatment permeates many aspects of an insolvency law, including the application 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 pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its security interest, while in the case of unsecured creditors it may be that any junior interests, including equity holders, receive nothing. To the extent that the approval procedure results in a significant impairment of the claims of creditors and other affected parties without their consent (in particular secured creditors), there is a risk that creditors will be unwilling to provide credit in the future. The mechanism for approval of the plan, and the availability of appropriate safeguards, is therefore of considerable importance to the protection of these interests. 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 cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such cases, some laws provide that each secured creditor with separate rights to encumbered assets forms a class of its own. Those laws also provide that, where secured creditors do vote as a class (e.g. where there are multiple holders of bonds that are secured by the same assets), the requisite majority of a class of secured creditors would generally be the same as that required for approval by unsecured creditors, although there are examples of laws that require different majorities depending upon the manner in which 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 cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Code must ensure clarity of priority, and that the rights of all stakeholders are upheld in resolving bankruptcy. 12. The law must clearly lay out the priority of distributions in bankruptcy to all stakeholders. The priority must be designed so as to incentivise all stakeholders to participate in the cycle of building enterprises with confidence. 13. While the law must 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 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortance of valuing security interests separately from interests of creditors who do not have security is well set out in the IMF paper on Development of Standards for Security Interest by Pascale De Boeck and Thomas Laryea, Counsel, IMF Legal 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 le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditors and encourage greater predictability in commercial relationships. Deviations from this general rule should occur only where necessary 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finance; security reduces the cost of credit, e.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 "equa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly declaring defaulters 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 bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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, creditors with similar legal rights should be trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 equitable dealing of operational creditors' rights, together with priority in payment over financial creditors." (emphasis supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, 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 applicants), also provides for the amount of claims admitted and security interest in respect of such claims. Under Regulation 39(4), the compliance certificate of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 with a view to finding out whether the scheme is fair, just and reasonable and is not contrary to any provisions of law and it does not violate any public policy. This is implicit in the very concept of compromise or arrangement which is required to receive the imprimatur of a court of law. No court of law would ever countenance any scheme of compromise or arrangement arrived at between the parties and which might be supported by the requisite majority if the Court finds that it is an unconscionable or an illegal scheme or is otherwise unfair or unjust to the class of shareholders or creditors for whom it is meant. Consequently it cannot be said that a Company Court before whom an application is moved for sanctioning such a scheme which might have got the requisite majority support of the creditors or members or any class of them for whom the scheme is mooted by the company concerned, has to act merely as a rubber stamp and must almost automaticall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors 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 an umpire in a game of cricket who has to see that both the teams play their game according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to the umpire." In Mihir Mafatlal (supra), the Court was dealing with schemes of amalgamation under Section 391 of the Companies Act, 1956. Under Section 392 of the said Act, the High Court is vested with a supervisory jurisdiction, which includes the power to give directions and make modifications in such schemes, as it may consider necessary, for the proper working of the said Schemes. This power in Section 392 is conspicuous by its absence when it comes to the Adjudicating Authority under the Code, whose jurisdiction is circumscribed by Section 30(2). It is the Committee of Creditors, under Section 30(4) read with Regulation 39(3), that is vested with the power to approve resolution plans and make modifications therein as the Committee deems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 delegate its functions unless it is enabled to do so expressly or by necessary implication". But the exercise of the power to appoint or dismiss an officer is the exercise not of a judicial power but of an administrative power. It is nonetheless so, by reason of the fact that an opportunity to show cause and an enquiry simulating judicial standards have to precede the exercise thereof. It is well-recognised that a statutory functionary exercising such a power cannot be said to have delegated his functions merely by deputing a responsible and competent official to enquire and report. That is the ordinary mode of exercise of any administrative power. What cannot be delegated except where the law specifically so provides - is the ultimate responsibility for the exercise of such power. As pointed out by the House of Lords in Board of Education v. Rice [(1911) AC 179, 182] , a functionary who has to decide an administrative matter, of the nature involved in this case, can obtain the material on which he is to act in such manner as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in his individual capacity, nor by the Committee of Judges. For the convenient transaction of administrative business in the Court, the Full Court of the Judges of the High Court generally passes a resolution authorising the Chief Justice to constitute various committees including the committee to deal with disciplinary matters pertaining to the subordinate judiciary or the ministerial staff working therein. Article 235, therefore, relates to the power of taking a decision by the High Court against a member of the subordinate judiciary. Such a decision either to hold an enquiry into the conduct of a judicial officer, subordinate or higher judiciary, or to have the enquiry conducted through a District or Additional District Judge etc. and to consider the report of the enquiry officer for taking further action is of the High Court. Equally, the decision to consider the report of the enquiry officer and to take follow-up action and to make appropriate recommendation to the Disciplinary Committee or to the Governor, is entirely of the High Court which acts through the Committee of the Judges authorised by the Full Court. Once a resolution is passed by the Full Court of the High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith ArcelorMittal, mooted at the 20th Committee of Creditors meeting on 19.10.2018, a request was made by Standard Chartered Bank for inclusion in the said sub-committee. However, Standard Chartered Bank did not agree to put the reconstitution of the sub-committee to vote by the Committee of Creditors. Given these facts, we find, therefore, that it is only when Standard Chartered Bank found that things were going against it that it started raising objections on the technical plea that sub-committees cannot be constituted under the Code. This is not a bonafide plea. For all these reasons, this objection of Standard Chartered Bank is also rejected. Extinguishment of Personal Guarantees and Undecided Claims 63. Shri Gopal Subramanium and Shri Rakesh Dwivedi have also appealed against the extinguishment of the rights of creditors against guarantees that were extended by the promoters/promoter group of the corporate debtor. According to them, this was done by a side wind by the Appellate Tribunal without any reasons for the same. 64. Shri Prashant Ruia a promoter/director of the corporate debtor in his personal guarantee dated 28.09.2013, specifically stated as follows: "7. The obl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective Date; - Issue such letters and communications, and take such other actions, as may be required or deemed necessary for the release, assignment or novation of (i) the Encumbrance over the assets of the Corporate Debtor; and (ii) the pledge over the shares of the Corporate Debtor; within 5(five) Business Days from the Effective Date; and - Be deemed to have waived all claims and dues (including interest and penalty, if any) from the Corporate Debtor arising on and from the insolvency Commencement Date, until the effective Date." 65. Shri Rohatgi, learned senior advocate appearing on behalf of Shri Prashant Ruia, also pointed out Section XIII (1)(g) of the resolution plan dated 23.10.18, in which it is stated as follows: "Upon the approval of the Resolution Plan by the Adjudicating Authority in relation to guarantees provided for and on behalf of, and in order to secure the financial assistance availed by the Corporate Debtor, which have been invoked prior to the Effective Date, claims of the guarantor on account of subrogation, if any, under any such guarantee shall be deemed to have been abated, released, discharged and extinguished. It is hereby clarified that, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and of the Respondents, it is clear that in point of fact, Section 31 is one more factor in favour of a personal guarantor having to pay for debts due without any moratorium applying to save him." Following this judgment, it is difficult to accept Shri Rohatgi's argument that that part of the resolution plan which states that the claims of the guarantor on account of subrogation shall be extinguished, cannot be applied to the guarantees furnished by the erstwhile directors of the corporate debtor. So far as the present case is concerned, we hasten to add that we are saying nothing which may affect the pending litigation on account of invocation of these guarantees. However, the NCLAT judgment being contrary to Section 31(1) of the Code and this Court's judgment in State Bank of India (supra), is set aside. 67. For the same reason, the impugned NCLAT judgment in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raught with serious consequences to the nation. We have also seen that the working of the Code is being monitored by the Central Government by Expert Committees that have been set up in this behalf. Amendments have been made in the short period in which the Code has operated, both to the Code itself as well as to subordinate legislation made under it. This process is an ongoing process which involves all stakeholders, including the petitioners." It is in this background that the constitutional challenge to the Amending Act of 2019 will have to be decided. 70. Closely on the heels of the impugned NCLAT judgment which was delivered on 04.07.2019, a representation dated 17.07.2019 was written by the Deputy Secretary General, FICCI to the Secretary, Ministry of Corporate Affairs, pointing out the flaws of the NCLAT judgment and suggesting that the Government may consider amendment of the Code to reinstate the law as it was and should be. This representation stated: "A case in point is the recent NCLAT judgment which, in effect, places Secured and unsecured Financial Creditors as well as Financial and Operational Creditors on an equal footing, thus virtually erasing the distinction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y with secured financial creditors. xxx xxx xxx We would like to draw your attention to Sections 30 and 31 of the Code which contain detailed provisions on submission and approval of the resolution plan. As per section 31(1), once the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors meets the requirements of section 30, it shall approve the resolution plan. The Insolvency and Bankruptcy Board of India has also prescribed rules and regulations on mandatory requirements of resolution plan. The statute thus clearly empowers the committee of creditors to decide the distribution of funds. It also recognizes that as long as the resolution plan is in conformity with law, the Adjudication Authority must approve the resolution plan, as is evidenced by the usage of the word 'shall' in section 31(1). In K. Sashidhar case the Supreme Court has clearly held that commercial decisions of the committee of creditors are not open to judicial review. We would like to clarify that the fundamental principle that there should be no discrimination between similarly situated creditors is not being questioned by the industry. The question is whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolution plan had been distributed in accordance with the order of priority in sub- section (1) of section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the corporate debtor. Explanation 1.--For the removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors. Explanation 2.--For the purposes of this clause, it is hereby declared that on and from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate insolvency resolution process of a corporate debtor-- (i) where a resolution plan has not been approved or rejected by the Adjudicating Authority; (ii) where an appeal has been preferred under section 61 or section 62 or such an appeal is not time barred under any provision of law for the time being in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f bona fides or mala fides on the part of the legislature. The whole doctrine resolves itself into the question of competency of a particular legislature to enact a particular law. If the legislature is competent to pass a particular law, the motives which impelled it to act are really irrelevant. On the other hand, if the legislature lacks competency, the question of motive does not arise at all. Whether a statute is constitutional or not is thus always a question of power [ Vide Cooley's Constitutional Limitations, Vol 1 p 379] . A distinction, however, exists between a legislature which is legally omnipotent like the British Parliament and the laws promulgated by it which could not be challenged on the ground of incompetence, and a legislature which enjoys only a limited or a qualified jurisdiction. If the Constitution of a State distributes the legislative powers amongst different bodies, which have to act within their respective spheres marked out by specific legislative entries, or if there are limitations on the legislative authority in the shape of fundamental rights, questions do arise as to whether the legislature in a particular case has or has not, in respect to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and substance, or as covered by the ancillary powers implied in that Entry? Can the legislation be read down reasonably to bring it within the legislature's constitutional powers? If these questions can be answered affirmatively, the law is valid. Malice or motive is beside the point, and it is not permissible to suggest parliamentary incompetence on the score of mala fides." It is clear therefore for all these reasons that Sections 4 and 6 of the Amending Act of 2019 cannot be struck down on this score. 74. So far as Section 4 is concerned, it is clear that the original timelines in which a CIRP must be completed have now been extended to 330 days, which is 60 days more than 180 plus 90 days (which is equal to 270 days). But this 330-day period includes the time taken in legal proceedings in relation to such resolution process of the corporate debtor. This provision is to get over what is stated in the judgment in ArcelorMittal India (supra) at paragraph 86, that the time taken in legal proceedings in relation to the corporate resolution process must be excluded from the timeline mentioned in Section 12. Secondly, the third proviso added to the Section also mandates that whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the resolution plan. xxx xxx xxx Speed is of essence Speed is of essence for the working of the bankruptcy code, for two reasons. First, while the "calm period‟ can help keep an organisation afloat, without the full clarity of ownership and control, significant decisions cannot be made. Without effective leadership, the firm will tend to atrophy and fail. The longer the delay, the more likely it is that liquidation will be the only answer. Second, the liquidation value tends to go down with time as many assets suffer from a high economic rate of depreciation. From the viewpoint of creditors, a good realisation can generally be obtained if the firm is sold as a going concern. Hence, when delays induce liquidation, there is value destruction. Further, even in liquidation, the realisation is lower when there are delays. Hence, delays cause value destruction. Thus, achieving a high recovery rate is primarily about identifying and combating the sources of delay. This same idea is found in FSLRC's treatment of the failure of financial firms. The most important objective in designing a legal framework for dealing with firm failure is the need for speed. Identifying and add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k about the status of CIRPs. Number of admitted cases is 2162; number of cases closed on appeal, which I read out about, is 174; number of cases closed by withdrawal under Section 12A, is 101, I have given you a slightly later data; number of cases closed by resolution is 120; closed by liquidation, 475; and ongoing CIRPs are 1292. So, now, I would like to mention the number of days of waiting. I would like to mention here the details of the ongoing CIRPs, along with the timelines. Ongoing CIRPs are 1,292, the figure just now I gave you. Over 330 days, 335 cases; over 270 days, 445 cases; over 180 days and less than 270 days, 221 cases; over 90 days but less than 180 days, 349 cases; less than 90 days, 277 cases. The number of days' pending includes time, if any, excluded by the tribunals. So, that gives you a picture on what is the kind of wait and, therefore, why we want to bring the Amendments for this speeding up." Mrs. Madhvi Divan also pointed out that the Hon'ble Minister's speech had also adverted to the strengthening of the NCLT as follows: "In view of the increasing number of cases, the Government has increased the number of benches of NCLT from 10 to 15, during ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngh [(1992) 1 SCC 673] the learned counsel for the claimants have referred to the Statement of Objects and Reasons appended to the Bill in 1982 as well as the Bill of 1984 and have submitted that the said Statement of Objects and Reasons show that the object underlying the enactment of Section 23(1-A) was to remove the hardship to the affected parties on account of pendency of acquisition proceedings for a long time which renders unrealistic the amounts of compensation offered to them. Our attention has also been invited to the speeches made by members at the time when the Bill was considered and was adopted by Parliament. It has been urged that a construction which advances the said object must be adopted. We are unable to accept this contention. As regards the Statement of Objects and Reasons appended to the Bill the law is well settled that the same cannot be used except for the limited purpose of understanding the background and the state of affairs leading to the legislation but it cannot be used as an aid to the construction of the statute. (See Aswini Kumar Ghosh v. Arabinda Bose [1953 SCR 1, 28 : AIR 1952 SC 369] ; State of W.B. v. Subodh Gopal Bose [1954 SCR 587, 628 : AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of finally. It is common knowledge that unless a suit is instituted soon after the date of letting it would never be disposed of within ten years and even then within that time it may not be disposed of. That will make the ten years holiday from the Rent Act illusory and provide no incentive to the landlords to build new houses to solve problem of shortages of houses. The purpose of legislation would thus be defeated. Purposive interpretation in a social amelioration legislation is an imperative irrespective of anything else." Likewise, in Sarah Mathew v. Institute of Cardio Vascular Diseases, (2014) 2 SCC 62, this Court held that for the purpose of computing limitation under Section 468 of the Code of Criminal Procedure, 1973 the relevant date is the date of filing of the complaint and not the date on which the Magistrate takes cognizance, applying the aforesaid maxim as follows: "39. As we have already noted in reaching this conclusion, light can be drawn from legal maxims. Legal maxims are referred to in Bharat Kale [Bharat Damodar Kale v. State of A.P., (2003) 8 SCC 559 : 2004 SCC (Cri) 39] , Japani Sahoo [Japani Sahoo v. Chandra Sekhar Mohanty, (2007) 7 SCC 394 : (2007) 3 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bath water, inasmuch as the time taken in legal proceedings is certainly an important factor which causes delay, and which has made previous statutory experiments fail as we have seen from Madras Petrochem (supra). Thus, while leaving the provision otherwise intact, we strike down the word "mandatorily" as being manifestly arbitrary under Article 14 of the Constitution of India and as being an excessive and unreasonable restriction on the litigant's right to carry on business under Article 19(1)(g) of the Constitution. The effect of this declaration is that ordinarily the time taken in relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w to be paid the minimum amount mentioned in sub-section (2). Mrs. Madhavi Divan is also correct in stating that the order of priority of payment of creditors mentioned in Section 53 is not engrafted in sub-section (2)(b) as amended. Section 53 is only referred to in order that a certain minimum figure be paid to different classes of operational and financial creditors. It is only for this purpose that Section 53(1) is to be looked at as it is clear that it is the commercial wisdom of the Committee of Creditors that is free to determine what amounts be paid to different classes and sub-classes of creditors in accordance with the provisions of the Code and the Regulations made thereunder. 81. As has been held in this judgment, it is clear that Explanation 1 has only been inserted in order that the Adjudicating Authority and the Appellate Tribunal cannot enter into the merits of a business decision of the requisite majority of the Committee of Creditors. As has also been held in this judgment, there is no residual equity jurisdiction in the Adjudicating Authority or the Appellate Tribunal to interfere in the merits of a business decision taken by the requisite majority of the Commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From this upfront cash recovery, unsecured financial creditors were to be paid only an aggregate amount of 5% of their admitted claims. Apart from this, INR 8,000 crores of upfront fresh capital infusion for improving operations and enhancing revival prospects of the corporate debtor was also proposed. So far as operational creditors were concerned, it was proposed that workmen and employees were to be paid INR 18 crores in full against their admitted claims, and out of other operational creditors, those small trade creditors defined as "having admitted claims of less than INR 1 crore" were to be paid in full, as opposed to trade and government creditors of over INR 1 crore, who were to be paid aggregate amount INR 196 crores. Other operational creditors were to be given nothing, liquidation value being payable to operational creditors as a class being in any case nil (INR 3339 crores were the aggregate admitted claims of all operational creditors as a class). Under the caption "Treatment of various stake holders" the plan provided as follows:- "VIII. Treatment of Various Stakeholders" xxx xxx xxx Stakeholder Proposed Treatment Financial Creditors As per the Liquidation V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Creditors are paid the up-front cash amount shall be available to the Financial Creditors over and above the upfront cash recovery under the Resolution Plan. However, notwithstanding anything stated herein, a Dissenting Financial Creditor will be entitled to only receive Liquidation Value realizable by such Financial Creditor in case of liquidation of the Corporate Debtor, which shall be paid out of the upfront cash recovery amount being offered. Operational Creditors (other than Workmen, Employees and Governmental Operational Creditors) The Resolution Applicant recognizes the role that the various Trade Creditors have played in connection with the business of the Corporate Debtor. Whilst Operational Creditors as a class of Creditors would receive nil returns on liquidation of the Corporate Debtor, the Resolution Applicant has agreed to settle part of the Admitted Claims to the extent set out in Section V above. Without prejudice to the above, the Resolution Applicant is desirous of setting aside amounts under the financial package to settle at least part of the Claims of the small Trade Creditors. This class of Trade Creditors are being provided such payments since the Resoluti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... implement the plan, as agreed. Thereafter, the representative of AM India also deliberated with the members of the CoC regarding the revised financial proposal and responded to the queries raised in relation thereto." It was stated that the value and quality of security should be the basis on which proceeds should be distributed by most of the secured financial creditors. This amended resolution plan was approved by a majority of 92.24% of financial creditors. The sharing ratio between secured financial creditors having charge on project assets of the corporate debtor was 99.86% as opposed to 0.14%, so far as Standard Chartered Bank was concerned, which only had a charge on the pledge of shares of ESOL, being an offshore subsidiary of the corporate debtor. The upfront payment to secured financial creditors on the effective date would now be INR 41,909.29 crores and INR 60.71 crores to Standard Chartered Bank. It was pointed out that this was based on the worth of those shares as security, being only INR 24.86 crores. The reasons given for acceptance of this amended resolution plan was stated as follows: "By majority consensus of COC (except Standard Chartered Bank and SREI), it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are more often than not granted against property or other valuable collateral. C. The Report of the Insolvency Law Committee provides valuable insights on the principles governing inter-creditor agreements and their relevance to distribution arrangements. In practice, subordination agreements inter- se creditors were respected in practice. This was also the stated position in insolvency resolution proceedings other jurisdiction and in other developed countries. D. The Hon'ble National Company Law Appellate Tribunal has held that the COC has the discretion to approve any resolution plan and its decision to approve the same cannot be interfered with by the Adjudicating Authority or the Appellate Authority, except for in terms of Section 31(1) to examine compliance of Section 30(2) read with relevant regulations. (See Kannan Tiruvengandram Vs. M.K. Shah Exports Ltd. & Ors. in and Darshak Enterprise Pvt. Ltd. and Ors. v. Chhaparia Industries Pvt. Ltd. and Ors. E. The Code specifically provides the COC with the power under section 30(4) of the Code, to approve a resolution with requisite majority as set out thereunder. It is an accepted position in law, and as enunciated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law (hereinafter, the "UNCITRAL Guide") in the chapter that recommends the policy and legislative design of the "key objectives and structure of an effective and efficient insolvency law" L. Further, in recognition of the principle that creditor rights and ranking of priority claims existing before commencement of insolvency must be recognised and expected in the insolvency proceedings. To protect/respect the creditor rights and ranking of priority claims, the IBC does not in any manner impose any prescription, mandatory or otherwise on the resolution applicant that would be disruptive of the creditor rights and priority claims of the secured creditors as on insolvency commencement date. If this rule was not to be recognised, it will lead to a free-for-all situation, no short of chaos, as any rights on differential security interest would then be ignored. M. Therefore in conclusion, since the Code provides the COC with the power to approve a resolution for the Corporate Debtor, the manner in which such resolution shall be executed including but not limited to the decision as to the methodology of distribution or the amount a money to be paid to individual stakeholders would als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed to be paid to financial creditors", the minutes of the meeting reflect that the Committee of Creditors had sought for and obtained the opinion of retired Justice B.N. Srikrishna. This opinion dated 23.03.2019 stated as follows: "In view of this peculiar situation, where a financial creditor has advanced money to the corporate debtor assessing the commercial risk and covers his risk by a charge on the assets of the corporate debtor, there can be no question of his being entitled to the liquidation value or any other fixed value towards his debt. In any event, the plan formulated by the resolution applicant, has to be placed before the COC for its final approval. It is at that juncture the commercial wisdom of lenders forming the COC comes into play and they are entitled to take a call on either to approve or not to approve the resolution plan which the FRP has put forward before the COC for its approval. In my view, therefore, the Approved Resolution Plan would be fully justified in classifying between secured and unsecured financial creditor, and also according to the value of their securities and apportioning the amounts payable to them in the best manner which is considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be binding on all stake holders, which also would include SCB. xxx xxx xxx In the facts and circumstances, I am of the opinion that the manner in which the resolution plan was formulated and approved by the overwhelming majority of 92.24% of the voting creditors, is not only perfectly justified but is also equitable. As the Supreme Court has pointed out in Swiss Ribbons (supra), "equitable" does not mean equal distribution; it means distribution which does justice to every stakeholders involved in the process. In my opinion, mere equal distribution would definitely do injustice to the large majority of 92.24% shareholders who in their commercial wisdom had ensured that the security was created on project assets, while SCB was content with creating a charge only on the shares of the offshore company and seeking a corporate guarantee from the Corporate Debtor." 88. The aforesaid opinion was shared with all Committee of Creditors members including Standard Chartered Bank. Importantly, the minutes record: "At this point, the representative from Canara Bank stated that he requires clarity on the following questions before he can consider the revised apportionment to SCB: (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons on behalf of Standard Chartered Bank, that the offer made by ArcelorMittal of payment of INR 42,000 crores as upfront in order to pay 100% principal outstanding of secured financial creditors of the corporate debtor cannot be accepted. Given that Standard Chartered Bank was reclassified as a secured financial creditor of the corporate debtor only on 10.09.2018 and that the aforesaid upfront payment of INR 42,000 crores would include the principal amount payable to Standard Chartered Bank as well, we have seen how in the course of negotiation, the vast majority of financial creditors have ultimately decided that Standard Chartered Bank will only get an amount based on its security interest, which was accepted by ArcelorMittal. Shri Sibal also argued that the final resolution plan ultimately offered a sum of INR 39,500 crores instead of INR 42,000 crores, being a minimum upfront payment from which it was possible to negotiate upwards but not downwards. 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 at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance distributed to all secured financial creditors pro-rata. This methodology of distribution has, according to him, been applied in State Bank of India v. Orissa Manganese and Minerals Ltd. CA(IB) No. 391/KB/2018, approved by the NCLT and not disturbed by the NCLAT. Therefore, it is argued that, applying the aforesaid classification, the average liquidation value of the security in the instant case, is to be as per the report of DUFF & Phelps and RBSA, being a sum of INR 15,838 crores. This, according to him, is the amount required to be distributed to the secured financial creditors according to the value of their respective security interests (viz. first charge, second charge, subservient charge, residuary charge, etc.) and the balance to be distributed pro- rata amongst all financial creditors irrespective of their security. The sum of INR 42,000 crores offered by ArcelorMittal would therefore, according to him, be a sum of INR 15,838 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 import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny fiduciary capacity to any group of creditors, as is sought to be suggested by Shri Sibal. On the contrary, it is to take a business decision based upon ground realities by a majority, which then binds all stakeholders, including dissentient creditors. It is important to note that the original threshold required by way of majority was 75%. It is during the working of the Code that this was found to be unrealistic and therefore reduced to 66% - see the amendments made to Section 28(3) and 30(4) of the Code by the Insolvency and Bankruptcy Code (Second Amendment) Act of 2018. For all these reasons therefore, it is not possible to accept Shri Sibal's arguments. 94. The NCLAT judgment which substitutes its wisdom for the commercial wisdom of the Committee of Creditors and which also directs the admission of a number of claims which was done by the resolution applicant, without prejudice to its right to appeal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission of the Appellant with respect to the sum of INR 121.72 crores as the same has been rightly rejected by the NCLAT in view of the fact that the said claim was filed after the completion of the CIRP period. However, the NCLAT's judgment inasmuch as it left it open for the Appellant to pursue the matter in terms of Section 60(6) of the Code deserves to be aside in terms of this judgment. This Appeal is thus partly allowed. 99. So far as Civil Appeal No. 7266 of 2019 and Civil Appeal No. 7260 of 2019 are concerned, the resolution professional has rejected the claim of the Appellants on the ground of non-availability of duly stamped agreements in support of their claim and the failure to furnish proof of making payment of requisite stamp duty as per the Indian Stamp Act despite repeated reminders having been sent by the resolution professional. The application 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oration Ltd. (Respondent No. 18 in Civil Appeal Diary No. 24417 of 2019) are concerned, the resolution professional admitted the claim of the abovementioned respondents notionally at INR 1 on the ground that there were disputes pending before various authorities in respect of the said amounts. However, the NCLT through its judgment dated 08.03.2019 directed the resolution professional to register the entire claim of the said respondents. The NCLAT in paragraphs 43 and 196 of the impugned judgment upheld the order passed by the NCLT as aforesaid and admitted the claim of the abovementioned respondents. We therefore hold that this part of the impugned judgment deserves to be set aside on the ground that the resolution professional was correct in only admitting the claim at a notional value of INR 1 due to the pendency of disputes with regard 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. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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