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TMI Blog2020 (4) TMI 513X X X X Extracts X X X X X X X X Extracts X X X X ..... have been left high and dry giving them nil amount which Hon'ble Supreme Court has observed that giving NIL to Operational Creditors would certainly not balance the interest of all stakeholders or maximise the value of assets of the Corporate Debtor if it becomes impossible to continue running its business as a going concern. The Impugned Order accepting the Resolution Plan cannot be upheld. The Resolution Plan does not appear to have taken care of interest of all stakeholders including Operational Creditors and the decision of the COC also does not reflect that it has taken into account the fact that the Corporate Debtor needs to be kept as a going concern and that there is need to maximise the value of the assets and that the interest of all the stakeholders including Operational Creditor has to be taken care of - matter remitted back to the Adjudicating Authority with a direction to send back the Resolution Plan to the Committee of Creditors to resubmit the Plan - appeal disposed off. - Company Appeal (At) (Ins) No. 606 Of 2019 - - - Dated:- 14-2-2020 - A.I.S. Cheema, Judicial Member Kanthi Narahari And V.P. Singh, Technical Member Alipak Banerjee, Ms. Indrani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ultimately submitted as revised Resolution Plan which came to be approved on 14th March, 2019. These two summaries have been filed as Annexure 'A' and 'B' of Reply Affidavit of the Resolution Professional and which read as under:- ANNEXURE A SUMMARISED FORMAT OF RESOLUTION AMOUNT PAYMENT SCHEDULE Page 34 of the Resolution Plan dated 06/02/2019 filed before Committee of Creditors on 14/02/2019 (Rs in Crores) Particulars Resolution Debt Resolution Amount 30 days 12 months 24 months Total Allahabad Bank [Secured Financial Creditors 98.960 29 688 29688 0.000 0.000 29.688 Workmen Dues 1.270 1.270 1.270 0.000 0.000 1.270 Loans 1.030 0.000 0.000 0.000 0.000 0.000 Statutory Dues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Respondents 4 and 5 proposed to pay Operational Creditors to the extent of ₹ 2.668 Crores while in the revised Resolution Plan, the amount became zero. The Resolution Professional in Annexure - B has shown zero amount for the workmen's dues also. However, we are keeping in view what is shown in the approved Resolution Plan (Plan Pages.33 and 34) where the plan proposed to pay the workmen/employees after verifying documentary evidence and other aspects as mentioned in the concerned pages. 5. Respondents 4 and 5 have also filed their Reply (Diary No. 13260) and opposed the Appeal and in substance are claiming that the Committee of Creditors took a commercial decision while accepting the Resolution Plan and the Resolution Plan meets requirements of the provisions of IBC and they are relying on the observations of the Adjudicating Authority for accepting the Resolution Plan. 6. On 11th November, 2019 when this Appeal had come up before us, the parties made submissions and we had passed the following Order:- ORDER 11-11-2019 Counsel for the Appellant and Counsel for Respondent Nos.4 and 5 state that in the Resolution Plan, there is reference to settling claims ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors and in any event be made before the expiry of 30 (thirty) days after the approval of a Successful Applicant by the NCLT. In case, the Liquidation Value of the Operational Creditors is higher than the Amount decided to be paid by the RA, then the RA shall allocate/increase the Upfront Payment under the Proposed Resolution Plan to such extent (Difference between Resolution Plan Payment to Operational Creditors and the Liquidation Value of the Operational Creditors) to pay the Operational Creditors to the extent of Liquidation Value in priority to any financial creditors and in any event be made before the expiry of 30 (thirty) days after the approval of a Successful Applicant by the NCLT. 8. In written submission filed by the Respondents 4 and 5 (Diary No. 16548), it is claimed (in Para - 3.2) that considering the liquidation value and the divisions in terms of Section 30 and Section 53 of IBC and even as per the said calculations, the assets available for distribution to the Operational Creditors as per the aforesaid Sections would be NIL. Respondents 4 and 5 are then claiming that the Adjudicating Authority and this Appellate Tribunal have scope of limited interference i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy resolution process. Workmen need to be paid, electricity dues need to be paid, purchase of raw materials need to be made, etc. [Emphasis Supplied] Then reference was made by Hon'ble Supreme Court of India to Judgement in the matter of Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365 and Para - 46 of the Judgement is important which is as follows:- 46. This is the reason why Regulation 38(1A) speaks of a resolution plan including a statement as to how it has dealt with the interests of all stakeholders, including operational creditors of the corporate debtor. Regulation 38(1) also states that the amount due to operational creditors under a resolution plan shall be given priority in payment over financial creditors. If nothing is to be paid to operational creditors, the minimum, being liquidation value - which in most cases would amount to nil after secured creditors have been paid - would certainly not balance the interest of all stakeholders or maximise the value of assets of 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 exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editors something more than was given earlier as it is the higher of the figures mentioned in sub-clauses (i) and (ii) of sub-clause (b) that is now to be paid as a minimum amount to operational creditors. The same goes for the latter part of sub-clause (b) which refers to dissentient financial creditors. Mrs. Madhavi Divan is correct in her argument that Section 30(2)(b) is in fact a beneficial provision in favour of operational creditors and dissentient financial creditors as they are now to be paid a certain minimum amount, the minimum in the case of operational creditors being the higher of the two figures calculated under sub-clauses (i) and (ii) of clause (b), and the minimum in the case of dissentient financial creditor being a minimum amount that was not earlier payable. As a matter of fact, pre-amendment, secured financial creditors may cramdown unsecured financial creditors who are dissentient, the majority vote of 66% voting to give them nothing or next to nothing for their dues. In the earlier regime it may have been possible to have done this but after the amendment such financial creditors are now to be paid the minimum amount mentioned in sub-section (2). Mrs. Madhav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors 2.668 Crores, the figure converted to zero after negotiations with the COC. So much so for the trust law has put on the shoulders of the COC to protect interest of all stakeholders. It is clear from the Judgement of Hon'ble Supreme Court that the record should reflect that the Committee of Creditors has taken into account that Corporate Debtor needs to be kept a going concern; that maximising the value of assets is necessary and that the interest of all stakeholders including Operational Creditors has been taken care of. The Judgment says that the Adjudicating Authority should look into reasons given by the Committee of Creditors while approving the Resolution Plan . 11. If the minutes of the Committee of Creditors dated 14-3-2019 is perused (copy of which has been filed by the Respondent No. 1 with Annexure - C (Page 21 at 24), it can be appreciated that the meeting was held on 14th March, 2019 and the COC took up the revised Resolution Plan submitted on the same date and approved it. The observations of the COC with regard to Item No. 4 and Item No. 5 recorded in the minutes are as under:- Item No. 4 RP has informed the CoC Members that the Corporate Insolvency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an cannot be upheld. The Resolution Plan does not appear to have taken care of interest of all stakeholders including Operational Creditors and the decision of the COC also does not reflect that it has taken into account the fact that the Corporate Debtor needs to be kept as a going concern and that there is need to maximise the value of the assets and that the interest of all the stakeholders including Operational Creditor has to be taken care of. 14. For the above reasons, we set aside the Impugned Order and remit the matter back to the Adjudicating Authority with a direction to send back the Resolution Plan to the Committee of Creditors to resubmit the Plan after satisfying the parameters as laid down by the Hon'ble Supreme Court in the Judgement in the matter of Essar Steel , portions of which have been reproduced above, and IBC. The Adjudicating Authority may give specific time period to the Resolution Professional to place matter before Committee of Creditors for resubmitting the Resolution Plan after satisfying the parameters laid down by the Hon'ble Supreme Court and IBC. Further incidental Orders may also be passed. On resubmission of the Resolution Plan, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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