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TMI Blog2020 (6) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the CoC, which is not permitted in law - the Adjudicating Authority is having limited power of judicial scrutiny under section 31, which has to remain within the four corners of Section 30(2) of the Code and the same cannot, in any circumstance, trespass upon the commercial wisdom of the CoC. There is nothing on record to show that the RP manipulatively conducted the bidding process. It is also clear that the role of the Resolution Professional is only that of a facilitator. Evaluation matrix of the Resolution Plan also falls within the parameters of commercial wisdom of the CoC, which is non-justiciable - Appeal dismissed. - Company Appeal (AT) (Insolvency) No. 1490 of 2019 And Oths. - - - Dated:- 5-3-2020 - Bansi Lal Bhat, Judicial Member, V. P. Singh And Shreesha Merla, Technical Member For the Appellant : Ms. Anju Jain, Hitesh Sachar and Ms. Nandita Choudhary, Advs. For the Respondent : Anuj Kumar, Abhijeet Sinha, Susheel Joseph Cyriac, Ms. Richa Bharadwaj , Saikat Sarkar, Amresh Shukla, Pankaj Jain, Naurya Vijay Chandra, Sucheta Gupta, Advs. and Darpan Wadhwa, Sr. Adv. JUDGMENT V. P. SINGH, TECHNICAL MEMBER 1. These Appeals emanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 31(1) of the I B Code, which is circumscribed by Section 30(2) of the Code. The Appellant further placed reliance on the judgment of the Hon'ble Supreme Court passed in case of: K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Others (2019) SCC OnLine SC 1478 3. The Appellant further contends that as per the law laid down by the Hon'ble Supreme Court in the cases mentioned above, it is clear that the Adjudicating Authority, under section 31, is having limited power of judicial review which has to be within the four corners of Section 30(2) of the Code and the same cannot, in any circumstance, trespass upon the commercial wisdom of the CoC. The approach of the Adjudicating Authority while directing the re-bidding to take place after the approval of Resolution Plan by the requisite majority is erroneous, as a Resolution Plan is neither a sale nor an auction, and not a recovery proceeding or liquidation proceeding. 4. Appellant in Company Appeal No. 184 of 2020 has assailed the impugned order based on the evaluation process; alleging that the Resolution Professional has cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Counsel for the parties and perused the records. 9. Admittedly, in the instant case the Adjudicating Authority while exercising its power under section 31 of the Code for approval of the Resolution Plan, has directed the Resolution Professional for fresh bidding within 15 days and file the re-approved Resolution Plan, despite approval by the CoC with 84.70% vote share. 10. The question that arises for our consideration is as under: Whether the Adjudicating Authority has exceeded its jurisdiction in passing order for re-bidding, despite the approval of the Resolution Plan by CoC, with a vote share of 84.70% of votes? 11. It is pertinent to mention that Hon'ble Supreme Court in case of K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150: (2019) 4 SCC (Civ) 222: 2019 SCC OnLine SC 257at page 187has laid down the law regarding approval of Resolution Plan. It is held that; 52. As aforesaid, upon receipt of a rejected resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under section 33(1) of the I B Code. The legislature has not endowed the adjudicating authority (NCLT) with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board. The Board referred to is established under section 188 of the I B Code. The powers and functions of the Board have been delineated in Section 196 of the I B Code. None of the specified functions of the Board, directly or indirectly, pertain to regulating the manner in which the financial creditors ought to or ought not to exercise their commercial wisdom during the voting on the resolution plan under section 30(4) of the I B Code . 55. The subjective satisfaction of the financial creditors at the time of voting is bound to be a mixed baggage of variety of factors. To wit, the feasibility and viability of the proposed resolution plan and including their perceptions about the general capability of the resolution applicant to translate the projected plan into a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 31(2) read with Section 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. 59. 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 per cent of financial creditors have accorded approval to the resolution plan would be of no avail, unless the approval is by a vote of not less than 75%(after amendment of 2018 w.e.f 6-6-2018, 66%) of voting share of the financial cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity which first admits an application by a financial or operational creditor, or by the corporate debtor itself under section 7, 9 and 10 of the Code. Once this is done, within the parameters fixed by the Code, and as expounded upon by our judgments in Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407 and Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd., (2018) 2 SCC 674, the Adjudicating Authority then appoints an interim resolution professional who takes administrative decisions as to the day to day running of the corporate debtor; collation of claims and their admissions; and the calling for resolution plans in the manner stated above. After a resolution plan is approved by the requisite majority of the Committee of Creditors, the aforesaid plan must then pass muster of the Adjudicating 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 44. On a bare reading of the provisions of the I B Code, it would appear that the remedy of appeal under section 61(1) is against an order passed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave 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 accorded approval to the resolution plan would be of no avail, unless the approval is by a vote of not less than 75% (after amendment of 2018 w.e.f. 6-6-2018, 66%) of voting share of the financial creditors. To put it differently, the action of liquidation process postulated in Chapter-III of the I B Code, is avoidable, only if approval of the resolution plan is by a vote of not less than 75% (as in October, 2017) of voting share of the financial creditors. Conversely, the legislative intent is to uphold the opinion or hypothesis of the minority dissenting financial creditors. That must prevail, if it is not less than the specified percent (25% in October, 2017; and now aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. 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 with Section 31(1) of the I B Code. It cannot make any other inquiry nor is competent to issue any direction in relation to the exercise of commercial wisdom of the financial creditors - be it for approving, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recting the successful Resolution Applicant to enhance their fund inflow upfront. The Hon'ble Supreme Court in case of K. Shashidhar (supra) has explicitly laid down the law that there is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act based on a 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 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 non-justiciable. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to the scrutiny of the resolution plan as approved by the requisite per cent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is about matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n applicant has a right to receive complete information as to the Corporate Debtor, debts owed by it, and its activities as a going concern, before the commencement of CIRP and the Appellant was not given an opportunity and hence the whole process is biased towards H1 bidder is also not a ground which can justify the judicial scrutiny by the Adjudicating Authority on this ground. 17. The Appellant has further assailed the impugned order on the ground that the respondent no. 1 has not complied with the provisions of Sections 30(2) and 30(4) of the Code, which mandatorily require the CoC to comply with the provisions of maximization of assets before approval. Since the CoC in the instant case has overlooked the maximation of assets and as such, the Adjudicating Authority has all the right to interfere under section 31 of the Code. 18. It is pertinent to mention that the Adjudicating Authority has a very limited power of judicial scrutiny and the statutory provision does not permit the Adjudicating Authority to interfere with the commercial wisdom of the CoC. Even for maximisation of value of the assets of the Corporate Debtor, the Adjudicating Authority is not entitled to overt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot followed; the RP manipulatively conducted the bidding process and vitiated the whole process of approval of the Resolution Plan. 24. There is nothing on record to show that the RP manipulatively conducted the bidding process. It is also clear that the role of the Resolution Professional is only that of a facilitator. Evaluation matrix of the Resolution Plan also falls within the parameters of commercial wisdom of the CoC, which is non-justiciable. Thus appeal No 184 of 2020 also fails and is therefore dismissed. 25. Therefore in the light of the above discussion, the Appeal No. 1490 of 2019 is allowed. 26. Based on the discussion above we are satisfied that the Resolution Plan satisfies the muster of sub clause (2) and (4) of Sec 30 of the Code. In the circumstances stated above, the impugned order passed by the Adjudicating Authority/National Company Law Tribunal, Kolkata, dated 10th December 2019, passed in C.A. (IB) No. 1577/KB/2019, under section 31 of the Insolvency in Bankruptcy Code 2016 (in short I B Code'), whereby the Adjudicating Authority, Kolkata Bench has issued directions for fresh bidding within 15 days and file the re-approved Resolution Plan by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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