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TMI Blog2020 (10) TMI 682X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;Operational Creditor' or 'Secured Creditor' or 'Unsecured Creditor' can be decided by the Committee of Creditors based on facts and circumstances of each case. What can be screened by this Bench is that whether the plan approved by Committee of Creditors meets the requirements as referred to in sub-section (2) of Section 30 of the Code. In the present case the resolution plan has been approved with 66.13 % voting share well above the statutory requirement of 66 % in terms of Section 30(4) of the Code and has the requisite statutory voting share. Besides the decision of Committee of Creditors is a reasoned and self-speaking one as required under proviso to Regulation 39(3) of the CIRP Regulations, 2016 - It is well settled proposition of law that commercial and business decisions of Committee of Creditors are not open to judicial review. Adjudicating Authority cannot enquire into the commercial wisdom of Committee of Creditors. The ground for rejection is limited to the matter specified under Section 30(2). It is however reiterated that the resolution plan in question meets the requirements specified in Section 30(2) of the Code and the commercial majority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied with. Moreover, the Resolution Plan has been approved by 66.13 % voting share of the members of Committee of Creditors and has been submitted in compliance of Section 30 of the Code for approval - Resolution plan is approved. - C.A. 931(PB)/2019 in Company Petition No. (IB)- 563(PB)/2018 - - - Dated:- 14-2-2020 - B.S.V. Prakash Kumar, Actg. (President) and Santanu Kumar Mohapatra, Member (T) For the Appellant : Anoop Prakash Awasthi For the Respondent : N.P. Gaur, Advocates ORDER Santanu Kumar Mohapatra, Member (T) 1. This is an application filed by the Resolution Professional under Section 30(6) of Insolvency and Bankruptcy Code, 2016 (hereinafter referred as the Code ) seeking approval of the Resolution Plan under Section 31 of the Code read with Regulation 39 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 in respect of the corporate debtor M/s. Kalptaru Steel Rolling Mills Limited. 2. The facts in brief necessary for disposal of the present application are that Andhra Bank one of the Financial Creditors had preferred an application under Section 7 of the Code for initiatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meetings dated 06.03.2019, 16.03.2019 and 18.04.2019. The CoC keeping in mind the commercial viability insisted upon the resolution applicant to further revise its resolution plan and in accordance with the same M/s. Shiva Ferric Private Ltd. submitted a revised resolution plan on 02.05.2019. 8. In the 10th meeting of the CoC held on 07.05.2019 the Final Resolution Plan as submitted by the resolution plan applicant- M/s. Shiva Ferric Private Ltd. was put to vote and the plan garnered 66.13% of the votes which is at par with the threshold of 66% as prescribed under the Code. 9. The Resolution Professional has submitted in the application that the approval of the resolution by the financial creditor is in conformity with the Regulation 39 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. It has also been submitted that the Resolution Applicant has confirmed on affidavit of its eligibility under Section-29A to submit the resolution plan and that it does not fall foul of the provisions of Section-29A. The Resolution Professional also has filed a compliance certificate in FORM - H as per Regulation 39(4) of the IBBI (Insolvency Resolution Proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Employees NIL 1 Other Debts and Dues NIL Total 2619 13. Resolution Professional has submitted that the Resolution Applicant provides an amount of ₹ 26.19 Crores as Resolution plan amount, out of which an amount of ₹ 26.15 Crores, subject to deduction of actual Insolvency process cost, will be paid to secured financial creditors against the admitted claim of ₹ 136.59 crores. Out of the remaining amount of ₹ 4.00 lakhs, ₹ 1.00 lakh will be paid to operational creditors, ₹ 1.00 lakhs will be paid to Statutory liabilities, ₹ 1.00 lakhs will be paid to Employees dues and liabilities and ₹ 1.00 lakh will be paid to Workmen liabilities. 14. In terms of Section 30(6) of the Code read with Regulation 39 of the CIRP Regulations, 2016 the resolution professional has submitted the Resolution Plan submitted by M/s. Shiva Ferric Private Ltd. seeking an order unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the resolution plan contains a provision for combination, as referred to in section 5 of the Competition Act, 2002 (12 of 2003), the resolution applicant shall obtain the approval of the Competition Commission of India under the Act prior to the approval of such resolution plan by the Committee of Creditors. (Emphasis given) 17. Therefore, before approving the Resolution Plan, the Code mandates the Adjudicating Authority to ensure that, (1) the Resolution Plan meets the requirements of Section 30(2) of the Code and (2) the resolution plan has provisions for its effective implementation. 18. In respect of compliance of condition (1) above, it is necessary to refer to sub-section (2) of Section 30 of the Code which reads as follows: 30. Submission of resolution plan. -(1)............. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan - (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; (b) provides for the payment of debts of operational creditors in suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ................................. 19. Sub-section 2 of Section 30 casts a duty on the Resolution Professional to examine the Resolution Plan received by him to confirm that such Resolution Plan provides for the payment of insolvency resolution process costs, provides for the payment of the debts of the operational creditors and financial creditors in such manner as specified, provides for the management of the affairs of the corporate debtor after approval of the Resolution Plan; the implementation and supervision of the Resolution Plan, that the Resolution Plan does not contravene any of the provisions of the law, and that the Resolution Plan conforms to such other requirements as may be specified by the Board. 20. The Resolution Professional has filed compliance certificate in Form H and inter alia has confirmed that he has examined and verified the Resolution Plan approved by the Committee of Creditors of M/s. Kalptaru Steel Rolling Mills Limited, in the light of the requirements of the Code and Regulations and that it is compliant to the relevant provisions of the Code and Regulations. 21. In terms of Section 31(1) of the Code, Adjudicating Authority has also to exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25. There appears to be no discrimination in the resolution plan in respective class of creditors, as same treatment is provided to similarly situated each class of creditors. So long as the provisions of the Code and the Regulations have been met, it is the commercial wisdom of the requisite majority of the Committee of Creditors which is to negotiate and accept a resolution plan, which may involve differential payment to different classes of creditors. Needless to say, that the ultimate discretion of what to pay and how much to pay to each class or subclass of creditors is with the domain of the Committee of Creditors. Equitable treatment has been accorded to each creditor depending upon the class to which it belongs. 26. Besides the resolution plan provides for the payment of the debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under Section 53. In terms of Regulation 38(1) the amount due to operational creditors under a resolution plan shall be given priority in payment over financial creditors. 27. As a seque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribes certain eligibility criteria and disqualifications for persons who submit a resolution plan. Resolution Applicant has given adequate declaration and undertaking on their eligibility to submit the Resolution Plan. At para 4. ii. of Form H Resolution Professional has also certified that the Resolution Applicant has submitted an affidavit in this regard. It has been confirmed that the Resolution Applicant is eligible to submit resolution plan and does not fall under any of the category as mentioned in Section 29A of the Code. 33. Regulation 36B(4A) of the CIRP Regulations requires that the Resolution Applicant shall provide a performance security. Resolution professional has certified that the Resolution Applicant has undertaken to submit Performance Guarantee once the plan is approved. Accordingly, the Resolution Applicant is directed to submit Performance Guarantee for ₹ 5,00,00,000/- (Rupees Five Crores only) in compliance of Regulation 36B(4A) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 within a week from the date of receipt of this order. 34. As a sequel to aforesaid discussions we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited to the matter specified under Section 30(2). It is however reiterated that the resolution plan in question meets the requirements specified in Section 30(2) of the Code and the commercial majority decision of the Committee of Creditors appears to be neither discriminatory nor perverse. 40. Before departing it is appropriate to consider the objections raised by the dissenting member of the Committee of Creditors namely Andhra Pradesh State Financial Corporation ( APSFC ) having 33.87% voting share. 41. The main objection of M/s. APSFC is that it had sanctioned loan to the corporate debtor which was secured by mortgage and Hypothecation of land, plant and machinery of the corporate debtor. It is contended that the property belongs to the APFSC under the State Financial Corporation Act and could not have been included in the resolution plan as the property of the corporate debtor vest in the Andhra Pradesh State Financial Corporation. Further it is also averred that APSFC had taken the lawful possession' of the said properties long since 2013. It is also the case of APSFC that Section 14 of the Code is not applicable as APSFC took possession and had absolute rights ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. 47. It is pertinent to refer here the case of M/s. Innoventive Industries Ltd. V. ICICI Bank and Ors. reported in AIR 2017 SC 4084 wherein Hon'ble Supreme Court has held at para 56 that: The non-obstante clause, in the widest terms possible, is contained in Section 238 of the Code, so that any right of the corporate debtor under any other law cannot come in the way of the Code . 48. It is thus seen that Moratorium is intended to prohibit debt recovery actions against the assets of Corporate Debtor. During the continuance of moratorium period in respect of the corporate debtor, any type of recovery actions endangering, diminishing, dissipating or adversely impacting the assets of Corporate Debtor are clearly prohibited. 49. Therefore, once moratorium starts and after initiation of insolvency process under the Code assets of corporate debtor irrespective of whether mortgaged or not, will be dealt with under the resolution plan and on its approval under Section 31 of the Code shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of amalgamation of the corporate debtor, the statutory requirements of applicable provisions of the Companies Act, 2013 including the provisions of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 shall be adhered to. 54. The spirit of the Code encourages resolution. Resolution is the rule and the object of the Code is to promote resolution. Every effort must be made to try and see that resolution is made possible. Commercial collective decision of Committee of Creditors with requisite majority has to be respected. The commercial or business decisions of the financial creditors are not open to any judicial review by the adjudicating authority or the appellate authority. 55. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of the Committee of Creditors. Adjudicating Authority has no jurisdiction to question the actions of the Committee of Creditors. Tribunal cannot sit in appeal over the expert business decision of the 'Committee of Creditors'. After a resolution plan is approved by the requisite majority of the Committee of Creditors, the aforesaid pl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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