9911796707
TMI Blog2020 (12) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Professional ("IRP"). 3. The applicant adds that pursuant to the said admission order, public announcement inviting the claims from all the creditors in Form A of the Schedule II as per Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("Regulation") was made by the IRP on 23.12.2018 and 24.12.2018. Copies of the public announcement inviting the claims are annexed with the application as Exhibit 2. Under the public announcement, the IRP received the claims from the creditors of the Corporate Debtor and accordingly the IRP constituted the Committee of Creditors (CoC). The final list of members of CoC as on 12.09.2019 with their respective voting shares is given below: Sr. No. Financial Creditors Voting Share % 1. Religare Finvest Limited 58.11 2. IndusInd Bank Limited 27.81 3. Aditya Birla Finance Limited 1.44 4. Cap Float Financial Services Private Limited 1.58 5. P. C. Bhatia (HUF) 0.58 6. Premchand C. Bhatia 0.05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.06.2019 and the resolution plan was unanimously rejected by the CoC. In the said meeting a resolution was also put for voting for extension of the CIRP under Section 12(2) of the Code for 90 days which was approved by 97.11% voting share and the same was subsequently approved by this Bench, vide its order dated 19.06.2019. Accordingly, a fresh public announcement inviting the EOI from the PRAs was issued on 25.06.2019. 9. In the Fifth meeting of the CoC held on 29.08.2019, the CoC discussed the feasibility and viability of the resolution plan dated 22.08.2019 received from Nitrex (from now on referred to as RA), with the President of RA. The CoC requested the RA to increase the amount of the resolution plan as the same was not satisfactory. The RA informed the CoC that it had already increased the amount of the resolution plan from Rs. 8 crores to Rs. 9 crores when they submitted the same under the second EOI process. After negotiations, the RA agreed to provide an addendum to the resolution plan, wherein the RA would increase the amount of the resolution plan to Rs. 9.40 crores. The said addendum was received on 30.08.2019. E-voting was conducted on 31.08.2019 to 03.09.2019, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified that the resolution plan complies with all the provisions of the I&B Code, the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations) and does not contravene any of the provisions of the law for the time being in force. 16. The Resolution Applicant has submitted an Affidavit pursuant to section 30(1) of the Code confirming its eligibility under section 29A of the Code to submit resolution plan. The Resolution Professional has further certified that the said Resolution Plan has been approved by the CoC in accordance with the provisions of the I&B Code and the CIRP Regulations made thereunder. The Resolution Plan has been approved by 96.91% of voting share of financial creditors after considering its feasibility and viability and other requirements specified by the CIRP Regulations. 17. The Resolution Plan includes a statement under Regulation 38(1A) of the CIRP Regulations as to how it has dealt with the interests of all stakeholders in compliance with the I&B Code and Regulations made thereunder. 18. The Resolution Plan reveals that the RA is bringing a sum of Rs. 76 Lakhs as promoter contribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. The Resolution Applicant, vide his letter dated 05.03.2020 sent to RP, has confirmed and revised the Plan amount accordingly. The amount to employees to be paid upfront within 90 days from the date of Order approving this Plan. 24. It is made clear that no further liability can be imposed on the Resolution Applicant in whatever manner except the above resolution amount of Rs. 9.40 Crore as provided in the Plan and a sum of Rs. 11 Lakhs (as mentioned in the above said para) as agreed at the time of hearing to be paid to RP who will distribute it to all the employees/workers. There won't be any further liability on RA towards Financial Creditors, Operational Creditors or other stakeholders, etc. Restructuring of Existing Shareholding 25. On the effective date and with effect from the appointed date, all existing issued, subscribed and paid-up share capital comprising of 76,000 equity shares of Rs. 100/- shall stand cancelled. 26. Equity shares of the Corporate Debtor having an aggregate face value equal to the subscription amount will be issued and allotted by the Corporate Debtor to the Resolution Applicant in consideration of the subscription amount. Supervision and Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36. On perusal of the Resolution Plan, we find that the resolution plan has necessary provisions for its effective implementation. The CoC has approved this Resolution Plan with requisite vote of more than 66% as required under the law, in favor of the Resolution Plan. 37. We are satisfied that the Resolution Plan fulfils the mandatory requirements of Section 30 of the I&B Code and Regulation 38 & 39 of IBBI (CIRP) Regulations, 2016. 38. On the basis of discussion made above and in view of the provisions of Section 30(4) of the Code, we approve the resolution plan submitted for International Book House Private Limited as approved by the CoC. The resolution plan so approved shall be binding on the corporate debtor and its employees, members, creditors [including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed,] guarantors and other stakeholders involved in the resolution plan. 39. Under the provisions of Section 31(3) of the Code, we also direct as under:- a) The moratorium order passed by the Adjudicating Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by R1 there is mention of valuation of the security held by the applicant and in fact R1 did not even attempt to make such study. The burden to show a basis for differentiation raises on the person who chooses to differentiate. D) There is a discrimination in treatment with reference to liquidation value of the respective security, the sum of Rs. 8.40 Crores proposed to be paid to R3 in excess of the liquidation value of its security i.e. Rs. 8 Crores which is found in the valuation report. E) The security comprises hypothecation charge on current assets, stocks, book dates, investments, trade receivable, current assets etc. of the Corporate Debtor and the liquidation value of the said hypothecated asset has not been considered at all by the R1 in distribution. F) The liquidation value of the above referred assets on which applicant has exclusive charge is approximately Rs. 2 Crores. G) No value has been assigned to the current assets worth of Rs. 2.07 Crores which is the exclusive security of the applicant. On the contrary it has been stated by the Resolution Applicant and also recorded in the minutes of the 5th CoC meeting that the Sundry Debtors will form part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been provided with 45% of its admitted claim; the 'Bank of Baroda' has been provided with 45% of its admitted claim and the 'Punjab National Bank' has been provided with 45% of its admitted claim. . 12. The impugned order approving the 'Resolution Plan' has been passed by the Adjudicating Authority on 17th October, 2018, but the Adjudicating Authority failed to notice that no 'Resolution Plan' can be approved discriminating the dissenting 'Financial Creditor' in terms with the post amended Regulation 38. It also failed to notice that this Appellate Tribunal much prior to the same, declared the un-amended (old) Regulation 38(1)(c), which stipulated liquidation value for the dissenting 'Financial Creditor', as illegal which resulted in amendment of Regulation 38. 13. In "Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors." (Supra), the Hon'ble Supreme Court observed that "the NCLAT while looking into viability and feasibility of resolution plans as approved by the committee of creditors, always gone into whether the operational creditors are given roughly the same treatment as financial creditors, and if they are not, suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Bank of India (Supra)" the Insolvency and Bankruptcy Board of India also amended/repealed the Regulation 38 aforesaid having found it discriminatory. 29. We agree with the submissions made by Mr. Arun Kathpalia, learned Senior Counsel that Section 53, including explanation given therein cannot be relied upon while approving the 'Resolution Plan'. However, that does not mean that a discriminatory plan can be placed and can be got through on one or other ground, which is against the basic object of maximization of the assets of the 'Corporate Debtor' on one hand and for balancing the stakeholders on the other hand. 43. From the two 'Resolution Plans', it will be clear that the 'Rajputana Properties Private Limited' in its 'Resolution Plan' has discriminated some of the 'Financial Creditors' who are equally situated and not balanced the other stakeholders, such as 'Operational Creditors'. Therefore, the Adjudicating Authority has rightly held the 'Resolution Plan' submitted by 'Rajputana Properties Private Limited' to be discriminatory." 46. For the proposition that the similarly situated class cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiated when it comes to amounts to be paid under a resolution plan, together with what dissenting secured or unsecured financial creditors are to be paid. And, most importantly, operational creditors are separately viewed from these secured and unsecured financial creditors in S. No. 5 of paragraph 7 of statutory Form H. Thus, it can be seen that the Code and the Regulations, read as a whole, together with the observations of expert bodies and this Court's judgment, all lead to the conclusion that the equality principle cannot be stretched to treating unequals equally, as that will destroy the very objective of the Code-to resolve stressed assets. Equitable treatment is to be accorded to each creditor depending upon the class to which it belongs: secured or unsecured, financial or operational." 47. By relying on the above said Judgments the Ld. Counsel for the applicant submits that: a) All Secured financial creditors are similarly situated and there can be no further differentiation inter se among them; b) Even if we were to assume that there can be different classes between the category of secured financial creditors, there has to be some basis for such differentiation; c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uated financial creditors i.e. the applicant and R3. However, even though both are secured financial creditors, the value of security held by R3 is comparatively much higher than the value of the security held by the applicant. The average liquidation value of the securities held by the financial creditors, as reported in the valuation report, is taken as the basis for arriving at the distribution figures. It is to be noted that the valuation reports have not been challenged by the applicant till date and hence the applicant is estopped from contending that the valuations are incorrect. 50. The Resolution Professional submits that, R3 is secured against a property located at, Ground Floor, Tej Kiran Co-Operative Housing Society Limited, 2nd Dadisheth X Lane, Chowapaty Bandstand, Mumbai - 07, and the applicant is secured against hypothecation of current assets consisting of stock of raw materials, work in progress, finished goods, book dates and other movable assets and plants & machinery. 51. The Resolution Professional submits that, the reliance of the applicant on the information memorandum to contend that over Rs. 10 Crores were recoverable, is not correct in view of the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has not voted in favor of the distribution pattern. The Resolution Professional therefore submits that since the applicant has voted for approval of the Resolution Plan, the applicant cannot challenge the Resolution Plan itself which has been voted by the applicant also. 56. The Resolution Professional further submitted that since the distribution pattern was also approved by the CoC with 66.98% voting share, whereas the minimum requirement for approval is 66%, it has to be construed that the distribution pattern has also been approved by the CoC in its commercial wisdom. 57. The Resolution Professional has relied on the Judgement of Hon'ble NCLAT in the case of, Darshak Enterprise Pvt. Ltd. and Ors. Vs. Chhaparia Industries Pvt. Ltd. and Ors. (MANU/NL/0088/2018), wherein it is held that: "6.In a particular case, what should be the percentage of claim amount payable to one or other 'Financial Creditor' or 'Operational Creditor or 'Secured Creditor' or 'Unsecured Creditor' can be decided by the Committee of Creditors based on facts and circumstances of each case." 58. The Resolution Professional further relies on the judgment of Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat manner the corporate resolution process is to take place. 42.Thus, it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of Section 30(2) of the Code, insofar as the Adjudicating Authority is concerned, and Section 32 read with Section 61(3) of the Code, insofar as the Appellate Tribunal is concerned, the parameters of such review having been clearly laid down in K. Sashidhar (supra). 46.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 subclass 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... differential payment to different classes of creditors, together with negotiating with a prospective resolution Applicant for better or different terms which may also involve differences in distribution of amounts between different classes of creditors. 57.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. 89.We cannot arrive at the conclusion that the acceptance of the resolution plan by the majority of the Committee of Creditors should be set aside on this score, inter alia, for the reason that Shri Sibal assured us that he was not attacking the acceptance of the revised plan but only distribution of amounts payable under the said plan. This being so, it is also not possible to accept the submission of Shri Sibal, that "feasibility and viability" of a resolution plan will not include distribution of the amount of debt under the said plan. All that was left for distribution by Arcelor Mittal was distribution inter se between secured financial creditors which was then done by a majority of 92.24%, as has been seen above based upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 non-justiciable. 35The 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 reality. The resolution applicant may have given projections backed by normative data but still in the opinion of the dissenting financial creditors, it would not be free from being speculative. These aspects are completely within the do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribution among the creditors; iii. Judicial review is available only within the four corners of Section 30(2) of the Code; iv. The ultimate discretion of what to pay and how much to pay to each sub-class of creditors is with the CoC and the same should reflect maximizing the value of Corporate Debtor; v. The feasibility and viability of Resolution Plan will also include the distribution of amount to creditors under the plan and in this case, distribution is also voted by more than 66% and hence distribution cannot be faulted; vi. The CoC has the authority to make payment based upon the realizable value of security of each creditor; vii. The equality for all approach may not be conducive for successful resolution of the Corporate Debtor. 61. In view of the decision of the Hon'ble Supreme Court in case of Essar (supra) the reliance of the Applicant on the judgements in Binani and Hero Corp (both Supra) is not helping the Applicant in any way. 62. In view of the above discussion this application is dismissed. MA 3236/2019: 63. This is an application filed by the applicant/unsecured creditor for the following reliefs: 1. The Respondent No. 1 and 2 be ordered and dir ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
