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TMI Blog2022 (1) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... scriminatory as against them and despite its plea that it was entitled to the equal and share in regard to the distribution of the Resolution Fund on the footing that the Bank held more than 80% of the assents of the Corporate Debtor as security, the fact of the matter is that the Committee of Creditors had approved the Resolution Plan of Jagannth Financial Advisory Pvt. Ltd by 75.70% of votes. It cannot be gainsaid that the Resolution Fund was equally distributed among all the Financial Creditors showring them equal share i.e., 23.43 % and that the 1st Respondent/Resolution Professional had certified the plan and the compliance certificate was furnished. There is no illegality in the Resolution Plan as opined by this Tribunal, it comes to be known that the Successful Resolution Applicant/Respondent No. 4 had implemented the Resolution Plan in part and made part payments quite in tune with the Approved Resolution Plan . The distribution of the amount between the Creditors provide the equal treatment to all of them. Also that the Appellant was provided with a fair value as per decision of the Committee of Creditors and the value proportionate to the dues was allot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court stayed the execution of that order. Secondly, the facts before Hon ble NCLAT and point for consideration was whether Operational Creditor can be treated in discriminatory manner while distributing assets of the Corporate Debtor in between them and the Financial Creditors. In this case, there are some Operational Creditors but no provision is made to pay any sum in view of Section 53 of Insolvency and Bankruptcy Code, 2016. All Financial Creditors are equally treated while distributing funds. 9. In case of K. Sashidhar Vs Indian Overseas Bank Ltd (Civil Appeal No.10673 of 2018), the Hon ble Apex Court hold that the legislature has not endowed on the Adjudicating Authority (NCLT) with the jurisdiction or authority to analyse or evaluate commercial decision of CoC, which lies to enquire into the justness of the rejection of resolution plan by descending financial creditors. 10. In short it is held tehat this Authority cannot sit in appeal against the financial decisions that are taken by CoC, In our considered opinion, it is within commercial wisdom of the CoC as to what Financial Creditors will get what share of the resolution funds. 11. Hence, we reject the ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors while distributing Funds under the Resolution Plan. 4. The Learned Counsel for the Appellant contends that the Resolution Plan approved by the Adjudicating Authority is not in compliance with the ingredients of Section 30 of the I B Code and further that there is Fair and Equitable distribution under the Resolution Plan. 5. According to the Learned Counsel for the Appellant the share given to the Appellant/Bank under Resolution Plan is much less in comparison with the security interest that it has over the Assets of the Corporate Debtor . In this connection it is the plea of the Appellant/Bank that it has an exclusive charge on the Company s Fixed Assets valued at ₹ 5.00 crores. But the Punjab National Bank and NEDFI do not have any charge on the Company s Fixed Assets except the Lease Hold Property at Agartala and on Third Party Securities exclusively charged to them and therefore, would be benefited by pooling of the securities and distribution of resolution amount based on the voting share. As such, the distribution pattern is against the Appellant s interest. 6. It is the stand of the Appellant that the Appellant/Bank through its l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Creditors shall be considered by the Adjudicating Authority , only when the Members of the Committee of Creditors really discuss the aspect of distribution of funds in their Meeting, applied their mind and then arrived at a logical conclusion. But, in the present case, the Members of the Committee of Creditors never deliberated upon the issue of the Distribution of the Resolution Fund to the Financial Creditors on the basis of the security value in their Meetings and directly placed the Resolution Plan for E-voting on the basis of distribution provided by the Resolution Applicant, which signifies the fact that there was absence of the commercial wisdom of the Members of the Committee of Creditors and the Commercial Wisdom of the Resolution Applicant prevails over the Committee of Creditors. Therefore, the Resolution Plan which is approved by the Adjudicating Authority is to be dismissed. STAND OF 1st RESPONDENT/(FORMER) RESOLUTION PROFESSIONAL 11. The stand of the 1st Respondent is that she had diligently complied with all the pre-requisites of Section 30(2) of the I B Code, 2016 before placing the Resolution Plan before the Committee of Creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9402-9405/2018) wherein at paragraph 77 it is observed as under: The Resolution Professional is not required to take any decision, but merely to ensure that the resolution plans submitted are complete in all respects before they are placed before the Committee of Creditors, who may or may not approve it. The fact that the Resolution Professional is also to confirm that a resolution plan does not contravene any of the provisions of law for the time-being in force, including Section 29A of the Code, only means that his prima facie opinion is to be given to the Committee of Creditors that a law has or has not been contravened. Section 30(2)(e) does not empower the Resolution Professional to decide whether the resolution plan does or does not contravene the provisions of law. 15. The Learned Counsel for the 1st Respondent refers to the Judgement dated 14.11.2018 of this Tribunal in Binani Industries Ltd V. Bank of Baroda Ors, Company Appeal (AT)((Ins) No.82/2018 wherein it is observed as under:- 1. The objective of the I B Code As evident from the long title of the I B Code , it is for reorganisation and insolvency resolution of corporate persons, partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s securities exclusively charged with it was ₹ 4.36 crores. However, the liquidation value done by the Valuers currently has been pegged at ₹ 1.38 crores and was enquiring the reason for such a low valuation. The RP and other COC Members namely NEDFI and Canara Bank mentioned that the Valuation Reports had been discussed thoroughly and noted by the CoC Members with unanimity way back in early January 2019and that in each of the CoC and that in each of the CoC meetings, all the Financial Creditors has always been present. Anyways, the other CoC members went on to mention that the valuation has been done by the approved valuers and there will always be difference between realizable value as a going concern and liquidation value. The representative of Canara Bank noted the same. 2ND RESPONDENT S PLEAS 18. The 2nd Respondent is secured Financial Creditor and one of the Members of Committee of Creditors. In fact, in the 6th COC Meeting 16.01.2019 all the three Resolution Plans submitted by one Damani Infracom (P) Ltd (ii) Jagannath Financial Advisory (P) Ltd (iii) Dalmia Industrial Development were discussed with all the COC Members including the Appellant s repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embers of the COC and the same was noted by the Appellant/Bank in the 12th Meeting. The NEDFI has its charge not only on the land of the Agartala Unit but also on the Plant and Machinery as well as building and other assets of the Agartala Unit . In short, it is the stand of the 2nd Respondent that the Committee of Creditors had approved the Resolution Plan where the distribution on pari passu (voting share) basis and that no discrimination was shown to any of the secured creditor. 22. The 2nd Respondent adverts to the relevant provisions of the Insolvency Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 which read 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. (1A) 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. (2) A resolution plan shall provide: (a) the term of the plan and its implementation schedule; (b) the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o submit a resolution plan approved by the Committee to the Adjudicating Authority at least fifteen days before the maximum period for completion of corporate insolvency resolution process under Section 12, along with a compliance certificate in Form H of the Schedule. (5) The resolution professional shall forthwith send a copy of the order of the Adjudicating Authority approving or rejecting a resolution plan to the participants and the resolution applicant. (6) A provision in a resolution plan which would otherwise require the consent of the members or partners of the corporate debtor, as the case may be, under the terms of the constitutional documents of the corporate debtor, shareholders agreement, joint venture agreement or other document of a similar nature, shall take effect notwithstanding that such consent has not been obtained. (7) No proceedings shall be initiated against the interim resolution professional or the resolution professional, as the case may be, for any actions of the corporate debtor, prior to the insolvency commencement date. (8) A person in charge of the management or control of the business and operations of the corporate debtor afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Jaypee Kensington(supra), this Court repeatedly made it clear that a dissenting financial creditor would be receiving the payment of the amount as per his entitlement; and that entitlement could also be satisfied by allowing him to enforce the security interest, to the extent of the value receivable by him. It has never been laid down that if a dissenting financial creditor is having a security available with him, he would be entitled to enforce the entire of security interest or to receive the entire value of the security available with him. It is but obvious that his dealing with the security interest, if occasion so arise, would be conditioned by the extent of value receivable by him. 21. The limitation on the extent of the amount receivable by a dissenting financial creditor is innate in Section 30(2)(b) of the Code and has been further exposited in the decisions aforesaid. It has not been the 18 intent of the legislature that a security interest available to a dissenting financial creditor over the assets of the corporate debtor gives him some right over and above other financial creditors so as to enforce the entire of the security interest and thereby bring about an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der was obtained on 23.09.2019. Even then, the instant Appeal is barred by limitation since the Appeal should have been filed by the Appellant within November, 2019. 30. There is no illegality or discrimination in regard to the Resolution Plan. The 4th Respondent/Successful Resolution Applicant had already implemented the Resolution Plan in part and made part payments in consonance with the approved Resolution Plan. If the Resolution Plan of the 4th Respondent is set aside by this Tribunal, the Corporate Debtor will go into liquidation which will prejudice the rights and interest of all the stakeholders of the Corporate Debtor. The approved Resolution Plan of the 4th Respondent maximize the value of the assets of the Corporate Debtor and the same is in consonance with the objectives of the Code. RESOLUTION PROFESSIONAL S DUTIES 31. A Resolution Professional has a duty among other things to invite the prospective Resolution Applicant who satisfies the requirements as prescribed by him with the approval of the Committee of Creditors keeping in mind the complexity and scale of operation of the business of the Corporate Debtor and other conditions as may be pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ode, the Resolution Professional is to examine each Resolution Plan received by him to confirm that the Resolution Plan provides for payment of Insolvency Resolution Process Costs, Payment of Debts of the Operational Creditors, management of the affairs of Corporate Debtor, the fulfillment and supervision of Resolution Plan, other requirement as may be specified by the Board and does not violate any of the provisions of the law for the time being in force. 36. A Resolution Plan submitted by the concerned Resolution Applicant on accounts of its confidentiality, cannot be disclosed to any competing Resolution Applicant nor any opinion can be taken or objection can be called for from other Resolution Applicants in regard to one other Resolution Plan. RESOLUTION PLAN S APPROVAL: 37. Subjective satisfaction is a pre-requisite for approval of Resolution Plan. A threadbare scrutiny and a study of the Resolution Plan is to be made prior to the satisfaction being arrived at by the Adjudicating Authority in a written form. The I B Code speaks of accountability of the Insolvency Professional and also the Committee of Creditors who comprise of the Lender Banks. ASSESS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 force; or (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 21 it is mentioned as under: 21. The limitation on the extent of the amount receivable by a dissenting financial creditor is innate in Section 30(2)(b) of the Code and has been further exposited in the decisions aforesaid. It has not been the intent of the legislature that a security interest available to a dissenting financial creditor over the assets of the corporate debtor gives him some right over and above other financial creditors so as to enforce the entire of the security interest and thereby brining about an inequitable scenario, by receiving excess amount, beyond the receivable liquidation value proposed for the same class of creditors. 47. To be noted, in the present case, the distribution of the amount was made by the Committee of Creditors resting on the total dues of individual Creditor and the same is not either whimsical or arbitrary in any manner. To put it differently, the distribution of the amount between the Creditors provide the equal treatment to all of them. Also that the Appellant was provided with a fair value as per decision of the Committee of Creditors and the value proportionate to the dues was allotted same as that of other Financia ..... 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