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TMI Blog2022 (3) TMI 996X X X X Extracts X X X X X X X X Extracts X X X X ..... dom of the CoC. The judgment of Hon ble Supreme Court in the matter of India Resurgence ARC Pvt. Ltd. [ 2021 (6) TMI 684 - SUPREME COURT ], wherein in para 14 the Hon ble Supreme Court has held that business decision taken in exercise of the commercial wisdom of CoC does not call for interference unless creditors belonging to a class being similarly situated are denied fair and equitable treatment also provides strength and support to the contention of the Respondents. There is no other allegation against the valuation done by registered valuers who were appointed to determine the fair and liquidation value of the corporate debtor in accordance with regulation 35 which calls in question the assessment of liquidation value. The mere fact that the appointment was done two days after the 47th day from the insolvency commencement date, does not make the process vitiated because no other irregularity has been urged by the Appellant in the process of valuation of the corporate debtor s assets. Moreover Form-H (attached at pp. 56-64 of the reply affidavit filed on behalf of Respondent No. 2) in which the compliance certificate under Regulation 39(4) of the CIRP Regulations is give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 035057712 since 19.3.2008 and is liable to pay Entry Tax as levied under the West Bengal Tax of Entry on Goods into Local Areas Act, 2012, Value Added Tax and Central Sales Tax to the Appellant as a registered dealer. Due to non-payment of dues, there was an accumulated amount of ₹ 76,12,41,782/- that became due for payment to the Appellant by Respondent No. 1. The Appellant has further stated that on an application filed by Dena Bank/ Financial Creditor under section 7 of the Insolvency and Bankruptcy Code, 2016 (hereafter called IBC ) Corporate Insolvency Resolution Process (hereafter called CIRP ) was initiated against the Respondent No. 1/Corporate Debtor Kharkia Steels Pvt. Ltd. During the CIRP, the Resolution Professional (in short RP ) sought Resolution Plan from prospective Resolution Applicants and the submitted resolution plans were considered by the Committee of Creditors (in short CoC ) and approved by a voting share of 82.75% in a meeting of the CoC on 4.4.2020. Thereafter, an application bearing IA No. 680/KB/2020 was submitted by the Resolution Professional for approval of the resolution plan approved by the CoC which was approved vide order dated 21.9.2020 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of the Corporate Debtor was not done in accordance with the requirement of Regulation 27 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (in short CIRP Regulations ) whereby the appointment of registered valuers has to be done by the Resolution Professional within 47 days from the insolvency commencement date, which was not done in this case. She has further argued that the total admitted claim of the Operational Creditor, which is ₹ 76.12 crores, pertains to the dues that relate to a long period which is much before the commencement of CIRP and was assessed by the State Tax Authorities and such an assessment can only be overturned through an appeal to the designated authority and not through a Resolution Plan which is approved by the Adjudicating Authority. 7. The Learned Counsel for Appellant has, therefore, urged that while the satisfaction of the CoC and the Adjudicating Authority has to be subjective in approving the proposed Resolution Plan, it cannot be arbitrary in approving the resolution plan wherein the operational creditors are provided payment of very meagre amount. She has also point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter of Principal Commissioner of Income Tax vs. Monnet Ispat and Energy Limited (2018 18 SCC 786) wherein the Hon ble Supreme Court has held that by virtue of section 238 of IBC, the provisions of IBC will override anything inconsistent contained any other enactment, including Income Tax Act and in such a view the Appellant s contention that the liability accrued due to state taxes prior to enactment of the IBC cannot be overridden by the resolution plan approved under the provisions of IBC is erroneous. 10. The two issues that arise in this appeal are : (i) Whether the commercial wisdom of the CoC has taken into account the feasibility and viability of the proposed resolution plan which does not treat the operational and financial debts on parity; and (ii) Whether the process assessment of liquidation value is vitiated as the registered valuers were appointed beyond the stipulated time period stipulated in the CIRP regulations rendering the approval of resolution plan defective. 11. Section 30(2)(b), clauses (i) and (ii) read with section 53 of the IBC stipulates how allocation for the operational creditors is to be done in a resolution plan. The relevant provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For Business Improvement within 12 months of Total IRP Cost 0.300 0.300 Workman/Employees - - Operational Creditors (Other Workman/ Employees) 0.140 0.140 Secured Financial Creditors 8.220 8.220 Unsecured Financial Creditors 0.004 0.004 Sub-Total 8.664 8.664 Business Improvement 25.00 25.000 Total 8.664 25.00 33.664 Funded by Equity 0.500 0.500 Own contribution of RA (in the form of other inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted Sharing %age Settlement amount offered and to be paid upfront within a period of 13 days from the effective date Commissioner of Commercial Taxes, Government of West Bengal 76.13 80.27% 0.11 Damodar Valley Corporation 18.71 19.73% 0.03 Total 94.84 100% 0.14 The total payout under this head shall remain unchanged at ₹ 0.14 crore, irrespective further Claims admitted by RP. In case any further claim admitted under this head, the time line for payment and the Settlement amount of ₹ 014 crore shall remain unchanged and shall be distributed in proportion to respective admitted claim against total admitted claims under the head. The Operational Creditors shall be paid in priority over Financial Creditor under this plan. Further, the Resolution Applicant confirms that the payments to Operational Creditors under this Resolution Plan is not be less than: a) The amount to be paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 could be continued . 18. Furthermore, the Respondents find support of their case in the judgment in the matter of Pratap Technocrats (P) Ltd. (supra), where Hon ble Supreme Court has held as follows:- 25. The resolution plan was approved by the CoC, in compliance with the provisions of IBC. The jurisdiction of the Adjudicating Authority under section 31(1) is to determine whether the resolution plan as approved by the CoC, complies with the requirement of section 30(2). NCLT is within its jurisdiction in approving a resolution plan which accords with IBC. There is no equity- based jurisdiction with NCLT under the provisions of IBC. 19. The judgment of Hon ble Supreme Court in the matter of India Resurgence ARC Pvt. Ltd. (supra), wherein in para 14 the Hon ble Supreme Court has held that business decision taken in exercise of the commercial wisdom of CoC does not call for interference unless creditors belonging to a class being similarly situated are denied fair and equitable treatme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be adjudicated by the Adjudicating Authority under the IBC. In this regard, we note section 238 of the IBC, which is as follows:- 238. Provisions of this Code to override other laws. The provisions of this 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. 23. Further, this tribunal has upheld the approval of resolution plan in respect of insolvency resolution of the corporate debtor Kharkia Steels Pvt. Ltd. in the following matters including the payments proposed to the operational creditors namely Directorate of Commercial Taxes and Damodar Valley Corporation in the matter of Damodar Valley Corporation vs Kharkia Steels Pvt. Ltd. Ors [Company Appeal (AT)(Ins) No. 1111 of 2020] in its judgment dated 15.03.2022. 24. Therefore, in accordance with section 238, when the resolution plan is proposed under the provisions of IBC during the currency of CIRP and considered by the CoC and subsequently approved by the Adjudicating Authority, all these actions taking place during the currency of CIRP, section 238 provides full protectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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