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TMI Blog2022 (8) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... is no contravention of the provisions of law. From the record and the order passed by the Adjudicating Authority, this Tribunal finds that there is neither any material regularity nor contravention of any provisions of law by the CoC and the plan has been rightly approved by the Adjudicating Authority - the plan has been approved by the sole member of CoC with 100% voting share in their commercial wisdom as contemplated under the law. Therefore, the commercial wisdom of the creditors is paramount and cannot be interfered with by the Adjudicating Authority or this Tribunal. It is the settled proposition of law that the commercial wisdom of the Committee of Creditors in approving or rejecting a resolution plan is essentially based on a business decision which involves evaluation of resolution plan based on its feasibility besides the Committee of Creditors being fully informed about the viability of the Corporate Debtor. The Committee of Creditors invariably examine the Resolution Plan and an assessment is made through their team of experts in that regard - Further, there is no such mechanism under the Code that gives the right to the Unsuccessful Resolution Applicant to chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) on 07.03.2019 and the Appellant submitted its plan on 27.04.2019. The Appellant had a meeting with RP on 06.05.2019. 4. While matter stood thus, the CIRP period was extended to 90 days and the Appellant submitted its revised plan on 30.05.2019 to the RP. The 7th CoC meeting was held on 31.05.2019 in which 3 Resolution Plans were opened in the presence of all three Prospective Resolution Applicants including the Appellant without disclosing contents of the Resolution Plans and name of the highest bidder. On 21.06.2019 a meeting of PRA s was proposed to be convened by the RP, the Appellant conveyed its inability to attend the meeting and requested to adjourn the same for some other day, however, the RP did not accept. The RP informed the Appellant that the CoC expects the PRAs to enhance their amount and the term of the plan should be reduced to one year and upfront amount should be higher. The Appellant submitted its revised Resolution Plan in a sealed envelope through its representative. All the three plans were opened in the presence of three PRAs but neither the amount quoted by the PRAs nor the name of the highest bidder was disclosed. 5. The Appellant enhanced its bid a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn by this Tribunal in Padmanabhan Venketesh Vs. Shri V. Venkatachalam and Ors. in CA(AT) (Ins) No. 128/2019, para 54. 9. The Learned Counsel also relied upon a decision of this Tribunal in Rajputana Properties Pvt. Ltd. Vs. Ultra Tech Cement Ltd. Ors. CA(AT)(Ins) No. 188/2018. 10. In view of the reasons as stated above, the Learned Counsel has prayed that the Appeal be allowed and the impugned order dated 02.01.2020 passed by the Adjudicating Authority be set aside. 1st Respondent s Submissions: 11. Learned Counsel for the 1st Respondent raised certain preliminary submissions and objections assailing the maintainability of the present Appeal. It is submitted that there is no infirmity in the impugned order, no locus standi to file the Appeal, the commercial wisdom of the CoC is paramount, the Appellant cannot challenge the order which is impugned and relied upon the judgments of the Hon ble Supreme Court in support of his stand. 12. It is submitted that the 1st Respondent had published the EoI on 01.02.2019 in Form-G and as per the decision taken in 3rd CoC dated 25.05.2019 since no EoI was received from the PRA s, this Respondent again published a revised For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted by Shree Metals Mujibi Private Limited for the CD, Era T D Ltd. and for filing of the approved Resolution Plan with Hon ble Adjudicating Authority i.e. NCLT by RP 15. The Learned Counsel further submitted that the Appellant has failed to prove that how the Resolution Plan is non-compliant in terms of Section 30(2) of the Code. Section 30(5) of the Code, 2016 provides that the Resolution Applicant may attend the meeting of the CoC, in which the Resolution Plan of the Applicant is considered. The representative of the Appellant was very much present in various meetings of the CoC when the Resolution Plan was considered by the CoC. It is submitted that the legislature has not given the powers to the Adjudication Authority to analyse or evaluate the commercial decision of the CoC. In this regard, the Learned Counsel has relied upon the judgment of the Hon ble Supreme Court in the matter of Maharashtra Seamless Ltd. vs. Padmanabhan Venkatesh Ors. in Civil Appeal No.4242/2019 dated 22.01.2020 (para 28). He also relied upon the judgment of the Hon ble Supreme Court on the point that if the CoC exercises its discretion by casting its vote in its meeting is a collective bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7% thus, upon evaluating the plan provided by the Appellant with the evaluation matrix, it is evident that the infusion of working capital falls within the category of = 1% 5% of the Resolution debt amount resulting into grant of 2 points to the Appellant. 18. The CoC while approving the Resolution Plan of the 3rd Respondent has duly considered all the aspects namely; i. The Resolution plan addresses the interest of all stock holders and provides for a time-bound resolution of Corporate Debtor in a very short period of time. ii. No layoff of workmen and employees of the Corporate Debtor and no change in their employment terms and conditions. iii. The Successful Resolution Applicant has been supplying Zinc metal to the Corporate Debtor for last many years and is well-acquainted with functions of Era T D Limited. iv. The Successful Resolution Applicant has progressive figures in their revenue generation in balance sheets. v. The strategy of the Resolution Applicant to turn around the business of the Corporate Debtor by (a) containing the finance cost by mean normative gearing between equity and debt, (b) by enhancing the revenue and cutting down the dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructuous. 24. The Learned Counsel has also relied upon the judgment of the Hon ble Supreme Courts in (i) K. Sashidhar Vs. Indian Overseas Bank reported in 2019 SCC Online SC 257 (Para 49), (ii) Maharashtra Seamless Ltd. Vs. Padmanabhan Venketesh Ors. (Para 8). Analysis / Appraisal: 25. Heard, the Learned Counsel appeared for the respective parties perused the pleadings, documents and citations relied upon by them. 26. After analysing the pleadings, the moot point for consideration is whether the Appellant has made out any case to interfere with the order passed by the Adjudicating Authority? 27. On filing of an application by the RP under Section 30(6) read with Section 60(5) of the I B Code, 2016 before the Adjudicating Authority seeking approval of the Resolution Plan under Section 31 of the Code read with Regulation 39 of the IBBI (CIRP Regulations), 2016, the Adjudicating Authority after careful consideration of the plan submitted by the 3rd Respondent herein approved the same vide order dated 02.01.2020 observing that the requirements as contemplated under the Code and Regulations have been complied with and the Resolution Plan has been unanimously approve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sheet for the year 2015-16 Rs.135.70 Cr. 2016-17 Rs.228.28 Cr. And for 2017-18 Rs.301.51 Cr. Besides they have strong net-worth of 2015-16 Rs.8.11 Cr. 2016-17 Rs. 11.71 Cr. And for 2017-18 Rs.17.17 Cr. They are supplying Zinc metal to the Corporate Debtor for the last many years and are well-acquainted with function of Era T D Limited. As deliberated in the Resolution Plan under the head mobilization of Equity the financials of Companies from which funds are to be arranged looks to be strong and convincing. Similarly, mobilization of debt of Rs.808 Lacs looks quite possible given the strength of the Resolution Applicant. Thus, CoC observes no challenge for the Resolution Applicant in mobilizing the required funds. The strategy of the Resolution Applicant has mentioned at pg. no. 34 for turn-around of the corporate debtor is as under: 1. Containing the finance cost by means of normative gearing between equity and debt. 2. Enhancement of revenue and cutting down the depreciation through optimum capacity utilization. 3. Efficient operations 4. Efficient working capital management CoC finds that the above strategy of Resolution Applicant is effecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution Process for Corporate Persons) Regulations, 2016 which emphasises the approval of Resolution Plan. Sub-regulation (1) thus, provides, a prospective Resolution Applicant in the final list may submit Resolution Plan or Plans prepared in accordance with the Code to the Resolution Professional electronically within the time given in the request for Resolution Plans under Regulation 36-B. Sub-regulation (3) thereof, empowers the Committee who shall- (a) evaluate the Resolution Plans received under Sub-regulation (2) as per evaluation matrix. (b) record its deliberations on the feasibility and viability of each resolution plan, and (c) vote on all such resolution plans simultaneously. 33. As per the provision and procedure prescribed with regard to approval of Resolution Plan and the powers and functions of the Committee (CoC) as detailed out herein above, the CoC has evaluated the plan after detailed deliberations on feasibility and viability of each Resolution Plan as discussed in 9th CoC meeting. This Tribunal does not find any contravention of law by the Committee regarding approval of the plan of 3rd Respondent. 34. Further, the Adjudicating Authority at para 51 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ode. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of the CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of Sick Industrial Companies Act, 1985 or under other such enactments which has now been forsaken. Besides, the commercial wisdom of the CoC has been given paramount status without any judicial intervention, for ensuring completion of the stated processes within the timelines prescribed by the I B Code. There is an intrinsic assumption that financial cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssenting financial creditors. That must prevail, if it is not less than the specified percent (25% in October, 2017; and now after the amendment w.e.f. 06.06.2018, 44%). The inevitable outcome of voting by not less than requisite percent of voting share of financial creditors to disapprove the proposed resolution plan, de jure, entails in its deemed rejection 64. 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Steel (supra), the relevant passage (para 54) of which we have reproduced in earlier part of this judgment. The case of MSL in their appeal is that they want to run the company and infuse more funds. In such circumstances, we do not think the Appellate Authority ought to have interfered with the order of the Adjudicating Authority in directing the successful Resolution Applicant to enhance their fund inflow upfront. Finding : 38. In view of the decisions of the Hon ble Supreme Court, it is the settled proposition of law that the commercial wisdom of the Committee of Creditors in approving or rejecting a resolution plan is essentially based on a business decision which involves evaluation of resolution plan based on its feasibility besides the Committee of Creditors being fully informed about the viability of the Corporate Debtor. The Committee of Creditors invariably examine the Resolution Plan and an assessment is made through their team of experts in that regard. 39. Further, there is no such mechanism under the Code that gives the right to the Unsuccessful Resolution Applicant to challenge the score granted as per the evaluation matrix prepared by the CoC and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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