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TMI Blog2023 (1) TMI 996X X X X Extracts X X X X X X X X Extracts X X X X ..... In this connection, this Tribunal, pertinently points out that in respect of the dues of the Workmen, initially only Rs.17 Lakhs was provided and at the behest of the Adjudicating Authority, the 2nd Respondent had revised the Resolution Plan and earmarked Rs. 34 Lakhs, towards the Workmen dues. Also that, a Sum of Rs.50.70 Crores was fully used in the payment of (a) CIRP Costs (b) the dues of the Financial Creditors and the Workmen. As such, no amount remains to be allotted in respect of the other Creditors. Therefore, the Liquidation Value, payable to the Operational Creditors, is Nil. Besides this, all the Creditors, had a significant haircut in the Corporate Insolvency Resolution Process of the 1st Respondent / Corporate Debtor. Thus, keeping in mind the payment to all the Operational Creditors, is Nil, there is no aspect of discrimination between the Operational Creditors, in the considered opinion of this Tribunal. Further, when the ingredients of Section 30 (2) (b) of the I B Code, 2016, are satisfied, the distribution is to be treated as Fair and Equitable one. After all, the Plea of the Fair and Equitable treatment is not between the different classes of Creditors, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UDGMENT ( Virtual Mode ) Justice M. Venugopal, Member ( Judicial ) : Introduction: TA (AT) No.13 of 2021 in Comp.App (AT) (INS.)No. 850 of 2019: The Appellant (one of the Operational Creditor s of the 1st Respondent / Corporate Debtor ), has preferred the instant TA (AT) No. 13 of 2021 in instant Comp. App (AT) (INS.) No. 850 of 2019, on being aggrieved, in respect of the impugned order dated 10.05.2019 in IA/40 of 2019 in CP(IB) No. 136 / BB / 2017, whereby, the Application , filed by the 4th Respondent / Resolution Professional of the 1st Respondent , [under Section 30 (6) (c) and 31 of the I B Code, 2016], seeking approval of the Resolution Plan dated 07.01.2019., submitted by the 2nd Respondent / SPG Macrocosm Limited, through SPV Vision Textile ( 2nd Respondent / Resolution Applicant ), as approved by the Committee of Creditors by e-voting on 15.01.2019, passed by the Adjudicating Authority , ( National Company Law Tribunal , Bengaluru Bench, Bengaluru), in Approving , the Resolution Plan , dated 07.01.2019 . 2. Earlier, the Adjudicating Authority , ( National Company Law Tribunal , Bengaluru Bench, Bengaluru), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted Coal to the Corporate Debtor , over several years and raised a total of 14 Invoices towards such supplies. Further, the Appellant , is an Operational Creditor , because of the fact that the aforesaid Invoices, were not paid , and that the Adjudicating Authority ( Tribunal ), through an Order dated 20.08.2018, had admitted the Application / Petition , in CP(IB) No. 136 of 2017, filed by another Operational Creditor of the Corporate Debtor (under Section 9 of the I B Code, 2016) and commenced the Corporate Insolvency and Resolution Process . 4. According to the Learned Counsel for the Appellant, pursuant to an invitation for Claims, by the Creditors of the Corporate Debtor, the Appellant , as an Operational Creditor of the Corporate Debtor had furnished a Claim of Rs.6,05,00,111/- to the Resolution Professional who had admitted only Rs.3.53 Crores of such Claim . Also that, the interest portion of Appellant s claim was disallowed by the Resolution Professional, based on the reason that the Interest was not mentioned in the Invoice. 5. It is represented on behalf of the Appellant that even in regard to the Admitted Claim of Rs.3.54 Crores, nothing was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Corporate Debtor, if the Corporate Debtor were to be Liquidated on the Insolvency Commencement Date . 10. Continuing further, it is projected on the side of the Appellant , that the Assets of the Corporate Debtor (in the Approved Resolution Plan itself) as on the Insolvency Commencement Date of 20.08.2018 , was Rs.80.75 Crores. As a matter of fact, prima facie, the Resolution Plan , appears to provide for the complete takeover of these Assets , for only a sale consideration of Rs.50.50 Crores, which is substantially, below the Value of the Assets of the Corporate Debtor . Moreover, the Resolution Plan , envisages an immediate Restructuring of the Share Capital of the Corporate Debtor , through a combination of Reduction of Share Capital of the Public Shareholders , and the Preferential Allotment of Fresh Equity Shares , to the Resolution Applicant (for Allotment Consideration of Rs.5 Crores only). 11. The Learned Counsel for the Appellant, brings to the notice of this Tribunal , that by Restructuring , the Resolution Applicant , became a 97.88% Shareholder of the Corporate Debtor . Besides this, the Resolution Applicant commits a further in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le for the same. 15. The Learned Counsel for the Appellant, submits that although the I B Code, 2016, does not require equal treatment of differently situated classes of Creditors , in a Resolution Plan, it certainly requires an Equitable Treatment of the Classes in non-discriminatory manner. 16. According to the Learned Counsel for the Appellant, the instant TA No. 13 of 2021 in Comp. App (AT) (INS.) No. 850 of 2019, is to be allowed, by setting aside the impugned order dated 10.05.2019 in IA/40 of 2019 in CP(IB) No. 136 / BB / 2017, in Approving the Resolution Plan , made by the Adjudicating Authority ( Tribunal ), and thereby the interests of the Operational Creditors , are protected in a sufficient manner. Appellant s Citations: 17. The Learned Counsel for the Appellant, refers to the decision of the Hon ble Supreme Court of India, in Binani Industries Limited v. Bank of Baroda (2018) SCC Online NCLAT 521, wherein at Paragraph 47 and 48, it is observed as under: 47. We have noticed the relevant provision of the 'process document' and Section 25(2)(h) and held that the 'Committee of Creditors' have not acted in terms with the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amage claimants (e.g. for environmental damage) and tax authorities. Even though the principle of equitable treatment may be modified by social policy on priorities and give way to the prerogatives pertaining to holders of claims or interests that arise, for example, by operation of law, it retains its significance by UNCITRAL Legislative Guide on Insolvency Law ensuring that the priority accorded to the claims of a similar class affects all members of the class in the same manner. The policy of equitable treatment permeates many aspects of an insolvency law, including the application of the stay or suspension, provisions to set aside acts and transactions and recapture value for the insolvency estate, classification of claims, voting procedures in reorganization and distribution mechanisms. An insolvency law should address problems of fraud and favouritism that may arise in cases of financial distress by providing, for example, that acts and transactions detrimental to equitable treatment of creditors can be avoided. 77. NCLAT has, while looking into viability and feasibility of resolution plans that are approved by the Committee of Creditors, always gone into whether operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the preamble of the Code does speak of maximisation of the value of assets of corporate debtors and the balancing of the interests of all stakeholders. There is no doubt that a key objective of the Code is to ensure that the corporate debtor keeps operating as a going concern during the insolvency resolution process and must therefore make past and present payments to various operational creditors without which such operation as a going concern would become impossible. Sections 5(26), 14(2), 20(1), 20(2)(d) and (e) of the Code read with Regulations 37 and 38 of the 2016 Regulations all speak of the corporate debtor running as a going concern during the insolvency resolution process. Workmen need to be paid, electricity dues need to be paid, purchase of raw materials need to be made, etc. This is in fact reflected in this court s judgment in Swiss Ribbons (supra) as follows: 26. The Preamble of the Code states as follows: An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximisation of value of assets of such persons, to promote entrepreneursh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the interests of all stakeholders, including operational creditors of the corporate debtor. Regulation 38(1) also states that the amount due to operational creditors under a resolution plan shall be given priority in payment over financial creditors. If nothing is to be paid to operational creditors, the minimum, being liquidation value - which in most cases would amount to nil after secured creditors have been paid - would certainly not balance the interest of all stakeholders or maximise the value of assets of a corporate debtor if it becomes impossible to continue running its business as a going concern. 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. 73. There is no doubt whatsoever that the ultimate discretion of what to pay and how much to pay each class or sub-class of creditors is with the Committee of Creditors, but, the decision of such Committee must reflect the fact that it has taken into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 38 set out in paragraph 77 again does not lead to the conclusion that financial and operational creditors, or secured and unsecured creditors, must be paid the same amounts, percentage wise, under the resolution plan before it can pass muster. Fair and equitable dealing of operational creditors rights under the said Regulation involves the resolution plan stating as to how it has dealt with the interests of operational creditors, which is not the same thing as saying that they must be paid the same amount of their debt proportionately. Also, the fact that the operational creditors are given priority in payment over all financial creditors does not lead to the conclusion that such payment must necessarily be the same recovery percentage as financial 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, together with negotiating with a prospective resolution applicant for better or different terms which may also involve differences in distribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Dissenting Secured Financial Creditors 2 Other Secured Financial Creditors 3 Dissenting Unsecured Financial Creditors 4 Other Unsecured Financial Creditors 5 Operational Creditors, Government, Workmen, Employees 6 Other Debts and Dues Total Quite clearly, secured and unsecured financial creditors are differentiated when it comes to amounts to be paid under a resolution plan, together with what dissenting secured or unsecured fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.01.2019. 24. The contention of the 2nd Respondent is that because of the ingredients of Section 53 of the Code, dues of Secured Financial Creditors and Workmen rank much higher than the Dues of the Operational Creditors , and the Liquidation Value of the corporate Debtor being Nil , no amount was assigned to such Creditors . In effect, according to the 2nd Respondent, the Resolution Plan , is in conformity with the ingredients of Section 30(2)(b) read with Section 53 (1) of the Code. 25. According to the 2nd Respondent, its intention is to maximise the Value of the Assets , of the Corporate Debtor , and to ensure it is run as a Going Concern , is evident from the Resolution Plan , submitted by it. In fact, in Clause 3.9 of the Resolution Plan, the 2nd Respondent had laid down the objections it has for the Corporate Debtor which run as under: a) To engage in textile manufacturing and e-commence the operations after due repairs and renovation b) Once the production is stabilised to carry out modernisation and expansion c) To carry on backward and forward integration d) To add diversified / value added services such as trading, manufacturing, me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors or Operational Creditors, as was wrongly alleged by the Appellant . Furthermore, the decision of this Tribunal in Central Bank of India v. Resolution Professional of Sirpur Paper Mills Ltd. (vide Comp. App (AT) (INS) No. 526 of 2018 dated 12.09.2018), is inapplicable to the facts of the present case. 31. The Learned Counsel for the 2nd Respondent takes a plea that the Judgment in Standard Chartered Bank v. Satish Kumar Gupta, RP of Essar Steel Ltd Ors. CA AT INS No. 242 of 2019, is incorrectly relied on , by the Appellant . 32. The Learned Counsel for the 2nd Respondent while concluding, submits that the Resolution Plan is in consonance with the amended Provisions of the I B Code, 2016, and the same was upheld by the Adjudicating Authority , and therefore, the Appellant is not entitled to get any relief , in the instant Appeal , and the same is liable to be dismissed, to secure the ends of justice . 2nd Respondent s Decisions : 33. The Learned Counsel for the 2nd Respondent, cites the decision of the Hon ble Supreme Court of India in Swiss Ribbons Pvt. Ltd. and Anr. v. Union of India Ors. (2019) 4 SCC 17, wherein, at Paragraphs, 28, 82 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t private information utilities that have been set up are not governed by proper norms. Also, the evidence by way of loan default contained in the records of such utility cannot be conclusive evidence of what is stated therein. The BLRC Report had stated: Under the present arrangements, considerable time can be lost before all parties obtain this information. Disputes about these facts can take up years to resolve in court Hence, the Committee envisions a competitive industry of information utilities who hold an array of information about all firms at all times. When the IRP commences, within less than a day, undisputed and complete information would become available to all persons involved in the IRP and thus address this source of delay. 34. The Learned Counsel for the 2nd Respondent, adverts to the decision of the Hon ble Supreme Court of India in Swiss Ribbons Pvt. Ltd. and Anr. v. Union of India Ors. (2019) 4 SCC 17, wherein at Paragraph 27, it is observed as under: 27. The Code is first and foremost, a Code for reorganization and insolvency resolution of corporate debtors. Unless such reorganization is effected in a time-bound manner, the value of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fair and equitable to the operational creditors. 37. The Learned Counsel for the 2nd Respondent, refers to the Judgement of the Hon ble Supreme Court of India, in the matter of Jaypee Kensington Boulevard Apartments Welfare Association Ors. v. NBCC (India) Ltd. Ors., (vide Civil Appeal No. 3395 of 2020 dated 24.03.2021), reported in India Kanoon, wherein at Paragraphs 76 and 77.6.1, it is observed as under: 76. The expositions aforesaid make it clear that the decision as to whether corporate debtor should continue as a going concern or should be liquidated is essentially a business decision; and in the scheme of IBC, this decision has been left to the Committee of Creditors, comprising of the financial creditors. Differently put, in regard to the insolvency resolution, the decision as to whether a particular resolution plan is to be accepted or not is ultimately in the hands of the Committee of Creditors; and even in such a decision making process, a resolution plan cannot be taken as approved if the same is not approved by votes of at least 66% of the voting share of financial creditors. Thus, broadly put, a resolution plan is approved only when the collective commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 the 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 creditors are 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 CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is rudimentary that the financial creditors (in most cases are national Bankers), who are called upon to consider the proposed resolution plan would take into account all the relevant materials, including the feasibility and viability and such other requirements as may be specified by the Board. Additionally, the financial creditors are also required to bear in mind that the legislative intent is to bring about resolution and revival of the corporate debtors so as to benefit not only the corporate debtor but also other stake holders in equal measure. 48. Suffice it to observe that the amended provision merely restates as to what the financial creditors are expected to bear in mind whilst expressing their choice during consideration of the proposal for approval of a resolution plan. No more and no less. Indubitably, the legislature has consciously not provided for a ground to challenge the justness of the commercial decision expressed by the financial creditors be it to approve or reject the resolution plan. The opinion so expressed by voting is non justiciable. Further, in the present cases, there is nothing to indicate as to which other requirements specified by the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y a thumping majority of 84.36%. The only creditor voted in favour of KIAL is Kotak Bank, which is a holding company of KIAL, having voting rights of 0.97%. We are of the considered view, that in view of the paramount importance given to the decision of CoC, which is to be taken on the basis of commercial wisdom , NCLAT was not correct in law in interfering with the commercial decision taken by CoC by a thumping majority of 84.36%. 158. It is further to be noted, that after the resolution plan of Kalpraj was approved by NCLT on 28.11.2019, Kalpraj had begun implementing the resolution plan. NCLAT had heard the appeals on 27.2.2020 and reserved the same for orders. It is not in dispute, that there was no stay granted by NCLAT, while reserving the matters for orders. After a gap of five months and eight days, NCLAT passed the final order on 5.8.2020. It could thus be seen, that for a long period, there was no restraint on implementation of the resolution plan of Kalpraj, which was duly approved by NCLT. It is the case of Kalpraj, RP, CoC and Deutsche Bank, that during the said period, various steps have been taken by Kalpraj by spending a huge amount for implementation of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f commercial wisdom of the financial creditors - be it for approving, rejecting or abstaining, as the case may be. Even the inquiry before the appellate authority (NCLAT) is limited to the grounds under Section 61(3) of the I B Code. It does not postulate jurisdiction to undertake scrutiny of the justness of the opinion expressed by financial creditors at the time of voting. 13. Thereafter, in Essar Steel India Ltd. (supra), this Court held: 67 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 . 73 .. Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09.01.2019 and 11.01.2019. In fact, the Resolution Plan dated 07.01.2019 along with amendments was approved by the CoC through e-voting, that took place on 15.01.2019, by 69.04% votes. Ultimately, the Resolution Plan, presented by the Resolution Professional , before the Adjudicating Authority , in IA No. 40 of 2019 in CP(IB)/136/BB/2017 (under Section 30(6)(c) and Section 31 of the Code) was approved on 10.05.2019, by the Adjudicating Authority . 43. The contention of the 4th Respondent is that, the instant Appeal , is per se not maintainable, because of the fact that the Appellant , is endeavouring to impugned the merits of the commercial decision taken by the Committee of Creditors in approving the Resolution Plan of the Corporate Debtor. 44. Moreover, the jurisdiction under the I B Code, 2016, does not extend to altering / changing the commercial wisdom of the Committee of Creditors , which took into consideration, the feasibility and viability of the Resolution Plan. Besides this, the Resolution Professional does not have any role to play, because of the supremacy being given to the commercial wisdom of the Committee of Creditors. Also that, any objection or conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debtor instead of its liquidation. As regards the objection about the eligibility of the appellant as a person acting jointly or in concert with the corporate debtor in terms of Section 29-A of the I B Code, it is contended that even this objection was being taken for the first time. Notably, Section 29-A of the I B Code came into force only from 23-11-2017, and it did not exist when the resolution plan was considered by the CoC. Further, the scope of appeal preferred by the appellant was to call upon the adjudicating authority to interfere with the unreasonable rejection of the resolution plan by the dissenting financial creditors and not to propound an independent plan of the appellant. Thus understood, Section 29-A of the I B Code would have no application and in any case, if the proposed resolution plan is to be taken forward, the appellant has no causal connection with the resolution applicant. The learned counsel submits that the appeal be allowed and the matter be restored to the file of the adjudicating authority (NCLT) for reconsideration of the proposed resolution plan afresh. 22. Mr. Colin Gonsalves, learned Senior Counsel appearing for the workers union concerning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the CIRP, under Sections 15(1), information as to the last date for submission of claims, as may be specified, is to be given; details of the interim resolution professional, who shall be vested with the management of the corporate debtor and be responsible for receiving claims, shall also be given, and the date on which the CIRP shall close is also to be given see Section 15(1)(c), (d) and (f) of the Code. Under Section 17 of the Code, the management of the affairs of the corporate debtor shall vest in the interim resolution professional, the Board of Directors of the corporate debtor standing suspended by law. Among the important duties of the interim resolution professional is the receiving and collating of all claims submitted by creditors and the constitution of a Committee of Creditors see Section 18(1)(b) and (c) of the Code. Under Section 20 of the Code, the interim resolution professional is to make every endeavour to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern. 54. Since it is the commercial wisdom of the Committee of Creditors that is to decide on whether or no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imately it is the commercial wisdom of the Committee of Creditors which operates to approve what is deemed by a majority of such creditors to be the best resolution plan, which is finally accepted after negotiation of its terms by such Committee with prospective resolution applicants. 62. In K. Sashidhar (supra), the role of the Committee of Creditors in the corporate resolution process was laid down by this Court thus: 34. The CoC is constituted as per Section 21 of the I B Code, which consists of financial creditors. The term financial creditor has been defined in Section 5(7) of the I B Code to mean any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to. Be it noted that the process of insolvency resolution and liquidation concerning corporate debtors has been codified in Part II of the I B Code, comprising of seven Chapters. Chapter I predicates that Part II shall apply in matters relating to the insolvency and liquidation of corporate debtor where the minimum amount of default is Rs. 1,00,000/-. Section 5 in Chapter I is a dictionary clause specific to Part II of the Code. Chapter II deals wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon receipt of a rejected resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I B Code. 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal as follows: 55. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan as approved by the requisite per cent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated requirements. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides: (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board. The Board referred to is established under Section 188 of the I B Code. The powers and functions of the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not pro vided 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. (emphasis supplied) 143. This Court has held, that it is not open to the Adjudicating Authority or Appellate Authority to reckon any other factor other than specified in Sections 30(2) or 61(3) of the I B Code. It has further been held, that the commercial wisdom of 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. This Court thus, in unequivocal terms, held, that there is an intrinsic assumption, that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the plan, including the manner of distribution of funds among the various classes of creditors. It has further been held, that CoC is entitled to suggest a modification to the prospective resolution applicant, so that carrying on the business of the Corporate Debtor does not become impossible, which suggestion may, in turn, be accepted by the resolution applicant with a consequent modification as to distribution of funds, etc. It has been held, that what is important is, the commercial wisdom of the majority of creditors, which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place. 49. The Learned Counsel for the 4th Respondent, falls back upon the decision of the Hon ble Supreme Court of India in the matter of Karad Urban Co-operative Bank Ltd., v. Swwapnil Bhingardevay, 2020 9 SCC 729 at Spl Pgs.: 733 to 736 and 740, wherein at Paragraphs 10.1, 12, 13 and 41, it is observed as under: 10.1. That the question of viability and feasibility, is to be left to the commercial wisdom of CoC and the same cannot be lightly interfered with by the Tribunal, in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld: 67. 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 . 73. . Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. 41. The third ground on which NCLAT proceeded, related to the ethanol plant and machinery. We have already dealt with this issue in detail, while dealing with the first issue. As stated therein, the SRA admittedly did not make his Resolution Plan on the strength of the ethan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto. 27. As is discernible, the Preamble gives an insight into what is sought to be achieved by the Code. The Code is first and foremost, a Code for reorganisation and insolvency resolution of corporate debtors. Unless such reorganisation is effected in a time-bound manner, the value of the assets of such persons will deplete. Therefore, maximisation of value of the assets of such persons so that they are efficiently run as going concerns is another very important objective of the Code. This, in turn, will promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When, therefore, a resolution plan takes off and the corporate debtor is brought back into the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how much to pay each class or sub-class 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 it has adequately balanced the interests of all stakeholders including operational creditors. This being the case, judicial review of the Adjudicating Authority that the resolution plan as approved by the Committee of Creditors has met the requirements referred to in Section 30(2) would include judicial review that is mentioned in Section 30(2)(e), as the provisions of the Code are also provisions of law for the time being in force. Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. If the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76 clearly refers to the UNCITRAL Legislative Guide which makes it clear beyond any doubt that equitable treatment is only of similarly situated creditors. This being so, the observation in para 77 cannot be read to mean that financial and operational creditors must be paid the same amounts in any resolution plan before it can pass muster. On the contrary, para 77 itself makes it clear that there is a difference in payment of the debts of financial and operational creditors, operational creditors having to receive a minimum payment, being not less than liquidation value, which does not apply to financial creditors. The amended Regulation 38 set out in para 77 again does not lead to the conclusion that financial and operational creditors, or secured and unsecured creditors, must be paid the same amounts, percentage wise, under the resolution plan before it can pass muster. Fair and equitable dealing of operational creditors rights under the said Regulation involves the resolution plan stating as to how it has dealt with the interests of operational creditors, which is not the same thing as saying that they must be paid the same amount of their debt proportionately. Also, the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation. (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1) - it may, by an order, reject the resolution plan. (3)After the order of approval under sub-section (1) - (a) the moratorium order passed by the Adjudicating Authority under section 14 shall cease to have effect; and (b) the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database. (4) The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to MSL for Rs.477 crores. The learned counsel appearing for these two respondents have sought to strengthen their submission on this point referring to the other Resolution Applicant whose bid was for Rs.490 crores which is more than that of the appellant MSL. 28. No provision in the Code or Regulations has been brought to our notice under which the bid of any Resolution Applicant has to match liquidation value arrived at in the manner provided in Regulation 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. This point has been dealt with in Essar Steel. We have quoted above the relevant passages from this judgment. 29. It appears to us that the object behind prescribing such valuation process is to assist the CoC to take decision on a resolution plan properly. Once, a resolution plan is approved by the CoC, the statutory mandate on the Adjudicating Authority under Section 31(1) of the Code is to ascertain that a resolution plan meets the requirement of sub-sections (2) and (4) of Section 30 thereof. We, per se, do not find any breach of the said provisions in the order of the Adjudicating Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 4th Respondent, refers to the Judgment of this Tribunal dated 07.04.2022, in the matter of Genius Security and Allied Services v. Mr. Shivadutt Bannanje Anr., reported in (2022) SCC Online NCLAT 291, wherein at Paragraphs 44 and 45, it is observed as under: 44. Once the Plan is approved by the Adjudicating Authority under Sub-Section (1) of Section 31 it shall be binding on the Creditors including the Operational Creditors i.e. the Appellants herein. 45. From the perusal of the Resolution Plan this Tribunal finds that there is no infirmity or illegality in the Plan as approved by the Committee of Creditors by majority vote of 95.07% and approved by the Adjudicating Authority and the same shall be binding on the Appellants apart from other stakeholders. This Tribunal comes to a resultant conclusion that the approval of Resolution Plan is legal and valid. It is also seen that there is no discrimination amongst the Operational Creditors, for the reason that no amounts earmarked for any of the Operational Creditors. Moreover, in the Plan nil payments have been shown against the payments to be made to the Operational Creditors. While so the question of discrimination arise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) under Section 31 of the I B Code, 2016, read with Rule 11 of the NCLT Rules, 2016, seeking approval of the Resolution Plan dated 07.01.2019, as approved by the Committee of Creditors in its 15th Meeting, in the interests of Justice . 58. According to the Appellant / S.P. Coal Resources Pvt. Ltd. , had supplied the imported coal to the 1st Respondent / Corporate Debtor . over several years and raised, 14 Invoices in respect of the supply made. Because of the fact that the said Invoices, had remained unpaid, the Appellant is an Operational Creditor of the 1st Respondent / Corporate debtor. 59. It transpires, before the Adjudicating Authority / Tribunal , another Operational Creditor Viz. SF Dyes, Bengaluru (3rd Respondent in the instant Appeal ) of the 1st Respondent / Corporate Debtor ( INDUS Fila), had filed an Application in CP(IB)/136/BB/2017 under Section 9 of the I B Code, 2016, which was admitted by the Adjudicating Authority , on 20.08.2018, resulting in the commencing of the Corporate Insolvency Resolution Process . 60. It is brought to the fore that based on the commencement of the CIRP of the 1st Respondent / Corporate Debtor , the 4th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution Plan and the Impugned order, passed by the Adjudicating Authority (Tribunal) in IA / 40 of 2019 in CP(IB)/136/BB/2017 in approving the Resolution Plan dated 07.01.2019, as approved by the Committee of Creditors , through its 15th Meeting, are to be set aside because the impugned order , is against the well laid down principles of the I B Code, 2016. 66. In the present case, it is quite evident that the 2nd Respondent through a Resolution Plan , had offered Rs.50.70 Crores as Full and Final Settlement of all the Liabilities of the 1st Respondent / Corporate Debtor , which was duly approved with requisite majority of the Committee of Creditors , in its commercial wisdom , ofcourse, after numerous rounds of discussions and negotiations. 67. In this connection, this Tribunal , pertinently points out that in respect of the dues of the Workmen, initially only Rs.17 Lakhs was provided and at the behest of the Adjudicating Authority, the 2nd Respondent had revised the Resolution Plan and earmarked Rs. 34 Lakhs, towards the Workmen dues. Also that, a Sum of Rs.50.70 Crores was fully used in the payment of (a) CIRP Costs (b) the dues of the Financial Creditors and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B Code, 2016, in the instant case, exhibits that the approval , by the majority of the Committee of Creditors , had indeed, took into account the viability and practicability of the Resolution Plan , together with the objective of the revival of the 1st Respondent / Corporate Debtor . 72. It is brought to the fore that the Resolution Plan , was fully implemented and further that it must be borne in mind that the 2 nd Respondent (after the impugned order dated 10.05.2019), was passed in IA/40 of 2019 in CP(IB)/136/BB/2017, by the Adjudicating Authority ( Tribunal ), had paid all the amounts, to be paid under the Resolution Plan , to the Financial Creditors and the concerned Stakeholders , and the amounts were appropriated and that the majority of the Financial Creditors , had given No Due Certificates . 73. Be it noted, that the I B Code, 2016, is not a Debt Enforcement Procedure , and the same cannot be used as a mechanism for the Recovery of Dues , for the Creditors . It is an axiomatic principle in Law , there is not rule for substituting any commercial term(s) of the Resolution Plan , approved by the Committee of Creditors , espec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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