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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 ..... 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), while passing the 'impugned order' dated 10.05.2019 in IA/40 of 2019 in CP(IB) No. 136 / BB / 2017 (Filed by the 'Petitioner / 2nd Respondent / Successful Resolution Applicant') through 'SPV Vision Textile', wherein, inter alia at Paragraphs 4 to 6, had observed the following: 4. "It is stated that last date of submission of Resolution Plan was 10 October 2018 and received on resolution plan from SPG Macrocosm Ltd ('Resolution Applicant') on 10th October 2018. The said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 paid to the Appellant, as per the Terms of the 'Resolution Plan', approved by the 'impugned order'. Apart from that, the 'Appellant' came to know of the 'inequitable' provisions of the Resolution Plan', which envisage 'No Payment' whatsoever of the 'Operational Creditors' of the 'Corporate Debtor', only when the 'Resolution Professional', sent a communication dated 26.06.2019, stating that the Appellant's Admitted Claim against the Corporate Debtor, stood extinguished. 6. The Learned Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 infusion of Share Capital of Rs.20 Crores, 'as and when required in the Company for its Revival through its Group Companies, Associates, Investors and Promoters'. 12. The Learned Counsel for the Appellant points out that there is no 'upfront investment', beyond Rs. 5 Crores, by the Resolution Applicant, which is given complete 'Liberty', to bring in the 'Funds', whenever it pleases. Also that, the 'Plan', provides for the Balance Part of the ostensible consideration of Rs.50.50 Crores (i.e. Rs.45,50,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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 provisions of the 'I & B Code' and the 'process document'. The maximization of the value assets of the 'Corporate Debtor' cannot be ignored nor it can be ignored that the same should balance all the stakeholders. 48. If the 'Operational Creditors' are ignored and provided with 'liquidation value' on the basis of misplaced notion and misreading of Section 30(2)(b) of the 'I&B Code', then in such case no creditor will supply the goods or render services on credit to any 'Corporate Debtor&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 operational creditors are given roughly the same treatment as financial creditors, and if they are not, such plans are either rejected or modified so that the operational creditors' rights are safeguarded. It may be seen that a resolution plan cannot pass muster under Section 30(2)(b) read with Section 31 unless a minimum payment is made to operational creditors, being not less than liquidation value. Further, on 05-10-2018, Regulation 38 has been amended. Prior to the amendment, Regulation 38 read as follows: 38. Mandatory contents of the resolution plan.- (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 deple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 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 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 distribution of amounts between different classes of creditors. 89. Indeed, by vesting the Committee of Creditors with the discretion of accepting resolution plans only with financial creditors, operational creditors having no vote, the Code itself differentiates between the two types of creditors for the reasons given above. Further, as has been reflected in Swiss Ribbons (supra), most financial creditors are secured creditors, whose security interests must be protected in order that they do not go ahead and realise their security in legal proceedings, but instead are incentivised to act within the framework of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditors 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." 2nd Respondent's Submissions: 20. It is the contention of the 2nd Respondent that Section 30 (2) (b) of the I & B Code, 2016, envisages two ways in which a 'Resolution Plan', may provide for 'Payment of Debts' of the 'Operational Creditor', i.e. (i) The amount to be paid to the 'Operational Creditors', shall in no event be lesser than the amount to be paid to such Creditors, in the event of Liquidation of the Corporate Debtor, as per Section 53 of the Code (or) (ii) The Sum that would have been to such Creditors, if the 'Sum' under the 'Resolution Plan' were to be 'distributed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting all the industries like agro-products, iron and steel, engineering FMCG, etc. 26. Also, in Clause 3.10 of the Resolution Plan, the 2nd Respondent had listed its 'capabilities to revive the Corporate Debtor', and run it as a 'Going Concern', and the same is as follows: (i) The Resolution Applicant is financially sound with a net worth of around Rs. 2024 lakhs. (ii) This acquisition will generate new employment to labour and staff. The acquisition will also increase the revenue to the Government of India and boost exports. (iii) Resolution Applicant being a trader / merchant exporter of textile over years, has good network in the industry on the manufacturing as well as marketing front. 27. It is the version of the 2nd Respondent that the 'Resolution Plan' contemplates a sum of Rs.50.70 Crores, as 'Full and Final Settlement Sum', against all 'Existing Liabilities' and 'Contingent Liabilities', for the entire 'Assets / Rights / Business', as a 'Going Concern' of the 'Corporate Debtor'. Moreover, the 2nd Respondent, had undertaken to infuse approximately INR 20 Crores in the Corporate Debtor , as and when required for its 'Revival', through its Group Companies, Associates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontinuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters / those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protects the corporate debtor's assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends. 82. It is clear that once the Code gets triggered by admission of a creditor's petition under Sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the hands of banks and financial institutions. Above all, ultimately, the interests of all stakeholders are looked after as the corporate debtor itself becomes a beneficiary of the resolution scheme - workers are paid, the creditors in the long run will be repaid in full, and shareholders/investors are able to maximize their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development of credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development of the Indian economy." 35. The Learned Counsel for the 2nd Respondent, refers to the Judgment of the Hon'ble Supreme Court of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessment about maximisation of the value of assets, in the scheme of the Code, would always be subjective in nature and the question, as to whether a particular resolution plan and its propositions are leading to maximisation of value of assets or not, would be the matter of enquiry and assessment of the Committee of Creditors alone. When the Committee of Creditors takes the decision in its commercial wisdom and by the requisite majority; and there is no valid reason in law to question the decision so taken by the Committee of Creditors, the adjudicatory process, whether by the Adjudicating Authority or the Appellate Authority, cannot enter into any quantitative analysis to adjudge as to whether the prescription of the resolution plan results in maximisation of the value of assets or not. The generalised submissions and objections made in relation to this aspect of value maximisation do not, by themselves, make out a case of interference in the decision taken by the Committee of Creditors in its commercial wisdom." 38. The Learned Counsel for the 2nd Respondent, refers to the Judgement of Hon'ble Supreme Court of India, in K. Sashidar v. Indian Overseas Bank and Ors., (vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e adjudicating authority. That is made non− justiciable. 34. In the report of the Bankruptcy Law Reforms Committee of November 2015, primacy has been given to the CoC to evaluate the various possibilities and make a decision. It has been observed thus: "The key economic question in the bankruptcy process When a firm (referred to as the corporate debtor in the draft law) defaults, the question arises about what is to be done. Many possibilities can be envisioned. One possibility is to take the firm into liquidation. Another possibility is to negotiate a debt restructuring, where the creditors accept a reduction of debt on an NPV basis, and hope that the negotiated value exceeds the liquidation value. Another possibility is to sell the firm as a going concern and use the proceeds to pay creditors. Many hybrid structures of these broad categories can be envisioned. The Committee believes that there is only one correct forum for evaluating such possibilities, and making a decision: a creditors committee, where all financial creditors have votes in proportion to the magnitude of debt that they hold. In the past, laws in India have brought arms of the Government (legislature, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 188 of the I&B Code can perform powers and functions specified in Section 196 of the I&B Code. That does not empower the Board to specify requirements for exercising commercial decisions by the financial creditors in the matters of approval of the resolution plan or liquidation process. Viewed thus, the amendment under consideration does not take the matter any further." 39. The Learned Counsel for the 2nd Respondent refers to the Judgement of the Hon'ble Supreme Court of India, in the matter of Kalparaj Dharamshi v. Kotak Investment Advisors Ltd., vide Civil Appeal Nos. 2943 - 2944 of 2020 dated 10.03.2021), wherein at Paragraphs 155 to 158, it is observed as under: 155. "This Court observed, that the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. This Court clearly held, that the appellate authority ought not to have interfered with the order of the adjudicating authority by directing the successful resolution applicant to enhance their fund inflow upfront. 156. It would thus be clear, that the legislative scheme, as interpreted by various decisions of this Court, is unam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r conclusion, that NCLAT acted in excess of jurisdiction in interfering with the conscious commercial decision of CoC." 40. The Learned Counsel for the 2nd Respondent, relies on the decision of the Hon'ble Supreme Court of India in Karad Urban Co-operative Bank Ltd. v. Swwapnil Bhingardevay, reported in (2020) 9 SCC at Page 729 at Spl. Pgs: 734 to 736, wherein at Paragraphs 12 to 14, it is observed as under: 12. "We have carefully considered the rival submissions. On the first question regarding the viability and feasibility of a resolution plan, the law is now well−settled. In K. Sashidhar (supra), it was held as follows: "52. ... 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... 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 provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority. That is made no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n taken care of." 14. The principles laid down in the aforesaid decisions, make one thing very clear. If all the factors that need to be taken into account for determining whether or not the corporate debtor can be kept running as a going concern have been placed before the Committee of Creditors and the CoC has taken a conscious decision to approve the resolution plan, then the adjudicating authority will have to switch over to the hands off mode. It is not the case of the corporate debtor or its promoter/Director or anyone else that some of the factors which are crucial for taking a decision regarding the viability and feasibility, were not placed before the CoC or the Resolution Professional. The only basis for the corporate debtor to raise the issue of viability and feasibility is that the ownership and possession of the ethanol plant and machinery is the subject matter of another dispute and that the resolution plan does not take care of the contingency where the said plant and machinery may not eventually be available to the Successful Resolution Applicant. 41. The Learned Counsel for the 2nd Respondent, refers to the Judgment of this 'Tribunal', in Damodar Valley Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oC and not by the Resolution Professional. 45. The Learned Counsel for the 4th Respondent points out the reading of the Regulation 39 of the CIRP Regulations, coupled with the ingredients of Section 30 (4) of the Code, unerringly, proceeds to point out that the 'approval by a majority of the 'Committee of Creditors', takes into account the 'Feasibility' and 'Viability', of the 'Resolution Plan', along with the aim of 'revival' of the 'Corporate Debtor'. 4th Respondent's Decisions: 46. The Learned Counsel for the 4th Respondent refers to the decision of the Hon'ble Supreme Court of India in the matter of K. Sashidhar v. Indian Overseas Bank, vide Civil Appeal No. 10673 of 2018 dated 05.02.2019 (2019) 12 SCC 150 at Spl Pgs.: 169, 170 and 173, wherein at Paragraphs 20, 21, 22 and 31, it is observed as under: 20. "With regard to the second amendment to Section 30(4) of the I&B Code which came into effect from 6th June, 2018, reducing the voting threshold from 75% to 66%, the learned counsel contends that even the same operates from the time the section was brought on the statute book. For, the legislature consciously lowered the threshold requirement to 66%. It was to infuse more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the company is a viable company and all efforts should be made to revive the company and not to shove it into liquidation because of the whims and fancies of the minority financial creditors or, for that matter, in the guise of their commercial wisdom. Reliance is placed on United Bank of India, Calcutta Vs. Abhijit Tea Co. Pvt. Ltd.22, SCC para 20 and Karan Singh Vs. Bhagwan Singh23, SCC para 7 and additionally, on the decision of NCLAT in the case of another corporate debtor (Alok Employees Benefit and Welfare Trust) in SICOM Ltd. v. Alok Employees Benefit and Welfare Trust24 decided on 29-11-2018. He had also invited our attention to the chart given in Economic Survey 2017−18 Volume 2, to contend that there will be hardly any impact if this Court was to remit the case for reconsideration on the basis of the amended provisions by the adjudicating authority (NCLT) and especially because there is ample material on record to indicate that the corporate debtor (IIL) is a viable company and needs to be revived and not liquidated. 31. Ms. Mahima Singh, learned counsel appearing for the Official Liquidator in the case of corporate debtor (IIL), had sought liberty to place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such Committee, and leaving decisions to be made by the requisite majority of the members of the aforesaid Committee in its discretion. Thus, Section 21(2) of the Code mandates that the Committee of Creditors shall comprise all financial creditors of the corporate debtor. "Financial creditors" are defined in Section 5(7) of the Code as meaning persons to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred. "Financial debt" is then defined in Section 5(8) of the Code as meaning a debt along with interest, if any, which is disbursed against the consideration for the time value of money. "Secured creditor" is separately defined in Section 3(30) of the Code as meaning a creditor in favour of whom a security interest is created and "security interest" is defined by Section 3(31) as follows: "3. Definitions. - In this Code, unless the context otherwise requires. - (31) "security interest" means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is clear that the provisions in Part II of the Code are self-contained code, providing for the procedure for consideration of the resolution plan by the CoC. 35. The stage at which the dispute concerning the respective corporate debtors (KS&PIPL and IIL) had reached the adjudicating authority (NCLT) is ascribable to Section 30(4) of the I&B Code, which, at the relevant time in October 2017, read thus: '30(4)- The committee of creditors may approve a resolution plan by a vote of not less than seventy-five per cent of voting share of the financial creditors.' If CoC had approved the resolution plan by requisite per cent of voting share, then as per Section 30(6) of the I&B Code, it is imperative for the resolution professional to submit the same to the adjudicating authority (NCLT). On receipt of such a proposal, the adjudicating authority (NCLT) is required to satisfy itself that the resolution plan as approved by CoC meets the requirements specified in Section 30(2). No more and no less. This is explicitly spelt out in Section 31 of the I&B Code, which read thus (as in October 2017): 31. Approval of resolution plan.-(1) If the Adjudicating Authority is satisfied that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 nonjusticiable. 64. Thus, what is left to the majority decision of the Committee of Creditors is the "feasibility and viability" of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution applicant to the effect that such dues ought to be paid in full, so that the carrying on of the business of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e voting on the resolution plan under Section 30(4) of the I&B Code." 48. The Learned Counsel for the 4th Respondent, cites the decision of Hon'ble Supreme Court of India in the matter of Kalparaj Dharamshi & Anr. v. Kotak Investment Advisors Ltd. & Anr., 2021 SCC OnLine SC 204 at Spl Pgs.: 206 to 208, wherein at Paragraphs 142 to 145, it is observed as under: 142. After considering the judgment of this Court in the case of Arcelormittal India Private Limited vs. Satish Kumar Gupta46 and the relevant provisions of the I&B Code, this court further observed in K. Sashidhar (supra) thus: "52. As aforesaid, 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It has been held, that the legislature has consciously not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the Adjudicating Authority and that the decision of CoC's 'commercial wisdom' is made non−justiciable. 144. This Court in Committee of Creditors of Essar Steel India Limited through Authorised Signatory (supra) after referring to the judgment of this Court in the case of K. Sashidhar (supra) observed thus: "64. Thus, what is left to the majority decision of the Committee of Creditors is the "feasibility and viability" of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution applicant to the effect that such dues ought to be paid in full, so that the carrying on of the business of the corporate debtor does not become impossible for want of a most basic and essential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as follows (SCC pp. 183, 186-87 & 189, paras 52, 57-58 & 64) "52 ... 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.... 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 provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority. That is made nonjusticiable. 57. ... The provisions investing jurisdiction and authority in NCLT or NCLAT as noticed earlier, have not made the commercial decision exercised by CoC of not approving the resolution plan or rejecting the same, justiciable. This position is reinforced from the limited grounds specified for instituting an appeal that too against an order "approving a resolution plan" under Section 31. 58. ... Further, the jurisdiction bestowed upon the appellate authority (NCLAT) is also expressly circumscribed. It can examine the challenge only in relation to the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolution plan will fail. In paragraph 8.04 of the Resolution Plan, the SRA has undertaken to continue the operations in the normal course of business. It is a commercial decision that they have taken. The corporate debtor cannot cry wolf over the said decision. Therefore, the third ground on which NCLAT chose to interfere, is also bound to be rejected." 50. The Learned Counsel for the 4th Respondent, adverts to the Judgment of the Hon'ble Supreme Court in Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh and Ors., reported in (2020) 11 SCC at Page 467, wherein at Paragraphs 21 to 31, it is observed as under: 21. "The manner in which the claims of the operational creditors shall be considered in a CIRP has been dealt with by a co-ordinate Bench of this Court (of which two of us, Nariman, J. and Ramasubramanian J. were members) in Essar Steel India Limited, Committee of Creditors v. Satish Kumar Gupta. It has been held in paras 71-73 of this judgment in the said report: (SCC pp. 592-93) 71. However, as has been correctly argued on behalf of the operational creditors, the preamble of the Code does speak of maximisation of the value of assets of corporate debtors and the balan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheme- workers are paid, the creditors in the long run will be repaid in full, and shareholders/investors are able to maximise their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development of credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development of the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern. (See ArcelorMittal [ArcelorMittal (India) (P) Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1] at para 83, fn 3)." 72. This is the reason why Regulation 38(1-A) speaks of a resolution plan including a statement as to how it has dealt with the interests of all stakeholders, including operational creditors of the corporate debtor. Regulation 38(1) also states that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal." (emphasis in original) 22. It has been further been held in the Essar Steel (SCC p. 641, para 145) "145. The other argument of Shri Sibal that Section 53 of the Code would be applicable only during liquidation and not at the stage of resolving insolvency is correct. Section 30(2)(b) of the Code refers to Section 53 not in the context of priority of payment of creditors, but only to provide for a minimum payment to operational creditors. However, this again does not in any manner limit the Committee of Creditors from classifying creditors as financial or operational and as secured or unsecured. Full freedom and discretion has been given, as has been seen hereinabove, to the Committee of Creditors to so classify creditors and to pay secured creditors amounts which can be based upon the value of their security, which they would otherwise be able to realise outside the process of the Code, thereby stymying the corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 distribution of amounts between different classes of creditors." (emphasis in original) 24. But the controversy on there being no provision in the resolution plan for operational creditors is only academic now. Before the Appellate Authority itself the successful Resolution Applicant had agreed to clear the dues of the operational creditors in percentage on a par with the financial creditors. Moreover, none of the operational creditors has come before us questioning the legality of the resolution plan. It would appear from para 29 of the order under appeal: (Padmanabhan Venkatesh case, SCC OnLine NCLAT) "29. It was submitted that the claims received of the 'Operational Creditors' by the Respondent No.1 were to the tune of Rs.2,26,70,153/- whereas the claims verified were of Rs.2,02,88,948/-. However, it was submitted that the 4th Respondent is willing to pay the verified ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (12 of 2003), the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors." 26. On behalf of Indian Bank and the said promoter of the corporate debtor, reliance was placed on Regulation 35 of The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016: "35. Liquidation value. (1) Liquidation value is the estimated realizable value of the assets of the corporate debtor if the corporate debtor were to be liquidated on the insolvency commencement date. (2) Liquidation value shall be determined in the following manner: (a) the two registered valuers appointed under Regulation 27 shall submit to the interim resolution professional or the resolution professional, as the case may be, an estimate of the liquidation value computed in accordance with internationally accepted valuation standards, after physical verification of the inventory and fixed assets of the corporate debtor; (b) if in the opinion of the interim resolution professional or the resolution professional, as the case may be, the two estimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolution plan on the basis of quantitative analysis. Such is the scheme of the Code. Section 31(1) of the Code lays down in clear terms that for final approval of a resolution plan, the Adjudicating Authority has to be satisfied that the requirement of sub-section (2) of Section 30 of the Code has been complied with. The proviso to Section 31(1) of the Code stipulates the other point on which an Adjudicating Authority has to be satisfied. That factor is that the resolution plan has provisions for its implementation. The scope of interference by the Adjudicating Authority in limited judicial review has been laid down in the case of Essar Steel, 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. 31. So far as the IA taken out by the MSL is concerned, in our opinion they cannot withdraw from the proceeding in the manner they have appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellants." 52. The Learned Counsel for the 4th Respondent points out that only one 'Resolution Plan' was submitted, which was also revised several times, by the 'Committee of Creditors', and once by the 'Adjudicating Authority', to include 'Workmen Dues', and the same was complied with, and further that the 'commercial wisdom' of the 'Committee of Creditors', in approving the 'Resolution Plan', cannot be questioned. Resolution Plan: 53. A 'Resolution Plan', is not a 'Sale' / 'Recovery' / 'Liquidation' / an 'Auction'. A 'Resolution Plan', ought to be planned for 'Insolvency Resolution' of the 'Corporate Debtor', as a 'Going Concern', and not for 'Addition of Value', with an 'intent to sell', the 'Corporate Debtor'. Role of Resolution Professional: 54. The 'Resolution Professional', is to ensure that a 'Resolution Plan, is complete in all respects and to conduct a 'due diligence', with a view to 'report', to the 'Committee of Creditors', whether or not, it is in order. 55. The 'purport / intent' of the 'Legislature' is that, the 'Committee of Creditors', while 'approving' or 'rejecting' one or other 'Resolution Plan', ought to follow such procedure, which is a 'transparent' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Creditors of the Corporate Debtor, being an 'Operational Creditor'), and therefore, was unaware of the Resolution Plan terms. Upon receipt of communication dated 26.06.2019, by the Resolution Professional, the Appellant came to know that the 'Appellant's Admitted Claim against the 1st Respondent / Corporate Debtor stood extinguished. Furthermore, the 'Appellant' has filed the present 'Appeal', on coming to know of the terms of the 'Resolution Plan', and is assailing the 'impugned order' dated 10.05.2019, passed by the 'Adjudicating Authority', in approving Resolution Plan (vide IA/40/2019 in CP (IB)/136/BB/2017). 62. The grievance of the Appellant is that, the 'Resolution Plan', make no provision for any payment of the Debts', owed by the Corporate Debtor to its 'Operational Creditor', and that the 'Resolution Plan', fails to meet the requirement of (a) maximisation of the Value of the Assets of the Corporate Debtor (b) equitable and non-discriminatory treatment of the 'Operational Creditors'. 63. The stand of the Appellant is that in the approved 'Resolution Plan', assets of the Corporate Debtor, as on the 20.08.2018 (date of the commencement of Insolvency) was Rs.80.75 Crores a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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', and the same is between the 'Operational Creditors', as a 'Class', as opined by this 'Tribunal'. 69. In the instant case on hand, the '2nd Respondent', had undertaken to infuse approximately a Sum of Rs.20 Crores in the '1st Respondent / Corporate Debtor', when required for its 'revival', through its 'Group Companies', 'Promoters', 'Investors' and 'Associates'. Suffice it, for this 'Tribunal', to make a relevant mention that whether a certain 'Resolution Plan', leads to the maximisation of Value of the Assets or not is within the 'subjective realm of assessment' of the 'Committee of Creditors', and the same cannot be a matter of enquiry. 70. One cannot brush aside a vital fact that a 'Resolution Plan', as approved by the 'Committee of Creditors', in exercise of its 'subjective commercial wisdom', cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions, were arrived at, by the 'Committee of Creditors', in exercise of their 'subjective commercial wisdom', which has a 'supremacy and primacy', in 'Law'. 75. Before the Karnataka Labour Welfare Fund, the '2nd Respondent', had deposited the 'Unclaimed Monies', due to 'Workmen', as directed by the 'Adjudicating Authority' ('Tribunal') and it cannot be lost sight off, that the 'Monitoring Agency' of the 'Corporate Debtor', stood 'Dissolved'. 76. It is to be remembered that the '2nd Respondent' took physical possession of the 'Assets' of the '1st Respondent / Corporate Debtor', and the 'Adjudicating Authority', through an 'Order' dated 21.04.2022, had acclaimed the implementation of the 'Resolution Plan' in an 'entirety'. 77. An 'Adjudicating Authority' ('NCLT') or an 'Appellate Tribunal' ('NCLAT'), cannot sit in an 'Appeal', to find out the 'Viability' and 'Feasibility' of 'Financial Matrix' of such 'Resolution Plan', as opined by this 'Tribunal'. 78. Be that as it may, this 'Tribunal', on a careful consideration of divergent contentions advanced on either side, in the light of foregoing discussions, keeping in mind the facts and circumstances hovering around the instant case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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