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TMI Blog2023 (7) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... hich have to be deliberated and voted upon by the Committee of Creditors. The payment of Performance Linked Incentive Fee in event it is paid to the Resolution Professional shall be part of the Insolvency Resolution Cost which affects the entitlement of stakeholders when the Insolvency Resolution Cost is increased by adding performance linked incentive fee it is bound to reduce the payment which is to be received by the various stakeholders under the Resolution Plan, since the amount which is proposed in the Resolution Plan is a fixed amount - The law is well settled that the commercial decision of the CoC has to be given due credence and the Adjudicating Authority or the Appellate Authority is not to interfere in the commercial decision of the CoC unless it does not fulfill the requirement of Section 30 of the Code. Hon ble Supreme Court again in KALPRAJ DHARAMSHI ANR. VERSUS KOTAK INVESTMENT ADVISORS LTD. ANR. [ 2021 (3) TMI 496 - SUPREME COURT ] reiterated that limited judicial review which is available to the Adjudicating Authority and Appellate Authority can in no circumstances entitle to review the business decision arrived at by the majority of the CoC. The dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ropriate order for payment of performance linked payment incentive fees to the Applicant as per Regulation 34B of the CIRP Regulations, 2016, inter alia, for successfully completing CIRP and approval of resolution plan by CoC in 247 days (i.e., 26.04.2022 (admission order) to 29.12.2022 (voting on resolution plan completed), and for achieving value maximization; and/or b) Such other and further reliefs(s) as may deem fit in the interest of justice. 3. The Resolution which was placed before the Committee of Creditors for payment of performance linked payment incentive fee was not approved by 91.55 % vote. I.A. No. 222/2023 was filed questioning the said decision of CoC and seeking a direction to make the payment of performance linked incentive fee which came to be rejected. 4. Learned Counsel for the Appellant challenging the Order of the Adjudicating Authority contends that Adjudicating Authority failed to consider the decision of the CoC rejecting the claim which was not based on any reasonable basis. Power given in the Regulation to the CoC to take a decision to pay performance linked incentive fee has to be on the basis of relevant criteria and material and cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicant or members of the committee and/or raised by way of interim finance and shall be included in the insolvency resolution process cost. 7. Regulation 34B refers to schedule II which is to the following effect: Schedule-II (Under Regulation 34B of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016) Minimum Fixed Fee. 1. Minimum fixed fee as per the table -1 below shall be paid to the interim resolution professional or the resolution professional, as the case may be, for the period mentioned in clause 2: Table-1: Minimum Fixed Fee Structure Quantum of Claims Admitted Minimum Fee Per Month (Rs. lakh) (i) Less than or equal to Rs. 50 crore 1.00 (ii) More than Rs.50 crore but less than or equal to Rs.500 crore 2.00 (iii) More than Rs.500 crore but less than or equal to Rs.2,500 crore 3.00 (iv) More than Rs.2,500 crore but less than or equal to Rs.10,000 crore 4.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors was one hundred crore rupees. The resolution plan was submitted to the Adjudicating Authority on 170th day from the insolvency commencement date. The committee has decided to pay the performance-linked incentive fees under clause 3 and 4. In this case, fee payable to the resolution professional shall be as under: (i) Performance-linked incentive fee for timely resolution: 0.75% of Rs. 100 crore = Rs.75 lakh, and (ii) Performance-linked incentive fee for value maximisation: 1.00% of Rs. 80 crore (Rs.100 crore Rs.20 crore) = Rs.80 lakh. 8. The Appellant in the Application has claimed incentive fee of Rs. 21,33,000/- as performance linked incentive fee for timely resolution and Rs. 11,64,256/- as performance linked incentive fee for value maximization. 9. From the facts which have been brought on record and the Order of the Adjudicating Authority it is clear that the claim of incentive fee of the Appellant came to be considered by the CoC in its meeting dated 01.12.2022 and was not approved with 91.55% voting. 10. What is the nature of power and jurisdiction of the Committee of Creditors to grant performance linked incentive fee and whether the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing observations in Paragraph 28: 28. Discretionary power implies freedom of choice, a competent authority may decide whether or not to act. The legal concept of discretion implies power to make a choice between alternative courses of action (Discretionary Justice Davis 1969). Statute has conferred discretionary power on the Commissioner and State Government but not discretion coupled with duty because they are dealing with a subject matter on which State has exclusive privilege. Permissive language used by the Statute in Section 14 and the rule making authority in Rule 4 gives the State Government and the Commissioner, no mandatory duty or obligation to grant the licence except perhaps to consider the application, if the liquor policy permits so. 14. The decision of the CoC dated 01.12.2022 as noted above is a business decision of the CoC while approving the Resolution Plan including the payments which have to be made to the various creditors, stakeholders as well as to the Insolvency Professional Cost, which have to be deliberated and voted upon by the Committee of Creditors. The payment of Performance Linked Incentive Fee in event it is paid to the Resolution Profes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CoC on the proposal for approval of the resolution plan. 67. After adverting to the 2016 Regulations, the Court set out the jurisdiction of the Adjudicating Authority as well as the Appellate 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 percent 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 62 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 167. This Court in Committee of Creditors of Essar Steel India Limited through Authorised Signatory (supra) after reproducing certain paragraphs in K. Sashidhar (supra) observed thus: 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, the parameters of such review having been clearly laid down in K. Sashidhar. 168. It can thus be seen, that this Court has clarified, that the limited judicial review, which is available, can in no circumstance trespass upon a business decision arrived at by the majority of CoC. 17. The decision taken by the CoC in not approving the payment of performance linked incentive fee to the Appellant thus cannot be faulted and is in accord with the discretionary power vested with the CoC under Regulation 34B. Appellant at best was entitled for consideration of his claim under statutory scheme. When cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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