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TMI Blog2023 (10) TMI 750X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Section 30 (2) of the Code. An approved Resolution Plan cannot be subject to judicial review in terms of carrying out a quantitative analysis qua each Stakeholder. The Hon ble Supreme Court has observed so in India Resurgence ARC private Limited Vs. Amit Metaliks Limited [ 2021 (6) TMI 684 - SUPREME COURT] , that the commercial wisdom of CoC and the scope of judicial review remains limited within the four corners of Section 30 (2) of the Code for the Adjudicating Authority and Section 30 (2) read with Section 61 (3) for the Appellate Authority. Whether the CoC is empowered to decide the distribution methodology? - HELD THAT:- The Hon ble Supreme Court in the matter of Amit Metaliks has held that thus, what amount is to be paid to different classes or subclasses of creditors in accordance with provisions of the Code and the related Regulations, is essentially the commercial wisdom of the Committee of Creditors; and a dissenting secured creditor like the appellant cannot suggest a higher amount to be paid to it with reference to the value of the security interest . Though the IBC does not have a specific Provision that uses the term Business Decision of the CoC, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim of Rs. 159,56,12,810/- and the same amount was admitted in full by the Resolution Professional ( RP ) and the Appellant was inducted as the Member of the CoC. A perusal of the Resolution Plan submitted by M/s. Vedanta Limited says that Clause 3.5.5 did not propose any distribution mechanism for consideration of the CoC and has delegated the task of proposing the manner of distribution of funds to the CoC and the CoC has acted beyond its jurisdiction by determining the mechanism to be utilised for distribution of funds among the various Stakeholders. The Learned Senior Counsel drew our attention to Clause 3.5.5 which reads as hereunder: 3.5.5 Notwithstanding the above, the Resolution Applicant has agreed that the CoC will decide the manner in which the Total Financial Package (as reduced by the payments proposed under Clause 3.2, 3.3 and 3.4.5 (b)) being offered by the Resolution Applicant to the Financial Creditors will be distributed to the Financial Creditors. All such allocations to the Financial Creditors will be binding on all stakeholders. Further, all distributions to the Dissenting Financial Creditors in this Clause are fair and equitable under Sections 30(2)(b)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bution mechanism is related to the resolution plans, whether the voting window be same for all the items. SBI mentioned that outcome of the distribution mechanism is required to be informed to their competent authorities for their decision on plan approval. Hence, it is suggested to keep them separate. Members deliberated on the same and agreed to keep voting windows separate. 4. It is submitted that the Learned Adjudicating Authority has erroneously observed that the CoC in its commercial wisdom has decided to distribute the amounts received under the Vedanta Resolution Plan as per Section 53 of the Code and this is a prerogative of the CoC, hence, the CoC has neither acted with any mala fide intent nor violated the provisions of the Code. The distribution mechanism adopted by the CoC is entirely within its domain as per Section 30 (4) of the Code and the CoC, therefore opted to distribute the proceeds as per the waterfall mechanism provided under Section 53 of the Code. It is strenuously argued by the Learned Senior Counsel that the CoC has itself proposed and decided the manner of distribution which it has no jurisdiction, since the CoC cannot only consider the distributi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Plan and as it provides that upon receipt of compliant Resolution Plans from the Resolution Professional under Regulation 39 (2), the CoC is empowered to only (a) Evaluate the Resolution Plans received under Sub-regulation (2) as per evaluation matrix; (b) Record its deliberations on the feasibility and viability of each resolution plan; and (c) Vote on all such Resolution Plans simultaneously. 6. The Learned Counsel placed reliance on the following Judgments in support of his case that the CoC may approve a Resolution Plan taking into account different classes of Creditors, different priorities, and values of Security assets of a Secured Creditor: - K. Sashidhar v. Indian Overseas Bank, [(2019) 12 SCC 150] Essar Steel India Ltd Committee of Creditors Vs. Satish Kumar Gupta [(2020) 8 SCC 531] Pratap Technocrats (P) Ltd. Vs. Reliance Infratel Ltd. (Monitoring Committee) [(2021) 10 SCC 623] Vistra ITCL (India) Ltd. Vs. Torrent Investments Pvt. Ltd. Ors. [2023 SCC OnLine NCLAT 110] Hammond Power Solutions Private Limited Vs. Mr. Sanjit Kumar Nayak and Others. [2020 SCC OnLine NCLAT 199] 7. Strong reliance was placed on the Judgment of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deliberated upon by all its members, who have direct and substantial interest in the survival of corporate debtor and in the entire CIRP. 190. In light of the aforesaid position of law and its operation in relation to the decision-making process of CoC, it needs hardly any emphasis that each and every aspect relating to the resolution plan, and more particularly its financial layout, has to be before the CoC before it could be said to have arrived at a considered decision in its commercial wisdom. 8. The Resolution Plan which was considered and approved by the CoC was not the Plan submitted by the Resolution Professional ( RP ) to the Adjudicating Authority with IA No. 156/2023, but rather a different version of the Resolution Plan which was not before the CoC, but was submitted before the Tribunal in complete contravention to the duty of the RP under Section 30 (6) of the Code, which provides that a Resolution Professional shall submit their Resolution Plan as approved by the CoC to the Adjudicating Authority . Therefore, when the Section provides that the Resolution Plan should be the same one which the CoC had approved, but the RP had violated its duties in present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first Respondent that the Plan has attained finality as the Order assailed by way of a Civil Appeal was also dismissed by the Hon ble Apex Court vide Order dated 25/08/2023. It is submitted that the Resolution Professional has acted as per the provisions of the Code and has not violated any of its duties. 10. The Learned Counsel appearing for the second Respondent / the CoC of the Corporate Debtor Company submitted that the CoC has approved the payments and distribution mechanism under the Resolution Plan in its commercial wisdom and that such a decision is non-justiciable. The Learned Counsel placed reliance on the Judgment of the Hon ble Supreme Court in the matter of K. Sashidhar Vs. Indian Overseas Bank reported in [(2020) 11 SCC 467] in support of his submission that the scope of judicial review of the Adjudicating Authority for allowing the Resolution Plan is limited. 11. The CoC in its commercial wisdom has the discretion to decide the payments to various class of Creditors in the Resolution Plan. It is submitted that Clause 3.5.2 of the Resolution Plan proposed cash payments to the dissenting Financial Creditors and as per the provisions of the Code, the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant was very much present in this Meeting, however, had never raised any objections. There is no infirmity in the approval of the Resolution Plan as Clause 3.2 covers the CIRP Cost, Clause 3.3 deals with the payments for workmen and employees, Clause 3.4 provides for settling all the Claims of the Financial Creditors and Clause 3.5 deals with proposal for dissenting Members of the CoC. Clause 3.6 covers the proposal for Operational Creditors and Statutory Creditors. Clause 3.7 addresses the outstanding online dues and so on complying with all the Provisions of the Code. It is denied that the Resolution Plan submitted before the Adjudicating Authority different from the Resolution Plan which was approved by the CoC. It is contended that the Plan submitted before the Adjudicating Authority is a consolidation of all the proposals communicated by the SRA prior to voting of CoC and the Consolidation was necessary in view of the multiple amendments by way of letters/ e-mails etc. It is submitted that the business plan of a Resolution Plan is formulated with certain assumptions based on economic and financial factors. These assumptions change with time, especially with changes in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CoC, unless it is violative of the provisions of Section 30 (2) of the Code. An approved Resolution Plan cannot be subject to judicial review in terms of carrying out a quantitative analysis qua each Stakeholder. The Hon ble Supreme Court has observed so in India Resurgence ARC private Limited Vs. Amit Metaliks Limited reported in (2021) SCC OnLine SC 409], that the commercial wisdom of CoC and the scope of judicial review remains limited within the four corners of Section 30 (2) of the Code for the Adjudicating Authority and Section 30 (2) read with Section 61 (3) for the Appellate Authority. Para 13 of the aforenoted Judgment is of relevance here. It needs hardly any elaboration that financial proposal in the resolution plan forms the core of the business decision of Committee of Creditors. Once it is found that all the mandatory requirements have been duly complied with and taken care of, the process of judicial review cannot be stretched to carry out quantitative analysis qua a particular creditor or any stakeholder, who may carry his own dissatisfaction. In other words, in the scheme of IBC, every dissatisfaction does not partake the character of a legal grievan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than a resolution plan being approved. This would defeat the entire objective of the Code which is to first ensure that resolution of distressed assets takes place and only if the same is not possible should liquidation follow. 18. It is crystal clear from the aforenoted proposition that the distribution/amount to be paid to different classes or sub-classes of Creditors in accordance with the provisions of the Code essentially lies within the domain of the commercial wisdom of the CoC. Therefore, the question as to whether the proposed Resolution Applicant has suggested the distribution Plan or whether the CoC has proposed and decided the distribution pattern, is of no relevance as far as it is within the four corners of Section 30 (2) of the Code and is supported by the commercial wisdom of the CoC. Needless to add, the CoC in its 41st Meeting held on 22/11/2022 discussed that the distribution mechanism to be either based on the ratio of admitted Claims or as per Section 53 of the Code, taking into account the value and priority of security interest of each of the Creditors, as provided for under Section 30 (4) of the Code. It is pertinent to note that the Appellant who ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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