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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 ..... 2023 passed in I.P. No. 04/2023 and IA No.(IBC)/156/2023 in C.P.(IB) No. 184/7/HDB/2019, M/s. Devi Trading & Holding Pvt. Ltd., preferred this Appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'the Code'), challenging the Resolution Plan as approved by the 'Committee of Creditors' ("CoC") of M/s. Meenakshi Energy Ltd. / the Corporate Debtor, which Plan was approved by the 'Adjudicating Authority', vide the Impugned Order. 2. The Learned Senior Counsel appearing for the Appellant submitted that the Appellant is the Financial Creditor of the Corporate Debtor Company and had submitted its Claim 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors viz., as per ratio of admitted claims or as per Section 53 of the IBC; 2. Approval of RFRP deviations along with the resolution Plan submitted by PAL-VMLL; 3. Approval of RFRP deviations along with the resolution Plan submitted by Jindal; and 4. Approval of RFRP deviations along with the resolution Plan submitted by Vedanta. XXXXX XXXX XXXXX XXXX SBI suggested that the voting window for determining the distribution mechanism (Voting item no. 1) shall be closed prior to the voting on resolution plans (i.e. voting item no 2, 3 and 4). IDBI enquired that since the distribution 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a plain reading of Section 30 (4) of the Code clearly states that the ambit of the CoC is only to 'consider' a Resolution Plan as submitted by the Resolution Applicant and therefore have approved or disapproved the Plan. The words 'the manner of distribution proposed' used in Section 30 (4) of the Code indicate that the manner of distribution is required to be proposed by the Applicant which shall be 'considered' by the CoC. It is also the case of the Appellant that Regulation 39 (3) of the CIRP Regulations further confines the scope of CoC's power while dealing with the Resolution 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... November 2015, make it clear that commercial wisdom of CoC is assigned primacy in CIRP for it represents collective business decision, which is arrived at after thorough examination of the proposed resolution plan and assessment made with involvement of experts by the body of persons who are most vitally interested in rapid and efficient decision making. It follows as a necessary corollary that to be worth its name, the commercial wisdom of CoC would come into existence and operation only when all the relevant information is available before it and is duly 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 ("R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Consortium of Prudent ARC and Vizag Minerals' in the CIRP of the Corporate Debtor, vide IA No. 37/2023, which was dismissed by the 'Adjudicating Authority' on 23/01/2022 and this Order of dismissal was challenged by way of an Appeal before this Tribunal. Vide Order dated 27/06/2023, this Tribunal had also dismissed the PRA's Appeal and held that the CoC has approved the Resolution Plan by a majority of 94.96 % and also does not find any violation of Regulation 39 (1A) of the CIRP Regulations or any other Provisions of the Code. It is the case of the 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 Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CoC would decide the manner in which the total financial packages would be distributed and include Clause 3.5.5 in the Resolution Plan. The said Plan was placed for voting during the 41st Meeting of the CoC held on 22/11/2022 and the basis for distribution inter se the class of Financial Creditors namely, as per the ratio of the admitted Claim or as per Section 53 of the Code. The Voting on the said item concluded on 13/12/2022 wherein 93.43 % of CoC has voted to follow the waterfall mechanism contained in Section 53 of the Code. The Appellant 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) 8 SCC 713] observed that 'if the law requires something to be done in a particular manner, then it must be done in that manner, and if its not done in that manner, then it would have no existence in the eye of law.' 16. It is not in dispute that the Resolution Plan of Vedanta was approved by the CoC by a majority of 94.96 %. The Hon'ble Supreme Court in a catena of Judgments has held that the 'Adjudicating Authority' and the 'Appellate Tribunal' cannot enter into the merits of a 'Business Decision' of the requisite majority of 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 her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e envisaged by the Code; and cannot be countenanced. We may profitably refer to the relevant observations in this regard by this Court in Essar Steel as follows:- "85. Indeed, if an "equality for all" approach recognising the rights of different classes of creditors as part of an insolvency resolution process is adopted, secured financial creditors will, in many cases, be incentivised to vote for liquidation rather than resolution, as they would have better rights if the corporate debtor was to be liquidated rather 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision, keeping in view the mandatory requirements and approved the 'Consolidated Plan of Vedanta' with all the addendums, exercising its discretion and deliberating on the feasibility and viability. This Tribunal is of the earnest view that the Appellant having taken part in these Meetings and not having raised any substantial objections at that point of time, is estopped from questioning the commercial wisdom of the CoC in proposing, considering and approving the distribution methodology of the Resolution Plan. 21. Further, this Tribunal while dismissing the Appeal preferred by Consortium of Prudent ARC Limited (the unsuccessful Resolution Applicant) in Company Appeal (AT) (CH) (Ins) No. 37/2023, dated 27/06/2023 challenging the same Resolution Plan submitted by M/s. Vedanta Limited on the ground of violation of Section 39 (1A), has observed that there was no violation of Regulation 39 (1A) of the CIRP Regulations or any other provisions of the Code. The Hon'ble Apex Court in Civil Appeal Diary No. 27746/2023 has dismissed the Appeal. Keeping in view the catena of Judgments of the Hon'ble Apex Court regarding the commercial wisdom of the CoC in approving the Plan and the limit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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