9911796707
TMI Blog2023 (11) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... licant has sought direction to the Resolution Professional ("RP") to take into account the priority of distribution of the Plan realizations and taking into account the priority assigned to the dissenting Financial Creditor, who are also secured creditors. The Adjudicating Authority rejected the IA by the impugned order. Aggrieved by the order of rejection, this Appeal has been filed. 2. Brief facts of the case necessary for deciding this Appeal are: (i) The Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor was initiated by order dated 30.12.2020 in Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "IBC") filed by M/s Trimurti Associates Private Limited. (ii) The Appellant submitted its claim in Form-C for an amount of Rs.15,52,73,428/- (comprising of Rs.13.04 crores under the rupee term loan and Rs.2.48 crores under the working capital loan). The amount claimed by the Appellant in Form-C was admitted by the RP. The Appellant was also given a seat in the Committee of Creditors ("CoC"). (iii) A Resolution Plan was submitted by the Resolution Applicant. In the Resolution Plan submitted by Uniglobal P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lculation methodology of the Creditors' proportional share in the liquidation value of the Corporate Debtor for the purpose of distribution under Section 53(1) of the Code; b) stay of a further proceedings in the instant corporate insolvency resolution process, pending disposal of the instant application; c) Ad-interim orders in terms of prayer (b) hereinabove; d) Any further order or orders and/ or direction or directions as may deem fit and proper" (viii) The Application filed by the Appellant was opposed by the RP as well as Successful Resolution Applicant. The Adjudicating Authority after hearing the parties, by the impugned order has rejected the Application. The Adjudicating Authority placed reliance on the judgment of the Hon'ble Supreme Court in India Resurgence ARC Private v. Amit Metaliks Limited and Anr. (2021) SCC OnLine SC 409. Aggrieved by the said order, this Appeal has been filed. 3. We have heard Shri Krishnendu Datta, learned Senior Counsel appearing for the Appellant. Shri Rishav Banerjee, learned Counsel appearing for Respondent No.1/RP and Shri Avrojyoti Chatterjee, learned Counsel appearing for CoC. 4. Shri Krishnendu Datta, learned Senior Counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company Appeal (AT) (Insolvency) No.570 of 2022 and stated that accepting the submission advanced by the Appellant will ignite perverse incentives for secured creditors to vote for liquidation and shall be impeding the resolution of a Corporate Debtor, which is against the primary objective of the IBC. 6. The learned Counsel for the CoC has supported the submissions advanced on behalf of the RP. It is submitted that the Resolution Plan having been approved with 78.79% vote of CoC and the distribution to the Appellant is as per the Resolution Plan, the Appellant cannot be allowed to raise any grievance to the distribution, which has approval of the CoC. The Appellant being dissenting Financial Creditor, is entitled to only amount which it could have received in event the Corporate Debtor was liquidated. The Resolution Plan having already been approved by the Adjudicating Authority vide order dated 19.09.2023, no further grievance of the Appellant can be entertained. The Resolution Plan itself contemplate that amount proposed for payments towards Financial Creditors, shall be distributed among them based on the proportion of their admitted claims. It is submitted that commercial wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Along with email dated 06.05.2022 the RP has annexed a Chart, annexing the distribution matrix among secured creditors in the Resolution Plan. It is useful to extract the distribution matrix as circulated by RP is to the following effect: "Distribution matrix secured creditors in Resolution Plan for BKM Industries Ltd Amount offered to SFC in the resolution plan in Cr. 32 Assumption 1 Assumption 2 Bank Voting Shares Admitted claim Ratio of SFC admitted claim only Amounts per outstanding As per security interest - see working below Lender wise distribution of liquidation value as per Sec 53(1) SBI 30.11% 46.29 33.88% 10.84 8.76 11.76 Indian Bank 18.77% 28.86 21.12% 6.76 5.46 7.33 ACRE 15.79% 24.27 17.76% 5.68 0.15 6.17 ICICI Term loan 10.10% 13.04 9.55% 3.64 13.51 3.95 ICICI WCDL 2.48 1.82% IDBI 9.21% 14.15 10.36% 3.31 2.68 3.60 BOB 4.91% 7.55 5.52% 1.77 1.43 1.92 JP Fin 4.93% 7.58 Trimurty 4.91% 7.55 Manaksia Steel 0.12% 0.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank raised his concern that they would be requiring the approval from their higher authority for voting in this matter. After considering the CoC members requests RP announced in the meeting that he would initiate an e-voting for voting by the CoC members on the voting agenda and requested all the members to case their votes as soon as possible. * RP informed the CoC members that the e-voting platform would be opened from today late afternoon for the minimum hours as prescribed in IBC, 2016, in the context of time constrained. 3) Discussion on the voting of the final resolution plans submitted by the two prospective resolution applicants * RP informed the CoC members that once the voting on the distribution mechanism of amount offered for secured creditors in the resolution plan had been voted & decided by a majority of 66% of the CoC members, then both the resolution applicants would be requested to incorporate the same in their resolution plans and the same would be put for final voting by the CoC members subsequently even if the is no separate CoC meeting for the voting on the resolution plan. That voting would be considered as final voting for approval of resolution p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Creditors shall be distributed amongst them based on the proportion of their admitted claim." 13. The Resolution Plan was approved in the 16th CoC Meeting. Thus, distribution to the Appellant is as per the decision of the CoC. Now the submission of the Appellant that distribution is not in accordance with Section 30, sub-section (2) (b) and the Appellant has not been paid the liquidation value needs to be considered. Section 30, sub-section (2) (b) provides as follows: "30(2)(b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than- (i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the State Government including the amount to be received on account of the Consolidated Fund of India and the Consolidated Fund of a State, if any, in respect of the whole or any part of the period of two years preceding the liquidation commencement date; (ii) debts owed to a secured creditor for any amount unpaid following the enforcement of security interest; (f) any remaining debts and dues; (g) preference shareholders, if any; and (h) equity shareholders or partners, as the case may be." 15. When we look into Section 53, sub-section (1) (b), debt owed to a secured creditor has to be distributed equally between and amongst workmen's dues and debts owed to a secured creditors. The debt owed to the secured creditor is a debt as admitted in the CIRP. Admittedly, the claim as submitted by the Appellant was admitted in the CIRP and debt owed to Appellant is as per admitted claim. The distribution of the debt has to be as per the debt of the Financial Creditors. The 'debt' is defined in Section 3(11) of the IBC, which is as follows: "3(11) "debt" means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication is decided." * The case of the Appellant in the Application was that as per security interest of the Appellant, the Appellant is entitled to 6.93 % i.e. the amount of Rs. 5,64,97,893/- and as per voting share as approved by the CoC, the Appellant is entitled to 2.03% i.e. Rs. 1,65,47,078/-. The case of the Appellant set up in the Application is that he is entitled for his distribution of plan amount as per value of the security interest of the Appellant. The Application was objected by the Resolution Professional. The Adjudicating Authority by the Impugned Order dated 17th March, 2022 rejected the I.A. No. 581 of 2021 upholding the decision of the CoC for distribution of proceeds of the Resolution Plan as per the voting share. Appellant aggrieved by the said Order, has come up in this Appeal." 17. This Tribunal after taking into consideration the judgment in India Resurgence Arc Private Limited Vs. M/s. Amit Metaliks Limited & Anr., upheld the judgment of the Adjudicating Authority, who rejected the IA, which was filed by SIDBI for distribution as per security interest. In paragraphs 20 and 25 of the judgment, following was held: "20. When we look into above stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the valuation exercise has been done by registered valuers of IBBI who were appointed by the erstwhile IRP and he do not find any inconsistency in the same. Other members also agreed on the same. Mr. Shakti then raised the point that in the present scenario it will be better for them if the company goes into Liquidation and they will realize their security interest by exercising option u/s 52(1)(b). The RP then replied that Liquidation option may be beneficial to one creditor but is definitely detrimental to other secured lenders who are having majority stake of around 96%. Further the RP also said that the objective of IBC is resolution and revival of a distressed company and is not a recovery procedure."" 19. The Hon'ble Supreme Court after hearing the parties and referring to the provisions of Section 30 of the IBC, laid down following in paragraph 13, 14, 16 and 17: "13. 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors and dissentient financial creditors as they are now to be paid a certain minimum amount, the minimum in the case of operational creditors being the higher of the two figures calculated under sub-clauses (i) and (ii) of clause (b), and the minimum in the case of dissentient financial creditor being a minimum amount that was not earlier payable. As a matter of fact, preamendment, secured financial creditors may cramdown unsecured financial creditors who are dissentient, the majority vote of 66% voting to give them nothing or next to nothing for their dues. In the earlier regime it may have been possible to have done this but after the amendment such financial creditors are now to be paid the minimum amount mentioned in sub-section (2). Ms. Madhavi Divan is also correct in stating that the order of priority of payment of creditors mentioned in Section 53 is not engrafted in sub-section (2)(b) as amended. Section 53 is only referred to in order that a certain minimum figure be paid to different classes of operational and financial creditors. It is only for this purpose that Section 53(1) is to be looked at as it is clear that it is the commercial wisdom of the Committee of Credi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
