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TMI Blog2023 (12) TMI 959X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the Resolution Plan submitted by Successful Resolution Applicant. The Adjudicating Authority in its order dated 17.04.2023 while approving the Resolution Plan has also issued certain directions. The Appellant feeling aggrieved by few directions issued by the Adjudicating Authority in the impugned order has come up in this Appeal. 2. The brief facts of the case giving rise to this Appeal are: (i) On an Application filed by ICICI Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "Code"), Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor Unimark Remedies Ltd. commenced vide order dated 03.04.2018. (ii) The Resolution Plan submitted by consortium of asset Recovery Company (India Ltd., Intas Pharmaceuticals Ltd. and Shamrock Pharmachemi P Ltd. was approved by the Committee of Creditors ("CoC") by 72.25% vote share. On the basis of e-voting held between 24th December, 2018 and 26th December, 2018, Resolution Plan was approved. (iii) The Resolution Professional filed IA. No.23/MB-IV/2019 for approval of the Resolution Plan, which Application came to be allowed by the order impugned. Aggrieved by which or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49 & 66 OF THE Code, pending before the Adjudicating Authority, shall be pursued by Committee of Creditors and the proceeds of recovery in pursuance thereto shall be distributed amongst the Financial Creditor. If any balance is left after satisfaction of their admitted claim the same shall be distributed amongst other creditors in accordance with section 53 of the Code. To be deleted. c) That the Hon'ble Appellate Tribunal may, pending consideration and disposal of the present appeal, stay all actions in furtherance of the above clauses in impugned order in respect of Respondent No.1; and d) Pass such other and/ or further order(s) and /or direction(s) as the facts and circumstances of the case may warrant." 4. From the reliefs as claimed in the above paragraphs, the Appellant prays for deletion of paragraph 6.1.3, 6.2 and 6.5 of the impugned order of the Adjudicating Authority, which are as follows: "6.1.3. It was submitted by them on 03.02.2023 that the classification is not discriminatory as most of the ineligible employees are either promoters or KMPs, who are responsible for the position of Corporate Debtor, in which it is. However, the Counsel for RA fairly submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Corporate Debtor as a going concern being CIRP cost within the meaning of Section 5(13)(c) of the Code has to be paid first before any payment made to any other creditor. The Adjudicating Authority exceeded its authority in modifying the Resolution Plan approved by the CoC insofar as it issued directions for redetermination of the CIRP cost by the CoC. It is submitted that Resolution Plan insofar it discriminate between employees who have dues of more than INR 10 lacs and those who have dues of less than 10 lacs is contrary to Section 30,sub-section (2) (b) of the Code. The direction of the Adjudicating Authority to impose new condition in paragraph 6.5 that the Resolution Professional shall ensure that no claim in relation to avoidance transaction, where any of the promoters/ KMPs falling under employee category, is pending for adjudication before the Adjudicating Authority before releasing the amount payable to such promoters/ KMPs under the Plan. The amounts so detained shall be subject to appropriation towards amount found recoverable from such promoter/ KMP in accordance with the order passed by the Adjudicating Authority. This direction made by the Adjudicating Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions against the Promoters/ Key Managerial Personnel ("KMPs"), which is pending adjudication before Adjudicating Authority. The dues of Promoters/ KMPs are liable to be set-off against the amounts recoverable from them under the avoidance applications. The Resolution Professional has submitted estimates of the CIRP costs before the Adjudicating Authority from time to time. The Resolution Professional to conduct detailed audit of the CIRP cost has appointed N.V. Dand & Associates, who have submitted their Report. The Report of Audit, as submitted by N.V. Dand & Associates has also been approved by the CoC in its meeting dated 16.06.2022 to the extent of Rs.92.41 crores as CIRP cost. 8. The learned Counsel for the CoC and Financial Creditors have also supported the impugned order and submit that order passed by the Adjudicating Authority is neither discriminatory, nor in conflict with provisions of the Code. It is submitted that classification made in the Resolution Plan in paragraph 3.3.2 is reasonable as held by the Adjudicating Authority vide order dated 17.04.2023 passed in M.A. No.933 of 2019, which order has not been challenged by the Appellant. The salaries allegedly payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Respondent. It may also be noted that the liquidation value payable to the employees is 'nil' and no workmen claims have been received by the Answering Respondent. 4.10 Clause 3.3 of the Resolution Plan deals with payment towards workmen and employee dues and provides for payment of INR 5 Crores towards workmen and employee claims in the following manner: a) First, towards full discharge of dues/wages of workmen of the Corporate Debtor for the period of 24 months preceding the insolvency commencement date, if any; b) Second, towards full/ proportionate discharge of the liability of the Corporate Debtor for gratuity and leave encashment accrued till the 'Transfer Date' of the employees which have resigned from/ discontinued with Corporate Debtor; c) Third, towards full/ proportionate discharge of liability of the Corporate Debtor liability for outstanding amounts of wages and salaries of (a) the continuing workmen, if any; and (b) continuing employees of the Corporate Debtor (who have not resigned from/ discontinued their employment with the Corporate Debtor) where each of the total dues of such employees are upto INR 10 lakh. If any of the continuing emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as separate class when it comes to payment of dues under the resolution plan. It is submitted that failure to provide for discharge of debt of the related party is in violation of Section 30(2)(b), (e) and (f) of the Code. The submissions made on behalf of the related party and the observations of the Appellate Tribunal are difficult to be accepted. 200. The lengthy discussion of Appellate Tribunal in regard to the related party (the parts whereof have been reproduced in paragraph 19.7 hereinabove) depict rather unsure and irreconcilable observations of the Appellate Tribunal. 201. After taking note of the fact that related party is prohibited to be a part of CoC and is further prohibited to be a resolution applicant or an authorized representative etc., the Appellate Tribunal has rightly observed that involvement of a related party in CIRP in any capacity was seen as giving unfair benefit to the corporate debtor; and that the statutory recognition of related party as a different class would apply even to resolution plan when CoC would decide whether in its commercial wisdom it should pay to related party at all because that would mean paying to the same persons who are beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Code. The payments to Operational Creditors has to be as per Section 30, sub-section (2), which is as follows: "30(2). The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan - (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; (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 to such creditors in accordance with sub-section (1) of section 53 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "5(13) "insolvency resolution process costs" means - (a) the amount of any interim finance and the costs incurred in raising such finance; (b) the fees payable to any person acting as a resolution professional; (c) any costs incurred by the resolution professional in running the business of the corporate debtor as a going concern; (d) any costs incurred at the expense of the Government to facilitate the insolvency resolution process; and (e) any other costs as may be specified by the Board;" 17. As per Section 5, sub-section (13)(c), costs incurred by the Resolution Professional in running the business of the Corporate Debtor as a going concern is part of the CIRP cost. 18. Under Section 28 of the Code, Resolution Professional is required to obtain 'Approval of the Committee of Creditors for certain actions'. Section 28 provides as follows: "28. Approval of committee of creditors for certain actions. - (1) Notwithstanding anything contained in any other law for the time being in force, the resolution professional, during the corporate insolvency resolution process, shall not take any of the following actions without the prior approval of the committee of creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness of the Corporate Debtor was required approval of CoC under Section 28 of the Code. The Adjudicating Authority by the impugned order in paragraph 6.2 has held that CoC shall be competent to determine the quantum of CIRP cost payable under the Plan. When the Plan has been approved by the CoC, which included payment of the CIRP cost and it is not shown that CIRP cost determined by the Resolution Professional required any approval under Section 28, we fail to see any reason for redetermination of the CIRP cost by the CoC. The direction to CoC to redetermine the CIRP cost after approval of the Resolution Plan by the CoC is unsustainable. We, thus, accept the submission of the Appellant that direction in paragraph 6.2 deserves to be set aside. We, however, notice the submission of the Resolution Professional that Resolution Professional has obtained Audit Report regarding the CIRP cost and CIRP cost of INR 92.41 crores is now approved. In paragraph 4.26 and 4.27 of the reply of the Resolution Professional, following has been stated: "4.26. It is submitted that for audition the CIRP costs, the Answering Respondent had appointed N.V. Dand & Associates ("N.V. Dand") on 4 January 202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Section 66 of the Code. The directions, which were issued by the Adjudicating Authority in paragraph 6.5 was to withhold the claim of Promoters/ KMPs, falling for adjudication and before releasing the amount payable to such Promoters/ KMPs amount was directed to be detained and was made subject to appropriation towards amount found recoverable from such Promoters/ KMPs towards CIRP cost. The above direction can be sustained subject to a modification, which according to us shall balance the interest of all. We are of the view that Resolution Professional shall determine the amount payable towards the CIRP cost to Promoters/ KMPs and as per his determination, the amount payable to Promoters/ KMPs shall be kept in Fixed Deposit Receipt ("FDR"), so as to earn interest, which FDR shall be released to those Promoters/ KMPs only after determination of their liability in the avoidance applications, which are pending adjudication before the Adjudicating Authority. The avoidance applications, which are pending before the Adjudicating Authority may also be expeditiously considered and decided, so as to not withhold the receipt of the payment by such Promoters/ KMPs for a long period. In r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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