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TMI Blog2024 (9) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... orically laid down that the scope of interference in decision of the CoC regarding the approval of the Resolution Plan. The Hon ble Supreme Court has laid down that payment to different class of Creditors can be different payment and entitlement of Operational Creditor is not less than payment which becomes due in event the Corporate Debtor is liquidated. It has been held by the Hon ble Supreme Court that so long as the provisions of the Code and Regulations having met, it is the commercial wisdom of the CoC which is to negotiate and accept the Resolution Plan which may involve differential payment to different classes of Creditors. The Hon ble Supreme Court while noticing the jurisdiction of the Adjudicating Authority and Appellate Tribunal has held that provisions investing jurisdiction in NCLT and NCLAT has not made the commercial wisdom exercise by CoC of not approving the Plan rejecting the same justiciable. Hon ble Supreme Court held that Adjudicating Authority is circumscribed by Section 30(2). As per the provision of Section 30(2)(b) Operational Creditor has to be paid not less than the amount which would have been payable in event the Corporate Debtor is liquidated under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NT ASHOK BHUSHAN, J. This Appeal by Appellant an Operational Creditor of the Corporate Debtor has been filed challenging the Order dated 21.04.2022 passed by the Learned Adjudicating Authority (National Company Law Tribunal, New Delhi Bench, Court V), by which Order Adjudicating Authority has allowed the Application I.A. 2946/2021 filed by the Resolution Professional (`RP ) for approval of the Resolution Plan. Operational Creditor who has not been proposed any amount in the Resolution Plan aggrieved by the Order has come up in this Appeal. 2. Brief facts necessary to be noticed for deciding the Appeal are: i. The Corporate Debtor, Vinayak Rathi Steels Rolling Private Limited was put into Corporate Insolvency Resolution Process (`CIRP ) was initiated by Order dated 16.06.2020, on an Application filed by Jammu and Kashmir Bank, the Financial Creditor. ii. A public announcement was made on 19.06.2020, the Appellant filed its claim as Operational Creditor on 01.08.2020 for an amount of ₹1,54,64,626/-. RP admitted the amount of ₹93,00,564/-. iii. Appellant filed an Application against rejection of the claim which Application was rejected on 23.09.2021 against the Order of di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional Creditor is entitled minimum of the amount which became payable to Operational Creditor in event of Liquidation of the Corporate Debtor. In the present case Liquidation amount which is payable to Operational Creditor in the event of the Liquidation being NIL. CoC did not commit an error in approving the Plan. It is submitted that Resolution Plan can be interfered with only when it violates provision of Section 30(2)(b) of the IBC. When the Operational Creditor could not have got any amount as per Section 30(2)(b), Adjudicating Authority did not commit any error in approving the Resolution Plan. 6. We have heard Counsel for the parties and perused the record. 7. Section 30(2)(b) provides as follows: 30. Submission of resolution plan.- (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sses of Creditors. In Paragraphs 83, 88 93, following was laid down by the Hon ble Supreme Court: 83. Quite apart from the fact that the 2010 Report is an earlier report, which opined on the basis of the French system, that creditors are divided into two separate classes without any further sub-classification and that the advantage of such system is that it avoids potential conflict of interest among creditors in a particular class, the Report then goes on to state: 4.5.3. Voting and Classes * * * In some cases, classification makes it easier to treat the claims of major creditors, who may be persuaded to opt to receive a different treatment from the general class of unsecured creditors, where such treatment is necessary to render the plan feasible. In such cases, the treatment for these major creditors is generally on less favourable terms than other, similarly situated creditors. Finally, classification may be a useful means of overriding the vote of a class of creditors that votes against the plan where the class is otherwise treated in a fair and equitable manner. [ This override, which has come to be known as a cramdown based on its effect, allows the court to conclude that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Code and the Regulations have been met, it is the commercial wisdom of the requisite majority of the Committee of Creditors which is to negotiate and accept a resolution plan, which may involve differential payment to different classes of creditors, together with negotiating with a prospective resolution applicant for better or different terms which may also involve differences in distribution of amounts between different classes of creditors. 93. In Miheer Mafatlal [Miheer H. Mafatlal v. Mafatlal Industries Ltd., (1997) 1 SCC 579] , the Court was dealing with schemes of amalgamation under Section 391 of the Companies Act, 1956. Under Section 392 of the said Act, the High Court is vested with a supervisory jurisdiction, which includes the power to give directions and make modifications in such schemes, as it may consider necessary, for the proper working of the said schemes. This power in Section 392 is conspicuous by its absence when it comes to the Adjudicating Authority under the Code, whose jurisdiction is circumscribed by Section 30(2). It is the Committee of Creditors, under Section 30(4) read with Regulation 39(3), that is vested with the power to approve resolution plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated above. After a resolution plan is approved by the requisite majority of the Committee of Creditors, the aforesaid plan must then pass muster of the Adjudicating Authority under Section 31(1) of the Code. The Adjudicating Authority's jurisdiction is circumscribed by Section 30(2) of the Code. In this context, the decision of this Court in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] is of great relevance. 66. In K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] this Court was called upon to decide upon the scope of judicial review by the Adjudicating Authority. This Court set out the questions to be determined as follows: (SCC pp. 173-74 176, paras 32 37) 32. Having heard the learned counsel for the parties, the moot question is about the sequel of the approval of the resolution plan by CoC of the respective corporate debtor, namely, KS PIPL and IIL, by a vote of less than seventy-five per cent of voting share of the financial creditors; and about the correctness of the view [Kamineni Steel Power (India) (P) Ltd. v. Indian Bank, 2018 SCC OnLine NCLAT 654] taken by NCLAT that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IRP Cost ₹30,50,206/ . The payout as proposed in the Resolution Plan cannot be said to be violate in any manner provisions of Section 30(2)(b). It is well settled that Adjudicating Authority can interfere with commercial wisdom of CoC only when Resolution Plan violates any of the provisions of Section 30(2)(b). 12. Learned Counsel for the Appellant has placed much reliance on the Judgment of this Tribunal in `Hammond Power where this Tribunal after referring the Judgment of the Hon ble Supreme Court in `Committee of Creditors of Essar Steel India Ltd., Through Authorized Signatory (Supra) and `Swiss Ribbons Pvt. Ltd. Anr. Vs. `Union of India Ors. , has laid down that interest of all stakeholders including the Operational Creditor has to be taken care of. In Paragraphs 13 14 of the Judgment following has been held: 13. For these reasons, we find that the Impugned Order accepting the Resolution Plan cannot be upheld. The Resolution Plan does not appear to have taken care of interest of all stakeholders including Operational Creditors and the decision of the COC also does not reflect that it has taken into account the fact that the Corporate Debtor needs to be kept as a going co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.9500 Crores. In the process although earlier there was proposal to pay Operational Creditors 2.668 Crores, the figure converted to zero after negotiations with the COC. So much so for the trust law has put on the shoulders of the COC to protect interest of all stakeholders. It is clear from the Judgement of Hon ble Supreme Court that the record should reflect that the Committee of Creditors has taken into account that Corporate Debtor needs to be kept a going concern; that maximising the value of assets is necessary and that the interest of all stakeholders including Operational Creditors has been taken care of. The Judgement says that the Adjudicating Authority should look into reasons given by the Committee of Creditors while approving the Resolution Plan . 14. In the above circumstances in the `Hammond Power (Supra), this Tribunal came to the view that the CoC has not applied its mind and has not taken care of all stakeholders and in the said circumstances, the Order was set aside. Judgment of this Tribunal in `Hammond Power (Supra), was on the facts of the said case. In `Hammond Power (Supra), also this Tribunal has noted and relied on `Committee of Creditors of Essar Steel I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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