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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 ..... ution 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 Rs.1,54,64,626/-. RP admitted the amount of Rs.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 dismissal of the Application, Comp. App. (AT) (Ins.) No. 797/2021 was filed by the Appellant which was allowed directing the Adjudicating Authority to consider the contention in I.A. No. 4040/2021, while hearing the Resolution Plan. iv. I.A. No. 4103/2021 was filed by the Appellant for rejecting the Resolution Plan which Application also came to be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 rejecting class should be compelled to accept the plan where the class is paid in strict accordance with the relative priority of creditor claims and will receive under the plan a distribution in an amount equal to or greater than such creditors would receive in a liquidation proceeding. The rationale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pective 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 plans and make modifications therein as the Committee deems fit. It is this vital difference between the jurisdiction of the High Court under Section 392 of the Companies Act, 1956 and the jurisdiction of the Adjudicating Authority under the Code that must be kept in mind when the Adjudicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 percentage of voting share of the financial creditors specified in Section 30(4) of the I&B Code is mandatory. Further, is it open to the adjudicating authority/appellate authority to reckon any other factor [other than specified in Sections 30(2) or 61(3) of the I&B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 concern and that there is need to maximise the value of the assets and that the interest of all the stakeholders including Operational Creditor has to be taken care of. 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C. 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 India Ltd., Through Authorized Signatory' (Supra), thus, the law as laid down in `Committee of Creditors of Essar Steel India Ltd., Through Authorized Signatory' ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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