9911796707
TMI Blog2025 (1) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... all stakeholders including the dissenting financial creditor. The commercial wisdom of the CoC approving the Resolution Plan is binding on all, which is law laid down by the Hon ble Supreme Court in K. Sashidhar vs. Indian Overseas Bank Ors. [ 2019 (2) TMI 1043 - SUPREME COURT ] and the Hon ble Supreme Court decision in Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta and Ors. [ 2019 (11) TMI 731 - SUPREME COURT ] where it was held that ' The NCLAT judgment which substitutes its wisdom for the commercial wisdom of the Committee of Creditors and which also directs the admission of a number of claims which was done by the resolution applicant, without prejudice to its right to appeal against the aforesaid judgment, must therefore be set aside.' One of the subject on which CoC is to approve a Resolution Plan is the manner of distribution proposed . As noted above, the manner of distribution which was approved by the CoC in 31st CoC meeting contained an approval of deduction of Rs.33.34 Crores from payout of the Appellant. Appellant-Financial Creditor by IA No.222 of 2020 had challenged in effect the decision of the CoC taken in 31st CoC meeting held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolution Professional after commencement of CIRP wrote to the Appellant to continue the Non Fund Based facility on account of business requirement of the corporate debtor to run it as a going concern. The Corporation Bank extended the Non Fund Based Facility to the corporate debtor starting from 24.07.2017 till 24.10.2018. Letter of Credit/ Bank Guarantee issued by Appellant during CIRP period were debited from the account of the corporate debtor. 2.2. A Resolution Plan was submitted by the Respondent Nos.2 and 3. In 30th meeting of the CoC held on 05.02.2020, the Resolution Professional brought into notice of the CoC that the Appellant had affected a recovery of Rs.33.34 Crores. Appellant urge before the members of the CoC that the amount of Rs.33.34 crores be treated as interim finance. The CoC in its deliberations on 30th and 31st meeting of the CoC held on 05.02.2020 and 07.02.2020 decided to deduct the amount of Rs.33.34 Crores from the amount to be paid to the Appellant under the Resolution Plan. The distribution to various stakeholders including the Financial Creditors was placed by the Resolution Professional before the CoC which was approved by the CoC. The Resolution Pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d during CIRP period due to the fact that the Resolution Professional had requested the Union Bank of India to continue its Non Fund Based facility to keep the corporate debtor as a going concern. Letter of credits issued by the bank were required to be honoured by the Bank and Appellant has not unduly enriched itself. The Resolution Professional having been regularly giving instructions with respect to debiting of cash credit account of the corporate debtor as and when any LC/BG is presented which arrangement is reflected in the letter issued by the Resolution Professional after commencement of the CIRP. All payments were made directly to the supplier/ vendor/ beneficiary of NCB Facility by debiting the cash credit account of the corporate debtor and there has been no amount which has been credited towards the loan account of the corporate debtor. NFB Facility has been issued in favour of the beneficiary/vendors for purchase of various types of steels and other alloys. The corporate debtor is liable to pay to the suppliers/ beneficiaries during the CIRP period. The same was done by the Appellant by debiting the cash credit account of the corporate debtor as instructed by Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of Rs.1,49,66,13,386/- and payment debited by Appellant during the CIRP period was Rs.1,83,00,47,429/-. Thus, excess amount of Rs.33,34,34,043/- was deducted by the Appellant which has rightly been directed to be deducted from the payouts of the Appellant since Appellant was not entitled to make that recovery. It is submitted that when only an amount of LCs of Rs.1,49,66,13,386/- has been issued during the CIRP period by the Appellant, it had no jurisdiction to deduct an amount of Rs.1,83,00,47,429/-. It is submitted that the decision taken by the CoC regarding distribution of the amount to different financial creditors is a commercial decision which cannot be challenged by the Appellant. Appellant is bound by the decision of the CoC. By directly affecting the recovery of LCs which were issued prior to CIRP commencement date, Appellant has enriched itself. 6. Shri Sumant Batra, Learned Counsel appearing for the Resolution Professional submits that two options were placed in the meeting of the CoC dated 07.02.2020. One to treat the amount deducted by Appellant as interim finance as was suggested by the Appellant and second, to deduct the amount from the payout of the Appellant. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofessional which was made in the reply filed in IA No.222 of 2020. Details of the claim submitted by the Appellant and claim which was verified by the Resolution Professional has been mentioned in paragraph 6 of the reply which is as follows:- 6. It is submitted that pursuant to the Public Announcement made by the Answering Respondent as IRP, the Applicant filed its proof of claim dated 04.08.2017 as on the insolvency commencement date, for an aggregate amount of Rs. 8,76,42,09,926/-. Admittedly in the said claim the Applicant has included an amount of Rs. 39,61,54,488/- account of Non-Fund based Letter of Credit/Bank Guarantee facility (hereinafter, NFB Facility ) which had not crystallised as on the insolvency commencement date. The Answering Respondent on verification and collation of the claim filed by the Applicant in terms of the provisions of the Code and the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016 (hereinafter, the CIRP Regulations ) included an amount of Rs. 8,36,80,55,438/- as Financial Debt of the Applicant while not including uncrystallised amount of Rs. 39,61,54,488/- on account un-invoked/un- dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 13,82,13,132 69,77,961 13,12,35,171 6 Dec-17 13,34,90,426 24,63,162 13,10,27,264 7 Jan-18 6,49,64,611 62,27,878 5,87,36,733 8 Feb-18 7,61,18,847 1,35,36,488 6,25,82,359 9 March- 18 8,95,08,900 86,03,983 8,09,04,917 10 Apr-18 4,16,22,860 84,88,460 3,31,34,400 11 May-18 11,47,85,748 12,79,510 11,35,06,238 12 Jun-18 16,17,37,408 1,44,94,815 14,72,42,593 13 Jul-18 6,74,53,864 27,30,901 6,47,22,963 14 Aug-18 11,71,67,007 76,51,376 10,95,15,631 15 Sep-18 11,21,63,819 80,29,257 10,41,34,562 16 Oct- 18** 5,97,84,739 20,11,808 5,77,72,931 Total 1,60,48,54,106 10,82,40,720 1,49,66,13,386 *Amounts in each LC which remained unutilised and were eventually cancelled and no payments were required to be made to Corporation Bank for these amounts **No Fresh LC was opened after Oct 24, 2018 12. 30th and 31st meetings of the CoC has deliberated and taken decision on the said issue. It is necessary to notice the deliberation in 30th and 31st CoC meetings which minutes have been brought on the record by Respondent No.4 in its reply. In the minutes of the CoC held on 05.02.2020 under the heading discussion on Resolution Plan . Under the sub-heading LC recovery by Corporation Bank , following has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd no fresh LCs were issued to support the Going concern of Corporate Debtor and recovered approximately Rs. 34 cr in LCs from AAL. n) The RP further stated that Corporation Bank was unduly enriched by the amount of LCs forcefully debited from the Operating Account of the corporate debtor and thus after repeated messages, when the Bank still did not stop the deductions, the he was forced to move the collection account out of Corporation Bank to secure collections. o) Given the afore-mentioned turn of events, the RP proposed the following options for CoC to approve: Option 1: Accord Interim Finance status to the Rs. 34 Cr LC adjusted by Corporation Bank to accord priority to this and thus the LC limits gets regularized and Existing Non fund-based limit be made available to the Corporate Debtor/Resolution Applicant on the same terms and conditions as applicable to the facility utilized by the Corporate Debtor during CIRP; The facility to be utilised for purchase of Steel and Scrap Option 2: The amount of Rs. 34 Cr is deducted from the total amount to be distributed to Corporation Bank and made available to the whole CoC in excess of current resolution Proceeds p) The RP further point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that the same cannot be treated like interim finance and should be deducted from the amount to be distributed to Corporation Bank and be made available to the entire CoC in excess of the current resolution proceeds. q) The RP also presented the distribution sheet to the CoC and the same was discussed and ratified by the CoC. 14. The above minutes indicate that the CoC approved the Option 2 which was to deduct Rs.34 Crores from the total amount to be distributed to Corporation Bank and Option 1 to treat the same as interim finance was not approved. It is further relevant to notice that the distribution sheet to the CoC was placed and approved. Distribution clearly provided for distribution by deduction of Rs.34 Crores from pay outs of the Appellant. 15. The Resolution Plan came to be approved by the CoC with vote share of 70.07%. As noted above, the appellant has voting share of 6.64% and Appellant voted against the Resolution Plan and thus, was a dissenting financial creditor. The Resolution Plan which is approved in commercial wisdom of the CoC binds all stakeholders including the dissenting financial creditor. The commercial wisdom of the CoC approving the Resolution Plan is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roval of deduction of Rs.33.34 Crores from payout of the Appellant. Appellant-Financial Creditor by IA No.222 of 2020 had challenged in effect the decision of the CoC taken in 31st CoC meeting held on 07.02.2020 approving the distribution and opting for second option i.e. deduction of Rs.34 Crores from payout of the Appellant. Appellant- Dissenting Financial Creditor is fully bound by the decision of the CoC and cannot be allowed to challenge the same. 17. It is also relevant to notice that the Resolution Professional in reply to IA No.222 of 2020 has placed all relevant facts and figures including the net LCs issued during CIRP period from July 2017 to October 2018 which was Rs.1,49,66,13,386/- and from Annexure R2 as extracted above, it is clear that the payments made/ debited by Corporation Bank during the CIRP period was Rs.1,83,00,47,429/-. Thus, it is clear that the excess amount debited by Corporation Bank was Rs.33,34,34,043/-. The facts and figures which were placed by the Resolution Professional are not subject to dispute. It is beyond doubt that the amount debited by Corporation Bank of Rs.33,34,34,043/- was in excess of the amount which relate to LCs issued and honoured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution plan and/or as mutually agreed. Any lapse on the part of any of the parties in implementing the approved resolution plan with the time stipulated hereinabove shall be viewed very seriously. 11. With the above observations and directions, the present appeal stands disposed of. Pending applications, if any, also stand disposed of. True Copy of the judgment and order dated 01.12.2021 passed by the Hon'ble Supreme Court in Civil Appeal 6707 of 2019 is annexed herewith and marked as ANNEXURE R-6. 22. In compliance of the above order passed by the Hon'ble Supreme Court, the Resolution Plan of the Respondent Nos. 2 3 came to be fully implemented on 08.12.2021 except for the creation of certain security interests by the Resolution Applicant in lieu of the debentures issued to the erstwhile CoC in terms of the Resolution Plan which also was done on 01.04.2022. 19. It is relevant to notice that by order of the same date 09.07.2020 when IA No.222 of 2020 was decided Resolution Plan was also approved. 20. In view of the foregoing discussions, we are of the view that no grounds have been made out to interfere with the order passed by the Adjudicating Authority rejecting IA No.222 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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