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2023 (12) TMI 857 - AT - Insolvency and BankruptcyApproval of Resolution Plan - treatment of claims as being inconsistent with the objectives of the IBC - whether, in the facts of the present case, the Appellants were entitled to any proceeds under the resolution plan at a time when the liquidation value payable to them as Operational Creditors is nil? - HELD THAT - As per the law which exists as of date, the Respondent No.1 is agreed with, that the question with respect to payments to Operational Creditors under resolution plan as per the scheme of the IBC is no longer res-integra. The Appellants as Operational Creditors are entitled to the minimum entitlement as per Section 30(2)(b) of the IBC. There is no dispute that liquidation value of the Appellants in the present case is nil. That being so, we are not in a position to accept the submissions made by the Appellants that since nil amount has been allocated to them, the plan cannot be accepted. CoC in its commercial wisdom has decided not to allocate any amount to the other creditors while following the water fall mechanism as contained in Section 53 of the IBC. The Appellants have failed to point out any material irregularity or contravention of any provision of law by the CoC in approving the plan. That being the case, the Adjudicating Authority with the limited powers of judicial review available to it, cannot substitute its views with the commercial wisdom of the CoC in rejecting the resolution plan unless it is found to be contrary to the express provisions of law or there is sufficient basis which establishes material irregularity. There can be no fetters on the commercial wisdom of CoC and the supremacy of commercial wisdom of CoC has been reaffirmed time and again by the Hon ble Supreme Court in a catena of judgements including K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK OTHERS 2019 (2) TMI 1043 - SUPREME COURT . The resolution plan which has been approved by the Adjudicating Authority does not require any interference - there are no cogent reasons to interfere with the impugned order - appeal dismissed.
Issues Involved:
1. Treatment of Operational Creditors' claims under the resolution plan. 2. Compliance with the provisions of the Insolvency and Bankruptcy Code (IBC) and related regulations. 3. Judicial review of the Committee of Creditors' (CoC) commercial decisions. Summary: Issue 1: Treatment of Operational Creditors' claims under the resolution plan The appellants, who are Operational Creditors of M/s Jaycon Infrastructure Ltd, challenged the resolution plan approved by the Adjudicating Authority, arguing that their claims were admitted in full by the Resolution Professional (RP) but were paid nil under the resolution plan. They contended that this was discriminatory since Financial Creditors received 16.5% of their claims, while Operational Creditors faced a 100% haircut. They argued that the IBC provisions do not support such discriminatory treatment and that this goes against the primary objective of the IBC to balance the interests of all stakeholders. Issue 2: Compliance with the provisions of the Insolvency and Bankruptcy Code (IBC) and related regulations The appellants argued that the Adjudicating Authority misinterpreted the IBC by suggesting that Operational Creditors could be paid nil if the liquidation value payable to them was nil. They contended that the resolution plan did not comply with Section 30(2) read with Section 53 of the IBC and Regulation 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation, 2016. They claimed that the SRA failed to show how the interests of all stakeholders were balanced, and that Financial Creditors cannot be paid proportionately higher than Operational Creditors. Issue 3: Judicial review of the Committee of Creditors' (CoC) commercial decisions The respondents argued that the appeal was not maintainable as the approval of the resolution plan lies solely within the domain of the CoC's commercial wisdom, which cannot be substituted by the Adjudicating Authority. They cited several Supreme Court judgments reaffirming the primacy of the CoC's commercial decisions. They also referenced the Tribunal's judgment in Dharmindra Constructions Pvt. Ltd. & Anr. v. Rajendra Kumar Jain, which held that Operational Creditors are entitled to a minimum of the liquidation value, which in this case was nil. Therefore, the impugned order did not suffer from any material irregularity. Tribunal's Findings: The Tribunal noted that the Adjudicating Authority had considered the compliance of the resolution plan with the relevant sections of the IBC and related regulations. The liquidation value of the Corporate Debtor was Rs.11.53 crore, while the admitted claim of the secured Financial Creditor was Rs.70.24 crore. The resolution plan provided nil payment to other creditors, including the appellants, which was challenged as discriminatory. The Tribunal referred to the Supreme Court's judgment in Essar Steel India Ltd., which emphasized the limited judicial review of the CoC's commercial decisions and the need to balance the interests of all stakeholders. The Tribunal concluded that the appellants, as Operational Creditors, were entitled to the minimum liquidation value, which was nil in this case. The CoC's decision to allocate nil to other creditors was within its commercial wisdom, and there was no material irregularity or contravention of law. Conclusion: The Tribunal upheld the resolution plan approved by the Adjudicating Authority, finding no merit in the appeal and dismissed it without costs.
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