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2018 (12) TMI 1730 - AT - Insolvency and BankruptcyApproval of the ‘Resolution Plan’ - Insolvency and bankruptcy - Appellants submitted that the payment terms provided in the ‘Resolution Plan’ is in contravention to the applicable provisions of law. The 3rd Respondent- ‘Successful Resolution Applicant’ has arbitrarily reduced or written off substantial liabilities of the promoters/ shareholders without any legal basis - HELD THAT:- The object of the ‘I&B Code’ is, inter alia, maximization of the value of the assets of the ‘Corporate Debtor’, then to balance all the creditors and make availability of credit and for promotion of entrepreneurship of the ‘Corporate Debtor’. While considering the ‘Resolution Plan’, the creditors focus on resolution of the borrower ‘Corporate Debtor’, in line with the spirit of the ‘I&B Code’. The present appeal has been preferred by the promoters, who are responsible for having contributed to the insolvency of the ‘Corporate Debtor’. The ‘I&B Code’ prohibits the promoters from gaining, directly or indirectly, control of the ‘Corporate Debtor’, or benefiting from the ‘Corporate Insolvency Resolution Process’ or its outcome. The ‘I&B Code’ seeks to protect creditors of the ‘Corporate Debtor’ by preventing promoters from rewarding themselves at the expense of creditors and undermining the insolvency processes. For the aforesaid reasons, it will be evident from the ‘I&B Code’ that the powers of the promoters as the members of the Board of Directors of the ‘Corporate Debtor’ are suspended. The voting right of the shareholders, including promoter shareholders, are suspended and shareholders’ approval is deemed to have been granted for implementation of the ‘Resolution Plan’ as apparent from explanation to Section 30(2)(f) of the ‘I&B Code’. The promoters, being ‘related parties’ of the ‘Corporate Debtor’, have no right of representation, participation or voting in a meeting of the ‘Committee of Creditors’. Admittedly, the shareholders and promoters are not the creditors and thereby the ‘Resolution Plan’ cannot balance the maximization of the value of the assets of the ‘Corporate Debtor’ at par with the ‘Financial Creditors’ or ‘Operational Creditors’ or ‘Secured Creditors’ or ‘Unsecured Creditors’. They are also ineligible to submit the ‘Resolution Plan’ to again control or takeover the management of the ‘Corporate Debtor’. If no amount is given to the promoters/ shareholders and the other equity shareholders who are not the promoters have been separately treated by providing certain amount in their favour, the Appellant cannot claim to have been discriminated.
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