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2021 (2) TMI 1184 - AT - Insolvency and BankruptcyValidity of approved Resolution Plan - Priority of rights created by transfer - treatment of all Secured Financial Creditors equally though all Financial Creditors did not hold first charge on the properties of Respondent No.4 - contravention of Section 48 of the Transfer of Property Act - HELD THAT - Admittedly the Appellant was part of COC and the COC had in 9th Meeting deliberated and unanimously agreed that distribution of the proceeds under the Resolution Plan to the Financial Creditors shall be in proportion to the share of the voting rights of the relevant Financial Creditors in the COC. In the e-voting which came to be held the Appellant had consented to the Resolution Plan which even specifically stated the specific amounts which will be given in the distribution. Having agreed to such Resolution Plan the Appellant needs to be estopped from questioning the same. The Appellant in the Appeal has claimed that the Appellant had sent e-mail to the Resolution Professional on 05.03.2020 asking why other lenders had been treated equally with the Appellant - The Appellant could see the options open to it and chose one. The Appellant took informed decision to vote in favour. Having done so the Appellant needs to be estopped from questioning the Resolution Plan with regard to the manner of distribution. Apart from this considering decision of the COC that the distribution would be in proportion to the share of voting rights being commercial decision of the COC to see through the CIRP proceedings so as to reach a resolution we would not like to interfere - IBC is subsequent law with Section 238 giving overriding effect. When COC has the discretion as mentioned Resolution Professional could not have relied on Section 48 of Transfer of Property Act which is in context of contractual rights to hold back the Resolution Plan from COC. There are no substance in the Appeal - appeal dismissed.
Issues Involved:
1. Approval of the Resolution Plan by the Adjudicating Authority. 2. Distribution of proceeds among Secured Financial Creditors. 3. Violation of Section 48 of the Transfer of Property Act, 1882. 4. Commercial discretion of the Committee of Creditors (COC). 5. Estoppel against the Appellant for consenting to the Resolution Plan. 6. Legal precedence and overriding effect of the Insolvency and Bankruptcy Code (IBC). Detailed Analysis: 1. Approval of the Resolution Plan by the Adjudicating Authority: The appeal was filed against an order approving the Resolution Plan submitted by the Successful Resolution Applicant (SRA), which was sanctioned by the Committee of Creditors (COC). The appellant, Indian Renewable Energy Development Agency Ltd. (IREDA), contended that the distribution proposed in the Resolution Plan was unfair and did not account for their secured status. 2. Distribution of proceeds among Secured Financial Creditors: The Resolution Plan proposed a payment of Rs. 60 Crores, with Rs. 54.25 Crores allocated to Secured Financial Creditors based on their voting share in the COC. IREDA was to receive Rs. 6.61 Crores against its admitted claim of Rs. 69.48 Crores. The appellant argued that this distribution ignored their first and prior pari passu charge over the assets of the Corporate Debtor, treating all lenders equally without considering the secured status of IREDA. 3. Violation of Section 48 of the Transfer of Property Act, 1882: IREDA argued that the Resolution Plan contravened Section 48 of the Transfer of Property Act, which prioritizes the rights of first charge holders over subsequent charge holders. The appellant cited the Supreme Court judgment in "ICICI Bank Ltd. Versus Sidco Leathers Ltd." to support their claim that their secured rights should prevail over others. 4. Commercial discretion of the Committee of Creditors (COC): The respondents argued that the COC, including IREDA, had unanimously agreed on the distribution of proceeds based on voting shares. The COC's decision was a commercial one, and the Supreme Court in "Committee of Creditors of Essar Steel India Limited versus Satish Kumar Gupta & Ors." affirmed that the COC has the discretion to determine the manner of distribution, considering different classes of creditors and security interests. 5. Estoppel against the Appellant for consenting to the Resolution Plan: The respondents highlighted that IREDA participated in the COC meetings and approved the Resolution Plan during e-voting. Having consented to the plan, IREDA could not later challenge the distribution. The appellant's informed decision to vote in favor of the plan, despite raising concerns, estopped them from questioning the plan's provisions. 6. Legal precedence and overriding effect of the Insolvency and Bankruptcy Code (IBC): The Tribunal noted that the IBC, being subsequent legislation with an overriding effect under Section 238, grants the COC discretion in distribution matters. The Resolution Professional was not required to withhold the plan based on Section 48 of the Transfer of Property Act. The Tribunal referenced the "Essar Steel" judgment, which clarified the COC's discretion and the non-applicability of Section 53's priority of payment during resolution processes. Conclusion: The Tribunal found no merit in the appellant's arguments. The COC's commercial decision regarding the distribution of proceeds was within its discretion and aligned with the IBC provisions. The appellant, having consented to the Resolution Plan, was estopped from challenging it. The appeal was dismissed with no orders as to costs.
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