TMI Blog2019 (9) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirm the test of Section 30(2) (e), being discriminatory, as having discriminated the similarly situated Secured Creditors . The Insolvency and Bankruptcy Board of India has not provided for separate treatment to dissenting Secured Financial Creditors who do not vote in favour of the Resolution Plan . No such amendment has been made in Regulation 38 since amended Section 30(2) (b) came into force i.e. 16th August, 2019. The Appellant a Secured Financial Creditor has been discriminated with other Secured Financial Creditors , we hold that the Resolution Plan is violative of Section 30(2) (e) of the I B Code . However, we are not inclined to set aside the approved plan on such ground. The Successful Resolution Applicant is given opportunity to remove the discrimination of Appellant by providing similar treatment as provided to other similarly situated Financial Creditors . Appeal allowed. - Company Appeal (AT) (Insolvency) No. 745 of 2018 - - - Dated:- 17-9-2019 - Mr S.J. Mukhopadhaya, Chairperson, Mr A.I.S. Cheema, Member (Judicial) And Mr Kanthi Narahari, Member (Technical) For The Appellant : Dr. U.K. Choudhary, Senior Advocate wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Descriptio n of Secured FC Claim filed by FCs Liquidati on Value Settlement offered to FCs in CoC % offere d in final approv ed plan Remarks Dated 13.10.2017 Dated 12.01.2018 16.02.2018 Dated 13.03.201 8 Status of Resolution Plan in COC Disapproved Disapproved Approved more than 78% voting A. Secured Public Sector Banks- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Religare Finvest Ltd. 654.03 335.17 241.06 336.00 336.00 51.37 Maintain ed LV under Reg. 38 Total Term Loan 3367.94 1388.45 1245.43 1390.00 1390.00 41.27 Maintain ed LV under Reg. 38 % of claim in total FCs claim (D) 28.28% C. Secured Car Loan - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E. Unsecured Loan from NBFC 429.68 0 21.49 21.49 21.49 5.00 F. Unsecured Loan other than NBFC 775.54 0 38.77 38.77 38.77 5.00 G. Total Financial Creditors: (A+B+C) 13112.16 4460.91 5031.71 5286.93 H. Operationa l Creditors WC 0 93.09 68.29 113.07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made therein (by Central Government) to carry out the provisions of the Code. therefore, we hold that the provisions made by the Board cannot override the provisions of I B Code nor it can be inconsistent with the Code. 9. Clause (b) and (c) of Regulation 38(1) being inconsistent with the provisions of I B Code, and the legislators having not made any discrimination between the same set of group such as Financial Creditor or Operational Creditor , Board by its Regulation cannot mandate that the Resolution Plan should provide liquidation value to the Operational Creditors (clause (b) of regulation 38(1)) or liquidation value to the dissenting Financial Creditors (clause (c) of regulation 38(1)). Such regulation being against Section 240 (1) cannot be taken into consideration and any Resolution Plan which provides liquidation value to the Operational Creditor(s) or liquidation value to the dissenting Financial Creditor(s) in view of clause (b) and (c) of Regulation 38(1), without any other reason to discriminate between two set of creditors similarly situated such as Financial Creditors of the Operational Creditors cannot be approved being illegal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al creditors and provide for such payment in priority to any financial creditor which shall in any event be made before the expiry of thirty days after the approval of a resolution plan by the Adjudicating Authority; and (c) liquidation value due to dissenting financial creditors and provide that such payment is made before any recoveries are made by the financial creditors who voted in favour of the resolution plan. Post amendment, Regulation 38 reads as follows: 38. Mandatory contents of the resolution plan.- (1) The amount due to the operational creditors under a resolution plan shall be given priority in payment over financial creditors. (1-A) A resolution plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the corporate debtor. 72. The aforesaid Regulation further strengthens the rights of operational creditors by statutorily incorporating the principle of fair and equitable dealing of operational creditors rights, together with priority in payment over financial creditors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Important Points : 1. Reg. 37(1) of CIRP requires a plan to offer- maximization of value of its assets which is fulfilled by offering ₹ 54.00 Cr. against liquidated value of ₹ 36.06 Cr. only. 2. Reg. 38 (1) (c) mandatory provides to maintain liquidated value of dissenting Financial Creditors before the amendment dt. 05.10.2018- Resolution Applicant offered LV. 3. COC in its meeting directed RP to seek legal opinion on differential value of FCs. COC accepted opinion obtained by RP stating that LV has to be maintained for dissenting creditors. Accordingly in the next Revised Resolution Plan dt. 12.01.2018, 16.02.2018 and 13.03.2018, Resolution Applicant offered minimum LV (not % of claim). 4. PSU banks had higher stake in total claim value and liquidated value of assets. Having security of fixed assets, plant machinery, debtors, inventory personal guarantee etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate insolvency resolution process of a corporate debtor (i) where a resolution plan has not been approved or rejected by the Adjudicating Authority; (ii) where an appeal has been preferred under section 61 or section 62 or such an appeal is not time barred under any provision of law for the time being in force; or (iii) where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan; 19. It was submitted that as per Section 30 (2) (b) (ii), the Resolution Plan allows to treat the Financial Creditors , who do not vote in favour of the Resolution Plan separately. However, they have failed to notice that as per amended Section 30(2) (b) (ii), Resolution Applicant may treat the dissenting Financial Creditor , but such treatment can be given in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imilar treatment as provided to other similarly situated Financial Creditors . We, accordingly, pass the following order: (i) The Successful Resolution Applicant / Mr. Rahul Jain ( Corporate Debtor ) is directed to provide the Appellant (a Secured Financial Creditor ) 45% of its admitted claim in place of 32.34% as shown in the Resolution Plan and thereby equate it with all other similarly situated Secured Financial Creditors namely Indian Overseas Bank , Bank of Baroda and Punjab National Bank . The Resolution Plan , as approved, is modified to the extent above. (ii) Though Tata Capital Financial Services Ltd. has been provided with higher percentage, we are not disturbing the same. (iii) If the Successful Resolution Applicant do not remove the discrimination by paying 45% admitted claim of the Appellant- Hero Fincorp Ltd. within one month as per modification as ordered above, the impugned order dated 17th October, 2018 approving the Resolution Plan shall stand set aside and the Adjudicating Authority will proceed in accordance with law. The appeal is allowed with aforesaid observations and directions. No cost ..... X X X X Extracts X X X X X X X X Extracts X X X X
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