TMI Blog2020 (11) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the erstwhile COC of the Corporate Debtor on 11th November 2019, i.e. before voting on the Resolution Plan took place. It is also important to observe that out of the average liquidation value of ₹ 305 Crores, approximately one-third value i.e. ₹ 95 Crores is attributable to the shareholding of the Corporate Debtor in FPL - thus, it is clear that objection regarding the valuation of shares of Facor Power Ltd (FPL) is also not sustainable. It is pertinent to mention that the shareholding pattern in any company demonstrates the extent of control that a shareholder has and can exercise over the said Company. Hence, even in the absence of such an express provision in Resolution Plan, the Resolution Applicant after taking over the Corporate Debtor is entitled to exercise its right over its subsidiary company - the Appellant s objection regarding the inclusion of the subsidiary company of the Corporate Debtor in the Resolution Plan is not sustainable. Whether the Adjudicating Authority can approve a Resolution Plan which is discriminatory and gives differential treatment amongst the same Class of the Financial Creditors, merely based on assenting or dissenting Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shwari, Ms Pratiksha Mishra, Advocates for R-3. JUDGMENT [ Per; V. P. Singh, Member (T) ] These two Appeals emanate from the common Impugned Order dated 30th January 2020 passed by the Adjudicating Authority/National Company Law Tribunal, Cuttak Bench, Cuttak in Company Petition (IB) No. 157/C.T.B./2019, whereby the Adjudicating Authority has approved the Resolution Plan filed by Respondent No.3. The Parties are represented by their original status in the Company Petition for the sake of convenience. 2. The brief facts of the case are as follows: The Company Appeal (AT)(Insolvency) No.340 of 2020 is filed against the Impugned Order, dated 30th January 2020, whereby the Adjudicating Authority has approved the Resolution Plan filed by Respondent No.3 Sterlite Power Transmission Limited (in short SPTL ), mainly on the ground that the Resolution Plan encompasses with assets of third parties (including the Appellant herein) and not just of the Corporate Debtor which is contrary to Law, thus violative I B Code, 2016. 3. In addition to the above, it is submitted that the Resolution Plan of Respondent No.3 does not factor the value of shares of Facor Power Limited (in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as liabilities of subsidiary companies of Corporate Debtor. Adjudicating Authority has been unable to appreciate that the provisioning of transfer of the existing promoters shares in 'FPL' in the Resolution Plan, is in itself a transgression of power and Authority of Respondent No.1 and 2. In the circumstances, the Appellant has filed this Appeal to set aside the Impugned Order dated 30th January 2020 whereby the Adjudicating Authority has approved resolution Plan of the Respondent No.3. 8. In Company Appeal (AT)(Insolvency) No.462 of 2020, the Appellant/ Toplight Corporate Management Private Limited has challenged the approved Resolution Plan on the ground that the Adjudicating Authority has approved the Resolution Plan which is contrary to Law as it violates Section 30(2) of the Code and is against the objectives of the Code, as it gives unequal treatment to the same category of Financial Creditors (including the Appellants herein) purely on the basis that the Appellant dissented/abstained from voting to the said Resolution Plan. 9. The Appellant contends that Financial Creditors belonging to the same category, even if they dissent to the Resolution Plan, have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n together will be the Sustainable Debt of the consenting Creditor. An amount equal to the amount to be paid to Dissenting Financial Creditors in accordance with sub-section (I) of Section 53 of the I B Code in the event of a liquidation of the Company. Sustainable Debt of Dissenting Creditors forming part of the Admitted Financial Debt of the Dissenting Financial Creditors would be converted into zero coupons, secured and unlisted Non-Convertible Debentures of the Company and will be issued to the Dissenting Financial Creditors proportionally. It is alleged that the Adjudicating Authority has failed to consider that the Resolution Plan of the Respondent No.3 is approved without giving any reasons qua the unequal treatment being given to the same Class of creditors, which is contrary to the intent and objective of the Code. 13. It is further contended that the approved Resolution Plan does not in any manner protect the interest of all the stakeholders, especially the Financial Creditors who have dissented to the said Resolution Plan. It is submitted that the said Resolution Plan, on the face of it is contrary to the basic pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate Debtor 'Ferro Alloys Corporation Limited' (FACL)? ii) Whether the Adjudicating Authority can approve a Resolution Plan which is discriminatory and gives differential treatment amongst the same Class of the Financial Creditors, merely based on assenting or dissenting Financial Creditors? iii) Whether approved Resolution Plan filed by Sterlite Power Transmission Limited is violative of Section 30(2) of the I B Code, 2016? Issue No.1 21. Learned Counsel for the Appellant submits that after initiation of Corporate Insolvency Resolution Process under Section 7 of the Code, IRP/RP is entitled to take over the management and assets of the Corporate Debtor, i.e. Ferro Alloys Corporation Limited, which is the corporate guarantor of the principal borrower. 22. It is submitted that the REC/Respondent No.2 has initiated CIRP qua Corporate Debtor. However, under the Resolution Plan, a third party company Facor Power Limited (FPL) is being given away at a throwaway price without ascribing any value to the shares of FPL, whereas the valuation of 'FPL' is more than ₹ 538 crores. The clandestine manner in which 'FPL' has been included in the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ole pledgee of such shares. Accordingly, the Resolution Plan merely provides for the exercise of contractual rights by REC. 26. Concerning the specific averments on non-compliance of Section 176 of the Indian Contract Act, it is submitted that the Approved Resolution Plan does not stipulate that the invocation and transfer shall be made without regard to the underlying pledge Agreement. Further, the Approved Resolution Plan does not restrict the Appellants in any manner from redeeming the pledge created. Neither the Appellants have denied the existence of the pledge, nor have they denied the existence of defaults which makes the pledge enforceable. The Approved Resolution Plan is thus, in accordance with the Law of contracts and other applicable laws and therefore, fully compliant with the requirement of Section 30(2)(e) of the Code. 27. Counsel for the Respondent No. 3 submits that the Corporate Debtor holds 86.09% shares in FPL. In terms of Section 18(f) (v) of the Code, any shares held by the Corporate Debtor in a subsidiary Company form part of assets of the Corporate Debtor. Therefore, it is an obvious consequence that a Resolution Applicant, while taking over the Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue i.e. ₹ 95 Crores is attributable to the shareholding of the Corporate Debtor in FPL. 32. Based on the above, it is clear that objection regarding the valuation of shares of Facor Power Ltd (FPL) is also not sustainable. 33. It is pertinent to mention that the shareholding pattern in any company demonstrates the extent of control that a shareholder has and can exercise over the said Company. Hence, even in the absence of such an express provision in Resolution Plan, the Resolution Applicant after taking over the Corporate Debtor is entitled to exercise its right over its subsidiary company. Based on the above, we are of the considered view that the Appellant s objection regarding the inclusion of the subsidiary company of the Corporate Debtor in the Resolution Plan is not sustainable. Issue No 2 3; 34. In Appeal No. 462 of 2020, the Appellant has raised an issue that the approved Resolution Plan of Respondent No. 3 is entirely against the provisions of the Insolvency and Bankruptcy Code, 2016. The said Resolution Plan provides differential treatment among the same Class of Creditors which is discriminatory and impermissible in Law. 35. It is contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting Financial Creditors are paid more. b) Explanation 1 to Section 30 (2) (b) of the Code provides that the dissenting creditors will get fair and equitable treatment which means that they will be treated at par with the consenting creditors. c) Regulation 38(1) (b) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ensures priority in payment to non-consenting creditors, therefore, it would be contrary to the Code to give priority in payment to non-consenting Financial Creditors, however, on the other side give lower quantum of payment. d) Regulation 38(1A) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 states that interest of all the stakeholder will be consider, again bringing on the notion of fairness and equality in treatment of the same Class (emphasis supplied) 38. It is further contended that Hon'ble Supreme Court in Case of Rahul Jain vs Rave Scans Pvt. Ltd. has held that prior to the amendment in CIRP Regulations under Insolvency and Bankruptcy Code on 5th October, 2018, it was possible to differentiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid as a minimum amount to operational creditors. The same goes for the latter part of sub-clause (b) which refers to dissentient financial creditors. Mrs. Madhavi Divan is correct in her argument that Section 30(2)(b) is in fact a beneficial provision in favour of operational creditors and dissentient financial creditors as they are now to be paid a certain minimum amount, the minimum in the Case of operational creditors being the higher of the two figures calculated under sub-clauses (i) and (ii) of clause (b), and the minimum in the Case of dissentient financial Creditor being a minimum amount that was not earlier payable. As a matter of fact, pre-amendment, secured financial creditors may cramdown unsecured financial creditors who are dissentient, the majority vote of 66% voting to give them nothing or next to nothing for their dues. In the earlier regime it may have been possible to have done this but after the amendment such financial creditors are now to be paid the minimum amount mentioned in sub-section (2). Mrs. Madhavi Divan is also correct in stating that the order of priority of payment of creditors mentioned in Section 53 is not engrafted in sub-section (2)(b) as am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the requirement under the Amended Regulation 38, which admittedly did not apply in this case. 44. Thus, we are of the considered opinion that the approved Resolution does not give differential treatment among the same Class of Financial Creditors merely based on assenting or dissenting Financial Creditors. Thus, the approved Resolution Plan is not discriminatory. 45. The Learned Counsel for the Respondent No. 3, Sterlite Power Transmission Ltd, which is the Successful Resolution Applicant submits that the Resolution Plan is approved by the COC with a majority of 95.15% of vote share and thereafter approved by the Adjudicating Authority. The Appellant contends that it became aware of the Resolution Plan on 2nd February 2020 after coming across a public notice, and hence, approached this Appellate Tribunal directly without first approaching the Adjudicating Authority. 46. It is important to mention that the Appellant duly participated in the Resolution Process, which is evident from the perusal of relevant part of the Appeal Paper Book provided as under: Para 9, Appeal Paper Book of 462 of 2020: That the Respondent No. 3 had submitted a Resolution Plan dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 46. We find that the Resolution Plan submitted by JSW Steel has been approved by the Committee of Creditors with 97.12% voting shares and voters having 2.88% voting shares remained absent. If some members of the Committee of Creditors having 2.88% voting shares remained absent, it cannot be held that they have considered the feasibility and viability and other requirements as specified by the Board, therefore, their shares should not have been counted for the purpose of counting the voting shares of the 27 Company Appeal (AT) (Insolvency) No. 198 of 2018 Committee of Creditors . In fact, 97.12% voting shares of members being present in the meeting of the Committee of Creditors and all of them have casted vote in favour of JSW Steel , we hold that the Resolution Plan submitted by JSW Steel has been approved with 100% voting shares. (verbatim copy) 50. In Case of IDBI Bank Ltd. Vs Anuj Jain order dated 10th June 2019 this Tribunal has held that 'we make it clear if any of the Financial Creditors remains absent from voting, their voting percentage should not be counted for the purpose of counting the voting shares. 51. Based on the above discussio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion case [State of Karnataka v. Hansa Corporation, (1980) 4 SCC 697 : (1981) 1 SCR 823 : AIR 1981 SC 463] is binding on all concerned whether they were parties to the Judgment or not. This Court further observed that to contend that the conclusion therein applied only to the parties before this Court was to destroy the efficacy and integrity of the Judgment and to make the mandate of Article 141 illusory. 18. In that view of the matter this question is no longer open for agitation by the petitioners. It is also no longer open to the petitioners to contend that certain points had not been urged and the effect of the Judgment cannot be collaterally challenged. -------- Thus it is clear that the binding effect of a decision does not depend upon whether a particular argument was considered therein or not, provided that the point with reference to which an argument was subsequently advanced was actually decided. (emphasis supplied) 54. The legal position is well settled that an approved Resolution Plan can deal with the related party claim and extinguish the same which shall ensure that the Successful Resolution Applicant can take over the Corporate Debtor on a clean s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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