9911796707
TMI Blog2024 (4) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... evision Home Shopping Network Limited commenced on 03.03.2023. The Appellant, an Operational Creditor, filed its claim in Form-B on 25.04.2023 for amount of Rs.1,41,16,647/-. The claim of the Appellant was admitted to the extent of Rs. 1,24,73,281/-. (ii) The Financial Creditor - Centre for Economic and Social Inclusion Private Ltd. was the only Member of the Committee of Creditors ("CoC"), having 100% vote of share. Resolution Plan submitted by Respondent No.2, was approved by 100% vote share on 06.08.2023. (iii) The Resolution Professional ("RP") submitted an Application being IA No.3908 of 2023 for approval of Resolution Plan. The Adjudicating Authority vide order dated 09.11.2023, approved the Resolution Plan. Aggrieved by which order, this Appeal has been filed. In the Resolution Plan, which was submitted by Respondent No.2, total Plan amount was Rs.9.05 crores. Key features of the Resolution Plan have been noticed by Adjudicating Authority in paragraph 7 of the judgment, which is as follows: "7. THE KEY FEATURES OF THE RESOLUTION PLAN ARE SUMMARIZED BELOW : Resolution Applicant Proposed Amount Admitted Amount Amount (in Rs.) Timeline Section of Resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is not applicable in this Plan. C. Settlement of claims filed by Operational Creditors (Other than Workmen and Employees and Government dues): (25 days) That the RP has admitted the Claim of INR 16,36,64,956/- is admitted claim of Operational Creditors (Other than Workmen and Employees and Government dues). The plan proposes to pay to the operational creditors an Upfront Amount of INR 35,34,092/- (Rupees Thirty-Five Lacs Thirty- Four Thousand Ninety-Two Only) in proportionate to the aggregate of their claims of Rs, 16,36,64,956/- admitted by the RP as per latest claim register, within a period of 25 days from the Approval Date of this Resolution Plan. The same shall be paid prior to making any payment to the financial creditors. In addition to above referred upfront cash payment, each operational creditors (other than Statutory Claim of Government Departments whose claims are accepted as contingent claim by RP) within a period of 25 days from the Approval Date of this Resolution Plan by AA, shall have an Option (in proportion to the aggregate of their admitted claims) for subscription of the 6% total 1,60,00,000 partly paid (Rs 5/- paid) Non Cumulative, Non-Participating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nil payment towards full and final settlement / discharge of the entire amounts of all workmen & employees (i.e., excluding "the Financial Creditors and the Operational Creditors including any dues to Statutory authorities") E. Payment to Statutory Dues & Contingent Liabilities : ( 25 days ) The plan proposes to pay the Operational Creditors- Government Dues, an Upfront Amount of INR 15,00,000/- (Indian Rupees Fifteen Lacs Only) within a period of 25 days from the Approval Date of this Resolution Plan against claims shown as contingent claims by resolution professional in the claim register amounting to INR. 377,37,53,910/-. It is to be noted that RP has admitted Rs 1/- as notional value against each four statutory government departments totalling to Rs 4/- as all these claims are contingent claims and balance amount shown under the head contingent claims in the claim register amounting to Rs. 377,37,53,910/ Sr. no. Name of Department Amount 1. Deputy Commissioner of Income Tax, Circle 16(1) Mumbai (CLAIM FILED) 3, 62, 54, 74, 594/- 2. Department of CGST & C. Excise Noida Sector - 3, Gautam buddha nagar, Uttar Pradesh (CLAIM NOT FILED) 6, 38, 80, 498/- 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). G. The Implementation and supervision of the Resolution Plan: On and from the NCLT Approval Date and until the Effective Date, a Monitoring Committee, ("Monitoring Committee") shall be appointed for supervision of implementation of this Resolution Plan. The Monitoring Committee shall be in the form of a committee comprising of three (3) members, being one (1) nominated by the Resolution Applicant, one (1) nominated by the CoC and (3) the Resolution Professional (Monitoring Agent or Chairperson of the Monitoring Committee). The Monitoring Committee shall supervise the implementation of the Resolution Plan and shall be required and entitled to do all such acts, deeds, matter and things as may be necessary, desirable or expedient in order to implement and give effect to this Resolution Plan. The day to day functioning of the Corporate Debtor shall be monitored by the Monitoring Committee. All decisions of the Monitoring Committee shall be taken by majority consent of the members of the Monitoring Committee. (Clause 7.3.1 of the Resolution Plan, ANNEXURE - D @ Pg No. 88 of the IA." (v) Under the Resolution Plan, total claim of the Operational Creditor was admitted as Rs.16,36, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.05 crores and liquidation value being only Rs.5,74,822/-, out of which only upfront cash payment of Rs.1.05 crores has been offered. The Operational Creditor having been given option of partly paid redeemable preference shares 1,60,00,000 having paid value of INR 10 wherein the amount proposed is INR 8 crores. The total upfront payment being INR 1.05 crores, the plan provides to pay to the Operational Creditor upfront payment of INR 35,34,092/-, which is 2.16% of their admitted claim. The payment offered to the Operational Creditor is in compliance of Section 30, sub-section (2). The CoC has also noted that the return on funds involving partly paid amount comes to around 12% per annum. The present Appeal does not raise any question of law, which warrants adjudication by this Tribunal. The Resolution Plan is just and fair Plan. 6. We have heard learned Counsel for the parties and have perused the records. 7. The question, which needs to be answered in this Appeal is as to whether the Resolution Plan submitted, which was approved by the Adjudicating Authority, is in compliance of provisions of Section 30, subsection (2). The extent of judicial review of Resolution Plan approved b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entities to be carved out of the corporate debtor, that would not be shunning off the debts of operational creditors but would only be keeping them glued to the corporate debtor or its successor entities. Such a method of payment could least be a step towards insolvency resolution. The same features, with necessary variations, would apply to the second part of clause (b) of sub-section (2) of Section 30 in regard to the dissenting financial creditors. The operational creditors as also the dissenting financial creditors are to be paid in terms of the amount to be determined with reference to Section 53 of the Code and are to be paid in priority, as described in Regulation 38(1) of the CIRP Regulations." 9. Section 30, sub-section (2) has been amended by Act 26 of 2019, which amendment was brought in the statute with the object to balance the interest of the stake holders. It is relevant to notice Statement of Objects and Reasons of the Bill of The Insolvency and Bankruptcy Code amendment Bill, 2019. Statement of Objects and Reasons of the bill are as follows: "STATEMENT OF OBJECTS AND REASONS The Insolvency and Bankruptcy Code, 2016 (the Code) was enacted with a view to conso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section12 of the Code to mandate that the insolvency resolution process of a corporate debtor shall not extend beyond three hundred and thirty days from the insolvency commencement date, which will include the time taken in legal proceedings, in order to prevent undue delays in the completion of the Corporate Insolvency Resolution Process. However, if the process, including time taken in legal proceedings, is not completed within the said period of three hundred and thirty days, an order requiring the corporate debtor to be liquidated under clause (a) of subsection (1) of section 33 shall be passed. It is clarified that the time taken for the completion of the corporate insolvency resolution process shall include the time taken in legal proceedings; (d) to insert sub-section (3A) in section 25A of the Code to provide that an authorised representative under subsection (6A) of section 21 will cast the vote for all financial creditors he represents in accordance with the decision taken by a vote of more than fifty per cent. of the voting share of the financial creditors he represents, who have cast their vote, in order to facilitate decision making in the committee of creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h creditors in the event of a liquidation of the corporate debtor under section 53; or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, 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 the event of a liquidation of the corporate debtor. Explanation 1. - For removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors. Explanation 2. - For the purpose of this clause, it is hereby declared that on and from the date of commencement 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 rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 30, sub-section (2) (b) is sought to be subsumed by offering option of partly paid redeemable preference shares as noted above. The Hon'ble Supreme Court in Jaypee Kenisington has already held that the amount to be paid to the Financial Creditor has to be paid in priority only by way of cash payment and not by way of issuing equity. Hence, the payment offered to the Operational Creditor is not in accordance with Section 30, sub-section (2), (b) (ii) and is also contrary to the law laid down by the Hon'ble Supreme Court in Jaypee Kenisington. 12. We, thus, are of the view that distribution of the amount to the Operational Creditor (other than Government Departments) is clearly contrary to provisions of Section 30 (2)(b)(ii). The Adjudicating Authority has failed to advert to Section 30, sub-section (2) (b) (ii) and failed to notice that amount proposed to the Operational Creditor is clearly contrary to Section 30(2)(b)(ii). We, thus, are of the view that order of Adjudicating Authority approving the Resolution Plan cannot be sustained. However, we make it clear that the Appeal has been filed by the Operational Creditor questioning only part of the Resolution Plan by which dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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