Bank of Maharashtra vs Ms. Vandana Garg & Ors.

[Per: Arun Baroka, Member (Technical)]

The present Appeal is filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, (the "Code") against the order dated 23.12.2021 ("Impugned Order") passed by the Hon'ble National Company Law Tribunal, Court-I, Mumbai Bench ("Ld. Adjudicating Authority, Mumbai") in IA 2028 of 2021 in CP No. 1137/MB/2017.

The brief facts relevant to decide the case are as under:-

o 62.66% of CoC members voted in favour of Resolution Plan;

o 23.12% voted against the Resolution Plan, and

o 14.21% of CoC members abstained from voting. The Bank of Maharashtra abstained from voting for the Resolution Plan, while Central Bank of India cast a dissenting vote. IDBI Trusteeship Services (0.04%), Indian Bank (6.31%) and Standard Chartered Bank (3.31%) changed their voting from Dissenting to Assenting.

The Appellant – Bank of Maharashtra, in CA(AT)(Ins.) No. 344 of 2022 is a Secured Financial Creditor of M/s. Jyoti Structures Limited (“Corporate Debtor”) and had abstained from voting on the resolution plan. The Appellant in Company Appeal (AT)(Ins.) No. 345 of 2022 – Central Bank of India, is another Secured Financial Creditor, who had cast a dissenting vote against the Resolution Plan.

The questions which arise for consideration in the present Appeal are:

The admitted claim of Bank of Maharashtra is to the extent of Rs.184,55,84,031/-, out of which the liquidation value proposed to be paid proportionate to their exposure is of Rs.27,51,67,000/-. The admitted claim of Central Bank of India is to the extent of Rs.144,10,31,047/- out of which the liquidation value proposed to be paid proportionate to their exposure is of Rs.21,48,51,000/-.

Appellants claim that the inequitable, unfair and discriminatory treatment in payment of resolution value is evident from the following:

The payment which the appellant would have been entitled to, if there was fair and equitable treatment, is as under: -

Appellant claims that the Impugned Order merely records the contentions of the Appellant, extracts the said provision and paraphrases the said provision of the Code and thus claimed to be cryptic order, which is liable to be set aside. [CCT v. Shukla & Bros., (2010) 4 SCC 785 (para 23)].

Appellant claims that Section 30(2)(b)(ii)^{11.Section 30(2)(b)(ii) – (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 the 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.} of the Code provides for the minimum payment to be made to a dissenting/abstaining creditor, and that provision does not permit inequitable, unfair and discriminatory treatment between Assenting Secured Financial Creditors and Abstaining / Dissenting Secured Financial Creditors when it comes to payment/distribution of the resolution amount. Further, the Explanation I to 30(2)(b)(ii) of the Code mandates that the distribution shall be fair and equitable. Appellant advances the argument that merely because one Bank (i.e., Bank of Maharashtra) had abstained from voting and another bank (i.e., Central Bank of India) had cast a dissenting vote, they cannot be paid only as per the liquidation value, and not on par with the other Secured Financial Creditors. If discrimination in payment of resolution value between the same class of creditors (i.e., Secured Financial Creditors) on the basis of their voting is permitted, then it will have far reaching consequences in as much as a person who abstains or dissents is punished for such vote. This will have a chilling effect and not encourage a participative CoC. Furthermore, that under the fear of being given only liquidation value, most of the members of the CoC will be forced to vote in favour of a plan, which may not really be in the best interests of all stakeholders and achieve the object of the Code of maximisation of the assets and revival of the Corporate Debtor.

Appellant places its reliance on Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta, (2020) 8 SCC 531 (para 90), wherein the Hon’ble Supreme Court has observed that equitable treatment is to be accorded to each creditor depending upon the class to which it belongs: secured or unsecured, financial or operational. Appellant has also relied on Central Bank of India Vs Resolution Professional of Sirpur Paper Mills Ltd and Others 2018 SCC OnLine NCLAT 1034. Appellant has also relied on RBL Bank Ltd Vs Sical Logistics Ltd, Company Appeal (AT) (CH) (Ins) No.36/2024, which is similar to the above cited judgment.

Appellant also contends that the decision in Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9 SCC 657 has no application to the present case in as much as the Appellant is not seeking to make any claims which are not part of the resolution plan, but is only seeking for proper distribution of the resolution amount in a non-discriminatory manner. The Appellant claims not to be seeking to setting aside of the Resolution Plan, but only seeking to establish that the Adjudicating Authority has failed to discharge the statutory duty enjoined under the Code.

Appellant claims that a resolution plan, which is contrary to the Code cannot be approved by the Adjudicating Authority [State Tax Officer (1) v. Rainbow Papers Limited, 2022 SCC OnLine SC 1162 (para 15, 41, 43, 45, 47-48, 59)]. It is claimed that in the event that the discrimination in payment is set aside, then the same would not in any manner affect the basic structure of the Resolution Plan as the tenure of the payment (12 years), the Resolution Plan Value (Rs. 3965.06 Crores) and other pre-conditions for the benefit of Resolution Applicant would remain unaltered and only the payment to the Financial Creditors would get readjusted as per their exposure towards Corporate Debtor.

Resolution Professional/now member of the Monitoring Committee of the Corporate Debtor (Jyoti Structures Limited) has raised the question of maintainability of the present appeal, which to us is the most important issue. RP brings to our notice that in the same CIRP this Appellate Tribunal in another IA had already adjudicated and therefore the present Appeal attracts res-judicata. It was brought to our notice, that in the same CIRP, the resolution applicant Sharad Sanghi had submitted a resolution plan which was approved, basis negotiation with the CoC with 81.31% of voting shares. However, NCLT vide order dated 31.07.2018 rejected the resolution plan, which was approved by the CoC and ordered the RP to file for liquidation for Corporate Debtor. The Resolution Applicant Sharad Sanghi had come before this Appellate Tribunal under Section 61 and on March 19, 2019 and this Appellate Tribunal had remitted the mater back to NCLT to approve the resolution plan with one modification. The relevant portion of the said order dated March 19, 2019 passed by this Appellate Tribunal has been reproduced below:

(Emphasis supplied)

Respondent No.2, which is the Successful Resolution Applicant, also canvases arguments similar to the arguments presented by the RP that the Appellant is effectively seeking to challenge the resolution plan at this belated stage, after the resolution plan has already attained finality, and therefore questions the maintainability of the Appeal. SRA brings to our notice that Adjudicating Authority vide order dated 27.03.2019 had approved the resolution plan. No appeals were filed against the resolution plan approval order within the statutory period prescribed under the Code and therefore the resolution plan approved attained finality. It also brings to our notice that, being a Financial Creditor of the company, the appellant was at all times aware of all the developments with respect to the resolution plan from the date of the plan approval order till its implementation on 09.11.2021. Despite this, Appellant had chosen to file an application in September 2021, about 30 months after the approval of the resolution plan. It brings to our notice that there is an unjustifiable delay on the part of the Appellant in challenging the provisions of the resolution plan. The Respondent No. 2/SRA also brings to our notice that the plan has been implemented as on November, 2021 and the business of the company has already been taken over by the new management of the company. Furthermore, the pay outs as envisaged under the resolution plan are already under process and disrupting them will militate against the very logic of the due process envisaged under the code.

The Respondent No.2/SRA also brings to our notice that once the resolution plan has been approved, it is binding on all the stakeholders. The resolution plan is claimed to be unfair and inequitable to dissenting / abstaining Financial Creditors as the quantum of payments provided to the Appellant is less than the payments provided to the assenting secured Financial Creditors under the resolution plan and basis this discriminatory treatment the Appellant has sought for a modification of the resolution plan. SRA – Respondent No.2 brings to our notice that the plan provides for the payments to dissenting Financial Creditors as per Section 30(2) of the Code, which 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. The above has also been accepted by the Adjudicating Authority in the impugned order. Respondent No.2/SRA brings to our notice that the provision relating to payment to dissenting Financial Creditors as is being claimed was not existing in Section 30(2) of the Code at the time of the approval of the resolution plan by the CoC.

Furthermore, Regulation 38 of the CIRP Regulations, contained the following as mandatory contents of the resolution plan:

SRA - Respondent No.2 has also relied on the judgment of Jaypee Kensington Boulevard Apartments Welfare Association vs. NBCC (India) Ltd., (2022) 1 SCC 401, wherein it was held that the amount prescribed under the code and CIRP Regulations was the amount payable to dissenting Financial Creditors, which we will deal in hereinafter. Furthermore, Appellant relies on the judgement of Appellate Tribunal in Facor Alloys Limited and Anr. Vs. Bhuvan Madan, 2020 SCC OnLine NCLAT 789 wherein it was noted that the only requirement for a resolution plan under the Code was to provide for the prescribed payment to dissenting Financial Creditors.

Respondent No. 4/Corporate Debtor has contended that the Appellant is seeking indirectly to challenge the resolution plan by challenging the impugned application and indirectly extend the period of limitation to challenge the resolution plan. Respondent No.4 relies on the decision of Hon’ble Supreme Court in National Spot Exchange Vs. Anil Kohli, 2021 SCC Online SC 716 wherein the Hon’ble Supreme Court has held that:

Respondent No. 4/Corporate Debtor also contends that the resolution plan once approved is binding on all the stakeholders. It brings to our notice the same judgments which have been relied upon by the Respondent No. 2. Respondent No. 4 also brings to notice the relevant provisions for payments to such creditors who do not vote in favour or abstain from voting the resolution plan which are follows:

Respondent No. 4/Corporate Debtor has also relied on the judgment of Hon’ble Supreme Court in Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta, (2020) 8 SCC 531 wherein it has held that:

And claims that there cannot be any interference with the commercial wisdom of the CoC provided the payments are made to dissenting Financial Creditors in accordance with the provisions of the Code. Such minimum payment as prescribed under the Code has been stated to be fair and equitable, and beyond the minimum payment any amount is to be paid or not is left to the commercial wisdom of the CoC.

Respondent No.4 have also relied upon the judgment of Ghanashyam Mishra & Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited, Civil Appeal No. 8919 of 2019 even though the Appellant claims the Ghanashyam Mishra (supra) is not applicable in this case.

Respondent No. 5 – State Bank of India, which was impleaded, as a party brings to our notice that the abstaining / dissenting Financial Creditors with a voting share of 4.41% are seeking pay outs under the resolution plan on par with the assenting Financial Creditors (which were having 81.31% voting share). In their Appeal before NCLT, Respondent No.4 – SBI was not made a party. However, they have been impleaded before NCLAT. Respondent No. 5 – State Bank of India brings to our notice that out of 34 Financial Creditors around 20 Financial Creditors (81.31% voting share) voted in favour of the resolution plan, yet the Appellants with 4.41% voting share have moved to implead, only SBI as a party when the prayer, they are seeking in these appeals affects the rights and financials of all the Financial Creditors. Therefore, others are also relevant parties. Respondent No. 5 also bring to our notice that the terms and provisions of the resolution plan are in accordance with the provisions of Code. Since the resolution plan has been approved by the CoC and Adjudicating Authority by its order dated 27.03.2019 and this order has attained finality, therefore, the contents and provisions of the resolution plan are binding on all the parties or stakeholders including the Appellants herein. Thus, the present appeal cannot be sustained in law.

We observe that the Appellant had filed an IA No. 2028/2021 in CP (IB) No. 1137/MB/2017 on 09.09.2021 before the Adjudicating Authority with the following prayers:

The Adjudicating Authority vide order dated 23.12.2021 had dismissed the above-mentioned I.A. No.2028 of 2021 with following observations:

We note that now in the present Appeal before us, the Appellant has sought the following reliefs:

We observe that resolution plan of the Corporate Debtor was approved by NCLT on 27.03.2019. The IA No. 2028 of 2021 was filed before the NCLT on 07.09.2021 by the Appellant praying that the discrimination in payment under the Resolution Plan on the basis of the Assenting and Dissenting / Abstaining Financial Creditor be modified to the extent that all Secured Financial Creditors (SFCs) inter alia Applicant be treated equally for payment of Plan value subject to their individual exposure with the same terms as that of Assenting Financial Creditors. This IA No. 2028 of 2021 was dismissed by NCLT on 23.12.2021 along with the application of Central Bank of India. Pursuant to such rejection of these applications, the applicant filed this appeal before Appellate Tribunal on 04.03.2022 which is filed with a delay of around 41 days from the permissible last date of filing an appeal i.e. 22.01.2022. We find that sufficient cause for the condonation of delay has not come on record or explained in any hearing. Perusal of record shows that there is no application for condonation of delay. The law as per Section 61(2) of the Code is very clear that the Appeal has to be filed within 30 days and beyond 30 days, basis sufficient cause, the condonation can be allowed up to 15 days. Basis date of issue of the certified copy of the impugned order, which is placed on record, with a date of 14.02.2022, the limitation has been counted and taken within time, but which is against the provisions in the Code. And the Appeal should be dismissed on this ground alone.

Furthermore, we also observe that in the present case, the resolution plan was approved by the CoC on 27.03.2018 / 06.04.2018 while the same was approved by the Adjudicating Authority on 27.03.2019. However, the IA Nos. 2028/2021 and 2035/2021 were preferred by the Appellants only in September, 2021, which is after more than 3 years 6 months from approval of the resolution plan by the CoC and after more than 2 years 6 months from approval of the resolution plan by the Adjudicating Authority. Thus, the said IAs were belated and unjustified and could not have been entertained. There is nothing on record to suggest that the Appellants objected to the Resolution plan, post approval by the CoC and pre-approval by the Adjudicating Authority even though they were having full knowledge of contents of the resolution plan. We observe that even though the Appellant claims that it is not challenging the resolution plan and it is just raising a question of discrimination, basis which distribution to the dissenting Financial Creditor is lower than the assenting Financial Creditor and even less than the Operational Creditor, effectively it is challenging the resolution plan. To us this is a case of challenge of resolution plan disguised as the modification in the distribution. We are convinced with the arguments of R5/SBI that IAs filed before the AA were much belated and unjustified and ought not to have been entertained at all. We observe that the Resolution Plan was approved by the CoC with 81.31% on 27.03.2018/06.04.2018, and the same was approved by the Adjudicating Authority on 27.03.2019. However, the I.A. Nos. 2028/2021 & 2035/2021 before AA were preferred by the appellants only in September 2021 i.e. after more than 3 years 6 months from approval of the Resolution Plan by the СoC and after more than 2 years 6 months from approval of the Resolution Plan by the Adjudicating Authority as noted by as earlier herein. Thus, the said IAs were much belated and unjustified and ought not to have been entertained at all because of acquiescence and gross delay on the part of the Appellants. We are also convinced with the arguments of R5/SBI that the Appellants, that in order to create appellate jurisdiction, the Appellants approached the Adjudicating Authority by filing the IA Nos. 2028/2021 & 2035/2021 despite knowing fully that the Adjudicating Authority does not have the power/jurisdiction to change/modify the approved Resolution Plan and thus, the said power/jurisdiction could not have been exercised by way of appellate jurisdiction before this NCLAT.

Perusal of the submissions of the SRA and RP and the reliefs sought by the Appellant, which, interalia, include modifying the provisions of the resolution plan which provide for the distribution of amounts payable to assenting and dissenting Financial Creditors, modifying the definitive documents executed pursuant to implementation of the resolution plan and in effect to stay the implementation of the resolution plan, we observe that it is effectively challenging the resolution plan. Such a challenge could have been done as an appeal before the Adjudicating Authority, within the statutory period provided under the Code, but it was not done so. We observe that the Appellant has filed the impugned application on 09.09.2021, only to circumvent the limitation period for filing appeals. The resolution plan was approved vide order dated 27.03.2019 and the order is not under challenge and has never been under challenge by any of the two parties. The Appellants cannot be allowed to challenge the resolution plan in the garb of their IAs being dismissed, when the order dated 27.03.2019, of the Adjudicating Authority approving the resolution plan has attained finality.

Respondents also get support from the judgment of Ghanashyam Mishra & Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited, Civil Appeal No. 8919 of 2019 which has been relied upon by Adjudicating Authority. Hon'ble Supreme Court has held as follows in this judgment:

The above judgment reaffirms the binding nature of the resolution plan as per Section 31 of the Code and we observe that the Appellant cannot be permitted to take recourse to any other mode or manner to satisfy the payment or recover the amounts payable to it other than what was envisaged under the resolution plan. We note that the resolution plan stands frozen upon its approval. By seeking amounts other than in the resolution plan, the resolution applicant could not be saddled with liabilities which were not foreseen by it. The present situation is similar to Ghanashyam Mishra & Sons Private Limited (supra) and therefore as claimed by the Appellants. it cannot be said that the judgment is not applicable in this case.

It was also argued by the Appellants that in the event that the discrimination in payment is set aside, then the same would not in any manner affect the basic structure of the Resolution Plan as the tenure of the payment (12 years), the Resolution Plan Value (Rs. 3965.06 Crores) and other pre-conditions for the benefit of Resolution Applicant would remain unaltered and only the payment to the Financial Creditors would get readjusted as per their exposure towards Corporate Debtor. For arguments sake if it is claimed that there is no change in the value of the resolution plan and it is only distribution within the same size of total plan and for that reason Ghanashyam (supra) is not applicable, we note that such an argument is not convincing as it upsets the resolution plan and brings uncertainty for the SRA. Even if this argument is accepted, we find that basis other arguments as noted herein earlier – particularly non-maintainability for which the Appeal cannot be entertained by us and also the extant legal provisions in the Code come in the way of the Appellants.

In the facts and circumstances of the case, we thus find that the appeal filed is belated one without sufficient cause and is not maintainable. We also observe that in the guise of intervention application, it is an appeal.

We also observe that the resolution plan had been agitated earlier by one Resolution Applicant Sharad Sanghi and it was settled as per orders of this Appellate Tribunal on 19^th March 2019 and Appellant in the present case being a FC, was fully aware of the proceedings. Thus, we observe that it could have intervened or filed an Appeal, which it didn’t do. By allowing the present IA of the Appellant in this case we cannot reopen the approval of the resolution plan. The Appellant is thus estopped from any relief on this Appeal.

We also note that the plan has been implemented as on November, 2021 and the business of the company has already been taken over by the new management of the company. The pay outs as envisaged under the resolution plan are already under process and disrupting them will militate against the very logic of the due process envisaged under the Code.

Adjudicating Authority vide order dated 27.03.2019 had approved the resolution plan. No appeals were filed against the resolution plan approval order within the statutory period prescribed under the Code and therefore the resolution plan approved attained finality. Being a Financial Creditor of the company, the appellant was at all times aware of all the developments with respect to the resolution plan from the date of the plan approval order till its implementation on 09.11.2021. Despite this, Appellant had chosen to file an application in September 2021, about 30 months after the approval of the resolution plan. There is an unjustifiable delay on the part of the Appellant in challenging the provisions of the resolution plan. The Appellant is effectively seeking to challenge the resolution plan at this belated stage, after the resolution plan has already attained finality.

Thus, on the count of limitation under Section 61(2) of the Code, the Appeal is not maintainable. Accordingly, the Appeal doesn’t deserve to be entertained. No intervention is required in the orders of the Adjudicating Authority. We also observe that the Appellants have been wasting the precious time of both NCLT and NCLAT by filing unjustified claims and that too belatedly.

Basis above analysis, the appeal is dismissed as not maintainable. All related IAs are also disposed of. No orders as to costs.