J. Karthiga vs DBS Bank India Limited & Ors.

(i)

Pass an order approving the resolution plan submitted by the Resolution Applicant consortium lead by Maa Kudargarhi Steel Pvt Ltd & B.M. Foods in respect of the Corporate Debtor under Section 31(1) of the Code and declare that the same is binding on the Corporate Debtor, its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan;

(ii)

Pass an order directing that pending disposal of the present application by this Tribunal, the Applicant herein shall continue to conduct her role as Resolution Professional of the Corporate Debtor and during such period shall have all powers, duties and protections as available to her as a Resolution Professional under the Code and CIRP Regulations thereunder;

(iii)

Pass an order directing the Resolution Applicant to implement the Resolution Plan in the manner set out in the resolution plan;

(iv)

Pass an order approving the appointment of Monitoring Agent (MA) and Monitoring Committee (MC) from the date of approval of resolution plan by this Hon'ble Tribunal until the date on which the Resolution Applicant acquires control of the Corporate Debtor i.e. closing date under the Resolution Plan and during such period extend protection to the MC (including extension of the protection of the moratorium against any suit, legal proceedings and investigations or have any ability with respect to anything which is done or intended to be done or omitted in good faith and in compliance with the Code, CIRP Regulations or any other applicable law) to enable it to monitor the Corporate Debtor as a going concern;

(v)

Pass an appropriate order in relation to the grant of concessions, reliefs and dispensations sought for by the Resolution Applicant in the resolution plan;

(vi)

Pass an order directing all stakeholders to cooperate with the Resolution Applicant, Monitoring Agent to keep the Corporate Debtor a going concern and to implement the Resolution Plan in the manner approved by this Tribunal and

(vii)

Pass such other order/orders as it may deem fit and proper in the facts and circumstances of the case and thus render justice.

2. CORPORATE INSOLVENCY RESOLUTION PROCESS – CAPRICORN FOOD PRODUCTS INDIA LIMITED

"13.

We have gone through the contentions and rival contentions of both the parties, it is admitted that MSME Certification was obtained behind the back of the RP and the person who applied for the said registration was never authorised either of board of directors or by the RP. Nowhere in the response, the RP has questioned the basic criteria based on which an enterprise can be registered as an MSME unit and whether the Company is eligible to be registered as MSME Unit at all.

14.

Admittedly it is not in dispute that the CIRP in relation to the Corporate Debtor was ordered by this Tribunal vide order dated 13.11.2020 and the Applicant through its employees have obtained the MSME Certificate on 02.12.2020 i.e. much after initiation of the CIRP by this Adjudicating Authority. Once the CIRP has been ordered, the Board of Corporate Debtor stands suspended and the entire management of the Corporate Debtor vest with the RP and hence the act of the Employee acting under the instructions of the suspended Board is viewed seriously by this Tribunal and such practise is required to be deprecated. However, it is required to be noted that the eligibility of the Corporate Debtor under Section 29A of IBC, 2016 is required to be determined at the time of submission of the Resolution Plan and in the present case it is the case of the Applicant that at the date of submission of the Resolution Plan, they were MSME and as such the ineligibility clause under Section 29A(c) and (h) of IBC, 2016 would not apply to them.

15.

Thus, taking into consideration the facts and circumstances of the present case, in the fitness of things, this Tribunal feels that the act of an Employee of the Corporate Debtor should not adversely affect the Resolution Process of the Corporate Debtor and in such a circumstances, we direct the RP to ratify the action taken by the person who has applied for the registration under the MSME Act. Further, the RP is also permitted to take appropriate action against the Employee who has obtained the MSME Certificate behind the back of the RP.

16.

With the above said directions, IA/771/2021 and IA/970/2021 stands disposed off."

"30.

Thus, the action of the RP in removing the 'abstained' vote from the total number of voting share would run contrary to the what has been laid down by the Hon'ble Supreme Court in K. Sashidhar (supra).

31.

The act of the RP while calculating the voting pattern, has lead to the following consequences;

(i)

By removing 'Abstained' vote from the total number of votes from the denominator, the voting share of the other Financial Creditors have been increased indirectly.

(ii)

If the vote results are being declared as such, then the Resolution Plan would not have passed the muster of 66% in and by which by a thin margin of 2.47% over and above 66% the Resolution Plan has been approved.

(iii)

By removing the 'Abstained' vote from the total number of voting share, the vote of 'HDFC Bank' has been indirectly construed as they have voted in favour of the 'Resolution Plan'.

32.

All these would show that the RP was not right in ignoring the voting share of 6.62% who has abstained from voting, from the total voting share in and by which the Resolution Plan also should fail, since it failed to garner the requisite vote share of 66% from the financial creditors. In this connection, it is required to be noted that the RP has filed his Form – H in the Resolution Plan Application i.e. IA(IBC)/661(CHE)/2022 and has certified that the Resolution Plan does not contravene the provisions of IBC, 2016 or any other provisions of law for the time being in force. Hence, we are of the view that the RP was not right in placing the Resolution Plan which has not garnered the voting share of 66% of the Financial Creditors for approval before this Adjudicating Authority in and by which the RP has violated the provisions of IBC, 2016.

33.

Thus, from the dispositive reasoning stated supra, we come to an irresistible conclusion that the Resolution Plan submitted by the RP before the CoC did not garner the requisite vote share of 66% of the Financial Creditors as mandated under Section 30(4) of IBC, 2016 and accordingly IA(IBC)/661(CHE)/2022 filed by the RP stands dismissed, with a leave to file a fresh Application, at an appropriate time, when circumstances warrants.

34.

In so far as IA(IBC)/649(CHE)/2022 is concerned as regards prayer (i) is concerned, we pass the following directions;

a. The RP is directed to convene one or more CoC meeting and the first meeting shall be within a period of 5 days from the date of this order.

b. In the interest of justice, we hereby grant the opportunity to all the three prospective Resolution Applicant's to upwardly revise their Resolution Plan amount and submit the same before the CoC.

c. The prospective Resolution Applicants viz. (i) M/s. Mantra Industries in consortium with Balaji Machine works; (ii) M/s. Maa Kudargarhi in consortium with BM Foods; and (iii) Mr. Rahoul Jain & Ms. Shuchi Jain; and the CoC members are free to negotiate the terms and commercials in respect of the Resolution Plan.

d. The personal assets of the guarantors of the Corporate Debtor are required to be dealt with in accordance with the provisions of IBC, 2016 by all the parties.

e. The RP is directed to fix a common closing date and time to the prospective Resolution Applicant in respect of the last date for the submission of the Resolution Plan and strictly no Resolution Plan from the prospective Resolution Applicant shall be received by the RP after the closing date and time.

f. Thereafter, the RP is directed to place the compliant Resolution Plan(s), so received before the CoC and e-voting may be conducted. The RP is directed to calculate the voting share strictly in accordance with the observations made by this Tribunal in the paragraphs supra and also in the light of the Judgment of the Hon'ble Supreme Court in the matter of K. Sashidhar (supra).

g. All these are required to be done by the RP within a period of 30 days from the date of this order.

h. Taking into consideration the Judgment of the Hon'ble Supreme Court in the matter of Committee of Creditors of Essar Steel India Limited -Vs- Satish Kumar Gupta and Others; (2020) 8 SCC 531, the CIRP period in respect of the Corporate Debtor is extended for a period of 30 days from the date of this order.

i.

The RP is directed to place this order before the CoC for its strict compliance in respect of the timelines.

j. The Registry of this Tribunal is directed to forward a copy of this order to IBBI for its information and records.

35.

In relation to prayer (ii) is concerned, in view of the directions passed above we are not inclined to grant the said relief to the Applicant. In respect of prayer (iii) is concerned, it was brought to the notice of this Tribunal by the Learned Counsel for the RP that substantial compliance has been made and the same was also confirmed by the Learned Counsel for the Applicant and hence nothing survives in the said prayer. In respect of prayer (iv) is concerned, since the Applicant is also one of the prospective Resolution Applicant, sharing of the valuation report with the Applicant cannot be granted by this Tribunal and accordingly the said prayer stands declined.

36.

With the above said directions, this Application stands disposed of."

** The payment is over and above the Surplus Cash (estimated to be in excess of Rs.25 Crore)

3. ABOUT THE CORPORATE DEBTOR

4. SOURCE OF FUND

Net worth Certificate

This is to certify that Networth of M/s Maa Kudargarhi Steels Private Limited, having its registered office at Near Ring Road No.2, Opposite Bajrang Alloys, Village Sarora Raipur-493221 (C.G.) as under:

Networth as on: 31.03.2021

Particulars	Amount (In Rs.)
Paid up Capital	2,26,06,910.00
Add: Reserve & Surplus	84,92,15,290.09
Total Net worth	87,18,22,200.09

This is to certify that the above mentioned information is true to the best of my knowledge and belief, according to the books and documents produced before me for verification.

Net worth Certificate

On the basis of books of accounts & relevant records produced before me and explanations/ clarifications given by the personnel of firm this is to certify that Net worth of M/s BM Foods, having its factory at Bhittikala, Ambikapur, Surguja (C.G.) is Rs. 11,17,81,280.16 as on 31.03.2021.

5. DETAILS OF MONITORING AND IMPLEMENTATION OF RESOLUTION PLAN

STEP 1: NCLT APPROVAL DATE ACTIONS:

Upon receipt of the approval of the Resolution Plan by the Hon'ble NCLT, the following actions shall have been deemed to have taken without any further action ordered by any person:

(i)

The appointment of the monitoring committee shall come into force consisting of 2 (two) members from the Committee of Creditors which have the largest share in the Admitted Financial Debt and the Resolution Professional-Mrs. J. Karthiga.

(ii)

The existing board of directors of the Company shall stand dissolved and the existing directors shall be deemed to have resigned without any further step/action.

(iii)

The existing board shall be replaced by the Monitoring Committee. It is clarifies that this structure has been proposed by the Resolution Applicant to ensure that the various corporate actions which required to be taken by the Company, for the implementation of the Resolution Plan (such as passing of board resolutions for capital reduction, issuance of shares) can be completed, so that the payment proposed to be made within 30 days under this Resolution Plan to the creditors can be completed in such a timeframe. The Monitoring Committee shall be bound to undertake the actions required including but not limited to, passing necessary resolutions, authorizing persons to sign loan agreement, making filings and applications, and other necessary and corollary actions required for the implementation of this Resolution Plan.

(iv)

During this period an independent O&M contractor (nominated by the Monitoring Committee) shall be responsible for the operation and maintenance of the Company's facilities.

(v)

Further, subject to applicable law, the monitoring committee shall ensure that the Company shall not incur any liabilities after the NCLT Approval date and until the Effective Date, other than in the ordinary course of business.

(vi)

Once this Resolution Plan is approved by the COC the Resolution Applicant shall (prior to the NCLT Approval Date) agree on the fees, costs and expenses which may be incurred by the Resolution Professional, Monitoring Committee and the O&M Contractor, in discharging their duties after the Effective Date (the Interim Management Cost). The Interim Management Cost shall be funded on a monthly basis from cash flows of the Company. In the event such cash flows are insufficient, the Interim Management Costs shall be borne by the Resolution Applicant.

(vii)

Monitoring Committee will arrange meetings on a time-to-time basis with notice in advance to understand the stage of implementation of the Resolution Plan and further course of action with respect to the Resolution Plan.

STEP 2: ACTIONS FROM NCLT APPROVAL DATE TILL EFFECTIVE DATE

(i)

After the NCLT Approval Date, the SPV shall provide the SPV Loan, to the Company. The Company may (with approval of the Monitoring Committee, which shall be granted) enter into a loan-agreement/relevant agreements with the SPV for such disbursements on the terms and conditions stated by the SPV and such loan/debentures shall carry an interest as per applicable law along with an option to convert such loan into equity shares of the Company at any time.

(ii)

Within a period of 30 days of the NCLT Approval Date, payments shall be made to the stakeholders in the following manner and order:

a. Payment towards outstanding CIRP costs (if any)

b. Payments to Operational Creditors in accordance with Clause 8.

(iii)

The assignee and the Secured Financial Creditors shall mutually agree on the form of Assignment Agreement.

STEP 3: PAYMENS TO BE MADE TO CREDITORS AND ASSIGNMENT OF ASSIGNED DEBT

(i)

Upon finalization of the form of the Assignment Agreement, the Resolution Applicant shall fix a date for implementation of the Resolution Plan, which date shall be within 30 Days from the NCLT Approval Date (unless extended with the consent of the Secured Financial Creditors).

(ii)

The Resolution Professional shall deliver to the monitoring committee a certified and audited statement, setting out the amount of Surplus Cash as of the NCLT Approval Date.

(iii)

Within 30 days, payments shall be made to the stakeholders in the following manner and order:

a. Payment of Surplus Cash to the Secured Financial Creditors.

b. Payment of CD FC Settlement Amount to the Secured Financial Creditors.

c. Payment of Loan Assignment Payment to the Secured Financial Creditors by the Assignee as a consideration for assignment of Assigned Debt along with Assigned Rights

Pursuant to the approval of the Resolution Plan on the NCLT Approval Date, the Assigned Debt along with Assigned Rights will be assigned [by way of operation of this Resolution Plan) by the Secured Financial Creditors to the Assignee in lieu of consideration which shall be the Loan Assignment Payment. The Loan Assignment Payment made by the Resolution Applicant or any other person nominated by the RA as the Assignee shall be deemed to have been made by the Resolution Applicant itself.

(iv)

The Secured Financial Creditors shall execute an Assignment Agreement in favour of the Assignee in the form agreed between to the Resolution Applicant and the Secured Financial Creditors against the receipt of the Loan Assignment Payment if required by the Resolution Applicant/ the Assignee, the Secured Financial Creditors shall Lake such steps as may be reasonably required to give effect to the above assignment.

On the NCLT Approval Date, consent of the Company shall be deemed to be given to such assignment of debt, irrespective of the terms of such assignment. The Assigned Debt shall stand transferred to the Assignee and the Loan Assignment Payment shall be released to the Secured Financial Creditor. On the NCLT Approval Date, any breaches and/or any enforcement actions that have been initiated by the Secured Financial Creditors prior to the NCLT Approval Date and are currently pending against the Company, shall be revoked and withdrawn and consent of the Secured Financial Creditors shall be deemed to have been given for such withdrawal and revocation.

(v)

Simultaneously with release of the Loan Assignment Payment from the Assignee, signed charge modification forms shall be provided by the Secured Financial Creditors and the security trustees/ security agents/ Secured Financial Creditors of the Company shall undertake such steps as may be required by the Resolution Applicant/Assignee (as may be applicable) without any further payment, to ensure the modification of charge mortgage/encumbrance/pledge as per the directions of the Resolution Professional/the Resolution Applicant/ Assignee (as may be applicable). No transfer of shares by a shareholder of the Company is to be permitted between release of the pledge and the capital reduction.

(vi)

To facilitate the implementation of the Resolution Plan on the Effective Date, the Secured Financial Creditors (and/or their security trustee, as relevant) shall provide the following to the Assignee ("Deposit Documents"):

a. 2 originals of Assignment Agreement, duly executed by the Secured Financial Creditors,

b. charge modification forms, duly executed by the secured Financial Creditors for modification of the Existing Security Interest excluding Non-Assigned Rights:

c. all title documents, title deeds, share pledge documents share certificates, share transfer forms that were deposited with them by the Corporate Debtor or its shareholders in connection with Security Interest as defined in the Assigned Rights or in respect of shares of the Corporate Debtor, and

d. a no-dues certificate in favour of the Company, duly executed by the Secured Financial Creditors in the form acceptable to Resolution Applicant

STEP 4: CONVERSION OF SPV LOAN TO EQUITY SHARES OF THE COMPANY, CAPITAL REDUCTION

(1) CONVERSION OF SPV LOAN INTO EQUITY SHARES OF THE COMPANY:

The Company shall issue and allot to the SPV equity shares in the Company, of the face value of INR 10 each (credited as fully paid-up) at par, by way of conversion of part or full of the SPV Loan. No further approval or consent shall be necessary from any other person/ governmental authority and no shareholders resolution shall be required in relation to the aforesaid action under any agreement, the existing constitution documents of the Company or under any applicable law and the approval of the NCLT (pursuant to Section31 of the IBC) to the Resolution Plan shall constitute approval of the issuance of equity shares of the Company to the SPV by way of conversion of the part of the SPV Loan

(II) CAPITAL REDUCTION:

As an integral part of the Resolution Plan and simultaneously with the issue of shares by the Company by conversion of part of the SPV Loan, as stated above, the existing med equity share capital of the Company each held by previous shareholders of the Company shall be entirely cancelled and extinguished (Capital Reduction), without any payment to such shareholders. There shall be no requirement to add "and reduced in the name of the Company.

The Capital Reduction shall not require any payment by the Company, the Resolution Applicant the Shareholder or the SPV to any existing shareholders of the Company.

The Capital Reduction shall not require the consents of any of the creditors of the Company or approval of any of the shareholders of the Company, or any other person having security interest over such shares and the approval of the NCLT (pursuant to section 31 of the code) to the Resolution Plan shall constitute approval of the reduction of share capital and shall be binding on the company and its stakeholders (including its creditors and shareholders).

(iii) REORGANIZATION OF THE SHARE CAPITAL:

The authorized share capital of the company as required may be increased and the stamp duties and registration charges shall be payable by the Company from the cash flows and any shortage will be met by the Resolution Applicant/SPV.

Accordingly, the capital clause of the Memorandum of the Articles of the Company shall and without any further act, deed, instrument, resolution or writing be replaced as required.

(iv) RECONSTITUTION OF BOARD, CHANGE OF NAME AND OTHER MATTERS;

Pursuance to the issuance of equity shares and Capital Reduction, the Board of the Directors shall be appointed as per the directions of the Resolution Applicant

Upon the issuance of equity shares against conversion of part of the SPV Loan and Capital Reduction, the name of the Company may be changed to such other name as determined by the Resolution Applicant, at its discretion post the Effective Date.

The entire equity share capital shall be held by the SPV and its nominees.

It is clarified that issuance of equity shares and/or compulsory convertible debentures by the Company upon conversion of part of SPV Loan, and capital reduction will be approved and implemented pursuant to the provision of IBC specifically, Regulation 37 of the CIRP Regulations read with Section 31 of the IBC, and will not be undertaken under the provisions of CA 2013, and the provisions of this Resolution Plan shall be deemed to be in accordance with and constitute compliance with any and all provisions of the law that would have otherwise applied to a similar restructuring or reduction of capital under CA 2013 and/or under rules/circulars/regulations/press notes/clarifications issued thereunder. Therefore, no separate shareholders resolution shall be required for the aforesaid actions/issuances.

It is further clarified that a company is not ordinarily permitted to carry forward its unabsorbed business losses in case of a change in the shareholding or such company in excess of 51% (fifty-one percent) as per Section 79 of the income-tax Act 1961. However, this restriction does not apply if such change in shareholding takes place pursuant to a resolution plan approved under the IBC, provided that the jurisdictional Principal Commissioner of Income-tax or the jurisdictional Commissioner of Income-tax (as appropriate), is afforded reasonable opportunity to express his views in this regard. Accordingly, the Resolution Professional shall, or cause the Company to serve a notice to jurisdictional principal commissioner of Income-tax or the jurisdictional commissioner of Income-tax (as appropriate) immediately after this Resolution Plan is submitted to the NCLT for its approval, and the Company should be permitted to carry forward its unabsorbed business losses notwithstanding a change in the shareholding of the Company pursuant to this Resolution Plan. For the avoidance of doubt, it is clarified that the Resolution Plan is not conditional upon grant of carrying forward of the unabsorbed business losses in case of a change in the shareholding of such company in excess of 51% (fifty-one percent) as per Section 79 of the Income-tax Act, 1961.

The Resolution Professional/management and officers of the company shall allow the possession of premises/offices of the company, all passwords, bank account details, cheque books, statutory registers, minute books, financial and tax records, all communication with vendors, customers, government and regulatory authorities and all other documents pertaining to the company and its business, information technology systems(including all software's and hardware's) access to ERP system etc. to the Resolution Applicant on the Effective Date.

(V) CHARTER DOCUMENTS:

On the Effective Date, the Memorandum of Association and the Articles of Association or the Company shall automatically, without any further act or deed be substituted and replaced with the form of memorandum of association and articles of association (the "New Charter Documents") as provided by the Resolution Applicant. Nothing in the Memorandum of Association and the Articles of Association of the Company shall affect the implementation of the Resolution Plan or any actions to be taken pursuant thereto, till the Effective Date

On and from the Effective Date, the Resolution Applicant shall have the right to appoint suitably qualified and experienced persons as the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and other key personnel in the functions of sales & marketing finance, human resources and operations, as well as in the post of "Key Managerial Personnel of the company.

6. PERFORMANCE BANK GUARANTEE

7. IA(IBC)/1501(CHE)/2022 – OBJECTION TO THE RESOLUTION PLAN

a. That this Hon’ble Tribunal may be pleased to direct the Respondent to exclude the Nashik Land from being dealt with in any manner from the Resolution Plan.

b. Pass such other order or orders as this Hon'ble Tribunal may deem fit.

"2.

I say and submit that during the pendency of the captioned Application, certain Financial Creditor of subsidiary of the Corporate Debtor I.e. Gonglu Agro Private Limited, had preferred Applications bearing no.IA/1501(CHE)/2022 stating that the approval of the Resolution Plan submitted by the SRA in the case of the Corporate Debtor would impact the smooth functioning of Corporate Insolvency Resolution Process of Gonglu Agro Private Limited. The alleged objection is with respect to certain parts of lands belonging to the Corporate Debtor which are being utilized by Gonglu Agro Private Limited for its business purposes. Therefore, approval of the said Resolution Plan would hinder the resolution of Gonglu Agro Private Limited and defeat the purpose of achieving the maximization of value of its assets.

3.

I humbly say and submit that the said allegations raised by the Financial Creditors are denied, however, in view of the delay and for the sake of prompt approval of the Resolution PLan, the SRA undertakes the following:

- That the SRA shall relinquish its rights under the Resolution Plan in respect of the lands as described below:

Jaitapur Village, Chandvad Taluk, Nasik District A dry land to an extent of 15 acres located in the premises of Gonglu Agro Pvt. Ltd. [Gat No. 211 (part), 213 (part)]

“iii.

I submit that on the hearing held on 10.05.2023, the counsel appeared for the successful resolution applicant stated that the successful resolution Applicant will pay the entire plan amount as envisaged in 1A/1052/2022 without deducting anything towards 'Nasik Land'. After recording the undertaking given by the counsel for the successful Resolution Applicant this Hon'ble Tribunal was pleased to reserve orders in the application on 10.05.2023. A copy of the order dated 10.05.2023 is submitted herewith as Annexure - 2.

iv.

I submit that this Hon'ble Tribunal on 13.06.2023 has directed the Applicant to file an Affidavit in this regard. The successful resolution applicant has sent an email confirmation on 14.06.2023 that they will pay the entire resolution plan amount as envisaged in 1A/1052/2022 without deducting any amount towards the value of 'Nasik land'. A copy of the said email is submitted herewith as Annexure-3.”

Jaitapur Village, Chandvad Taluk, Nasik District A dry land to an extent of 15 acres located in the premises of Gonglu Agro Pvt. Ltd. [Gat No. 211 (part), 213 (part)]

8. TABULATION OF VARIOUS COMPLIANCES REQUIRED UNDER THE PROVISIONS OF IBC, 2016

13. RELINQUISHMENT/WAIVER OF LIABILITIES AND APPROVALS

14. PAYMENT OF DUES OF THE STATUTORY AUTHORITIES

15. ANALYSIS AND FINDINGS OF THIS TRIBUNAL

"89. Conclusion

a)

...

b)

CIRP and avoidance applications, are, by their very nature, a separate set of proceedings wherein, the former, being objective in nature, is time bound whereas the latter requires a proper discovery of suspect transactions that are to be avoided by the Adjudicating Authority. The scheme of the IBC reinforces this difference. Accordingly, adjudication of an avoidance application is independent of the resolution of the corporate debtor and can survive CIRP

c)

The endeavour of the IBC and its rules and regulations is to ensure that all processes within the insolvency framework are time efficient. While the law mandates a resolution plan to necessarily provide for the treatment of avoidance applications if the same are pending at the time of submission of resolution plans, it cannot be accepted that avoidance applications will be rendered infructuous in situations wherein the resolution plan could not have accounted for avoidance applications due to exigencies that delayed initiation of action in respect of avoidable transactions beyond the submission of a resolution plan before the adjudicating authority. This is because such an interpretation will render the provisions pertaining to suspect transactions otiose and let the beneficiaries of such transactions walk away, scot-free. Money borrowed from creditors is essentially public money and the same cannot be appropriated by private parties by way of suspect arrangements. Therefore, in cases such as the present one, wherein such transactions could not be accounted, the Adjudicating Authority will continue to hear the application. Such benefit cannot be given in cases where the RP had already applied for prosecution of avoidance applications and the applicant ought to have been cognizant of pending avoidance applications but did not account for the same in its resolution plan.

d)

...

e)

...

f)

..."

"19...In the present case, however, our focus must be on the dispensation governing the process of approval or rejection of resolution plan by the CoC. The CoC is called upon to consider the resolution plan under Section 30(4) of the I&B Code after it is verified and vetted by the resolution professional as being compliant with all the statutory requirements specified in Section 30(2).

62.

...In the present case, however, we are concerned with the provisions of I&B Code dealing with the resolution process. The dispensation provided in the I&B Code is entirely different. In terms of Section 30 of the I&B Code, the decision is taken collectively after due negotiations between the financial creditors who are constituents of the CoC and they express their opinion on the proposed resolution plan in the form of votes, as per their voting share. In the meeting of the CoC, the proposed resolution plan is placed for discussion and after full interaction in the presence of all concerned and the Resolution Professional, the constituents of the CoC finally proceed to exercise their option (business/commercial decision) to approve or not to approve the proposed resolution plan. In such a case, non-recording of reasons would not per-se vitiate the collective decision of the financial creditors. The legislature has not envisaged challenge to the “commercial/business decision” of the financial creditors taken collectively or for that matter their individual opinion, as the case may be, on this count.”

42.

...Thus, it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of Section 30(2) of the Code, insofar as the Adjudicating Authority is concerned, and Section 32 read with Section 61(3) of the Code, insofar as the Appellate Tribunal is concerned, the parameters of such review having been clearly laid down in K. Sashidhar (supra).

“55.

Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan “as approved” by the requisite per cent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated requirements. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides: (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board. The Board referred to is established under Section 188 of the I&B Code. The powers and functions of the Board have been delineated in Section 196 of the I&B Code. None of the specified functions of the Board, directly or indirectly, pertain to regulating the manner in which the financial creditors ought to or ought not to exercise their commercial wisdom during the voting on the resolution plan under Section 30(4) of the I&B Code. The subjective satisfaction of the financial creditors at the time of voting is bound to be a mixed baggage of variety of factors. To wit, the feasibility and viability of the proposed resolution plan and including their perceptions about the general capability of the resolution applicant to translate the projected plan into a reality. The resolution applicant may have given projections backed by normative data but still in the opinion of the dissenting financial creditors, it would not be free from being speculative. These aspects are completely within the domain of the financial creditors who are called upon to vote on the resolution plan under Section 30(4) of the I&B Code.

58.

Indubitably, the inquiry in such an appeal would be limited to the power exercisable by the resolution professional under Section 30(2) of the I&B Code or, at best, by the adjudicating authority (NCLT) under Section 31(2) read with Section 31(1) of the I&B Code. No other inquiry would be permissible. Further, the jurisdiction bestowed upon the appellate authority (NCLAT) is also expressly circumscribed. It can examine the challenge only in relation to the grounds specified in Section 61(3) of the I&B Code, which is limited to matters "other than" enquiry into the autonomy or commercial wisdom of the dissenting financial creditors. Thus, the prescribed authorities (NCLT/NCLAT) have been endowed with limited jurisdiction as specified in the I&B Code and not to act as a court of equity or exercise plenary powers." (emphasis supplied)

"73.

There is no doubt whatsoever that the ultimate discretion of what to pay and how much to pay each class or sub-class of creditors is with the Committee of Creditors, but, the decision of such Committee must reflect the fact that it has taken into account maximising the value of the assets of the corporate debtor and the fact that it has adequately balanced the interests of all stakeholders including operational creditors. This being the case, judicial review of the Adjudicating Authority that the resolution plan as approved by the Committee of Creditors has met the requirements referred to in Section 30(2) would include judicial review that is mentioned in Section 30(2)(e), as the provisions of the Code are also provisions of law for the time being in force. Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. If the Adjudicating Authority finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the Committee of Creditors to re-submit such plan after satisfying the aforesaid parameters. The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal." (emphasis supplied)

76.

The expositions aforesaid make it clear that the decision as to whether corporate debtor should continue as a going concern or should be liquidated is essentially a business decision; and in the scheme of IBC, this decision has been left to the Committee of Creditors, comprising of the financial creditors. Differently put, in regard to the insolvency resolution, the decision as to whether a particular resolution plan is to be accepted or not is ultimately in the hands of the Committee of Creditors; and even in such a decision making process, a resolution plan cannot be taken as approved if the same is not approved by votes of at least 66% of the voting share of financial creditors. Thus, broadly put, a resolution plan is approved only when the collective commercial wisdom of the financial creditors, having at least 2/3rd majority of voting share in the Committee of Creditors, stands in its favour.

77.

In the scheme of IBC, where approval of resolution plan is exclusively in the domain of the commercial wisdom of CoC, the scope of judicial review is correspondingly circumscribed by the provisions contained in Section 31 as regards approval of the Adjudicating Authority and in Section 32 read with Section 61 as regards the scope of appeal against the order of approval.

77.1.

Such limitations on judicial review have been duly underscored by this Court in the decisions above-referred, where it has been laid down in explicit terms that the powers of the Adjudicating Authority dealing with the resolution plan do not extend to examine the correctness or otherwise of the commercial wisdom exercised by the CoC. The limited judicial review available to Adjudicating Authority lies within the four corners of Section 30(2) of the Code, which would essentially be to examine that the resolution plan does not contravene any of the provisions of law for the time being in force, it conforms to such other requirements as may be specified by the Board, and it provides for: (a) payment of insolvency resolution process costs in priority; (b) payment of debts of operational creditors; (c) payment of debts of dissenting financial creditors; (d) for management of affairs of corporate debtor after approval of the resolution plan; and (e) implementation and supervision of the resolution plan.

77.2.

The limitations on the scope of judicial review are reinforced by the limited ground provided for an appeal against an order approving a resolution plan, namely, if the plan is in contravention of the provisions of any law for the time being in force; or there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period; or the debts owed to the operational creditors have not been provided for; or the insolvency resolution process costs have not been provided for repayment in priority; or the resolution plan does not comply with any other criteria specified by the Board

77.6.1.

The assessment about maximisation of the value of assets, in the scheme of the Code, would always be subjective in nature and the question, as to whether a particular resolution plan and its propositions are leading to maximisation of value of assets or not, would be the matter of enquiry and assessment of the Committee of Creditors alone. When the Committee of Creditors takes the decision in its commercial wisdom and by the requisite majority; and there is no valid reason in law to question the decision so taken by the Committee of Creditors, the adjudicatory process, whether by the Adjudicating Authority or the Appellate Authority, cannot enter into any quantitative analysis to adjudge as to whether the prescription of the resolution plan results in maximisation of the value of assets or not. The generalised submissions and objections made in relation to this aspect of value maximisation do not, by themselves, make out a case of interference in the decision taken by the Committee of Creditors in its commercial wisdom

78.

To put in a nutshell, the Adjudicating Authority has limited jurisdiction in the matter of approval of a resolution plan, which is well defined and circumscribed by Sections 30(2) and 31 of the Code read with the parameters delineated by this Court in the decisions above referred. The jurisdiction of the Appellate Authority is also circumscribed by the limited grounds of appeal provided in Section 61 of the Code. In the adjudicatory process concerning a resolution plan under IBC, there is no scope for interference with the commercial aspects of the decision of the CoC; and there is no scope for substituting any commercial term of the resolution plan approved by the CoC. Within its limited jurisdiction, if the Adjudicating Authority or the Appellate Authority, as the case may be, would find any shortcoming in the resolution plan vis-à-vis the specified parameters, it would only send the resolution plan back to the Committee of Creditors, for re-submission after satisfying the parameters delineated by Code and exposited by this Court.