Manav Investment & Trading Company Limited vs Sri Pratim Bayal & Ors.

Per Arvind Devanathan, Member (Technical):

This Court is congregated through hybrid mode.

SN PARTICULARS PAGE NO(S).

I.A. (IB) No. 1599/KB/2023 5 – 17 (Manav Investment & Trading Company Limited)

I.A. (IB) No. 1648/KB/2023 17 – 29 (HDFC Bank Limited)

I.A. (IB) No. 1069/KB/2022 30 – 36 (Jamshedpur Transport Company Ltd.)

This Application has been filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, for brevity “I&B Code”/ “IBC”/ “Code” read with other provisions of law by Manav Investment & Trading Company Limited, seeking following relief that:

Birla Tyres Limited, the Corporate Debtor herein was made to undergo Corporate Insolvency Resolution Process (CIRP) under Section 9 of IBC, pursuant to an application filed by the Operational Creditor, SRF Limited. Mr. Seikh Abdul Salam was appointed as an IRP.

Vide an Order dated June 29, 2022, by this Tribunal, the Mr. Seikh Abdul Salam was appointed as a Resolution professional of the Corporate Debtor and on September 13, 2022, invitation of EOI for submission of Resolution Plan was published.

Further, Vide an Order dated October 31, 2022, as per the decision of the Committee of Creditors (in short “CoC”) by 90.74% voting to change the RP, Sri Pratim Bayal was appointed as the new RP of the Birla Tyres (Corporate Debtor) in place of Mr. Seikh Abdul Salam.

In the process of CIRP, the CoC of the Corporate Debtor approved a Resolution Plan and the same has been submitted before this Tribunal for approval in terms of Section 31 of IBC read with Section 30 and regulations made under CIRP Regulations 2016.

The Applicant claims that the Resolution Plan, which has been approved by the Committee of Creditors, “CoC”, and submitted for final approval before this Tribunal, is contrary to law and provisions of the I&B Code read with other applicable regulations and the same will cause prejudice to the Corporate Debtor, its worker, stakeholder and all concerned. Further, it is the contention of the Applicant that the RP and the members of the CoC have passed and approved this Resolution Plan arbitrarily and in a perverse manner.

The Ld. Counsel for the Applicant claims that the applicant is one of the shareholders of the Corporate Debtor, currently holding 64,17,421 number of shares in Corporate Debtor which is equivalent to 4.73% of the paid-up share capital of the Corporate Debtor and also one of promoter entities of the Corporate Debtor.

It is further claimed that the instant application has been filed by the Applicant upon coming to know that the CoC of the Corporate Debtor has approved the Resolution Plan submitted by the Respondent No. 2, Dalmia Bharat Refractories Limited along with their strategic partner, Respondent No. 3 who have been declared as Successful Resolution Applicants (SRAs).

It is alleged by the Applicant that the Resolution Plan submitted for approval by RP is contrary to the provisions of the I&B Code and does not fulfil the required parameters under Section 30 of the Code.

The Ld. Counsel for the Applicant claims that the Resolution Plan contemplates two scheme of demerger/arrangement which appears from Schedule 8 at Page 179 and Schedule 9 at Page 198 of this IA. It is alleged that the core assets will no longer be part of the Corporate Debtor. As per the Resolution Plan, the Corporate Debtor will be divested of its core assets. The Resolution Plan is against the “going concern” principle envisaged under IBC and is destructive of the Corporate Debtor.

Further, it is alleged that the Scheme of demerger/ schedule 8 is contrary to the interest of the workers and employees whose employment is at risk because there is no assurance or undertaking to provide continuity of employment for all the workers and employees of the Corporate Debtor and no manufacturing unit or division will be retained in Corporate Debtor. Further, the transfer of Tyre Undertaking is in violation of the provisions under Section 25FF of the Industrial Disputes Act.

Further, the Ld. Counsel for the Applicant claims that Successful Resolution Applicants do not have any connection with the family name “Birla” and use of this family name sans the participation of a member of Birla family, is not appropriate.

It is further alleged that the Resolution Plan lacks feasibility and viability as it fails to show how the ailing industry will be revived and the interests of workers will be protected. It is claimed that the CoC in its collective wisdom is interested only in the recovery of their money despite the insolvency resolution process not being a debt recovery mechanism. Successful Resolution Applicant (SRA) is also not interested in running the business of the Corporate Debtor or else would not have taken away the tyre factory itself out from the Corporate Debtor.

Further, it is alleged that the Resolution Plan is vague and uncertain. That, Schedule 4 under the heading “Assumptions and Limitations” at page 149 of this I.A. is vague and uncertain and SRA has relied upon certain assumptions for achieving successful implementation of the Plan which goes to demonstrate that the Resolution Plan is based on contingency and therefore becomes non-implementable and is in violation of Section 30(2)(d) of IBC.

Further, the Ld. Counsel for the Applicant claims that the Resolution Plan is conditional and there is no scope to revive the Corporate Debtor after approving it.

Further, it is claimed that the Closing Date in the Resolution Plan, mentioned in Page 102 of this I.A. is subjective and vague and cannot extend moratorium beyond the Order date envisaged in the proviso to Section 14(4) of I&B Code.

Further, it is alleged that the Resolution Plan is providing differential treatment to the financial creditors. Special definition has been made for Axis bank Debt, which is defined at Page 100 of I.A. and includes all claims of said bank, as also provides for difference in treatment for repayment under para 3.4.C at page 124 of this IA which seeks to compulsorily discharge the unsustainable debt of Axis bank, which also includes claims only for Axis bank, by issuance of equity shares of Corporate Debtor at face value, while an option is being granted to the other lenders in Para 3.4.D for assignment of unsustainable debt.

Further, it is claimed that purported Resolution Plan provides at Para 3.2.2 at Page 46 of this I.A. the provision of non-payment of the related party financial creditors which is contrary to Section 30(2)(b) read with Section 53 of the I&B Code.

Ld. Counsel for the Applicant alleges that the gratuity fund is not the asset of the Corporate Debtor and cannot be used for PF payment. Under para 3.3 in Schedule 2 of the Resolution Plan on implementation at page 122 of this I.A., PF dues if any paid by SRA will be adjusted against the KICM Gratuity Fund. It is claimed that the same cannot be done since the KICM Gratuity Fund is exclusively for payment of gratuity to workers and employees and cannot be used for payment of RF dues.

Further, the Ld. Counsel for the Applicant is alleged that the Resolution Plan clubs workers and employees into the same basket contrary to Section 30(2)(b) read with Section 53 of the Code. At Pages 44 and 45 of this I.A., it will appear that while pay-out of 28.85% is proposed for Secured Financial Creditors, pay out proposed to workmen, who have been wrongly clubbed with Employees is only 8.19%. This is contrary to Section 30(2)(b) of the Code.

The Ld. Further claims that Paragraph 4.9.1 at page 57 of IA in stating that measures and actions set out in the Resolution Plan shall take effect notwithstanding anything inconsistent in law is contrary to Section 30(2)(e) of the IBC. Consequently, Paragraph 4.9.2 of the Plan is also beyond the powers of NCLT.

The Ld. Counsel for the Applicant further submits that the Resolution Plan is violative of Section 79 of the Income Tax Act as the IT Authorities are only entitled to issue notice under section 79 of the Income Tax Act and the Resolution Plan at page 59 of IA cannot deem that the Principal Commissioner of Income Tax has no objection to carry forward of loss of Rs 493 crore and unabsorbed depreciation of Rs 459 crore in CD, or its transfer to SRA under transfer of tyre undertaking which is not even an undertaking within the meaning of Section 2(19AA) of the Income Tax Act, 1961. SRA by claiming unabsorbed depreciation and carry forward of losses is in effect proposing to gain more than the RA infusion amount; and in effect, RA is getting the core assets and properties of CD comprising its tyre undertaking and incomplete PCR tyre unit free of cost.

Further it is claimed that the resolution plan value is less than the liquidation value. If plan value of SRA is discounted at 10% to arrive at net present value considering the three-year payout schedule, it comes to Rs.306 crore at page 46 of IA (as against total plan value of Rs 347.03 crore and includes Rs 37.03 crores of Gratuity liability which is held back and is subject to availability with KICM Gratuity Fund. Therefore, the actual of payout could even go down to Rs 268.97 crore [Rs 306 crore –Rs 37.03 crore] as against the disclosed Liquidation value of Rs.335.10 crore.

Ld. Counsel for the Respondent verbally argues that:

That, the objections raised by the Applicant are frivolous and not maintainable in law.

The Ld. Counsel brought to our Attention Regulation 37 of the IBBI (Insolvency Resolution Process for Corporate Person) Regulation, 2016 which provides “transfer of all or part of the assets of the corporate debtor to one or more persons; sale of all or part of the assets whether subject to any security interest or not; and restructuring of the corporate debtor, by way of merger, amalgamation and demerger;”.

That, therefore, objection relating to the transfer of the entire unit for the purpose of the resolution plan is covered by the said regulations.

That the plan provides to keep CD as a going concern and all the employees would continue to work for the purpose of providing labour support to the undertaking which is going to be demerged.

Regarding the usage of the name “Birla”, the Applicant has no locus standi and if at all the same needs to be questioned, it would be the owners of “Birla Group”, and not the minority shareholder of the CD.

The CD continues to exist and therefore the question of changing the name of the CD does not arise and nevertheless cannot be questioned by the Applicant as stated above.

The challenge to the Resolution Plan alleging that the plan lacks feasibility, viability, certainty etc. are subject matters to be discussed and approved by the CoC. The Ld. Counsel for the Respondent submits that the Adjudicating Authority will go by the commercial wisdom of CoC unless the Plan is in violation of Section 30 of I&B Code read with IBBI (Insolvency Resolution Process for Corporate Person) Regulation, 2016. The CoC has approved the Plan with 82.48% votes. All other challenges made by the applicant to the Resolution Plan are frivolous and, in any case, the applicant herein has no locus standi to make such allegation against Respondent.

The Ld. Counsel further submits that this is not the case of where the company is under liquidation to claim that the Applicant is also a stakeholder in terms of Section 53 of I&B Code. He submits that on this ground alone and this application is not maintainable.

We have heard the submission made by the Ld. Counsels.

We are of the view that the Resolution Plan rightly provides for the transfer of assets and liabilities in terms of Regulation 37 of the IBBI (Insolvency Resolution Process for Corporate Person) Regulation, 2016, reproduced verbatim:

Further, in terms of Section 232 of the Companies Act, 2013, upon the final sanction of any scheme of arrangement all the properties, rights and interest of Demerged Company be transferred to and vested in without further act or deed in Resulting Company. We reproduce Section 232 of the Companies Act, 2013, verbatim:

Further, on the allegation of using the name of the “Birla” sans the participation of members of the Birla family, we are of the view that the applicant is neither a member of the “Birla” family nor authorized person to represent the “Birla” family. Thus, the Applicant herein has no locus standi to raise this allegation.

All other allegations relating to the resolution Plan being not viable, feasible, uncertain, conditional etc. have been dealt with by this Adjudicating Authority in the application being I.A. (IB) No. 1527/KB/2023 seeking the approval of the Resolution Plan.

The allegation relating to extension of Moratorium Period till the closing date of the Plan is misconceived as the moment Resolution Plan is approved under Section 31(1) of the IBC, the Moratorium Order passed under Section 14 of IBC shall cease to have effect, and therefore, the question of granting the protection under Moratorium beyond the date of approval of Resolution Plan by the Adjudicating Authority does not arise.

The allegation relating to the gratuity fund has been dealt at Page 5 of the Resolution Plan (Annexed at Page 46 to this I.A.) as under:

Regarding allegation relating to Plan value being less than liquidation value, we find that on the face of it the plan value is INR 347.03 Crore as against the liquidation value of 335.10 Crore. It is only when discounting for future cash pay-out is applied, the value comes down to INR 306 Crore. We rely upon the judgment passed by the Hon’ble Apex Court in the case of Maharashtra Seamless Limited v. Padmanabhan Venkatesh & Ors. (CIVIL APPEAL NO. 4242 OF 2019) reported in [2020] ibclaw.in 03 SC that:

On the allegation that the Resolution Plan clubs workers and employees into the same basket contrary to Section 30(2)(b) read with Section 53 of the Code, relying on the Honourable Supreme Court Judgement in the case of India Resurgence ARC, we respectfully reproduce the following words of the Apex court in that order that Section 53 is only referred to in order that a certain minimum figure be paid to different classes of operational and financial creditors. It is only for this purpose that Section 53(1) is to be looked at as it is clear that it is the commercial wisdom of the Committee of Creditors that is free to determine what amounts be paid to different classes and subclasses of creditors in accordance with the provisions of the Code and the Regulations made thereunder.” to state that this allegation too does not survive.

We have gone through the Resolution plan submitted before us. We found that CoC in their commercial wisdom has approved the plan with a majority of 82.48% percentage of votes. We have examined whether the Plan contravenes Section 30(2) of I&B Code and other applicable Sections of the Code read with relevant regulations under the IBBI (Insolvency Resolution Process for Corporate Person) Regulation, 2016, in I.A. (IB) No. 1527/KB/2023, seeking approval of the Resolution Plan, and the application has been approved, after noting that the Plan does not contravene Section 30 or any other applicable sections of the I&B Code. Therefore, the issues raised in this instant application does not survive and are liable to be dismissed.

We could have dismissed this application on the ground that the Applicant has no locus to file this Application, buy yet decided to deal with the issues raised. In view of the above discussion, this application being I.A. (IB) No. 1599/KB/2023 is dismissed.

No Costs.

This instant application has been filed under Section 60(5) of The Insolvency and Bankruptcy Code, 2016 read with Rule 11 of the National Company Law Tribunal Rules, 2016 by the HDFC Bank Limited for the following reliefs as prayed:

Birla Tyres Ltd, the Corporate Debtor herein was put to corporate Insolvency resolution process by the NCLT Kolkata Bench on May 5, 2021, pursuant to which Committee of Creditors was formed by the Resolution Professional and the Applicant became one of its members.

The Applicant has made a claim of Rs. 21.55 Crore and the claim to the tune of Rs. 21.28 Crore was admitted, consequent to which the Applicant's voting share was fixed at 1.88 per cent (proportionate percentage of debt of the Applicant to the total claim admitted as debt)

After following due procedure, the Resolution Professional received Resolution plans and the plans were put for vote in the 16^th CoC meeting and the same was approved with the requisite majority.

In the CoC meeting, two methods of distribution of plan value were considered, one based on the basis of percentage of voting share, and another based on value of security held by the respective financial creditors. The method of distribution based on the value of security was approved with 75.67% voting in the CoC meeting.

The Distribution mechanism of the Resolution Plan value to the financial creditors based on the security interest of the respective financial creditors is annexed to the Application at Pages 23-24.

The Ld. Counsel for the Applicant claims that distribution of the plan value should be based on voting share i.e., based on percentage of debt to the total debt and not based on the value of security interest held by the respective financial creditors and hence this application before us.

Ld. Counsel for the Applicant contends that the distribution in the Resolution Plan for the dissenting Financial Creditors will have to be made based on Section 30(2)(b) of the IBC, Code. Ld. Counsel relied on Para 2(b) of Section 30 of the IBC, which is reproduced as under:

Ld. Counsel contended that the liquidation value in terms of Section 53 will have to be distributed based on the voting share and the distribution should not be based on the value of security held by the respective Financial Creditors.

To substantiate this argument, Ld. Counsel relied on the Hon’ble NCLAT judgment rendered in the case of Jet Aircraft Maintenance Engineers Welfare Association vs. Ashish Chhawchharia, RP of Jet Airways reported in 2022 SCC OnLine NCLAT 418, wherein it was held that since Section 53(1)(b)(ii) uses expression of “debt” owed to a secured creditor the same should be the basis for distribution in order of priority as provided in Section 53(1)(ii). The debt owed to secured creditor is a debt not the value of security held by a secured creditor and therefore, distribution of plan amount as per voting share was approved by the Hon’ble Tribunal, in the judgment relied.

The said Judgment of the Honourable Appellate Tribunal also relied on the judgment of the same Appellate Tribunal rendered in the case of Small Industries Development Bank of India (SIDBI) vs. Vivek Raheja reported in 2022 SCC OnLine NCLAT 3979 in Para 25 where the contention of the appellant in that case that the distribution of proceeds of the plan as per value of security interest, was rejected and the Hon’ble NCLAT came to conclusion that distribution based on voting share as approved by CoC, is appropriate . It was held that the “The decision of the Committee of Creditors and the Adjudicating Authority deciding to distribute the proceeds of the plan value as per voting share of the secured creditor in no manner contravenes the provisions of Section 30(2)(b) of the Code. None of the submissions raised by the Learned Counsel for the Appellant has any substance. In result, the Appeal is dismissed.”

It is further submitted that the Resolution Plan suffers from further inequities as it discriminates against dissenting financial creditors vis-a-vis the transfer of Available Surplus Cash (Clause 5.7 under Implementation Provisions, Step-5). The Resolution Plan provides that available surplus Cash if any, shall only be transferred to all those who voted in favour of the Resolution Plan, over and above the pay-out for assenting financial creditors, thereby giving preferential treatment to the assenting financial creditors even though the same is unfair and inequitable. Further, unfair preference has been given to those who vote in favour of the Resolution Plan by allowing only the assenting financial creditors to carry on with the applications relating to avoidance of preferential transactions and enjoy the recovery made therefrom (Clause 5.8 under Implementation Provisions, Step-5).

It is the contention of the Ld. Counsel that all financial creditors, whether assenting or dissenting, should have the benefit of any amount recovered from the reversal of preferential transactions, if any, as the same is public money and it is unfair and inequitable to allow only the assenting creditors to enjoy such benefit.

Ld. Counsel for the respondent relied on the Hon’ble Supreme Court Judgment in the case of India Resurgence ARC Private Limited vs. Amit Metaliks Limited and Another reported in 2021 SCC OnLine SC 409 to state that process of consideration and approval of the resolution plan is now beyond a shadow of doubt and that the matter is essentially that of the commercial wisdom of Committee of Creditors and the scope of judicial review remains limited within the four corners of section 30(2) of the IB Code.

Ld. counsel also relied on the judgment rendered in Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (India) Ltd. reported in (2022)1SCC401: MANU/SC/0206/2021 of the Hon’ble Apex Court which took note of the previous judgments in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta reported in (2020) 8 SCC 531 and also in K. Sashidhar vs. Indian Overseas Bank, reported in (2019) 12 SCC 150 on the aspect of commercial wisdom of Committee of Creditors in taking such decisions.

Ld. Counsel relied on the judgement of Hon’ble NCLAT in Indian Bank v. Charu Desai in CA No.644 of 2021, where it has been held that “when the distribution is ultimately approved by CoC, the approved distribution value to each lender including the dissenting financial creditors, is taken by the CoC in its commercial wisdom, which cannot be interfered with by the AA or by this Appellate Tribunal since it has not been placed before us that the approval of the resolution plan by the CoC and the adjudicating Authority violates any statutory provision….”.

According to the Ld. Consultant sub-section (4) of Section 30 of IBC gives powers to CoC to decide on the distribution mechanism based on value of security of various Financial Creditors. Section 30(4) is reproduced verbatim as under for the sake of convenience:

The Ld. Counsel submitted that such an amendment to sub-section 4 of Section 30 only implies the considerations for Committee of Creditors while exercising its commercial wisdom, so as to take an informed decision in regard to the viability and feasibility of the resolution plan with fairness of distribution amongst similarly situated creditors and the business decision taken in exercise of commercial wisdom of CoC does not call for interference unless, creditors belonging to a class being similarly situated a denied fair and equitable treatment.

Thus, he submits that as long as the distribution is equitable and the proposal for payment is at par with the percentage of payment proposal for other financial secured creditors, no case of denial of fair and equitable treatment or disregard of priority is made out.

The Ld. Counsel further submitted that the descending financial creditors have to get amount not less than the liquidation value. It is not the case of the Applicant that they are not getting their dues based on liquidation value. Further he submits that any amounts other than those contemplated to be paid by SRA under the plan, will have to be deducted from their share without touching the amount payable to dissenting creditors and therefore such a provision is fair and equitable.

We find that it is not the case of the applicant that the amount of distribution has not been arrived based on liquidation value as provided in Section 30(2)(b) read with Section 53 of the IBC. The Applicant’s grievance before us is that the distribution method adopted by the CoC should be based on the voting share and not based on value of security held by respective financial creditors.

During 16^th CoC meeting two distribution mechanisms were presented one based on the basis of voting share and another on the basis of value of security, both under the waterfall mechanism as provided in Section 53 of the IBC. CoC in its commercial wisdom has approved the distribution mechanism on the basis of value of security interest by vote percentage of 75.67%.

Section 30(4) of the IBC, provides that the Committee of Creditors may approve the resolution plan by a vote of not less than 66 per cent of voting share of the Financial Creditors after considering its feasibility and viability, the manner of distribution proposed which may take into account the order of priority among creditors as laid down in sub-Section 1 of Section 53 including the priority and value of security interest of a secured creditor and such other requirements as such manner as may be specified by the Board.

In the case in hand, we have been tasked to examine whether CoC can legally adopt a distribution mechanism either based on the basis of voting share or value of security or they are restricted to only one of the methods of distribution?

It is not in dispute that secured financial creditors who have dissented to the resolution plan, proposal has been made in the plan for payment of the claim based on the liquidation value as provided in Section 30(2)(b) read with Section 53 of the IBC.

Therefore, what has been disputed herein is only the distribution methodology adopted in the plan. We have carefully examined all the Judgments relied by the applicant and the respondent.

In our considered view all the judgments only emphasize that the wisdom of CoC is supreme and there can be no judicial intervention unless the plan approved by the CoC contravenes Section 30 (2) (b) read with Insolvency resolution process regulation for corporate persons, 2016.

In the case laws relied by Ld. Counsel for the applicant the Hon’ble NCLAT has approved distribution of plan value based on voting share of each of the CoC members, because the CoC in its commercial wisdom has approved the plan on that basis whereas the appellant in those cases wanted distribution of plan value based on the value of security held by them.

In our considered view, had the CoC in its commercial wisdom approved the distribution of plan value based on the value of security held by the CoC members, which is in line with Section 30(4) of IBC, even that would not been faulted as Honorable NCLAT in the cases cited by the Applicant, refused interfere with the commercial wisdom of the CoC as long as it is not in contravention of Section 30(2)(b) of the Code. In the case in hand, no contravention of Section 30(2)(b) is found

The Hon’ble Supreme Court in Civil Appeal No. 1700 (2021) in India Resurgence ARC Private Limited (Supra) in Para 13, has observed that:

(Underlining supplied for emphasis)

Thus, from the above observation of the Hon’ble Apex Court, it makes it clear that Section 53 is referred to in Section 30(2)(b) of the IBC is to ascertain a certain minimum amount to be paid to different operational and financial creditors. It is only for this purpose that Section 53(1) is to be looked, as it is clear that it is the commercial wisdom of the Committee of Creditors that is free to determine what amounts to be paid to different classes and sub-classes of the creditors.

If we have to accept the view that the distribution has to be based only on the basis of voting share, then the manner of distribution proposed in Section 30(4) of the Code would become reductant to the extent of “distribution based on value of security”.

Section 30(4) of IBC provides that the manner of distribution proposed may take into account the order of priority amongst creditors as laid down in sub-Section (1) of section 53 including the value of security interest of a secured creditor.

In our view Section 30(4) has used the word “may” to prescribe that the distribution proposed may take into consideration the value of security interest of a secured creditor. Therefore, in light of honorable NCLAT judgments referred by the Ld. Counsel for the Applicant, distribution based on voting share is legal, if it was approved by the CoC. If the CoC chooses to approve the distribution based on value of security held as provided in Section 30(4) of the I&B Code, even that would be legal and cannot be faulted.

In light of above we are of the view that the judgements cited by the Ld. Counsel for applicant and respondent will have to be understood in that context. Any other understanding will make the distribution methodology prescribed under Section 30(4) redundant.

To define the expression “may”, we would be appropriate to refer to the ratio laid down in the judgment of the Hon’ble Apex Court in the case of State of Gujarat v. Utility Users' Welfare Association reported in (2018) 6 SCC 21: MANU/SC/0374/2018 that:

(Emphasis Added)

In view of the above we hold that both the distribution methods, one based on value of security and the other based on voting share is legal and not in violation of Section 30(2)(b) as along as the Committee of Creditors in its commercial wisdom approve one of the methods.

Another plea made by the Applicant on discriminatory treatment under Clause 5.7 and 5.8 of the resolution plans, where excess cash if any and proceeds if any receivable on account of avoidance proceedings under PUFE provisions to be shared only to assenting shareholders is taken up for consideration.

The Applicant wanted to play safe and ensure that they get at least the minimum guaranteed amount as per Section 30(2)(b) read with Section 53 of the Code and at the same time share the benefits of surplus cash if any in terms of clause 5.7 and 5.8 of the Resolution plan, whereas the assenting financial creditors run the risk of not even getting the amount as there could be excess payments other than those contemplated to be paid by SRA, which will be deducted from their share.

We are of the view that risk and reward go hand in hand, and we do not see any merit in this contention of the Applicant in this too, as long as the scheme of such distribution is approved by the CoC, provided such distribution is in accordance with Section 53 read with Section 30(2)(b) of the I&B Code and all dissenting financial creditors are treated in the same way.

In view of the above, we find no merit in the application (I.A. (IB) No. 1648/KB/2023) filed and hence dismissed.

No Costs.

This Application is filed under Section 60(5) of the I&B Code read with other relevant provisions of laws by Jamshedpur Transport Co. Limited, seeking the following relief:

The Applicant herein, a registered MSME has filed C.P. (IB) No. 366/KB/2021 for initiating CIR Process against the Corporate Debtor herein which became infructuous vide an Order dated May 20, 2022 and this Tribunal directed the Applicant, Jamshedpur Transport Company Limited to file its claim before the IRP appointed in C.P. (IB) 250/KB/2021 which has been admitted vide an Order dated May 05, 2022 passed by this Tribunal.

Ld. Counsel for the Applicant submits that the Jamshedpur Transport Company Limited, Applicant herein, as per the direction of this Tribunal has filed its claim for an Amount of Rs. 1,98,85,428.09 as prayed in the C.P. (I.B) No. 366/ KB/2021 which is due as on 31.08.2021 including the interest @ 3 times of Bank notified Base Rate by RBI as per MSMED Act 2006 in Form before the Resolution Professional Mr. Seikh Abdul Salam and also served Form B for the proof of claim dated 26.08.2022.

It is claimed that the Respondent has not admitted the claim for interest on the principal amount due as this application has been filed claiming the interest amount to the tune of Rs. 55,62,243.98/-.

That after filing the aforesaid Claim against the corporate debtor before the Resolution Professional Mr. Seikh Abdul Salam, the Applicant herein has sent several reminders to the Resolution Professional for admission of the aforesaid claim of the Applicant as per the direction of the Adjudicating Authority. But after much persuasion and follow-ups the learned Resolution Professional vide its email dated 29th June 2022 has only admitted an Amount of Rs. 1,42,34,672.36 (Rupees One Crore Forty-Two Lakhs Thirty-Four Thousand Six Hundred and Seventy-Two and Paisa Thirty-Six) instead of the Claim amount of Rs. 1,98,85,428.09/- (Principal Rs. 1,43,23,184.11/- and Interest Rs. 55,62,243.98/-) as on 31.08.2021.

Being aggrieved by the decision of RP, this Interlocutory Application has been filed this Application before the Tribunal praying for the relief to admit its claim of Rs. 1,98,85,428.09/- due as on 31.08.2021 in full and to modify the list of creditors be provided to the Applicant and be published in the Corporate Debtor’s website.

that relying upon the email dated November 25, 2020, to the Corporate Debtor by the Applicant herein, and the trailing emails below the same, it shall be evident beyond doubt that the Applicant admitted that amount shown as balance in the books of the Corporate Debtor, being Rs. 1,42,34,672.36/- (being the principal sum only), claimed certain amounts on account of TDS and interest TDS payment. In reply to the claim of the Applicant, Corporate Debtor clarified and confirmed only the amount of Rs. 1,42,34,672.36/- being due and payable to the Applicant as on 31.10.2020. There has been no contemporaneous denial or dispute by the Applicant to such confirmation between the parties.

It is further alleged that the present claims and disputes being raised by the Applicant is mala fide and by way of an afterthought to gain unfair benefits from the Corporate Debtor. The Respondent has already admitted the amount as appearing in the books of the CD and as informed to the Applicant prior to CIRP, as seen from email of erstwhile RP dated August 30, 2022 (relevant page 34 of the IA). It is alleged that the additional claim of the Applicant for interest is unreasonable, unlawful and untenable. The Respondent denies and disputes the purported calculation by the Applicant for the alleged claim. A printout of the email dated November 25, 2020, and the trailing communication between the Corporate Debtor and the Applicant, is annexed “Annexure B” at Page 9 of the Reply.

That, the Applicant is a registered MSME, and the claim of the Applicant interest is proper in accordance with Section 3(6)(a) of I&B Code read with Section 16 of the MSMED act, 2006.

Heard the rival contentions and perused the documents placed before us.

In the given case the amount of principal amount is Rs. 1,42,34,672.36/-and it been admitted, and this has not been disputed by the Applicant.

The only question that needs to be decided is whether interest amount would be clubbed with the principal amount to admit the Applicant’s claim in full.

We have examined the documents placed on records and found that there is no contract or any other document which has been acknowledged or contractually agreed upon between the Applicant and the Corporate Debtor, mentioning any clause relating to interest to be paid by the Corporate Debtor. It is evident that the same fact is claimed by the RP and undisputed by the Applicant, as the RP of the Corporate Debtor (M/s Birla Tyres Limited – in CIRP) vide the email dated September 8, 2022, has informed the Applicant that there is no interest clause present in the contract or any other document, and there is no denial and/or communication of denying the fact from the Applicant’s side. However, the Ld. Counsel for the Applicant pressed on Section 16 of the MSMED Act to make its claim for interest and to admit it with the principal amount. We herein reproduce the snapshot of the email dated September 08, 2022, annexed to this I.A. at Page 52, as follows:

We are of the view of, there is no dispute about the absence of interest clause in any contracts or invoices. When that being the case, we need examine whether Section 16 of the MSMED, Act would come to the rescue of the Applicant for sustaining his claim.

Section 16 of the MSMED Act, says that “Where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank.”

It is on record that the Applicant has been classified as “medium enterprise” registered with UDYAM bearing the Registration No. UDYAM -WB-10-0001920 and the date of incorporation 08/02/1982, registration certificate annexed at page 53 to this I.A.

The “appointed day” has been defined in Section 2(b) of the MSME, act a means the day following immediately after the expiry of the period of 15 days from the day of acceptance or the day of deemed supply of goods by the buyer from supplier. The word “Supplier” has been defined as micro or small enterprise in the Act. On the combined reading of 2(b) and 2(n) read with Section 16 of the MSMED Act, it can be concluded that it is only micro or small enterprise who are entitled to claim interest in case of delay in payment by the supplier.

We rely upon the judgment passed by the Hon’ble High Court at Calcutta in the case of The New India Assurance Co. Ltd. v. Winsome International Ltd., Appeal No.: AP/418/2023 reported in (2023) ibclaw.in 546 HC that.

In view of above, we find no merit in the case of the applicant (I.A. (IB) No. 1069/KB/2022) and thus dismissed.

No Costs.

Urgent Certified copy of this order, if applied for, be supplied to the parties, subject to compliance with all requisite formalities.