N. Kumar, Resolution Professional of M/s. Victory Vision Home Appliances Private Limited

6. TERMS OF RESOLUTION PLAN

The Resolution Plan as detailed herein envisages the following :

Financial Re-structuring – The Applicant proposes to settle Rs.61,02,483/- (Rupees sixty one lakhs two thousand four hundred and eighty three only) being 40% of the admitted claims of the Financial creditors of the Corporate debtor towards full and final settlement, immediately on approval of the Resolution Plan. The said amount shall be proportionately distributed among all the financial creditors as per their voting share determined by the RP. There will be no discrimination for dissenting Financial Creditors.

i.

CIRP and Liquidation Costs –The CIRP costs as determined in accordance with law and sanctioned by the COC shall be paid in full and in priority on the date of approval of the Resolution Plan.

ii.

Payment of Workmen / Employee Dues – Since no claims have been received from the employees, no amount is allocated separately for this purpose.

iii.

Payment to Operational Creditors – The Applicant proposes to pay the Rs.3,00,000/- (Rupees three lakhs only) towards full and final settlement of admitted claims of the Operational Creditors other than workmen, employees and statutory dues. The said payment shall be released immediately on approval of the Resolution Plan. Since in the event of liquidation, the operational creditors would not receive any money in terms of Section 53 of the Code, the above provision for payment made is in compliance with he provisions of the Code.

iv.

Payment to Statutory Creditors – No funds are allocated towards statutory dues. All statutory claims, contingent or crystallized or disputed or undisputed and whether or not filed with Govt. Authorities in relation to taxes, levies or other statutory dues including but not limited to IT, GST, Sales Tax, VAT, Water, Electricity, Excise Duty, Royalties and Fees, and/or penalties including but not limited to fines and interest shall stand unconditionally abated, settled and extinguished.

v.

Contingent Fund – The Resolution Applicant proposes to allocate a maximum sum of Rs.1,00,000/- (Rupees one lakh only) towards contingent claims/expenditure that may be incurred for approval and implementation of this Plan. The amounts unused from the said fund after a period of 6 months from the approval of the Resolution Plan, shall be deposited back into the account of the Corporate Debtor or Resolution Application or as per the instructions of the Resolution Applicant.

vi.

Management of Corporate Debtor - On approval of the Resolution Plan, the Resolution Applicant shall take over the Corporate Debtor and be at liberty to appoint new management of the Corporate Debtor or restore the board to how it existed prior to initiation of CIRP. Further, the entire shareholding of the Corporate Debtor shall stand unchanged and subject to the discretion of the Resolution Applicant. The Applicant is at liberty to merge the Corporate Debtor with other entities on approval of the Resolution Plan.

vii.

Full and Final Settlement – A total sum of Rs. 64,02,483/- (Rupees sixty four lakhs two thousand four hundred and eighty three only) plus CIRP Costs is being paid under the Resolution Plan. The payment to persons contemplated under the Plan shall be full and final on completion of performance and satisfaction of all obligations to all stakeholders (whether participating or not) in the CIRP and all claims against the Corporate Debtor shall stand irrevocably and unconditionally abated, settled and extinguished in perpetuity.

viii.

Going Concern - The Corporate Debtor shall continue as going concern and operate in its normal course of business upon implementation of the Resolution Plan. With effect from the approval of Plan by NCLT, the management of affairs of the Company after would be vested back to the Resolution Applicant and his nominees. The Resolution Applicant, on approval of the Resolution Plan, shall take over the entire assets of the Corporate Debtor including its licenses, permits, pre-qualifications, all type of investments, permissions, brands, intangible assets, sundry debtors, vehicles, stock, goods, cash, bank balance, and other sanctions accorded by any Authority under law, to carry out its activities of business, as a going concern.

ix.

Takeover – All assets, tangibles, intangibles, land, building, investment, plant & equipment, machinery, vehicles, stock, etc. of the Corporate Debtor, whether disclosed or undisclosed in the IM, E-mails, books of the Corporate Debtor or in any other document, shall upon approval of the Plan, vest absolutely, free from all charges and encumbrances, on the Applicant.

x.

Binding force - The Resolution Plan once approved by COC and then the Adjudicating Authority along with such conditions as may be stipulated by the Adjudicating Authority, shall be binding on the Corporate Debtor, all the stakeholders, Creditors, members, promoters and employees and all other parties in interest and each of their respective successors.

xi.

Charges and Securities – On approval of the Plan, all charges, whether secured or unsecured, disclosed or undisclosed, on any of the assets of the Corporate Debtor, shall stand extinguished. All security, including any guarantees, sureties and undertakings provided by the Corporate Debtor for any purpose whatsoever, shall stand rescinded. This shall include any guarantee or security given in favor of or for the benefit of any person whatsoever including any subsidiary or group company of the Corporate Debtor, shall stand rescinded and extinguished.

xii.

Assignment by creditors - Any financial or operational creditor may assign its rights under this Resolution Plan, subject to the transferee unconditionally agreeing to be bound by the terms of this Plan.

xiii.

Guarantors and Promoters rights – On and from approval of this Plan, the guarantors who have provided guarantees prior to CIRP for and on behalf of the Corporate Debtor, shall not be entitled to exercise any subrogation rights in respect of such guarantees. Further, on approval of this Plan, the guarantors of the Corporate Debtor shall stand discharged and shall not be liable towards any of the debts of the Corporate Debtor.

xiv.

Outstanding Instruments – On approval of the Plan, all the outstanding negotiable instruments (domestic and foreign) issued prior to the date of approval of the Plan on behalf of the Corporate Debtor including DPS, PDCs, LCs, invoked BGs, etc., shall stand irrevocably and unconditionally abated and extinguished.

xv.

Employees and Workmen – Upon the approval of the Plan, the Resolution Applicant shall be at liberty to renegotiate the terms of employment of any or all employees and workmen of the Corporate Debtor at its sole and complete discretion. The right conferred under this clause shall include the right to retain or remove any employee or workmen of the Corporate Debtor. The said decision in this aspect shall be final and binding in this regard on all parties concerned.

xvi.

Avoidance Applications – All avoidance applications pending, if any, shall cease to exist on approval of the Resolution Plan.

xvii.

Modification – Since only limited information was furnished to the Applicant, the Applicant reserves his right to apply to Adjudicating Authority for appropriate modification of such provisions of the Resolution Plan, to satisfaction of the Adjudicating Authority, to cure such invalidity or unenforceability of the provisions of the Resolution Plan if any. Any invalidity and/or unenforceability of the provisions of the Plan shall not render the whole Plan ineffective, unless otherwise directed by the Adjudicating Authority by an order. The Applicant reserves and retains the right to modify the proposed Plan in the event of amount proposed in this Plan for settling the dues to the Financial Creditor and other Creditors is revised based on the discussions between members of the COC and the Applicant. Further, the Applicant has made every possible effort to prepare and submit the Resolution Plan strictly in accordance with the various provisions of the Code. However, if there is any inadvertent inadequacy/shortcoming/defects in the Plan, the Applicant shall be given an opportunity for rectifying and removal of such inadequacy/shortcomings/defects so observed.

xviii.

Monitoring Committee – The RP shall be responsible for monitoring the implementation and execution of the Plan including smooth transition of the Management of the Corporate Debtor, after approval. The RP shall further be responsible for the distribution of the proceeds received from the Resolution Applicant under the Plan.

xix.

Premature failure of the Plan – In the unlikely event that the Applicant is not desirous of proceeding with the Plan for any reason, he shall be at liberty to withdraw/revoke the Plan at any time before the same is approved by the Hon'ble NCLT, and shall be indemnified against all acts consequent of said withdrawal. In the event of Plan being revoked, the existing facilities of the creditors, the rights and remedies of the creditors under their respective existing financing documents would continue as if they had not been waived, amended, modified, superseded or replaced by the Plan and the creditors shall be entitled to enforce such rights and remedies under the existing financing documents against the Corporate Debtor.

xx.

Connected Application – All connected Applications in respect of the CIRP of the Corporate Debtor shall stand closed on approval of the Resolution Plan. The monitoring committee/RP/Application shall however be at liberty to approach the NCLT in respect of implementation of the Resolution Plan.

xxi.

Dispute – Any dispute in relation to the interpretation of any provisions of this Plan shall be decided by the Resolution Applicant and his decision shall be final and binding.

"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."

"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."

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.