Nitin Narang RP For Afcan Impex Pvt Ltd vs Naresh Sevantilal Shah

a. Allow the present application and approve and accept the Resolution Plan submitted by Naresh S. Shah as approved by the Committee of Creditors with (100%) voting share in its 7th CoC meeting in respect of the Corporate Debtor i.e. Afcan Impex Private Limited;

b. Declare that upon approval of the Resolution Plan by this Hon'ble Adjudicating Authority, the provisions of the Resolution Plan shall be binding on the Company, its creditors, guarantors, members, employees, Statutory Authorities and other stakeholders in accordance with Section 31 of the Code, and shall be given effect to and implemented pursuant to the order of this Hon'ble Adjudicating Authority;

c. Approve the appointment of the monitoring agency as stated in the Resolution Plan and confirmed by the Committee of Creditors;

d. Approve and grant reliefs and directions sought under the Resolution Plan by the Resolution Applicants;

e. Pass such other further order/order(s) as may be deemed fit and proper in the facts and circumstances of the present case.

FACTS

"RESOLVED THAT in pursuant to Section 30(3) of the Insolvency and Bankruptcy Code, 2016 read with Regulation 39(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the consent of members of the COC be and is hereby accorded to approve the Final Resolution Plan submitted by Laxminarayan Gurjer and Hitesh L Rathod"

"RESOLVED FURTHER THAT pursuant to the provisions of Section 30(6) and other applicable provisions of the Insolvency and Bankruptcy Code, 2016 and rules and Regulations framed there under, the Resolution Professional be and is hereby authorized to submit the Resolution Plan as approved by the Committee of Creditors to the Hon'ble Adjudicating Authority and to do all acts, deeds and things as may be required or considered necessary or incidental thereto."

"RESOLVED THAT in pursuant to Section 30(3) of the Insolvency and Bankruptcy Code, 2016 read with Regulation 39(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the consent of members of the COC be and is hereby accorded to approve the Final Resolution Plan submitted by Sachin Kirti Kumar and Bhumi Sachin Kumar Dosaliya"

"RESOLVED FURTHER THAT pursuant to the provisions of Section 30(6) and other applicable provisions of the Insolvency and Bankruptcy Code, 2016 and Rules and Regulations framed there under, the Resolution Professional be and is hereby authorized to submit the Resolution Plan as approved by the Committee of Creditors to the Hon'ble Adjudicating Authority and to do all such acts, deeds and things as may be required or considered necessary or incidental thereto."

"RESOLVED THAT in pursuant to Section 30(3) of the Insolvency and Bankruptcy Code, 2016 read with Regulation 39(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the consent of members of the COC be and is hereby accorded to approve the Final Resolution Plan submitted by Naresh Sevantilal Shah"

"RESOLVED FURTHER THAT pursuant to the provisions of Section 30(6) and other applicable provisions of the Insolvency and Bankruptcy Code, 2016 and Rules and Regulations framed there under, the Resolution Professional be and is hereby authorized to submit the Resolution Plan as approved by the Committee of Creditors to the Hon'ble Adjudicating Authority and to do all such acts, deeds and things as may be required or considered necessary or incidental thereto."

"RESOLVED THAT, in terms of Regulation 39B estimated liquidation cost as presented before the CoC, enclosed as Annexure 3 be and is hereby approved and same shall be contributed by Sole member of CoC in the event of Liquidation of Corporate debtor"

"RESOLVED FURTHER THAT, in terms of Regulation 39C, approval of Committee is hereby accorded for sale of corporate debtor as going concern in the event of Liquidation of Corporate debtor"

6.4. Term of Resolution Plan & its Implementation Schedule

1.

In terms of the last order dated 09.08.2024, the applicant / RP has placed on record the copy of the order of the Hon'ble Supreme Court passed on 01.08.2024, dismissing the Civil Appeal No. 5580 of 2021 filed by the Suspended Management by way of an additional affidavit filed under inward diary No. D-6836 on 09.09.2024. The same is taken on record.

2.

Further, now the revised Form-H and copy of minutes of CoC meeting Nos. 8th to 11th held in between the intervening period of pendency of these proceedings. Learned Counsel for the RP seeks and is granted indulgence to file an appropriate application seeking exclusion of the period spent in the litigation from the Hon'ble NCLAT to the Hon'ble Supreme Court, with permission to hold another CoC meeting within a period of seven days in this regard.

3.

Learned Counsel for the applicant / RP apprised that the State Tax Department has claimed dues for 5,80,64,381/-, which was admitted by the RP and the attachment order by the Competent Authority was passed only on 29.04.2021, after the commencement of the CIRP process. A copy of that order is annexed with IA No. 887 of 2021 in the vernacular attached at page Nos. 146 and 147.

4.

Learned Counsel for the applicant / suspended management states that he has also in receipt of a reply from the SRA yesterday, i.e., 09.09.2024, to this IA and also seeks a week's time to file a rejoinder, if so required.

5.

Learned Counsel for the applicant / RP also seeks indulgence to move an appropriate application against the order of this attachment passed by the concerned state Tax department and to clarify whether the judgment by the Hon'ble Supreme Court in the matter of State Tax Officer (1) vs. Rainbow Papers Limited is effected to the present matter.

6.

Learned Counsel for the applicant/ RP undertakes to file the details of the other operational creditors as mentioned in page No. 13 of the revised Form-H. Further, Learned Counsel for the applicant/RP also seeks indulgence to place on record after holding another CoC meeting decision on the feasibility and viability of the Resolution Plan.

7.

Learned Counsel for the applicant/ RP has also filed an additional affidavit on 09.09.2024, vide inward diary No. D-6309, wherein at page No.11 has annexed the extension of bank guarantee submitted by the SRA, which is valid till 11.10.2024

8.

Since the performance guarantee is going to expire in a short period. Learned Counsel for the applicant/ RP undertakes to get another extension for a suitable period from the SRA qua this performance guarantee and place the same before this Tribunal.

9.

Learned Counsel for the applicant/RP also seeks time to place on record the decision of the CoC qua the 66 application pending before this Tribunal, as to who will take care of the after approval of the Resolution Plan Further, Learned Counsel for the applicant/RP also seeks indulgence to apprise about the status of the claim of the SEZ Kandala in view of the latest judgment in the matter of the Noida Authority.

10.

Learned Counsel for the applicant/RP also undertakes to place on record the information of memorandum by way of an additional affidavit.

11.

Subject to given confidentiality undertaking by the Suspended Management, the RP undertakes to provide the valuation report, if so required, within three days from the receipt of the confidentiality undertaking

12.

Permission is given to RP to hold another CoC meeting within a period of seven days in these regard.

I. The Applicant conducted the 12th meeting on 18.09.2024 to ensure compliance of directions issued by this Adjudicating Authority. The CoC deliberated para-wise on the directions issued by this Adjudicating Authority.

II. The RP is placing on record the following documents

i.

Revised Form-H annexed at Annexure-A3. ii. Information Memorandum annexed at Annexure-A4. iii. Extension letter for extending the performance bank guarantee issued by SRA up to 11.04.2025 annexed at Annexure-A5. iv. List of creditors annexed at Annexure-A6

III. In compliance with the order dated 10.09.2024, the RP preferred the following IAs before this Adjudicating Authority which are yet to be listed till date of filing of present affidavit; -

a. Application for exclusion of period spent in litigation before Hon'ble Supreme Court vide e-filing no. 2401105024432024

b. Application against Sale Tax Department for setting aside attachment order passed during the moratorium vide e-filing no. 2401105024082024.

IV. The applicant places the e-voting result of the 11th CoC meeting annexed at Annexure A7.

V. Insofar as directions issued by this Tribunal regarding sharing of valuation report with suspended directors, applicant craves leave of this Tribunal to refer to Regulation 35 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016, which reads thus-

"(2)

After the receipt of resolution plans in accordance with the Code and these regulations, the resolution professional shall provide the fair value and the liquidation value to every member of the committee in electronic form, on receiving an undertaking from the member to the effect that such member shall maintain confidentiality of the fair value and the liquidation value and shall not use such values to cause an undue gain or undue loss to itself or any other person and comply with the requirements under sub-section (2) of Section 29'

(3)

The resolution professional and registered valuers shall maintain confidentiality of the fair and liquidation value" Accordingly, in terms of Regulation 35, RP has communicated the same to suspended director vide email dated 15th September 2024. Copy of Email dated 15th September' 2024 is annexed as ANNEXURE A-8.

VI. The RP shall tender the valuation report before this Tribunal in sealed covers.

VII. In the 6th and 7th CoC meeting, CoC had evaluated the Resolution Plans and CoC has found the Resolution Plan submitted by Successful Resolution Applicant as feasible and viable and subjective satisfaction in this regard has been noted by CoC in 7th and 12th CoC meeting. Accordingly, the Resolution Plan, therefore, after exercising commercial wisdom, has been voted in favour by CoC with 100% voting share.

In compliance of last order dated 10.09.2024, the Applicant/RP has filed additional affidavit vide Diary No. D-7290 dated 30.09.2024 in compliance of last order dated 10.09.2024. The same is taken on record. However, in order dated 10.09.2024, point No.11 has not been complied with though the Suspended Management agreed to give the undertaking of confidentiality within 24 hours.

We direct the Applicant/RP to provide the valuation report to the suspended management within 24 hours of receipt of the confidentiality undertaking from the Suspended Management.

In case, no confidentiality undertaking is provided by the suspended management within 24 hours of this order, their right to get the valuation report will stand forfeited.

Further, the relevant portion of the resolution of the 12th CoC meeting dated 18.09.2024 is reproduced hereunder:-

" Mr. Ashutosh Ranjan, AR of BOM informed that since the attachment order has been passed by Sales Tax Department after declaration of moratorium and same being void, for which an application has already been filed by RP for setting aside the attachment, therefore Sales Tax Department shall be considered as unsecured creditor. Therefore, the Rainbow Papers judgement shall not be applicable in the present case. CoC member further informed that even in case it will be applicable, then right of sales tax department shall be restricted to Liquidation value of security interest, if any and same shall have to be distributed in paripassu basis with other secured creditor."

Ld. Counsel for the Applicant/RP undertakes to supply the copy of this affidavit with Resolution to the Ld. Standing Counsel for the State Tax Department..."

I. The SRA undertakes that information or records as sought by the RP which has not been provided by the Suspended Board of Directors in IA No. IA 274 of 2021 & IA 622 of 2021, will not impact on the implementation of the Resolution Plan, submitted by me. Further undertakes that, once the resolution plan is approved by this Tribunal, SRA implement the resolution plan, notwithstanding supplying or furnishing of the information and records by as sought by the RP.

II. The Resolution Plan was submitted in the year 2021 and therefore, in order to assist this Tribunal in adjudication of the present application, a copy of certificate of net worth as on 18.10.2024 duly certified by a Chartered Accountant is annexed at Annexure A-2.

III. An affidavit under section 29A of the IBC, 2016 along with the Resolution Plan submitted by SRA, wherein it has been declared that SRA along with all of SRA connected person are eligible under section 29A of the IBC. Further, in the Resolution Plan, SRA has proposed that resolution applicant and his nominee shall be inducted as director in the board of corporate debtor upon approval of Resolution Plan by this Tribunal. The SRA states that, upon approval of the Resolution Plan submitted before this Tribunal, SRA shall take steps to induct the following directors in the board of corporate debtor-

a)

Naresh Sevantilal Shah having DIN No.- 00928887

b)

Aalok Shah S/o Naresh Shah having DIN No.- 10831679

3.4. Financial indicators of corporate debtor -

Below are the financial indicators of corporate debtor for last 3 years as provided by RP -

6.1. Financial Outlay under Resolution Plan

Amount in INR Crores

Type of Creditor/Claim	Total Amount Admitted	Total amount to be paid under Resolution Plan	Terms of Payment
CIRP Cost	0.40	0.40	CIRP cost amounting to Rs. 0.40 Crore to be paid within a period of 30 days out of funds infused by RA. Any upside or downside in the estimated CIRP cost shall be absorbed by the Resolution Applicant.
Secured Financial Creditor	9.86	3.50	Secured Financial Creditor shall be paid amount of Rs. 3.50 Crore towards satisfaction of its entire claim against corporate debtor within a timeframe of 1 month from effective date.
Employees	0.00	0.00	Since no claim has been received from employees,

			therefore no amount is being proposed to be paid on this count.
Workmen	0.00	0.00	Since no claim has been received from workmen, therefore no amount is being proposed to be paid on this count.
Operational Creditors other than workmen and employees	7.44	0.15	To be paid within 30 days after effective date.
Other creditors	0.00	0.00	Since no claim has been received from workmen, therefore no amount is being proposed to be paid towards them.
Total	17.70	4.05
Towards working capital and capex	-	5.00	To be infused in one or more tranches on need basis after assessment of business operations post effective date.
Grand Total	17.70	9.05

Notes:

(i)

That all liabilities of the Corporate Debtor, whether admitted or not, due or contingent, asserted or unasserted, crystallised or uncrystallised, known or unknown, disputed or undisputed, present or future, or any guarantee given by the Corporate Debtor in relation to any third party/related party transaction of any nature in respect of which such third parties may have rights against the Corporate Debtor, which may have been provided or issued by any person in support of, for the benefit of, or at the behest of the Corporate Debtor or for any other reason whatsoever, in relation to any period till the Effective Date, save of this Resolution Plan, shall stand cancelled and terminated without any liabilities accruing to the Corporate Debtor and / or Resolution Applicant and / or SPV, and will be treated as extinguished, as the case may be, by virtue of the order of the Adjudicating Authority approving this Resolution Plan.

(ii)

This Resolution Plan is a full and comprehensive proposal for the insolvency resolution of the Corporate Debtor. For the removal of doubt, it is hereby clarified that all the rights, title and interest of the Corporate Debtor in all its Assets shall continue to vest with the Corporate Debtor, except as specifically set out in this Resolution Plan. All the charge created on the assets of the corporate debtor by virtue of corporate guarantees given by Corporate debtor on behalf of any third party/related party for whatsoever purpose it may be, stands extinguished and settled and revoked and vacated as an when the resolution plan is approved by the adjudicating authority.

(iii)

Upon payment of amount as mentioned in clause 6.1., each creditor to whom amount has been paid shall issue a no-dues certificate to the RA and Corporate debtor stating that entire liability owed to such creditor shall stand settled and corporate debtor is not liable to pay any amount to such creditor for any dues pertaining to period prior to effective date.

(iv)

RA also reserves right to prepone the payment schedule as mentioned in clause 6.1 and no penalty/fee etc shall be levied on such preponement.

(v)

RA shall be allowed a no-default period of 30 days and in case RA is unable to pay any instalment as per clause 6.1 on account of any reasons, RA may be allowed to cure the default within 30 days period.

(vi)

At the cost of repetition, it is clarified that the Resolution Applicant shall make payment as mentioned in clause 6.1 to the Creditor towards full and final consideration against acquisition/purchase by the Resolution Applicant or through his nominee(s) from the Corporate Debtor of all and whatever the business, goodwill, assets and rights of whatsoever nature of and/or belonging to and/or enjoyed by and/or inuring unto the benefit of the Corporate Debtor, whether directly or indirectly, on a 'going concern' basis, within the timeframe set out in the table provided in Clause 6.1 hereof;

(vii)

None of the payments made by the Resolution Applicant to the Secured Financial Creditor in the manner set out in Clause 6.1 shall carry interest.

(viii)

RA shall be entitled to effectively pursue, prosecute and/or enjoy the benefits of and/or concerning any assets of or recoverable, sundry debtor, advances etc payable to the Corporate Debtor, whether emanating from any judicial or quasi-judicial proceedings initiated or to be initiated by the Corporate Debtor or otherwise.

(ix)

All payments under this plan shall be made to the bank account designated for that purpose by the Implementation and Monitoring Committee.

(x)

On and from the Effective Date, the Corporate Debtor shall not be indebted to anyone except the RA. Any liability, whether known or unknown, crystallized or otherwise, owed by the Corporate Debtor prior to the Effective Dote shall be deemed to have been waived and/or written off by the creditor.

(xi)

As per the inquiries made by the RA, the assets of the Corporate Debtor are not enough to satisfy the debt owed by it to the secured financial creditor. Therefore, the liquidation value owed by the Corporate Debtor to the operational creditors is presumed to be NIL. If however, the liquidation value payable to operational creditors is higher, then the RA undertakes to pay the liquidation amount owed to operational creditors in priority within a period of 30 days from the Effective Date.

(xii)

We understand that CD has certain textile related inventory. It is understood that such inventory is lying there prior to commencement of CIRP and in order to avoid any further depletion in its value, RA should be allowed to dispose off the inventory. Entire proceeds from the sale will be first used to extinguish the amount due to secured financial creditors. RA may also explore sale of non-core assets/ plant & machineries which are outdated or require repair/overhauling.

(xiii)

On and from the Effective Date, any guarantee provided by the Corporate Debtor shall be deemed to have been extinguished and cannot be enforced.

(xiv)

On and from the Effective Date, any cheque or other negotiable instrument issued by the Corporate Debtor prior thereto shall be deemed to have been cancelled and cannot be enforced against the Corporate Debtor,

(xv)

All the power of attorneys provided to any person by the Corporate Debtor stands revoked with effect from the Effective Date.

(xvi)

RA shall not be liable to pay any amount to any person other than those mentioned under Clause 6.1 and for that matter, in case the secured financial creditor recovers any amount from the guarantors, they (the guarantors) shall not have any right of subrogation against the corporate debtor.

(xvii)

Any amount recovered under any avoidance applications relating to the Corporate Debtor being allowed by the Adjudicating Authority would inure unto the benefit of the secured financial creditor. However, any other benefit relating to any matter concerning the Corporate Debtor's leasehold rights to which it is entitled, shall inure unto the benefit of the RA exclusively as the same would be required for carrying out operations of corporate debtor and RA shall be permitted to take recourse to appropriate legal measures in this regard.

6.2. Monitoring and Implementation of Resolution Plan

For successful implementation of Resolution Plan, an Implementation and Monitoring committee (IMC) is being proposed by Resolution Applicant which shall have the following members:

1.

One Representative of Secured Financial Creditors to be decided in the CoC meeting

2.

One Insolvency Professional or other professional as maybe mutually decided by CoC and RA who shall act as chairperson of the committee.

3.

Either RA or One Representative of Resolution Applicant.

IMC shall oversee the implementation of the resolution plan and it shall report any deviation in timelines or breach of terms of Resolution Plan to NCLT after due consultation in their meeting of the IMC. RA shall be allowed a period of 30 days or such extended period as maybe allowed after mutual discussion in the meeting of IMC for curing of deviation, before reporting the same to NCLT.

6.4. Term of Resolution Plan & its Implementation Schedule

S. No.	Particulars	Timeline
1.	Submission of Performance guarantee to the tune of 1/3rd of Resolution plan amount and return of EMD of Rs. 25 Lakh deposited by RA	Within 7 business days from date of approval of this Resolution plan by CoC
2.	Effective date or date of approval of Resolution Plan by NCLT	T
3.	Renewal of Letter of approval and lease deed by KASEZ Authority	T+30 days
4.	Cessation of existing directors and Induction of new board	T+30 Days
5.	Cancellation of existing equity shares and acquisition of 100% shares by RA	T+30 Days
6.	CIRP cost to be paid	T+30 Days
7.	Payment to employees, workers, operational creditors and unsecured financial creditors	T+30 Days
8.	Payment to Secured Financial Creditors	T+30 Days
9.	Completion of term of Resolution Plan	T+30 Days

It is hereby clarified that after completion date, RA/CD shall be entitled to exercise any powers as per provisions of companies act' 2013 &other laws and any document issued by RP/CoC containing clauses contrary to provisions of companies act' 2013 and other applicable laws shall not restrain RA/CD to exercise such powers including capital restructuring, operational restructuring, debt restructuring, etc. as provided under companies act 2013 and other applicable laws.

6.5. Source of funds under Resolution Plan

The RA has sufficient net worth and liquid assets to finance the Resolution Plan. In case any shortfall arises, RA shall explore taking unsecured loans from relatives and friends for implementing the Resolution Plan. However, in order to implement the Resolution Plan, RA has following liquid asset available at disposal –

Further reasonable opportunity of being heard to be given to jurisdictional Principal Commissioner or Commissioner as provided under Section 79 of Income Tax Act, 1961. Resolution Professional would take the onus to give reasonable opportunity of being heard to jurisdictional principal commissioner with reference to concessions and reliefs granted under IBC, 2016 remains intact and entitlement of such reliefs are not withheld.

Upon sanction of this Resolution Plan, all the dues of the statutory authorities shall stand waived, save and except to the extent proposed to be paid herein, and such payment by the RA shall be treated as full and final settlement of the entire dues and claims of the statutory authorities against the Corporate Debtor and no further action shall be initiated by and/or order shall be passed by any authority against the company and/or the RA and/or any person claiming by, from, through and/or under them in this regard. The order of sanction of the Resolution Plan shall be treated as necessary approvals from the Central and State Governments and other authorities as provided in Clause 37 (1) of Insolvency any Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

All the contingent liabilities, including any demand from the

SOME ADDITIONAL FACTS

"It is observed that one of the companies where the SRA is Director is undergoing CIRP which was ordered by one of the Hon'ble Benches of Mumbai, NCLT. The admission order was upheld by Hon'ble NCLAT and is presently under challenge before the Hon'ble Supreme Court by the Suspended Directors of that particular company i.e., Can Enterprise Limited. Upon being asked, Mr. Naresh Shah stated that he is trying hard for a settlement in the matter and has requested time till the end of December, 2024 to come clean from the CIRP of Can Enterprise Private Limited."

LEGAL BASIS FOR APPROVAL/REJECTION OF THE RESOLUTION PLAN

'31. Approval of Resolution Plan

(1)

If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan. Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation.

(2)

Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan.

(3)

After the order of approval under sub-section (1),—

(a)

the moratorium order passed by the Adjudicating Authority under section 14 shall cease to have effect; and

(b)

the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database.

(4)

The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later.

Provided that where the resolution plan contains a provision for combination, as referred to in section 5 of the Competition Act, 2002, the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors."

“30. Submission of resolution plan.

(2)

The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan—

(a)

provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor;

(b)

provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than-

(i)

the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or

(ii)

the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the corporate debtor.

Explanation 1.-For removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors.

Explanation 2.-For the purpose of this clause, it is hereby declared that on and from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate insolvency resolution process of a corporate debtor-

(i)

where a resolution plan has not been approved or rejected by the Adjudicating Authority;

(ii)

where an appeal has been preferred under section 61 or section 62 or such an appeal is not time barred under any provision of law for the time being in force; or

(iii)

where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan;

(c)

provides for the management of the affairs of the corporate debtor after approval of the resolution plan;

(d)

the implementation and supervision of the resolution plan;

(e)

does not contravene any of the provisions of the law for the time being in force;

(f)

conforms to such other requirements as may be specified by the Board.

Explanation. -For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013 (18 of 2013) or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law."

31. FINDINGS OF THIS TRIBUNAL

“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.”

"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.”

“..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.

"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."

86.

"...The legislative intent behind this is, to freeze all the claims so that the resolution applicant starts on a clean slate and is not flung with any surprise claims. If that is permitted, the very calculations on the basis of which the resolution applicant submits its plans, would go haywire and the plan would be unworkable.

87.

We have no hesitation to say, that the word "other stakeholders" would squarely cover the Central Government, any State Government or any local authorities. The legislature, noticing that on account of obvious omission, certain tax authorities were not abiding by the mandate of I&B Code and continuing with the proceedings, has brought out the 2019 amendment so as to cure the said mischief...”