State Bank Of India vs Leo Primecomp Private Limited

2. BRIEF FACTS OF THE CASE:

"directs the 'Adjudicating Authority' (National Company Law Tribunal, Special Bench – II, Chennai), to take on 'Record' the 'Improved Resolution Plan' dated 30.08.2022, which was submitted by the 'Appellant' to the 2nd Respondent / State Bank of India (Sole Member of the Committee of Creditor) and to proceed further, as per the 'ingredients of the Insolvency & Bankruptcy Code, 2016 and as per the 'Rules and Regulations' that are in force.

7.

Added further, the 3rd Respondent / Liquidator, is to be continued as the 'Resolution Professional' for carrying out the Committee of Creditor's Proceedings, in view of the fact, that he is 'currently' / presently' in-charge of the 'Operations of the Corporate Debtor'."

8.

As regards the 'Exclusion of a Time', prayed for, by the 'Appellant', i.e., from 07.03.2022 till 8.09.2022 (205 Days), being the 'Time Spent' before the 'Adjudicating Authority' (National Company Law Tribunal, Special Bench – II, Chennai) and the 'Period Spent' from 06.06.2022, till 'this Date (13.10.2022), shall be 'Excluded', for the purpose of computing the 'Completion of Corporate Insolvency Resolution Process' period, by the 'Adjudicating Authority' (National Company Law Tribunal, Special Bench – II, Chennai).

3. SALIENT FEATURES OF THE RESOLUTION PLAN:

3.1. Eligibility:

SBI भारतीय स्टेट बैंक State Bank of India

WITHOUT PREJUDICE

To Shri B. Ashishyan S/o A. Balakumar No.161/A, VGP Layout Palavakkam Chennai - 600 041

To Shri V. Karthikeyan S/o A. Vasudevan No.161/A, VGP Layout Palavakkam Chennai - 600 041

SAMB/CHG/CLQ-1-612

Date 27.09.2022

NAME: No LEO PRIME COMP EVT LTD

We acknowledge receipt of Rs. 17.51 Cr as Upfront amount on 30.08.2022 and final amount of Rs. 54.49 Cr on 27.09.2022 totaling Rs. 72 Cr by us as per the improved resolution plan submitted by you in the captioned account. The said amount is deposited in our "No Lien" account. Subject to approval of improved resolution plan by NCT/NCLAY, it will be processed further.

2.

Kindly note that this letter is being issued at the request of the Resolution applicants.

Yours Faithfully,

Assistant General Manager & CLQ-1

"RESOLVED THAT, after considering the feasibility and viability of the Final Improved Resolution Plan along with Clarifications & Addendum and such other requirements as specified in the appropriate sections of the Insolvency and Bankruptcy Code, 2016 read with the relevant Regulations as specified under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 including amendments, if any, by the Board, the Committee of Creditors, in pursuance to Sec 30 of the Insolvency and Bankruptcy Code, 2016 and subject to the approval of the Hon'ble National Company Law Tribunal, Chennai Bench, hereby approves the Final Improved Resolution Plan, submitted by Mr. B. ATHITHYAN & Mr. V. KARTHIKAYAN"

3.2. DISTRIBUTION:

3.3. Time Line & Source of Funds.

3.4. Implementation and Monitoring Committee:

"With effect from the Approval Date, the Monitoring Committee shall be responsible for the implementation of the Plan.

The monitoring committee shall comprise of the Resolution Applicants, one representative of the Financial Creditor, the Resolution Professional."

The Resolution Applicants shall have the freedom to take such decisions as may be necessary to manage the business of the CD, which shall be strictly within the overall parameters of the approved Resolution Plan.

The Monitoring Committee shall have the following objectives:

a. To monitor and supervise the implementation of the Plan and shall be required and entitled to do all such acts, deeds, matters and things as may be necessary in order to implement and give effect to this Plan

b. To coordinate amongst all stakeholders for smooth implementation of the Plan;

c. To communicate the Feedback on the progress of the implementation of the Resolution Plan to the Adjudication Authority.

4. MANDATORY COMPLIANCE UNDER IBC, 2016 AND CIRP REGULATIONS:

5. RELIEFS / CONCESSIONS:

'19...In the present case, however, our focus must be on the dispensation governing the process of approval or rejection of the 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."

CONCLUSION: