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2024 Supreme(Online)(NCLAT) 378
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Hon'ble Justice Rakesh Kumar Jain (Member(Judicial)) , Hon'ble Mr. Indevar Pandey (Member (Technical)) , Hon'ble Mr. Naresh Salecha (Member (Technical)) ,
Central Transmission Utility of India Limited – Appellant
Versus
Ashish Chhawchharia – Respondent
25/ND/2022 COMPANY APPEAL(AT)(INS)
The court upheld the resolution plan under the Insolvency and Bankruptcy Code, affirming that the treatment of operational creditors as receiving NIL payment was lawful and the commercial wisdom of the Committee of Creditors is not subject to judicial review.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 30(2)(b) and 53 - Approval of resolution plan - The Adjudicating Authority approved the resolution plan submitted by Adani Power Ltd. with 100% votes from the Committee of Creditors, dismissing objections from operational creditors regarding their claims being treated as contingent - The court emphasized that the resolution plan complied with statutory requirements and the commercial wisdom of the Committee of Creditors cannot be interfered with unless there is a contravention of law. (Paras 10, 24, 26, 28)
Facts of the case:
The appeal arose from the approval of a resolution plan for Essar Power M.P. Ltd. under the Insolvency and Bankruptcy Code, where the Appellant contested the treatment of its claim as contingent and the resolution plan's fairness towards operational creditors.
Findings of Court:
The court found that the resolution plan was compliant with the Code, and the treatment of operational creditors as receiving NIL payment was justified based on the liquidation value and the distribution priorities outlined in the Code.
Issues: The main issues included whether the resolution plan violated Section 30(2)(e) of the Code and the appropriateness of classifying the Appellant's claim as contingent.
Ratio Decidendi: The court ruled that the classification of the Appellant's claim as contingent was appropriate due to the pending appeal, and the commercial wisdom of the Committee of Creditors was paramount, thus not subject to judicial review unless there was a legal contravention.
Result: Appeal dismissed.
Per: Justice Rakesh Kumar Jain:
- This appeal is directed against the order dated 01.11.2021 passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi) by which I.A. No. 2829 of 2021 filed by the Resolution Professional of Essar Power M.P. Ltd. (Corporate Debtor) for approval of the resolution plan submitted by Respondent No. 3/Successful Resolution Applicant (SRA) (Adani Power Ltd.) has been allowed and application bearing I.A. No. 4099 of 2021 filed by the Appellant objecting to the resolution plan and I.A. No. 3015 of 2021 filed by the Appellant against the adjudication of its claim of Rs. 2643,54,00,000/- as Rs. 1, treating the same as contingent claim, has been dismissed.
2. In brief, the financial creditor (ICICI Bank Ltd.) filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short ‘Code’) bearing No. (IB)/863/PB/2020 for the initiation of Corporate Insolvency Resolution Process (in short ‘CIRP’) against the Corporate Debtor which was admitted on 29.09.2020 and Respondent No. 1 was appointed as the Interim Resolution Professional (IRP) who continued as the Resolution Professional (RP).
3. The RP, consequent upon his appointment as IRP, made a public announcement in Form A on 10.10.2020 in the newspaper, namely, Business Standard – Delhi – Hindi Edition, Raj Express –Jabalpur – Hindi Edition and Financial Express – All India English Edition and also uploaded it on the website of the Insolvency and Bankruptcy Board of India (IBBI).
4. The Respondent No. 1 /RP constituted the Committee of Creditors (CoC) comprising of the following financial creditors with their respective voting share: -
- S.
- No.
- Name of Creditor Voting Share % age
1. ICICI Bank
29.19
2. REC Limited
24.53
3. Power Finance Corporation
24.26
4. Punjab National Bank
15.98
5. Edelweiss Asset Reconstruction Company Limited
6.04
5. Form G was published on 12.11.2020 in the newspapers. The last date for submission of Expression of Interest (EOI) was 27.11.2020 but it was extended to 04.12.2020 and then again to 14.12.2020. The last date for submission of resolution plan was ultimately fixed for 16.01.2020.
6. Four EOIs were made to the R1/RP i.e. by Adani Power Limited, Vedanta Limited, Jindal Power Limited and NTPC Limited out of which only two Prospective Resolution Applicants (PRAs) i.e. Vedanta Limited and Adani Power Limited submitted their resolution plans.
7. Voting for approval of the resolution plan was conducted in the 11th meeting of the CoC held on 21.05.2021 and the resolution plan submitted by Respondent No. 3 (Adani Power Limited) was approved by the CoC with 100 % votes. The Respondent No. 3 submitted performance guarantee of Rs. 150 Cr. on 22.06.2021. In the resolution plan, the detail of payments given to the various stakeholders of the Corporate Debtor was given in Form H.
The extract is reproduced as under:-
- Comp. App. (AT) (Ins) No. 25 of 2022
8. The liquidation value of the CD was disclosed as Rs. 1733.4 Cr. and the fair market value of the CD as Rs. 2657.2 Cr. After approval of the resolution plan, the Respondent No. 1 filed the application bearing 2829 of 2021 before the AA for the following prayers:-
- “a. Allow the present application b. pass an order approving the resolution plan dated 11.05.2021 (read with addendum dated 12.05.2021) submitted by Adani Power Limited (as annexed at Annexure Y) under Section 31(1) of the Code c. Pass an order granting the reliefs and concessions sought in Section 9 of the Successful resolution plan dated 11.05.2021 (read with addendum dated 12.05.2021) submitted by Adani Power Limited (as annexure Y) and d. Pass any such other order or orders it may deem fit and necessary in the interest of equity and justice.”
9. During the pendency of this application, various applications were filed by the Operational Creditors including the one by the present Appellant i.e. I.A. No. 4099 of 2021, questioning the validity of the resolution plan and also filed I.A. No. 3015 of 2021 seek
