Balaji Minerals & Ors vs Essar Power M.P Limited & Anr

Comp. App. (AT) (Ins) No. 1083 of 2021 & I.A. No. 2902 of 2021

IN THE MATTER OF:

Balaji Minerals & Ors. ...Appellant

Versus

Essar Power M. P. Ltd.

(Through Professional) & Ors. ...Respondents

Present:

For Appellant : Mr. Piyush Singh, Mr. Akshay Srivastava & Mr. Vivek Kumar, Advocates.

For Respondents : Mr. Ramji Srinivasan, Sr. Advocate along with Mr. Diwakar Maheshwari, Ms. Pratiksha Mishra. Mr. Vishnu Shriram & Ms. Namrata Saraogi, for R-1.

Mr. Sandeep Singhi, Mr. Vishal Gehrana, Ms. Hancy Maini & Ms. Aakriti Vohra, for R-2.

Mr. Siddhant Kant & Mr. Nikhil Mathur, for CoC.

JUDGMENT

Per: Justice Rakesh Kumar Jain:

This appeal is filed by four Appellants, namely, Balaji Minerals, Pawan

Associates, V2P Engineering Services Pvt. Ltd. and M/s Shree Enterprises

against the order dated 01.11.2021, passed by the Adjudicating Authority

(National Company Law Tribunal, New Delhi) by which application bearing

I.A. No. 3286 of 2021 filed by Balaji Minerals, I.A. No. 3293 of 2021 filed by

Pawan Associates, I.A. No. 3318 of 2021 filed by V2P Engineering Services

Pvt. Ltd. and I.A. No. 3614 of 2021 filed by Shree Enterprises, have been

dismissed recording the following reason which read as under: -

"REASONING

Comp. App. (AT) (Ins) No. 1083 of 2021 2

24. That after going through the objections made by the Operational Creditors, and examining the reply given by the RP and CoC, this bench observes that as per Section 30(2)(b) of IBC, 2016,the higher of the following amount is required to be paid to the Operational Creditors i.e the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or 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.

25. Since the Liquidation value of the Operational Creditors is 'Nil' and the amount which shall be distributed to the Corporate Debtor in accordance with Section 53(1) would have been the Nil as well. Therefore, we are of the considered view that the Resolution Plan is not in violation of Section 30(2)(b) of IBC, 2016.

26. Since the plan is approved by the 100% votes by the CoC. Therefore, this bench cannot interfere in the Commercial Wisdom of the CoC, in absence of any contravention of any provision of law. Therefore, we dismiss IA 3286, IA 3293, IA 3318, IA 3396, IA 3614.IA 3862, IA 3869 Of 2021, IA 4099 filed by the Operational Creditors.

27. That IA 3608, IA 3619, IA 3620, IA 3621 were the Applications filed by the CoC to intervene in the Applications filed by the Operational Creditors. Since the objections of the operational Creditors are already decided, therefore these IAs are dismissed as infructuous."

2. In brief, ICICI Bank, one of the financial creditors of the ESSAR Power

M.P. Limited (Corporate Debtor), filed an application i.e. I.B. No. 863 (PB) of

2020 under Section 7 of the Insolvency And Bankruptcy Code, 2016 (in

short 'Code') for the initiation of Corporate Insolvency Resolution Process (in

short 'CIRP') against the Corporate Debtor.

3. The aforesaid application was admitted by the Adjudicating Authority

on 03.10.2020 and Ashish Chhawchharia was appointed as the Interim

Resolution Professional (in short 'IRP'). The IRP constituted the Committee of

Creditors (CoC) with ICICI Bank Limited, REC Limited, Power Financial

Comp. App. (AT) (Ins) No. 1083 of 2021 3

Corporation Limited, Edelweiss Asset Reconstruction Company Limited and

Punjab National Bank.

4. The IRP issued advertisement, inviting the claims, in terms of the

order dated 03.10.2020. On 19.10.2020, the Appellants submitted their

claim to the IRP of their respective operational debts i.e. Rs. 5,44,85,630/-

(Appellant No. 1), Rs. 26,08,433.5/- (Appellant No. 2), Rs. 1,78,63,387.81/-

(Appellant No. 3) and Rs. 3,28,63,598/- (Appellant No. 4). The claims of the

Appellants were admitted by the IRP as under "Rs. 5,44,85,628/- (Appellant

No. 1), Rs. 25,70,452/- (Appellant No. 2), Rs. 1,60,19,388/- (Appellant No.

3) and Rs. 3,28,31,045/- (Appellant No. 4)"

5. The Respondent No. 2 i.e. Adani Power Limited, submitted the

resolution plan which was approved by the CoC. As per the said resolution

plan, the total amount of admitted claim is Rs. 12025,63,31,567/-. The

liquidation value is Rs. 1733 Cr. (approx.) and the Fair value is Rs. 2657 Cr.

(approx.).

6. The IRP filed the application bearing I.A No. 2829 of 2021 before the

Adjudicating Authority for approval of the resolution plan making the

following prayers "(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 IBC. (c)

Pass an order granting the reliefs and concessions sought in Section 9 of the

Successful Resolution Plan dated 11.05.2021 (r/w addendum dated

12.05.2021) submitted by Adani Power Limited (as annexure Y)"

Comp. App. (AT) (Ins) No. 1083 of 2021 4

7. During the pendency of this application, the present Appellants filed

their respective applications bearing I.A. No. 3286 of 2021, 3293 of 2021,

3318 of 2021 and 3614 of 2021, objecting to the resolution plan, approved

by the CoC and sought amendment in it in conformity with the Code and

Regulations.

8. The grievance of the Appellants raised in the said application is

regarding the provision of NIL payment to the Operational Creditor in the

resolution plan, however, all the applications have been dismissed by the

Adjudicating Authority vide its impugned order after recording specific

reasoning which has already been reproduced in the earlier part of this

order.

9. Counsel for the Appellant has argued that the resolution plan is

unfair as it must provide for payment of debts of the operational creditors,

the distribution should be fair and equitable and since the resolution plan

failed to make any provision for the operational creditors, therefore, the

distribution cannot be said to be fair and equitable.

10. On the other hand, Counsel for Respondent No. 1 has submitted that

the applications filed by the Appellants have rightly been dismissed by the

Adjudicating Authority by recording cogent reasons. It is further submitted

that as per Section 30(2) of the Code, the resolution professional is required

to examine that payments proposed to the operational creditors shall not be

less than the amount to be paid to the operational creditors in the event of

liquidation of the Corporate Debtor under Section 53 or less than the

amount payable to operational creditor if the resolution proceeds were to be

Comp. App. (AT) (Ins) No. 1083 of 2021 5

distributed in accordance with the priority under Section 53 of the Code

whichever is higher.

11. It is further submitted that liquidation value of the CD is

approximately Rs. 1733 Cr. while the total admitted financial debt of the

CD is Rs. 12607,57,69,383/- which is not sufficient to even cater to the

secured financial creditors of the CD, therefore, there is NIL liquidation

value due to operational creditors in the event of liquidation of the CD and

thus, the provisions in the resolution plan to pay NIL amount to the

operational creditors is not in violation of any of the provisions of the Code.

12. It is also submitted that when the liquidation value due to operational

creditors in a given case is NIL, then a resolution plan proposing NIL

payment to the operational creditors is in due compliance with Section 30(2)

r/w Regulation 38 of the CIRP Regulations.

13. It is further argued that the operational creditors are not required to

be paid anything more than the minimum liquidation value due to them and

the CoC in its commercial wisdom is duly empowered to accept a resolution

plan that may involve different payments to financial creditors and

operational creditors. In this regard, reliance has been placed on the

decision of the Hon'ble Supreme Court in the case of COC of ESSAR Steel

India Limited through its authorised signatory Vs. Satish Kumar Gupta &

Ors. (2020) 8 SCC 531 and also to the case of Pratap Technocrats (P) Ltd. &

Ors. Vs. Monitoring Committee of Reliance Infatel Limited & Anr., Civil

Appeal No. 676 of 2021.

Comp. App. (AT) (Ins) No. 1083 of 2021 6

14. Counsel for Respondent No. 1 has also submitted that the commercial

wisdom of the CoC, approving the resolution plan, that it is compliant with

the mandatory requirement of the Code is non-justiciable and also relied

upon a decision of the Hon'ble Supreme Court in the case of K. Shashidhar

Vs. Indian Overseas Bank & Ors., (2019) 12 SCC 50.

15. Counsel for Respondent No. 2 has submitted that the resolution plan

was unanimously approved by the CoC in exercise of its commercial wisdom

which is not open to judicial review. The liquidation value of the CD

disclosed by Respondent No. 1 was Rs. 1733/- Cr. and as such the

liquidation value of the operational creditors of the CD was NIL.

16. It is further submitted that the approved resolution plan, offered NIL

payment to unsecured financial creditors, operational creditors and

contingent creditors as such the offer is in accordance with Section 30(2)(b)

of the Code.

17. Counsel for Respondent No. 3 has also made the similar submissions

stating that the CoC has made all efforts in protecting the interest of all the

stakeholders. It is submitted that the resolution plan submitted by

Respondent No. 2 provided for an overall payout of Rs. 2500 Cr. towards the

stakeholders with an additional commitment of upto Rs. 1100 Cr. towards,

inter alia, investments in the CD towards working capital, operational

improvements and capital expenditure.

18. We have heard Counsel for the parties and perused the record with

their able assistance.

Comp. App. (AT) (Ins) No. 1083 of 2021 7

19. The amount provided for the stakeholders under the Resolution plan,

culled out from the impugned order is as under:-

Comp. App. (AT) (Ins) No. 1083 of 2021 8

Comp. App. (AT) (Ins) No. 1083 of 2021 9

20. The resolution plan has been approved by 100% voting by the CoC. It

is well settled that the commercial wisdom of the CoC is unjusticiable.

Moreover, the liquidation value of the operational creditors is NIL and the

amount which has been distributed to the CD in accordance with Section

53(1) shall have to be Nil as well, therefore, the resolution plan is not in

violation of Section 30(2)(b) of the Code.

21. Moreover, admitted claim regarding the financial creditors is to the

tune of Rs. 12067,57,69,383 and amount provided under the plan is Rs.

2500 Cr. which is to the tune of 20.098%, therefore, all the other creditors

including unsecured financial creditors and operational creditors have been

provided NIL.

22. Thus, in view of the aforesaid discussion, we do not find any error in

the impugned order having been passed in respect of the applications filed

by the Appellants, therefore, the appeal is found to be without any merit

and the same is hereby dismissed. No costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

[Mr. Indevar Pandey] Member (Technical) New Delhi

29th April, 2024

Sheetal

Comp. App. (AT) (Ins) No. 1083 of 2021