Canara Bank vs Mamta Binani

[Appeal filed under Section 61 of the I & B Code, 2016, arising out of impugned order dated 20th August, 2019 passed by the 'Adjudicating Authority' (National Company Law Tribunal, Kolkata Bench, Kolkata) in CA(IB) No. 709/KB/2019 in CP(IB) No. (IB) 570/KB/ 2018]

IN THE MATTER OF:

Canara Bank Canara Bank Circle Office, 21 Camac Street, Kolkata - 700 17 .. Appellant

Versus

1. Ms. Mamta Binani, (Resolution Professional), Aristo Texcon, DD House, P-32, Kasba Industrial Estate, Phase-I, Kolkata- 700 107

2. North East Development Finance Corporation Ltd. (Member of Committee of Creditors), NEDFI House, G.S. Road, Dispur Assam - 781 006

3. Punjab National Bank (Member of Committee of Creditors) PNB House, Brabourne Road Branch, 18A Braborne Road, Kolkata - 700 001

4. Jagannath Financial Advisory Pvt. Ltd. 3, Mangoe Lane Kolkata West Bengal- 700 001 .. Respondents

Present: For Appellant : Mr. PBA Srinivasan, Mr. P.S. Chandralekha, Ms. Ichchha Kalash and Mr. Parth Tandon, Advocates

For Respondents : Mr. Lalit Mohan, Advocate for R-1

Company Appeal(AT)(Insolvency) No. 1117 of 2019 2

Mr. Rituraj Biswa, Mr. Chandan Kumar and Ms. Kumud Shekhar, Advocates for Respondent No. 2 Mr. Rajesh Gautam, Advocate for Respondent No. 3 Mr. Rishav Banerjee and Mr. Neeraj Kr. Gupta, Advocates for Respondent No. 4/RA

JUDGMENT

(VIRTUAL MODE)

JUSTICE M. VENUGOPAL

INTRODUCTION

The 'Appellant' /Canara Bank as an 'Aggrieved Person' has preferred the

instant Company Appeal (AT)(Insolvency) No.1117 of 2019 being dissatisfied with

the with order dated 20.8.2019 in CA (IB)No.709/KB/2019 in

CP(IB)No.570/KB/2018 passed by the 'Adjudicating Authority' (National

Company Law Tribunal, Kolkata Bench, Kolkata).

2. The 'Adjudicating Authority' (National Company Law Tribunal, Kolkata

Bench) while passing the impugned order dated 20.08.2019 in CA

(IB)No.709/KB/2019 in CP(IB)No.570/KB/2018 (Filed by the Resolution

Professional under Section 30(6) and 31 of the I&B Code, 2016 r/w Regulation

39(4) of the Insolvency & Bankruptcy Board of India (Insolvency Resolution

Process for Corporate Persons) Regulations, 2016 at paragraph 8 to 15 had

observed the following:-

8. "We have given our thoughtful consideration to the submission made by the Ld. Counsel for the Canara Bank. We hold that order passed by NCLAT in case of Standard Chartered Bank Vs Satish Kumar Gupta RP of Essar Steel Ltd and Ors is now the subject to appeal before Hon'ble Supreme Court. Hon'ble Supreme Court stayed the execution of that order. Secondly, the facts before Hon'ble NCLAT and point for

Company Appeal(AT)(Insolvency) No. 1117 of 2019 3

consideration was whether Operational Creditor can be treated in discriminatory manner while distributing assets of the Corporate Debtor in between them and the Financial Creditors. In this case, there are some Operational Creditors but no provision is made to pay any sum in view of Section 53 of Insolvency and Bankruptcy Code, 2016. All Financial Creditors are equally treated while distributing funds.

9. In case of K. Sashidhar Vs Indian Overseas Bank Ltd (Civil Appeal No.10673 of 2018), the Hon'ble Apex Court hold that 'the legislature has not endowed on the Adjudicating Authority (NCLT) with the jurisdiction or authority to analyse or evaluate commercial decision of CoC, which lies to enquire into the justness of the rejection of resolution plan by descending financial creditors."

10. In short it is held tehat this Authority cannot sit in appeal against the financial decisions that are taken by CoC, In our considered opinion, it is within commercial wisdom of the CoC as to what Financial Creditors will get what share of the resolution funds.

11. Hence, we reject the objection of Canara Bank and proceed to check whether the resolution plan submitted for our approval complies the approval under Section 30(2) of Insolvency and Bankruptcy Code, 2016.

12. Section 30(2) of Insolvency and Bankruptcy Code, 2016 mandates that resolution plan shall provide:-

(a) the payment of insolvency resolution process cause in priority and payment of other debts of the Corporate Debtor.

(b) provides for payment of debts of Operational Creditors in such a manner specified by the Board subject to Section 153 of Insolvency and Bankruptcy Code, 2016.

(c) provides mechanism for management of affairs of the Corporate Debtor after approval of the resolut9ion plan.

(d) provides mechanism for implementation and supervision of the resolution plan.

Company Appeal(AT)(Insolvency) No. 1117 of 2019 4

(e) the plan should not contravene in provision of law for time being in force.

(f) plan must confirm other requirement as specified by the Board.

13. Keeping before our sight, we have examined the resolution plan

produced for our approval. It is seen that there is no Operational Creditor,

employees or the workmen and hence no provision made towards their

payment.

14. Para 6 of mandatory contents of the plan provides mechanism regarding management in control of affairs of the Corporate Debtor. It is also provided therein the mechanism for effective supervision and implementation of the plan. Provision is also made to pay resolution costs. The resolution fund appears to be equally distributed among all the Financial Creditors giving them equal share i.e. 23.43%. RP has certified the plan and compliance Certificate is produced as Annexure F. The affidavit of resolution applicant is also produced stating that they are not disqualified under Section 25A of Insolvency and Bankruptcy Code, 2016.

15. Perusal of plan shows that it does not contravene any provision of law time being in force and it complies all requirement of Insolvency and Bankruptcy Board of India (in short IBBI)."

accepted and approved the Resolution Plan of M/s Jagannath Financial

Advisory Pvt Ltd.

APPELLANT'S SUBMISSIONS:

3. The Learned Counsel for the Appellant/Bank submits that the

'Adjudicating Authority' while passing the impugned order dated 20.8.2019 in CA

(IB)No.709/KB/2019 in CP(IB)No.570/KB/2018 had failed to consider that there

Company Appeal(AT)(Insolvency) No. 1117 of 2019 5

is no equal treatment between the 'Financial Creditors' while distributing 'Funds'

under the Resolution Plan.

4. The Learned Counsel for the Appellant contends that the 'Resolution Plan'

approved by the 'Adjudicating Authority' is not in compliance with the ingredients

of Section 30 of the I&B Code and further that there is 'Fair and Equitable'

distribution under the Resolution Plan.

5. According to the Learned Counsel for the Appellant the 'share' given to the

Appellant/Bank under 'Resolution Plan' is much less in comparison with the

'security interest' that it has over the Assets of the 'Corporate Debtor'. In this

connection it is the plea of the Appellant/Bank that it has an exclusive charge on

the 'Company's Fixed Assets' valued at Rs.5.00 crores. But the Punjab National

Bank and NEDFI do not have any charge on the 'Company's Fixed Assets' except

the Lease Hold Property at 'Agartala' and on 'Third Party Securities' exclusively

charged to them and therefore, would be benefited by pooling of the securities

and distribution of resolution amount based on the voting share. As such, the

'distribution pattern' is against the Appellant's interest.

6. It is the stand of the Appellant that the Appellant/Bank through its letter

dated 15.5.2019 (which was discussed in the 13th Meeting of Committee of

Creditors) mentioned that the 'Resolution Plan' was submitted finally on a much

later date with constant changes/alterations as mentioned after later 'Committee

of Creditors Meetings' and Negotiations' therein even after the COC wherein H1

'bidder' was declared, the last change being made over mail dated 8.5.2019. As

such, there was enough scope for considering the stance of the Appellant in

Company Appeal(AT)(Insolvency) No. 1117 of 2019 6

regard to the distribution of funds to the 'Financial Creditors' on the basis of the

valuation of 'security interest' held by the Financial Creditors and hence, the

Appellant through the letter dated 15.05.2019 had requested to place the matter

before the 'Resolution Applicant' and arranged for distribution of the Resolution

Amount based on 'Security Interest'.

7. The Learned Counsel for the Appellant points out that the Appellant in '13th

Meeting of the Committee of Creditors' had objected to the adjustment of subsidy

sum of the Appellant amounting to Rs.2.03 crores relating to Aristo Industries by

the NEDFI/2nd Respondent in the account of 'Corporate Debtor' towards the

liability owed by it to the Respondent. In fact the Appellant had informed about

the same to the officials of the 2nd Respondent through letter dated 15.2.2019

addressed to the 2nd Respondent wherein it was mentioned that 'The Office of

Industries Department Bamuni Maidan, Guwahati informed our officer that the

subsidy amount of Rs.2.03 crores has been confirmed by your good office to our

aforesaid office and further informed that your good office have adjusted the

aforesaid subsidy amount towards their liability'.

8. The Learned Counsel for the Appellant brings to the notice of this Tribunal

that the Resolution Professional had not raised any objection in respect of the 2nd

Respondent's claim, as the 'Subsidy Amount' was adjusted by the Respondent

against the claim filed in CIRP of the Corporate Debtor.

9. The plea of the Appellant is that despite the realisable value of the

Corporate Debtor's securities exclusively charged with the Appellant was Rs.4.36

Company Appeal(AT)(Insolvency) No. 1117 of 2019 7

crores, the 'Liquidation Value' made by the 'Valuers' was pegged at a low valuation

of Rs.1.38 crores and there was no explanation in this regard.

10. The Learned Counsel for the Appellant contends that the Commercial

Wisdom of the 'Committee of Creditors' shall be considered by the 'Adjudicating

Authority', only when the Members of the 'Committee of Creditors' really discuss

the aspect of distribution of funds in their Meeting, applied their mind and then

arrived at a logical conclusion. But, in the present case, the 'Members of the

'Committee of Creditors' never deliberated upon the issue of the 'Distribution' of

the 'Resolution Fund' to the Financial Creditors on the basis of the security value

in their Meetings and directly placed the 'Resolution Plan' for 'E-voting' on the

basis of distribution provided by the Resolution Applicant, which signifies the fact

that there was absence of the commercial wisdom of the Members of the

Committee of Creditors and the 'Commercial Wisdom of the Resolution Applicant'

prevails over the Committee of Creditors. Therefore, the Resolution Plan which is

approved by the 'Adjudicating Authority' is to be dismissed.

STAND OF 1st RESPONDENT/(FORMER) RESOLUTION PROFESSIONAL

11. The stand of the 1st Respondent is that she had diligently complied with all

the pre-requisites of Section 30(2) of the I&B Code, 2016 before placing the

'Resolution Plan' before the Committee of Creditors for its approval. After

compliance of Section 30(3) of the Code, by the 1st Respondent, the Resolution

Plan was approved by the Committee of Creditors by a majority of 75.70. Later

the Adjudicating Authority on 28.2.2019 had approved the said Resolution Plan

after considering the objections raised by the Appellant which were more or less

the same.

Company Appeal(AT)(Insolvency) No. 1117 of 2019 8

12. The 1st Respondent is to offer her prima facie opinion to the Committee of

Creditors that a 'Law' has or has not been violated. Section 30(2)(e)of the Code

does not empower the Resolution Professional to decide whether the 'Resolution

Plan' does or does not violate the provision of Law. The Resolution Professional's

duty is to submit the 'Resolution Plan', before the 'Committee of Creditors' if the

same is in compliance with the provision of the Code, who may or may not

approve it and in this regard, the 1st Respondent refers to the judgement of

Hon'ble Supreme Court in K. Sashidhar V. Indian Overseas Bank and others

(vide Civil Appeal No.10673 of 2018 dated T05.02.2019) wherein at paragraph 44

it is mentioned as under:-

"...........The resolution professional is not required to express his

opinion on matters within the domain of the Financial Creditor(s)

to approve or reject the Resolution Plan under Section 30(4) of the

I&B Code."

13. The 1st Respondent adverts to the Judgement of Hon'ble Supreme Court

dated 25.1.2019 in Swiss Ribbons Pvt Ltd & Another V Union of India and

Others (Vide Writ Petition (Civil) No.99/2018) wherein at paragraph at 58 and 61

it is observed as under:-

58. It is clear from a reading of the Code as well as the Regulations that the resolution professional has no adjudicatory powers."

"61. Unlike the liquidator, the resolution professional cannot act in a number of matters without the approval of the committee of creditors under Section 28 of the Code, which can, by a two-thirds majority, replace one resolution professional with another, in case they are unhappy with his performance. Thus, the resolution professional is really a facilitator of the resolution

Company Appeal(AT)(Insolvency) No. 1117 of 2019 9

process, whose administrative functions are overseen by the committee of creditors and by the Adjudicating Authority."

14. The Learned Counsel for the 1st Respondent refers to the Judgement of the

Hon'ble Supreme Court dated 4.10.2018 in Arcelor Mittal India Pvt Ltd V. Satish

Kumar Gupta and others (Civil Appeal No. 9402-9405/2018) wherein at

paragraph 77 it is observed as under:

"The Resolution Professional is not required to take any decision, but merely to ensure that the resolution plans submitted are complete in all respects before they are placed before the Committee of Creditors, who may or may not approve it. The fact that the Resolution Professional is also to confirm that a resolution plan does not contravene any of the provisions of law for the time-being in force, including Section 29A of the Code, only means that his prima facie opinion is to be given to the Committee of Creditors that a law has or has not been contravened. Section 30(2)(e) does not empower the Resolution Professional to "decide" whether the resolution plan does or does not contravene the provisions of law."

15. The Learned Counsel for the 1st Respondent refers to the Judgement dated

14.11.2018 of this 'Tribunal' in Binani Industries Ltd V. Bank of Baroda & Ors,

Company Appeal (AT)((Ins) No.82/2018 wherein it is observed as under:-

"1. The objective of the 'I&B Code' As evident from the long title of the 'I&B Code', it is for reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons to promote entrepreneurship, availability of credit, and balance the interests of all stakeholders. The recent Ordinance explicitly aims to promote resolution over liquidation."

Company Appeal(AT)(Insolvency) No. 1117 of 2019 10

"The 'Resolution Professional' as well as the 'Committee of Creditors' are duty bound to ensure maximization of value within the time frame'. Such an object in finding out a 'Resolution Applicant' who can offer maximum amount so as to safeguard the interest of all stakeholders of the 'Corporate Debtor' is lacking in the case in hand from the side of the 'Committee of Creditors'."

16. According to the 1st Respondent, in the 12th Meeting of the 'Committee of

Creditors', the Appellant/Bank's Representatives had made the following

observations/points:

1) That the Canara Bank have the exclusive Security Interest

towards Kolkata and Howrah Projects of the Corporate Debtor,

whereas PNB and NEDFI has security interest towards

Agartala Unit of Corporate Debtor and accordingly Canara

Bank mentioned that its value of securities compared to the

value of securities of PNB and NEDFI is more. They added that

whether there is any possibility that distribution of funds to the

financial creditor as per Resolution Plan can be made based on

the security interest.

To this point, the remaining members of the CoC mentioned

that the Resolution Plan as received from the Resolution

Applicant, contains the provision of distribution of funds

amongst the financial creditors in ratio of voting percentage of

the respective financial creditor of CoC. This Resolution Plan

has been discussed several times in the CoC Meeting clause

by clause and point by point, including the distribution

mechanism therein, they mentioned that it has always been

Company Appeal(AT)(Insolvency) No. 1117 of 2019 11

the understanding from the day Resolution Plan has come that

the sharing will be done as per voting share of the respective

Financial Creditor in the CoC and that each of the meeting was

attended by all the CoC members, all the time. The

Representative of Canara Bank took note of the same."

17. As a matter of fact, in the 12th Meeting of the 'Committee of Creditors' it

was recorded as under:-

"That Canara Bank had got its own valuation done and as per the last valuation done by Canara Bank in the year 2017, the realizable value of the corporate debtor's securities exclusively charged with it was Rs. 4.36 crores. However, the liquidation value done by the Valuers currently has been pegged at Rs.1.38 crores and was enquiring the reason for such a low valuation. The RP and other COC Members namely NEDFI and Canara Bank mentioned that the Valuation Reports had been discussed thoroughly and noted by the CoC Members with unanimity way back in early January 2019and that in each of the CoC and that in each of the CoC meetings, all the Financial Creditors has always been present. Anyways, the other CoC members went on to mention that the valuation has been done by the approved valuers and there will always be difference between realizable value as a going concern and liquidation value. The representative of Canara Bank noted the same."

2ND RESPONDENT'S PLEAS

18. The 2nd Respondent is secured Financial Creditor and one of the Members

of Committee of Creditors. In fact, in the 6th COC Meeting 16.01.2019 all the

three Resolution Plans submitted by one Damani Infracom (P) Ltd (ii) Jagannath

Financial Advisory (P) Ltd (iii) Dalmia Industrial Development were discussed with Company Appeal(AT)(Insolvency) No. 1117 of 2019 12

all the COC Members including the Appellant's representative. A common

opinion was form which were as follows:-

"i) COC is in preliminary view that Corporate Guarantee, Personal Guarantee and Third-Party collateral securities would not be released in the present form of the resolution plans.

ii)The offer amount to be increased.

iii) The amount of CIRP Cost should be specifically mentioned in the resolution plan.

The Appellant had not raised any objection on the distribution pattern

proposed in the plans neither they gave their opinion to change the distribution

pattern in any of the CoC Meeting.

19. The Committee of Creditors considered all the Resolution Plans and in the

11th Meeting dated 24.4.2019, the CoC had decided to approve the Resolution

Plan submitted by M/s Jagannath Financial Advisory Pvt Ltd which was strictly

according to the evaluation matrix and the CoC declared the Resolution Plan of

Jagannath Financial Advisory Pvt Ltd as 'H1". In the 13th Meeting held on

21.05.2019, the Appellant/Bank had tendered 'Dissenting Vote' for approval of

the Plan on the ground that the distribution of Resolution Fund is discriminatory

as against it. But the Committee of Creditors had approved the Resolution Plan

of M/s Jagannath Financial Advisory P Ltd by 75.70% of votes.

20. While distributing funds in the Resolution Plan, in the present case, all the

Financial Creditors were treated equally as per the voting shares of each Financial

Creditor in the Committee of Creditors. The Resolution Fund was equally

distributed among all the Financial Creditors giving them equal share i.e. 23.43%

of the claim amount. Later the Resolution Plan was filed by the 1st

Company Appeal(AT)(Insolvency) No. 1117 of 2019 13

Respondent/Resolution Professional in CA (IB)No.709/KB/2019 under Section

31 of the I&B Code before the Adjudicating Authority (NCLT Kolkata Bench) for

approval of the Resolution Plan of M/s Jagannath Financial Advisory P Ltd.

Indeed, the Appellant/Bank raised the plea that the distribution of the Resolution

Fund was improper and it was to get due share considering the fact that they

hold 80% of the assets of the Corporate Debtor. The valuation made by the

Appellant/Bank in the year 2017 was made by its own Valuer and hence it is

disputable.

21. The valuation was made by the approved valuer and there will be always a

difference between a realizable value as a 'Going Concern' and 'Liquidation Value'

and this was approved by all the "Members of the COC' and the same was noted

by the Appellant/Bank in the 12th Meeting. The NEDFI has its charge not only on

the land of the Agartala Unit but also on the Plant and Machinery as well as

building and other assets of the 'Agartala Unit'. In short, it is the stand of the 2nd

Respondent that the 'Committee of Creditors' had approved the 'Resolution Plan'

where the distribution on pari passu (voting share) basis and that no

discrimination was shown to any of the secured creditor.

22. The 2nd Respondent adverts to the relevant provisions of the Insolvency &

Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons)

Regulations, 2016 which read as follows:-

"38. Mandatory contents of the resolution plan. (1) The amount due to the operational creditors under a resolution plan shall be given priority in payment over financial creditors.

Company Appeal(AT)(Insolvency) No. 1117 of 2019 14

(1A) A resolution plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the corporate debtor.

(2) A resolution plan shall provide:

(a) the term of the plan and its implementation schedule;

(b) the management and control of the business of the corporate debtor during its term; and

(c) adequate means for supervising its implementation. (3) A resolution plan shall demonstrates that:

(a) it addresses the cause of default;

(b) it is feasible and viable;

(c)it has provisions for its effective implementation;

(d) it has provisions for approvals required and the timeline for the same; and

(e) the resolution applicant has the capability to implement the resolution plan.

39. Approval of resolution plan. (1) A prospective resolution applicant in the final list may submit resolution plan or plans in accordance with the Code and these Regulations to the resolution professional electronically within the time given in the request for resolution plans Under Regulation 36B alongwith:

(a) Any affidavit stating that it is eligible under Section 29A to submit resolution plans; and

(b) (****)

(c) An undertaking by the prospective resolution applicant that every information and records provided in connection with or in the resolution plan is true and correct and discovery of false information and record at any time will render the applicant ineligible to continue in the corporate insolvency resolution process, forfeit any refundable deposit, and attract penal action under the Code.

(1A) A resolution plan which does not comply with the provisions of sub- Regulation (1) shall be rejected.

(2) The resolution professional shall submit to the committee all resolution plans which comply with the requirements of the Code and Regulations made

Company Appeal(AT)(Insolvency) No. 1117 of 2019 15

thereunder along with the details of following transactions, if any, observed, found or determined by him;

(a) preferential transactions under section 43;

(b) undervalued transactions under section 45;

(c) extortionate credit transactions under section 50; and

(d) fraudulent transactions under section 66, and the orders, if any, of the adjudicating authority in respect of such transactions. (3) The committee shall evaluate the resolution plans received under sub-

Regulation (1) strictly as per the evaluation matrix to identify the best resolution plan and may approve it with such modifications as it deems fit; Provided that the committee shall record the reasons for approving or rejecting a resolution plan.

(4) The resolution applicant shall endeavour to submit a resolution plan approved by the Committee to the Adjudicating Authority at least fifteen days before the maximum period for completion of corporate insolvency resolution process under Section 12, along with a compliance certificate in Form H of the Schedule.

(5) The resolution professional shall forthwith send a copy of the order of the Adjudicating Authority approving or rejecting a resolution plan to the participants and the resolution applicant.

(6) A provision in a resolution plan which would otherwise require the consent of the members or partners of the corporate debtor, as the case may be, under the terms of the constitutional documents of the corporate debtor, shareholders' agreement, joint venture agreement or other document of a similar nature, shall take effect notwithstanding that such consent has not been obtained.

(7) No proceedings shall be initiated against the interim resolution professional or the resolution professional, as the case may be, for any actions of the corporate debtor, prior to the insolvency commencement date. (8) A person in charge of the management or control of the business and operations of the corporate debtor after a resolution plan is approved by the Adjudicating Authority, may make an application to the Adjudicating

Company Appeal(AT)(Insolvency) No. 1117 of 2019 16

Authority for an order seeking the assistance of the local district administration in implementing the terms of a resolution plan."

23. The Resolution Plan complies with all the requirements of 'Insolvency &

Bankruptcy Board of India' and it does not violate any provision of Law time being

in force.

3rd RESPONDENT'S STAND(PUNJAB NATIONAL BANK)

24. By virtue of the amended Section 30 of the I&B Code, it is necessary that

the 'Dissenting Financial Creditor' is paid, in the minimum, the value they would

have received as per Section 53 of the Code, in the event the Corporate Debtor

went for 'liquidation'. As such, the 'Dissenting Financial Creditor' can lawfully

claim the sum they would have received in terms of Section 53 of the Code.

25. The distribution of the amount was made very fairly by the 'Committee of

Creditors' on the basis of the total dues of each respective creditor. The present

scheme of the distribution of the amount between the creditors, on the basis of

their dues, balances the interest of all stakeholders, as it minimizes the haircut

taken by all the Financial Creditors by giving an equitable division of the amount.

26. Even assuming that the distribution was made on the basis of the security

interest available with the 'Financial Creditor' the Appellant, having the least due

amount would have ended up with almost full recovery. However, the other two

Financial Creditors, including the Respondent Bank would have been paid a

negligible amount would have to take to a major haircut, even when they have

the maximum dues.

Company Appeal(AT)(Insolvency) No. 1117 of 2019 17

27. The Learned Counsel for the 3rd Respondent/Bank cites the decision of

Hon'ble Supreme Court in India Resurgence ARC Private Ltd V M/s Amit Metaliks

Limited & Anr. reported in 2021 SCC OnLine SC 409 wherein at paragraph 17,

19 21, 22 and 23 it is observed as under:-

"17. Thus, what amount is to be paid to different classes or subclasses of creditors in accordance with provisions of the Code and the related Regulations, is essentially the commercial wisdom of the Committee of Creditors; and a dissenting secured creditor like the appellant cannot suggest a higher amount to be paid to it with reference to the value of the security interest. 14. In the case of Jaypee Kensington (supra), the

19. In Jaypee Kensington(supra), this Court repeatedly made it clear that a dissenting financial creditor would be receiving the payment of the amount as per his entitlement; and that entitlement could also be satisfied by allowing him to enforce the security interest, to the extent of the value receivable by him. It has never been laid down that if a dissenting financial creditor is having a security available with him, he would be entitled to enforce the entire of security interest or to receive the entire value of the security available with him. It is but obvious that his dealing with the security interest, if occasion so arise, would be conditioned by the extent of value receivable by him.

21. The limitation on the extent of the amount receivable by a dissenting financial creditor is innate in Section 30(2)(b) of the Code and has been further exposited in the decisions aforesaid. It has not been the 18 intent of the legislature that a security interest available to a dissenting financial creditor over the assets of the corporate debtor gives him some right over and above other financial creditors so as to enforce the entire of the security interest and thereby bring about an inequitable scenario, by receiving excess amount, beyond the receivable liquidation value proposed for the same class of creditors.

22. It needs hardly any emphasis that if the propositions suggested on behalf of the appellant were to be accepted, the result would be that rather than insolvency resolution and maximisation of the value of assets of the corporate debtor, the processes would lead to more liquidations, with every secured financial creditor opting to stand on dissent. Such a result would be defeating the very purpose envisaged by the Code; and cannot be countenanced. We may profitably refer to the relevant observations in this regard by this Court in Essar Steel as follows:-

Company Appeal(AT)(Insolvency) No. 1117 of 2019 18

"85. Indeed, if an "equality for all" approach recognising the rights of different classes of creditors as part of an insolvency resolution process is adopted, secured financial creditors will, in many cases, be incentivised to vote for liquidation rather than resolution, as they would have better rights if the corporate debtor was to be liquidated rather than a resolution plan being approved. This would defeat the entire objective of the Code which is to first ensure that resolution of distressed assets takes place and only if the same is not possible should liquidation follow."

23. Viewed from any angle, the submissions made on behalf of the appellant do not merit acceptance and are required to be rejected."

4th RESPONDENT'S PLEAS.

28 The approved Resolution Plan is in complete consensus of the objective of

the Code and the same is proposed for an effective and viable time bound

Resolution, which not only achieve maximization of the value of the assets of the

Corporate Debtor but as also taken care of all the stakeholders of the Corporate

Debtor. The instant Appeal filed by the Appellant/Dissenting Financial Creditor

is not maintainable because of the fact the Resolution Plan of the 4th Respondent

was approved by a majority of the Committee of Creditors i.e. by 75.70% of

'Members of the Committee of Creditors'.

29. The present Appeal is barred by Limitation, as the impugned order

approving the 'Resolution Plan' was on 20.08.2019 and that the Appeal is filed on

03.12.2019, beyond the statutory period of 30 days, as well as even beyond the

extended period of 45 days, as specified under the Code. A plea is taken on behalf

of the Appellant that the certified copy of the impugned order was obtained on

23.09.2019. Even then, the instant 'Appeal' is barred by limitation since the

Appeal should have been filed by the Appellant within November, 2019.

Company Appeal(AT)(Insolvency) No. 1117 of 2019 19

30. There is no illegality or discrimination in regard to the Resolution Plan. The

4th Respondent/Successful Resolution Applicant had already implemented the

Resolution Plan in part and made part payments in consonance with the

approved Resolution Plan. If the Resolution Plan of the 4th Respondent is set

aside by this Tribunal, the 'Corporate Debtor' will go into liquidation which will

prejudice the rights and interest of all the stakeholders of the Corporate Debtor.

The approved 'Resolution Plan' of the 4th Respondent maximize the value of the

assets of the 'Corporate Debtor' and the same is in consonance with the objectives

of the Code.

RESOLUTION PROFESSIONAL'S DUTIES

31. A Resolution Professional has a duty among other things to invite the

prospective Resolution Applicant who satisfies the requirements as prescribed by

him with the approval of the 'Committee of Creditors' keeping in mind the

complexity and scale of operation of the business of the 'Corporate Debtor' and

other conditions as may be prescribed by the IBBI to place forward the Resolution

Plans, project such plan to the 'Committee of Creditors' etc. He is an Officer of

the Court and he is to exercise reasonable and responsible care for the company

whose property and affairs are entrusted with him. He has an absolute duty to

secure the best prize in the given circumstances and he is not made liable

because his perception is wrong, of course, with the rider that unless it is not a

reasonable one.

32. As per Section 25(2)(i) of the Code, a duty is cast on the Resolution

Professional to scrutinize the Resolution Plan to ensure that it is in accordance

Company Appeal(AT)(Insolvency) No. 1117 of 2019 20

with Section 30 of the I&B Code and Regulation 37 of the IBBI(Insolvency

Resolution Process for Corporate Persons) Regulations, 2016. In case, the

Resolution Plan is not meeting the requirement of Section 30 of the Code, the

Resolution Professional is empowered to refuse to present the Plan to the

Committee of Creditors.

33. A Resolution Professional is only to examine and confirm that each

Resolution Plan conforms to what is mentioned by Section 32 of the Code. The

'Resolution Professional' shall undertake to project all the Resolution Plans

during the Meetings of the 'Committee of Creditors' and as per Section 30(3) of

the Code the Resolution Professional shall present to the 'Committee of Creditors'

for its approval, such Resolution Plans which confirms the condition mentioned

in sub-section (2).

34. A 'Resolution Professional' is to scrutinise that the Resolution Plan

furnished by numerous applicants is complete in all aspects, before presenting it

to the Committee of Creditors. A 'Resolution Professional' is not required to take

any decision but he is to confirm that the Resolution Plan does not violate any of

the provisions of Law for the time being in force (including Section 29A of I&B

Code). Suffice for this 'Tribunal' to pertinently point out that an 'ex-facie' opinion

is to be offered to the 'Committee of Creditors' by the 'Resolution Professional'

that the Law was not violated.

35. It is the duty of the 'Resolution Professional' to determine as to whether the

eligibility criteria of Resolution Applicants prescribed in Section 29-A of the Code

are satisfied. He is to consider the objections brought to his notice prior to the

submission of the Resolution Plan to the 'Committee of Creditors'. As per Section

Company Appeal(AT)(Insolvency) No. 1117 of 2019 21

30(2) of the I & B Code, the Resolution Professional is to examine each Resolution

Plan received by him to confirm that the Resolution Plan provides for payment of

Insolvency Resolution Process Costs, Payment of Debts of the Operational

Creditors, management of the affairs of Corporate Debtor, the fulfillment and

supervision of Resolution Plan, other requirement as may be specified by the

Board and does not violate any of the provisions of the law for the time being in

force.

36. A Resolution Plan submitted by the concerned Resolution Applicant on

accounts of its confidentiality, cannot be disclosed to any competing Resolution

Applicant nor any opinion can be taken or objection can be called for from other

Resolution Applicants in regard to one other Resolution Plan.

RESOLUTION PLAN'S APPROVAL:

37. Subjective satisfaction is a pre-requisite for approval of Resolution Plan. A

threadbare scrutiny and a study of the Resolution Plan is to be made prior to the

'satisfaction' being arrived at by the 'Adjudicating Authority' in a written form.

The I & B Code speaks of accountability of the Insolvency Professional and also

the 'Committee of Creditors' who comprise of the Lender Banks.

ASSESSMENT:

38. The First Respondent/Resolution Professional before the 'Adjudicating

Authority' filed CA(IB) No. 709/KB/219 in CP(IB) No. 570/KB/2019 (under

Section 30(6) & 31 of the Insolvency & Bankruptcy Code 2016 r.w. Regulation

39(4) of Insolvency & Bankruptcy Board of India (Insolvency Resolution Process

for Corporate Persons) praying for an approval of the Resolution Plan dated

Company Appeal(AT)(Insolvency) No. 1117 of 2019 22

19.04.2019 submitted by Jagannath Advisory Pvt. Ltd. as per Section 31(1) of the

code as approved by the 'Committee of Creditors'.

39. The First Respondent/Resolution Professional in CA(IB) No. 709/KB/219

in CP(IB) No. 570/KB/2019 had averred that the Resolution Plan dated

19.04.2019 submitted by Jagannath Advisory Pvt. Ltd was examined and was

found to be fulfilling the mandatory provision of Section 30(2) of the Code and the

relevant regulations. Furthermore, Jagannath Advisory Pvt. Ltd was identified as

a 'Successful Resolution Plan' and that the First Respondent/Resolution

Professional resting on the instructions of and due authorization from the

'Committee of Creditors' issued the Letter of Intent (LOI) to Resolution Application

on 22.05.2019.

40. It transpires that the Successful Resolution Applicant / Jagannath

Advisory Pvt. Ltd had furnished an unconditioned Performance Deposit in the

form Demand Draft amounting to Rs. 30 lakhs, drawn in favour of the 'Corporate

Debtor i.e., 'Aristo Texon Private Limited' dated 22.05.2019 in regard to the

implantation of the 'Successful Resolution Plan'. Moreover, the Performance

Deposit was given together with an undertaking towards the maintaining the

Instruments validity for a period of atleast six months from the date of

communication of approval of the Resolution Plan by the Resolution Professional

or till the end of the Resolution Plan, implementation period whichever is later.

41. At this junction, this Tribunal pertinently points out that Section 30(2)(b)

of the I&B Code (amended as on 16.08.2018) runs as under

Company Appeal(AT)(Insolvency) No. 1117 of 2019 23

39(2)(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 that-

(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 the 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 purposes 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

Company Appeal(AT)(Insolvency) No. 1117 of 2019 24

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

42. In the present case, the 1st Respondent/Resolution Professional and the

'Committee of Creditors' were in receipt of four Resolution Plans- (1) Dalmia

Industrial Development Limited (2) Damani Infra com Pvt. Ltd. (3) Jagannath

Financial Advisory Pvt. Ltd. (4)KNG Industrial Traders Pvt. Ltd.

43. It is brought to the fore that in the 11th Meeting of the 'Committee of

Creditors' held 24..04.2019 the decided to accord approval to the Resolution Plan

furnished by M/s Jagannath Financial Advisory Pvt. Ltd. Because of the fact that

the required period for CIRP was to come to an end, the 'Committee of Creditors'

had turned down the contentions of the Appellant and approved the Resolution

Plan in its meeting that took place on 21.05.2019. In short, the distribution of

Resolution Fund was decided as (a) Canara Bank- 24-30% (b) North Eastern

Development Financial Corporation- 47.77% (c) Punjab National Bank - 27.93%.

44. Although, the Appellant/Canara Bank gave a dissenting Vote for the

approval of the Plan, based on the reason that 'Distribution of Resolution Fund'

was discriminatory as against them and despite its plea that it was entitled to the

equal and share in regard to the distribution of the Resolution Fund on the footing

that the Bank held more than 80% of the assents of the 'Corporate Debtor' as

security, the fact of the matter is that the 'Committee of Creditors' had approved

the Resolution Plan of Jagannth Financial Advisory Pvt. Ltd by 75.70% of votes.

Company Appeal(AT)(Insolvency) No. 1117 of 2019 25

45. It cannot be gainsaid that the 'Resolution Fund' was equally distributed

among all the 'Financial Creditors' showring them equal share i.e., 23.43 % and

that the 1st Respondent/Resolution Professional had certified the plan and the

compliance certificate was furnished. There is no illegality in the Resolution Plan

as opined by this Tribunal, it comes to be known that the Successful Resolution

Applicant/Respondent No. 4 had implemented the Resolution Plan in part and

made part payments quite in tune with the 'Approved Resolution Plan'.

46. Besides the above, at this juncture, this 'Tribunal' aptly points out the

decision of Hon'ble Supreme Court in India Resurgence ARC Pvt. Ltd. V. Amit

Metalks & Anr. 2021 SCC online SC 409 wherein a paragraph 21 it is mentioned

as under:

21. " The limitation on the extent of the amount receivable by a dissenting financial creditor is innate in Section 30(2)(b) of the Code and has been further exposited in the decisions aforesaid. It has not been the intent of the legislature that a security interest available to a dissenting financial creditor over the assets of the corporate debtor gives him some right over and above other financial creditors so as to enforce the entire of the security interest and thereby brining about an inequitable scenario, by receiving excess amount, beyond the receivable liquidation value proposed for the same class of creditors."

47. To be noted, in the present case, the distribution of the amount was made

by the 'Committee of Creditors' resting on the total dues of individual Creditor and

the same is not either whimsical or arbitrary in any manner. To put it differently,

the 'distribution of the amount' between the Creditors provide the equal treatment

Company Appeal(AT)(Insolvency) No. 1117 of 2019 26

to all of them. Also that the Appellant was provided with a fair value as per

decision of the 'Committee of Creditors' and the value proportionate to the dues

was allotted same as that of other Financial Creditors.

48. Undoubtedly, the commercial decision and matters pertaining to it solely

comes within the ambit of the 'Committee of Creditors' who in the present case

had approved the Resolution Plan with a majority of 75.70% affirmative votes. In

effect, the acceptance and approval of Resolution Plan of 4th Respondent/M/s

Jagannath Financial and Advisory Pvt. Ltd. by the 'Adjudicating Authority'

(National Company Law Tribunal, Kolkata Bench) as per its order 28.02.2019 in

CA(IB) No. 709/KB/2019 in CP(IB) No. (IB) 570/KB/ 2018 does not suffer from

any vice of material irregularities or patent illegalities in the eye of law, as opined

by this Tribunal. Viewed in that perspective, the instant Appeal sans merits.

RESULT:

49. In fine, the instant Company Appeal (AT)(Insolvency) No. 1117 of 2019 is

dismissed. No costs. Consequent to the dismissal of Company Appeal

(AT)(Insolvency) No. 1117 of 2019, C.A. No. 13 of 2020 (Contempt Application)

filed by the Appellant/Applicant Bank is closed.

[Justice M. Venugopal] Member(Judicial)

(V.P. Singh) Member(Technical)

(Dr. Ashok Kumar Mishra) Member(Technical) 3rd January, 2022 Bm/Akc

Company Appeal(AT)(Insolvency) No. 1117 of 2019