Chhattisgarh State Power Distribution ... vs Salasar Steel And Power Limited & Ors

IN THE MATTER OF: Chhattisgarh State Power Distribution Company Ltd. (CSPDCL) 3rd Floor, Vidyut Sewa Bhawan, Daganiya, Raipur - 492013 seonmcircleraigarh@gmail.com ...Appellant

Versus

1. Salasar Steel and Power Ltd. At - First floor, Bhatia Complex Opposite Rajkumar Collage, GE Road, Raipur - 492001 raipur@sspl-india.com ...Respondent No.1

2. J.M. Financial Asset Reconstruction Company Ltd. (JMFARCL) 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi Mumbai - 400025 vineet.singh@jmfl.com ...Respondent No.2

3. Rajesh Junjhunwala Resolution Professional of Salasar Steel and Power Ltd. A-51, Ashit Apartment, HB Gawde Marg, Juhu Koliwada Mumbai - 400049 claim.r.sspl@in.pwe.com ...Respondent No.4

4. Singhal Enterprises Private Ltd. Century Towers, 3rd Floor, Room No. 303, 45-Shakespeare Sarani Kolkata, Pin - 700071 info@singhalsteel.com; sepl.kolkata@rediffmail.com ...Respondent No.4

Company Appeal (AT) (Ins) No. 118 of 2022 1 of 28 5. Committee of Creditors of Salasar Steel & Power Ltd. C/o J.M. Financial Asset Reconstruction Company Limited 7th Floor, Cnergy, Appasahab Marathi Marg, Prabhadevi Mumbai - 400025 vineet.singh@jmfl.com ...Respondent No.5

Present: For Appellant : Ms. Suruchi Aggarwal, Sr. Advocate with Mr. Ravi Sharma, Advocate

For Respondent : Mr. Abhishek Anand, Mr. Karan Kohli, Mr. Mohak Sharma, Mr. Sahil Bhatia, Advocates for R-2 & 5 Mr. S K Singhi, Mr. Ankit Singh, Mr. Akshay Singhi, Mr. Sougata Ganguly, Mr. Harsh Khirwal, Advocates for R-3, RP Mr. Saurav Kalia, Mr. Sidhartha Sharma, Mr. Aniket Agarwal, Mr. Arjun Asthana, Ms. Anushka Sarkar, Mr. Siddhartha T. Advocates for R-1 & 4.

[30th September, 2022]

(Per Hon'ble Mr. Justice M. Satyanarayana Murthy)

Aggrieved by the order dated 08.11.2021 passed by the National

Company Law Tribunal, Cuttack Bench (hereinafter referred as

'Adjudicating Authority') in I.A. No.141/CTB/2020 along with CP(IB) No.

1411/MB/2018 and T.P. No. 203/CTB/2019 and received by the Appellant

on 26.11.2021, has preferred this Appeal challenging the findings recorded

by National Company Law Tribunal, Cuttack Bench on various grounds.

Company Appeal (AT) (Ins) No. 118 of 2022 2 of 28

2. The Appellant is the Chhattisgarh State Power Distribution Company

Ltd. ('CSPDCL'), in terms of the Hon'ble Supreme Court judgment dated

25.04.2014 passed in Civil Appeal No. 5479 of 2013 (2014) 8 SCC 444 in

case of M/s Sesa Sterlite Ltd. Vs. OERC & Ors, CSS & ASC as compensation

to the distribution licensee irrespective of the fact whether its line is used or

not, but for the open access, the consumer would pay tariff applicable for

supply which would include an element of cross subsidy surcharge on

certain other categories of consumers. Such surcharge is meant to

compensate such Distribution licensee from the loss of cross subsidy that

such Distribution licensee would suffer by the reason of the consumer

taking supply from someone other than such Distribution licensee.

3. The Appellant, Chhattisgarh State Power Distribution Company Ltd.

('CSPDCL') being distribution licensee has been charging Cross Subsidy

Surcharges ('CSS'), Additional Surcharges ('ASC') and Parallel Operation

Charges ('POC') as compensation from all those Consumers, who either

transmit power or avail the power supply by means of Open Access.

4. In accordance with the aforesaid settled legal position, the Appellant,

CSPDCL has levied the CSS and POC on the 1st Respondent, Corporate

Debtor i.e. Salasar Steel and Power Ltd. for the Financial Year 2007-08,

2008-09, 2011-12, 2012-13, 2013-14 and 2014-15 amounting to Rs.

14,70,72,580/- against M/s Salasar Steel & Power Ltd. who is the Power

Generating Company, situated in the State of Chhattisgarh.

Company Appeal (AT) (Ins) No. 118 of 2022 3 of 28

5. On 11.09.2018, Appellant 'CSPDCL' had sent Form-C under the

provisions of Chhattisgarh State Government Electrical undertaking (Dues

Recovery) Act, 1961 to the District Collector, Raigarh (CG) for recovery of Rs.

14,70,72,580/- from the 1st Respondent, Corporate Debtor. Thus, Rs.

14,70,72,580/- is an operational debt payable to the Appellant.

6. While so, on 30.09.2019, Appellant received Form-A Public

Announcement calling attention of all the creditors of Respondent No.1,

Corporate Debtor to file their respective claims on or before 11.10.2019 from

Mr. Rajesh Jhunjhunwala an Interim Resolution Professional ('IRP') i.e.

Respondent No.3 herein. In view of the Public Announcement dated

30.09.2019 the Appellant 'CSPDCL' came to know that petition of

Respondent No.2 for initiation of Corporate Insolvency was admitted by the

NCLT, Cuttack vide order dated 27.09.2019 and Mr. Rajesh Jhunjhunwala

was appointed as Interim Resolution Professional of Corporate Debtor.

7. In pursuance of Form-A, Public Announcement the Appellant

'CSPDCL' submitted its claim in Form-B claiming Rs. 14,70,72,580/- to 3rd

Respondent, IRP vide its email dated 11.10.2019, to email id

claim.r.sspl@in.pwc.com. On the same date i.e. 11.10.2019 Respondent

No.3 had sent email confirmation, acknowledging receipt of Form-B for Rs.

14,70,72,580/- from Appellant 'CSPDCL'.

8. On 26.11.2021 when 4th Respondent Singhal Enterprises Private

Limited had approached the Appellant for HT Connection, the Appellant

Company Appeal (AT) (Ins) No. 118 of 2022 4 of 28 came to know that the NCLT, Cuttack vide its order dated 08.11.2021

passed by NCLT, Cuttack Bench in I.A. No.141/CTB/2020 along with CP(IB)

No. 1411/MB/2018 and T.P. No. 203/CTB/2019 had approved the

Resolution Plan dated 26.06.2020 submitted by 4th Respondent without

application of mind and without scrutinizing the Resolution Plan.

9. The same is challenged in the Appeal, on the ground that the financial

proposal against the total dues amounting to Rs.48.38 crores of Operational

Creditors were made without actual assessment of Liquidation Value of

Corporate Debtor which dehors the provisions of Section 30(2)(b) read with

Section 53 of the Insolvency and Bankruptcy Code, 2016 (hereinafter

referred as 'IBC'), 2016. The Resolution Professional intentionally made

allocation of Operational Debt of Rs. 14,70,72,580/- of the Appellant being

Operational Creditor in Schedule 7 Statutory Liabilities of Resolution Plan,

due to which claims of Appellant was placed in the last of waterfall model

and Appellant's 100% claim had been lost.

10. The order passed by Tribunal is in violation of Regulation 38(1A) of

IBBI (CIRP) Regulations as Respondent failed to include the Operational

Creditors of the Company in CoC, and that no registered valuer was

appointed as per Regulation 27 of the Insolvency and Bankruptcy Board of

India (Insolvency Resolution Process for Corporate Persons) Regulations,

2016 and thus, committed a grave error in discriminating the Financial

Creditor from the secured creditor in approving and in distribution of the

Company Appeal (AT) (Ins) No. 118 of 2022 5 of 28 amount and that the Appellant is not a member of CoC constituted by CIRP

and no liquidation value was intimated to the Appellant. Consequently, the

order is illegal and violative of the provision, more particularly 38(1A) and

35(1) of Regulations, 2016. Finally, requested to set aside the order

impugned in the present Appeal.

11. The Respondent filed Reply supporting the order in all respect while

admitting about appointment of 3rd Respondent as Resolution Professional

and distribution of amount to various creditors and approval of the

resolution plan by the CoC and by the Adjudicating Authority. While

contending that the total financial outlay under the resolution plan was

Rs.165.21 crores the entire amount was arranged by Successful Resolution

Applicant before the 4th Respondent herein and funded by Respondent No.1

in the form of equity contribution by the 4th Respondent, its Promoters and

Group of Companies to the extent of Rs.60 crores and the balance amount

in the form of loans.

12. During the Corporate Insolvency Resolution Process (hereinafter

referred as 'CIRP') of the Corporate Debtor had 4 Financial Creditors who

were also part of the CoC. This included J.M. Financial Asset

Reconstruction Company Ltd., Bank of Baroda, Edelweiss Asset

Reconstruction Company Ltd. and Union Bank of India. The entire sum

allocated to the Financial Creditors as per resolution plan, being a sum of

Rs.1,43,23,00,014/-, after adjustment for excess amount of insolvency

Company Appeal (AT) (Ins) No. 118 of 2022 6 of 28 resolution process costs in terms of the Clause 6.3.2(iv) of the resolution

plan, has been paid to the Financial Creditors from the escrow account

opened in terms of the resolution plan and each of the Financial Creditors

have also issued their No-dues and security release letters dated 22.12.2021

in favour of the Respondent No.1.

13. All other payments including insolvency resolution process costs,

employee and workmen dues and dues of Operational Creditors have been

tendered by the completion date from the funds arranged by the Respondent

No.4 in the following summary:

Sl. Category Amount (Rs. No. Crores)

1. IRPC 16.84 2. Operational Creditors 3.50 3. Financial Creditors 143.23 4. Employees and Workmen 1.64 Total 165.21

6,00,00,000 new Equity Shares @ Rs.10/- each

aggregating to Rs.60 Crores were allotted to the Respondent No.4, its promoters and group of companies on 22nd December, 2021 and all existing (pre-resolution plan) Equity and Preference Shares in the Share Capital of the Respondent No.1 stood cancelled in terms of the resolution plan. The Authorised, Issued, Subscribed and Paid-Up Share Capital of the Respondent No.1 and the Memorandum and Articles of the Respondent stood altered accordingly. The Board of Directors of the Respondent No.1 was also reconstituted.

At the 5th meeting of the Monitoring Agency of the Corporate Debtor constituted in accordance with the approved Company Appeal (AT) (Ins) No. 118 of 2022 7 of 28 resolution plan, which was held on 24th December, 2021, it was duly placed on record that all payments as per the approved resolution plan has been completed and the resolution plan had been implemented before the Completion Date which was 22nd December, 2021 and within the timelines of 45 days as mentioned in the resolution plan. Further, the receipt of no-dues letters which were issued by the Financial Creditors of the Respondent No.1 were also noted. It was also noted that the new Board of Directors of the Respondent No.1 had been reconstituted on the Completion Date. Thus, the present Board of Directors of the Respondent No.1 is as follows:

i. Ajay Agarwal; ii. Piyush Agarwal; iii. Ayush Agarwal.

It was further recorded that since the completion date had been achieved as per the resolution plan, the Monitoring Agency would stand dissolved and powers of the Board of Directors would vest upon the reconstituted Board of Directors of the Respondent No.1 herein. A copy of the minutes of the 5th meeting of the Monitoring Agency dated 24th December, 2021 is annexed hereto and marked with the letter "R-2". The Respondent No.1 has duly filed all the forms recording the consequential changes, inter alia, in the Authorised, Issued, Subscribed and Paid-Up Share Capital, Memorandum and Articles of Association and Board of Directors of the Respondent No.1. A copy of the rec company master data of the Respondent No.1 as downloaded from the website of the MCA, is annexed hereto and marked with the letter "R-3".

Company Appeal (AT) (Ins) No. 118 of 2022 8 of 28 By arranging amount shown in the above table the resolution plan

was implemented and paid off and discharged and the Respondent No.1.

14. The Appellant as Operational Creditor of the Respondent No.1 also

submitted its claim in Form-B under the Insolvency and Bankruptcy Board

of India (Insolvency Resolution Process for Corporate Persons) Regulations,

2016 making a claim for Rs. 14,70,72,580/-. That claim was admitted by

resolution professional had however admitted a sum of Rs.14.67 crores,

which was approved by 100% members of the Committee of Creditors, the

total outlay for payment to Operational Creditors was Rs.3.5 crores out of

which the entitlement of the Appellant as the Operational Creditor was

Rs.72,83,022/-. The amount was tendered by NEFT by Respondent No.1 to

the Operational Creditors before the completion date. As per the details of

their bank accounts available with the Respondent No.1 including the

Appellant herein.

15. The contention of the Appellant that no liquidation value was

intimated to the Appellant is denied since the Appellant was not a member

of CoC and the provision mandates information about liquidation value be

given only to members of CoC not to the others. It also denies the allegation

that no registered valuer was appointed by the RP while, supporting the

order impugned in Company Appeal.

16. It is also contended that the approval of resolution plan is the

commercial wisdom of CoC and the Adjudicating Authority has nothing to

Company Appeal (AT) (Ins) No. 118 of 2022 9 of 28 do with the approval of the resolution plan by the CoC. Since it is in

compliance of the mandatory provisions of IBC, the Adjudicating Authority

approved it. There is absolutely no illegality and requested to dismiss the

Appeal.

17. During hearing the Learned Senior Counsel Ms. Suruchi Aggarwal

representing the Appellant Chhattisgarh State Power Distribution Company

Ltd. ('CSPDCL') reiterated the contentions in the appeal while pointing out

that the additional affidavit filed by the Appellant totally changed the earlier

plea and filed a rejoinder to the additional affidavit. It amounts to amending

the pleadings thereby not permissible. It is also contended that the

Respondent IRP did not follow the procedure laid down in IBC and

Regulation framed thereunder. More particularly, failed to intimate the

liquidation value of the Corporate Debtor and failed to appoint registered

valuer for assessing the liquidation value and fair value of the Corporate

Debtor and she placed reliance of judgment of Swiss Ribbons Private

Limited & Anr. Vs. Union of India & Ors. (2019) 4 SCC 17, also in

judgment of the Apex Court in Benani Industries Limited Vs. Bank of

Baroda & Anr. (2018) SCC OnLine NCLAT 521, Ghanashyam Mishra &

Sons Private Limited through authorised Signatory Vs. Edelweiss

Asset Reconstruction Company Ltd. through the Director and Ors.

(2021) SCC Online SC 313 and another judgment of Committee of

Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta (2020)

8 SCC 531 to support her contentions and requested to set aside the order

Company Appeal (AT) (Ins) No. 118 of 2022 10 of 28 passed by the Adjudicating Authority in I.A. No.141/CTB/2020 along with

CP(IB) No. 1411/MB/2018 and T.P. No. 203/CTB/2019 dated 11.08.2021.

18. Whereas, the Respondent No.1 & 4 filed a Written Submissions

contending that registered value was appointed and the Respondent No.1 is

not under an obligation to inform the Liquidation value of the Corporate

Debtor, since the Appellant is not a member of the Committee of Creditors

and that the order was passed only of a consideration of the entire material

by the Adjudicating Authority and requested to dismiss the Appeal and it is

devoid of merits. Respondent No.1 & 4 placed reliance on judgment of Apex

Court in Indian Resurgence ARC Private Limited Vs. M/s Amit Metaliks

Limited & Anr. (2021) SCC OnLine SC 409, Pratap Technocrats Private

Limited & Ors. Vs. Monitoring Committee of Reliance Infratel Limited

& Anr. (2021) 10 SCC 623, Damodar Valley Corporation Vs. Kharkia

Steels Pvt. Ltd. in Company Appeal (AT) (Insolvency) No. 1111 of 2020

and Ghanashyam Mishra & Sons Private Limited through authorised

Signatory Vs. Edelweiss Asset Reconstruction Company Ltd. through

the Director and Ors. (2021) SCC Online SC 313. On the strength of

these judgments, Learned Counsel for Respondent No.2 & 5 Mr. Abhishek

Anand requested to dismiss the Appeal confirming the order passed by

Adjudicating Authority. Counsel for Respondent No. 3 Mr. Sougata Ganguly

and Mr. Saurav Kalia for Respondent No.1 and 4, supported the order under

challenge.

Company Appeal (AT) (Ins) No. 118 of 2022 11 of 28

19. Considering the contentions perusing the material available on record.

The points need to be answered by this Appellate Tribunal are as follows:

(i) Whether the CoC and Adjudicating Authority discriminated the

Operational Creditors from Financial Creditor while approving

the Resolution plan making the Appellant to loss 100% of its

claim, if so, the order is liable to be set aside.

(ii) Whether the Resolution Professional is under legal obligation to

inform the fair, liquidation value of the Corporate Debtor to the

Appellant, who is not a member of CoC?

(iii) Whether the alleged failure to appoint a registered valuer for

valuing the Corporate Debtor to fix, fair and liquidation value is

an legality in the order passed by the Adjudicating Authority.

Point No.1

20. The main contention of the Appellant before this Tribunal is that

Section 30(2)(b) was not complied by Resolution Professional which vitiates

the entire proceedings, discriminated the Appellant from Financial Creditor.

21. Section 30 deals with submissions of Resolution Plan and 30(2)

obligates the Resolution Professional to examine each resolution plan issued

by him to confirm that such resolution plan provide for payment of

Insolvency Resolution Process cost in a manner specified by the Board in

priority to the payment of other debts of the Corporate Debtor; provides for

payment of debts Operational Creditor in such manner as may be specified

by the board which shall not be less than the amount to be paid to such

Company Appeal (AT) (Ins) No. 118 of 2022 12 of 28 creditors in the event of 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 and other 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 payment of debts to Financial Creditors

who do not in favour of resolution plan in such manner as may be specified

by the Court 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

liquidation of a Corporate Debtor.

22. Section 53 of the IBC deals with distribution of assets. According to

sub-section (1) of Section 53 the proceeds of the sale of liquidation assets

shall be distributed the order of priority within such period of the order of

priorities as follows:

a) The Insolvency Resolution Process costs and the liquidation

costs paid in full;

b) The workmen's dues for the period of twenty-four months

preceding the liquidation commencement date; and

c) debts owed to a secured creditor in the event of secured creditor

has relinquished security in the manner set out in Section 52;

"53(1) Notwithstanding anything to the contrary contained in any law enacted by the Parliament or any State Legislature for the time being in force, the proceeds from the sale of the liquidation assets shall be distributed in the following order of priority and within

Company Appeal (AT) (Ins) No. 118 of 2022 13 of 28 such period and in such manner as may be specified, namely:-

a) the insolvency resolution process costs and the liquidation costs paid in full;

b) the following debts which shall rank equally between and among the following:-

(i) workmen's dues for the period of twenty-

four months preceding the liquidation commencement date; and

(ii) debts owed to a secured creditor in the event such secured creditors has relinquished security in the manner set out in section 52;

c) wages and any unpaid dues owed to employees other than workmen for the period of twelve months preceding the liquidation commencement date;

d) financial debts owed to unsecured creditors;

e) the following dues shall rank equally between and among the following:-

(i) any amount due to the Central Government and the State Government including the amount to be received on account of the Consolidated Fund of a State, if any, in respect of the whole or any part of the period of two years preceding the liquidation commencement date;

(ii) debts owed to a secured creditor for any amount unpaid following the enforcement of security interest;

f) any remaining debts and dues;

g) preference shareholders, if any; and

Company Appeal (AT) (Ins) No. 118 of 2022 14 of 28

h) equity shareholders or partners, as the case may be."

23. The Resolution plan satisfied the requirement under Section 30(2)(b)

for payment of dues in the priority specified under Section 53(1) the

Resolution Professional is under obligation to place the same on its

examination, before the CoC for approval. Here the RP, satisfied himself

about the compliance of Section 30(2)(b) and 53(1) placed Resolution Plan

for approval before the CoC and CoC approved the resolution plan with

100% voting. Thereupon, filed a petition under Section 31 before the

Adjudicating Authority for approval of the resolution plan, accordingly, the

same was approved. Here, the grievance of the Appellant is that it being an

Operational Creditor is discriminated.

24. In the order of priority specified under Section 53(1) of the Code, the

sale proceeds the amount agreed to be paid in the resolution plan shall be

distributed. Accordingly, only an amount of Rs. 36 crores were left over for

distributing. The share of the Appellant amount in the balance shown in the

table is only Rs. 14,70,72,580/-. Therefore, on the ground of discrimination

of the Operational Creditors from the secured creditors the Learned Senior

Counsel requested to set aside the impugned order passed by the

Adjudicating Authority.

25. The Learned Senior Counsel relied on the judgment of Committee of

Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta (2020)

Company Appeal (AT) (Ins) No. 118 of 2022 15 of 28 8 SCC 531 in the judgment. The Hon'ble Apex Court observed that which

mandates that the minimum payment of liquidation value of which in most

cases would be Nil after paying the secured creditors would not balance the

interest of Stakeholders. The Hon'ble Apex Court directed to examine

whether the CoC has in its reasoning kept the above aspect in mind while

approving resolution plan, which is to be examined by the Adjudicating

Authority.

26. Similarly, in para 72 the Hon'ble Supreme Court observed as follows:

"72. This is the reason why Regulation 38(1A) speaks of a resolution plan including a statement as to how it has dealt with the interests of all stakeholders, including operational creditors of the corporate debtor. Regulation 38(1) also states that the amount due to operational creditors under a resolution plan shall be given priority in payment over financial creditors. If nothing is to be paid to operational creditors, the minimum, being liquidation value - which in most cases would amount to nil after secured creditors have been paid - would certainly not balance the interest of all stakeholders or maximise the value of assets of a corporate debtor if it becomes impossible to continue running its business as a going concern. Thus, it is clear that when the Committee of Creditors exercises its commercial wisdom to arrive at a business decision to revive the corporate debtor, it must necessarily take into account these key features of the Code before it arrives at a commercial decision to pay off the dues of financial and operational creditors."

Company Appeal (AT) (Ins) No. 118 of 2022 16 of 28

27. Similarly, in the same judgment in para 73 the Hon'ble Apex Court

has observed as follows:

"73. .... 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...."

28. But the discrimination pointed out in the Committee of Creditors of

Essar Steel India Limited (supra) is a discrimination among the same

Operational Creditors not between two classes of creditors. Though Section

30(2)(b) of IBC, minimum value to be paid to the Operational Creditor, as

per the provision is the amount to be paid to such creditors in the event of

liquidation of the Corporate Debtor under Section 53.

29. The Resolution Professional distributed the proportionate amount to

the Operational Creditors strictly adhering to Section 30(2)(b) and Section

53 of IBC. Even otherwise, the plan was approved by the CoC with 100%

majority voting share. The Adjudicating Authority shall examine, whether

the approved resolution plan by CoC is contrary to any law or whether it is

viable and implementable, and the Adjudicating Authority is not under an

obligation to examine the amount to be distributed to the different class of

creditors. Thus, the once the plan was approved by CoC in its commercial

Company Appeal (AT) (Ins) No. 118 of 2022 17 of 28 wisdom, the Adjudicating Authority cannot interfere with such decision

taken by the CoC, unless the plan is contrary to any of the provisions of IBC

or any other law. It is not the case of the Appellant that in approved is

against any of the provisions of the IBC or and any other, but, pleaded only

discrimination. This contention is contrary to the law laid down by the Apex

Court in various judgments more particularly, Indian Resurgence ARC

Private Limited Vs. M/s Amit Metaliks Limited & Anr. (2021) SCC

OnLine SC 409, where the Apex Court noted the principle laid down in Jaypee Kensington Boulevard Apartments Welfare Association & Ors.

Vs. NBCC (India) Limited and Others case and K. Sashidhar Vs. Indian

Overseas bank & Ors. and Maharashtra Seamless Ltd. Vs.

Padmanabhan Venkatesh & Ors.

"12. As regards the process of consideration and approval of resolution plan, it is now beyond a shadow of doubt that the matter is essentially that of the commercial wisdom of Committee of Creditors and the scope of judicial review remains limited within the four-corners of Section 30(2) of the Code for the Adjudicating Authority, and Section 30(2) read with Section 61(3) for the Appellate Authority. In the case of Jaypee Kensington (supra), this Court, after taking note of the previous decisions in Essar Steel (supra) as also in K. Sashidhar v. Indian Overseas Bank: (2019) 12 SCC 150 and Maharashtra Seamless Limited v. Padmanabhan Venkatesh:

(2020) 11 SCC 467, summarised the principles as follows:-

"77. In the scheme of IBC, where approval of resolution plan is exclusively in the domain of the commercial wisdom of CoC,

Company Appeal (AT) (Ins) No. 118 of 2022 18 of 28 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; 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

Company Appeal (AT) (Ins) No. 118 of 2022 19 of 28 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.

77.3. The material propositions laid down in Essar Steel (supra) on the extent of judicial review are that the Adjudicating Authority would see if CoC 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 have been taken care of. And, if the Adjudicating Authority would find on a given set of facts that the requisite parameters have not been kept in view, it may send the resolution plan back to the Committee of Creditors for re- submission after satisfying the parameters. Then, as observed in Maharashtra Seamless Ltd. (supra), there is no scope for the Adjudicating Authority or the Appellate Authority to proceed on any equitable perception or to assess the resolution plan on the basis of quantitative analysis. Thus, the treatment of any debt or asset is essentially required to be left to the collective commercial wisdom of the financial creditors."

Where the Supreme Court after noting paras 77, 77.1 to 77.3

concluded as follows:

"it needs hardly any elaboration that financial proposal in the resolution plan forms the core of the business decision of committee of Creditors. Once it is found that all the mandatory requirements have been duly complied with and taken care of, the process of Judicial review cannot be stretched to carry out quantitative analysis qua a particular creditor or any

Company Appeal (AT) (Ins) No. 118 of 2022 20 of 28 stakeholder, who may carry his own dissatisfaction. In other words, in the scheme of IBC, every dissatisfaction does not partake the character of a legal grievance and cannot be taken up as a ground or appeal."

30. The Hon'ble Apex Court also consider the judgment in Maharashtra

Seamless Ltd. Vs. Padmanabhan Venkatesh & Ors. finally concluded

based on Jaypee Kensington Boulevard Apartments Welfare

Association & Ors. Vs. NBCC (India) Limited and Others and other

judgments held as follows:

"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 process 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 kin Essar Steel as follows:-

"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

Company Appeal (AT) (Ins) No. 118 of 2022 21 of 28 resolution of distressed assets takes place and only if the same is not possible should liquidation follow."

31. The Counsel for the Respondent also raised a ground that the

principle laid down in the Jaypee Kensington Boulevard Apartments

Welfare Association & Ors. (supra), which is identical to the principle of

law laid down in above judgment and in the later judgment the Apex Court

in Pratap Technocrats Private Limited and Others Vs. Monitoring

Committee of Reliance Infratel Limited and Another (2021) 10 SCC

623.

"Held, the jurisdiction which has been conferred upon the adjudicating authority in regard to the approval of a resolution plan is statutorily structured by S. 31(1) and is limited to determining whether the requirements which are specified in S. 30(2) have been fulfilled - Further, this is a jurisdiction which is statutorily defined, recognised and conferred, and hence cannot be equated with a jurisdiction in equity, that operates independently of the provision of the statute - Adjudicating authority as a body owing its existence to the statute, must abide by the nature and extent of its jurisdiction as defined in the statute itself - Also, the jurisdiction of the appellate authority under S.61(3), while considering an appeal against an order approving a resolution plan under S.31, is similarly structured on specified grounds, and strictly restricted thereto and appellate authority cannot exercise jurisdiction beyond what is expressly conferred by S. 61(3) - Courts, Tribunals and Judiciary - Tribunals - Jurisdiction of statutory tribunals - Scope and extent of - Strictly governed by the statutory framework."

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32. In another judgment of this Court this Tribunal in Damodar Valley

Corporation Vs. Kharkia Steels Pvt. Ltd. and Another, this Tribunal held

that the NCLT does not hold equity-based jurisdiction and any distribution

which is in accordance with Section 30(2)(b) of IBC is considered fair and

equitable and accordingly the approved resolution plan is not interfered by

this Tribunal. Therefore, viewed from any angle, keeping in view in the

judgment of Pratap Technocrats Private Limited & Ors. Vs. Monitoring

Committee of Reliance Infratel Limited & Anr. and Damodar Valley

Corporation Vs. Kharkia Steels Pvt. Ltd. referred above, it is clear that

the discrimination among class of creditors vitiates the Resolution plan. The

Appellant being an Operational Creditor if discriminated from the other

Operational Creditor, it is a ground to set aside, but here Appellant, being

Operational Creditor was not discriminated from the other Operational

Creditors. Therefore, it is not a ground for set aside the resolution plan since

such discrimination is permissible in terms of the judgments referred above.

33. Apart from that the commercial wisdom of the CoC is final, in

Committee of Creditors of Essar Steel India Limited (supra) held that:

"It was beyond shadow of doubt that approval of the Resolution Plan fell within the domain of commercial wisdom of CoC and the scope of judicial review was limited to the four corners of Section 30(2) and 61(3) of IBC. In another judgment "Jaypee Kensington Boulevard Apartments Welfare Association & Ors. Vs. NBCC (India) Limited and Others"

reiterated the same principle. In case of K. Sashidhar Vs. Indian Overseas bank & Ors. and Maharashtra

Company Appeal (AT) (Ins) No. 118 of 2022 23 of 28 Seamless Ltd. Vs. Padmanabhan Venkatesh & Ors.

expressed the same view by Hon'ble Apex Court.

In Pratap Technocrats Private Limited and Others Vs. Monitoring Committee of Reliance Infratel Limited and Another held that jurisdiction of Adjudicating Authority cannot extend into entering upon merits of a business decision made by a requisite majority of the CoC in its commercial wisdom. Under the Indian insolvency regime, it appears that a conscious choice has been made by the legislature to not confer any independent equity-based jurisdiction on the Adjudicating Authority other than the statutory requirements laid down under Section 30(2) of the IBC.

In the Judgment "Ebix Singapore Private Limited Vs. Committee of Creditors of Educomp Solutions Limited and Anr. held, in a commercial decision taken by CoC, while accepting the Resolution Plan by their commercial wisdom, it cannot be interfered.

The commercial wisdom of CoC is supreme all safeguards are provided to such commercial decision vide "Vallal RCK Vs. Siva Industries Ltd" dated 03.06.2002.

On overall consideration of law laid down in various judgments referred above, it is clear that this Tribunal does not have power of judicial review, when the decision taken by CoC in compliance of Section 30(2) and Regulations 37 and 38 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016. Even this Tribunal is also not entitled to interfere with such decision, except where the approved Resolution Plan is

Company Appeal (AT) (Ins) No. 118 of 2022 24 of 28 contrary to the provision of IBC or any other law which would fall within Section 31(3) of IBC."

34. In view of the settled law referred above the ground of discrimination

does not stand to any scrutiny therefore, we find no ground to interfere with

the order, in view of the law laid down by the Apex Court. Accordingly, the

point is answered against in Appellant and in favour of respondents.

Point No.2

35. One of the contentions of the Appellant is that the Appellant was not a

member of CoC, no opportunity was given to participate in CoC meeting,

thereby, the decision taken by CoC is not binding upon it. This contention is

without any merit for the reason that the Appellant being an Operational

Creditor is not entitled to claim a notice, whose debt is less than 10% of the

total debt in terms of Section 24(3)(c) of IBC. Section 24 deals with meeting

of the CoC. Section 24(3) mandates that the Resolution Professional shall

give notice of each meeting of the Committee of Creditors. Clause (c) deals

with Operational Creditors or their representatives if the amount of their

aggregate dues is not less than ten percent of the debt, a notice shall be

issued. But the in the present facts the debt of Operational Creditor is less

than 10% of the total debt, thereby issue of notice of meeting of CoC to the

Operational Creditor, the Appellant herein does not arise and on that

ground, decision taken by CoC cannot be set aside. Hence this contention is

rejected, while answering the point in favour of respondent and against in

Appellant.

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36. One of the Contentions of the Appellant is that liquidation value of the

Corporate Debtor was not intimated to the Appellant. Whereas, the Mr.

Abhishek Anand contended that the liquidation value was kept as

confidential and cannot be disclosed to the Prospective Resolution

Applicant's as per Regulation 35(2) and 35(3) of the Insolvency and

Bankruptcy Board of India (Insolvency Resolution Process for Corporate

persons) Regulation, 2016. The Liquidation value was however, determined

which will appear in Form-H submitted by RP under Regulation 35(4) of the

Insolvency and Bankruptcy Board of India (Insolvency Resolution Process

for Corporate persons) Regulation, 2016. Regulation 35 mandates disclosure

of liquidation value to the members of the Committee of Creditors, the

resolution professional shall provide the fair value and the liquidation value

to every member of the committee in electronic form. Since the Appellant is

not a member of the CoC failure to provide fair value and liquidation value

to the Appellant is not a ground to set aside the order impugned in the

Appeal while exercising jurisdiction under Section 61 of IBC. Therefore, the

contention of the Appellant about non-compliance of Regulation 35(2) is

hereby rejected while holding that is not a ground to set aside the order

impugned. Accordingly, point is here against the Appellant and in favour of

the Respondents.

Point No. 3

37. The third ground before this Tribunal is that the Respondent No.1 did

not appoint registered valuer to fix fair value and liquidation value of the

Corporate Debtor. The Tribunal recording a finding in para 16 and 17 of the

Company Appeal (AT) (Ins) No. 118 of 2022 26 of 28 order about appointment of registered valuer for determining the fair value

and liquidation value of the Corporate Debtor in compliance of Regulation

27 of Insolvency and Bankruptcy Board of India (Insolvency Resolution

Process for Corporate persons) Regulation, 2016. But nobody will be allowed

to access to such information as to the liquidation value except providing

the same to the member of CoC. On over all consideration of material on

record, the resolution plan was approved by CoC strictly in compliance of

the procedure prescribed under the Code and Regulations framed

thereunder.

38. The power of this Tribunal under Section 61 to set aside the approved

resolution plan is limited. Section 61(3) says that an Appeal against an order

approving a resolution plan under Section 31 may be filed on the following

grounds:

"(i) the approved resolution plan is in contravention of the provisions of any law for the time being in force;

(ii) there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period;

(iii) the debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified by the Board;

(iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or

(v) the resolution plan does not comply with any other criteria specified by the Board."

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39. In the present facts of the case, except the alleged violation referred in

the earlier paras, nothing is brought on record to establish that this plan

was approved in contravention in any law. In those circumstances, the

Appellate Tribunal while exercising jurisdiction under Section 61 cannot

interfere with such order as no law as the approval of resolution plan is in

compliance of statutory procedure. Therefore, we find no ground to interfere

with the order passed by the Adjudicating Authority challenging for

interference of this Court, while exercising jurisdiction under 61 of the IBC.

40. In view of the findings recorded by us in the earlier paras, we find that

the Appeal is devoid of merits and liable to be dismissed.

41. In the result, the Appeal is dismissed. Confirming the order passed in

I.A. No.141/CTB/2020 along with CP(IB) No. 1411/MB/2018 and T.P. No.

203/CTB/2019.

[Justice M. Satyanarayana Murthy] Member (Judicial)

[Barun Mitra] Member (Technical)

pks

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