Icici Bank Limited vs Bkm Industries Limited & Anr

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No.405 of 2023 (Arising out of Order dated 01.03.2023 passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Court-II, Kolkata in I.A. (IB) No.471/KB/2022 in C.P. (IB) No.2078/KB/2029)

IN THE MATTER OF: ICICI Bank Limited Though its Authorized Signatory Mr. Shashank Raj Address: ICICI Bank Tower Near Chakli Circle, Old Padra Road Vadodara Gujarat 390007 Also at: ICICI Bank Tower, NBCC Place Bisham Pitamah Marg Pragati Vihar, New Delhi 110003 ... Appellant

Vs

1. BKM Industries Limited Through its Resolution Professional Mr. Pratim Bayal Address: 18/1 Tarapukur Main Road Ghosh Para, Agarpara Kolkata, West Bengal - 700109

2. Committee of Creditors of BKM Industries Limited Led by State Bank of India Address: Samriddhi Bhawan, 1 Strand Road Kolkata, West Bengal - 700 001. ... Respondents

Present:

For Appellant: Mr. Krishnendu Datta, Sr. Advocate with Mr. Udit Mendiratta, Ms. Niharika Sharma, Mr. Shivkrit Rai, Mr.Rajat Sinha, Mr. Tejas D. Jha, Advocates

For Respondents: Mr. Avrojyoti Chatterjee, Mr. Rajiv S. Roy, Mr. Siddharth Dhingra, Mr. Zoyeb Khan, Ms. Jayasree Saha, Mr. Shankar Mali, Advocates for R-2/CoC

Mr. Rishav Banerjee, Mr. Rajarshi Banerjee, Mr. Shambo Nandy, Advocates for R-1/RP

Company Appeal (AT) (Insolvency) No.405 of 2023 1 JUDGMENT

ASHOK BHUSHAN, J.

This Appeal by ICICI Bank Ltd., a Financial Creditor of the Corporate

Debtor - BKM Industries Limited has been filed challenging the order dated

01.03.2023 in IA (IB) No.471/KB/2022. In the said IA, the Applicant has

sought direction to the Resolution Professional ("RP") to take into account

the priority of distribution of the Plan realizations and taking into account

the priority assigned to the dissenting Financial Creditor, who are also

secured creditors. The Adjudicating Authority rejected the IA by the

impugned order. Aggrieved by the order of rejection, this Appeal has been

filed.

2. Brief facts of the case necessary for deciding this Appeal are:

(i) The Corporate Insolvency Resolution Process ("CIRP") against

the Corporate Debtor was initiated by order dated 30.12.2020

in Application under Section 7 of the Insolvency and

Bankruptcy Code, 2016 (hereinafter referred to as "IBC") filed

by M/s Trimurti Associates Private Limited.

(ii) The Appellant submitted its claim in Form-C for an amount of

Rs.15,52,73,428/- (comprising of Rs.13.04 crores under the

rupee term loan and Rs.2.48 crores under the working capital

loan). The amount claimed by the Appellant in Form-C was

Company Appeal (AT) (Insolvency) No.405 of 2023 2 admitted by the RP. The Appellant was also given a seat in the

Committee of Creditors ("CoC").

(iii) A Resolution Plan was submitted by the Resolution Applicant.

In the Resolution Plan submitted by Uniglobal Papers Private

Limited, the Resolution Applicant had proposed that amount

proposed for payment towards secured creditors shall be

distributed amongst them based on proportion of their

admitted claim.

(iv) In the 14th CoC Meeting held on 02.05.2022, Members of the

CoC had discussion on distribution of proceeds under the

received Resolution Plan, wherein the Appellant mentioned

that any distribution to be made to secured creditors must be

done keeping in mind the security interest. The Members of

the CoC requested the RP to assist the CoC with a proposed

distribution amount as per security interest and provide the

information with disclaimer that such calculation would be

suggestive only. The RP on 06.05.2022 addressed an email to

all the Financial Creditors of the Corporate Debtor, providing

the calculation methodology and the lender-wise proportional

share in the liquidation value of the Corporate Debtor for the

purposes of distribution as well as proportionate share as per

security interest. The Appellant raised objection to the

distribution methodology circulated by RP and claimed

Company Appeal (AT) (Insolvency) No.405 of 2023 3 distribution as per security interest. The Appellant had

security interest in immovable and movable property of the

Corporate Debtor situated at two places.

(v) On 10.05.2022, the 15th CoC Meeting was held where RP

proposed the Agenda for distribution of the amount offered to

secured creditors either on the basis of outstanding debt or on

the basis of security interest available with the respective

secured lenders. The Appellant objected to the methodology of

the calculation. The Agenda Item was put to vote. The CoC

with 78.79% vote share voted in favour of distribution as per

outstanding debt/ voting share. The Appellant vide email

dated 10.05.2022 again objected to it.

(vi) On 17.05.2022, in the 16th CoC Meeting, the CoC approved the

Resolution Plan of Uniglobal Papers Private Limited, which was

approved with vote share of 78.79%. The Resolution

Professional filed an Application for approval of the Resolution

Plan.

(vii) The Appellant filed an IA No.471 of 2022 before the

Adjudicating Authority on 21.05.2022 wherein the Applicant

prayed for following reliefs:

"(a) this Learned Adjudicating Authority be pleased to pass an order directing the Resolution Professional to take into account the priority on security interest of the financial

Company Appeal (AT) (Insolvency) No.405 of 2023 4 creditors while determining the calculation methodology of the Creditors' proportional share in the liquidation value of the Corporate Debtor for the purpose of distribution under Section 53(1) of the Code;

b) stay of a further proceedings in the instant corporate insolvency resolution process, pending disposal of the instant application;

c) Ad-interim orders in terms of prayer (b) hereinabove;

d) Any further order or orders and/ or direction or directions as may deem fit and proper"

(viii) The Application filed by the Appellant was opposed by the RP

as well as Successful Resolution Applicant. The Adjudicating

Authority after hearing the parties, by the impugned order has

rejected the Application. The Adjudicating Authority placed

reliance on the judgment of the Hon'ble Supreme Court in

India Resurgence ARC Private v. Amit Metaliks Limited

and Anr. (2021) SCC OnLine SC 409. Aggrieved by the said

order, this Appeal has been filed.

3. We have heard Shri Krishnendu Datta, learned Senior Counsel

appearing for the Appellant. Shri Rishav Banerjee, learned Counsel

appearing for Respondent No.1/RP and Shri Avrojyoti Chatterjee, learned

Counsel appearing for CoC.

4. Shri Krishnendu Datta, learned Senior Counsel for the Appellant

submits that Appellant has first charge on the assets of the Corporate

Company Appeal (AT) (Insolvency) No.405 of 2023 5 Debtor and as per liquidation value of the assets, on which the Appellant

has first charge, the Appellant was entitled to receive the liquidation value

as per security interest. It is submitted that the Appellant being dissenting

Financial Creditor is entitled to receive liquidation value by virtue of Section

30, sub-section (2) (b) of the IBC. The Appellant's entire claim of Rs.15.52

crores having been admitted, the proposal of RP to make payment of

Rs.4.54 crores to the Appellant is not as per liquidation value attributable

to the Appellant. The Appellant having first charge holder in respect of the

secured assets, and the liquidation value of such assets being Rs.24.5

crores, the Appellant is entitled to receive an amount of Rs.13.52 crores.

The RP has failed to correctly and appropriately calculate the Appellant's

proportionate share of the Corporate Debtor's liquidation value. The

Adjudicating Authority did not take into consideration the Appellant's

priority of charge in the security interest or the value of such security

interest. The Appellant's entitlement as a dissenting Financial Creditor

cannot be curtailed by exercise of commercial wisdom by the CoC.

5. The learned Counsel for the RP, Shri Rishav Banerjee refuting the

submissions of learned Counsel for the Appellant submits that distribution

methodology has been approved by the CoC in its 15th Meeting held on

10.05.2022. The distribution methodology having been approved, which is

as per Resolution Plan submitted by Uniglobal Papers Private Limited,

Appellant has no right to challenge the decision of the CoC approving the

distribution methodology. The statutory entitlement of the dissenting

Financial Creditor is regulated by Section 30, sub-section (2)(b) and the

Company Appeal (AT) (Insolvency) No.405 of 2023 6 Appellant is only entitled for an amount which it could have received in

event the Corporate Debtor was liquidated. The learned Counsel submits

that judgment of the Hon'ble Supreme Court of India in India Resurgence

ARC Pvt. Ltd., fully covers the issue. The Appellant being dissenting

Financial Creditor cannot suggest that a higher amount to be paid to it

with reference to the value of the security interest. The learned Counsel

has also relied on the judgment of this Tribunal in Small Industries

Development Bank of India (SIDBI) vs. Vivek Raheja - Company Appeal

(AT) (Insolvency) No.570 of 2022 and stated that accepting the

submission advanced by the Appellant will ignite perverse incentives for

secured creditors to vote for liquidation and shall be impeding the

resolution of a Corporate Debtor, which is against the primary objective of

the IBC.

6. The learned Counsel for the CoC has supported the submissions

advanced on behalf of the RP. It is submitted that the Resolution Plan

having been approved with 78.79% vote of CoC and the distribution to the

Appellant is as per the Resolution Plan, the Appellant cannot be allowed to

raise any grievance to the distribution, which has approval of the CoC. The

Appellant being dissenting Financial Creditor, is entitled to only amount

which it could have received in event the Corporate Debtor was liquidated.

The Resolution Plan having already been approved by the Adjudicating

Authority vide order dated 19.09.2023, no further grievance of the

Appellant can be entertained. The Resolution Plan itself contemplate that

amount proposed for payments towards Financial Creditors, shall be

Company Appeal (AT) (Insolvency) No.405 of 2023 7 distributed among them based on the proportion of their admitted claims.

It is submitted that commercial wisdom of the CoC in approving the

distribution methodology as well as Resolution Plan cannot be allowed to

be challenged at the instance of dissenting Financial Creditor. The dispute

raised in the Appeal is fully covered by the judgment of the Hon'ble

Supreme Court in India Resurgence ARC Pvt. Ltd.

7. We have considered the submissions of learned Counsel for the

parties and have perused the record.

8. Before we enter into respective submission of learned Counsel for the

parties, it is relevant to notice the Minutes of the CoC Meeting dated

02.05.2022 and 10.05.2022, i.e., 14th and 15th CoC Meeting respectively.

In 14th CoC Meeting, discussion was made on the Resolution Plan received

by Uniglobal Papers Private Limited. One of the matters, which was

discussed was regarding the distribution as per the Resolution Plan. In

Agenda Item No.3, following was noted:

"3. Any other matter that CoC members like to discuss.

• The members of CoC requested the RP to prepare and share with the distribution ratio if the amount offered for secured creditors under the Resolution Plan be distributed as per the security interest available with the lenders. The RP mentioned that while he can share the proposed distribution keeping in view the amount of claims admitted by him, the lenders must among themselves arrive at the proposed distribution

Company Appeal (AT) (Insolvency) No.405 of 2023 8 on the basis of security interest. The members of CoC requested the RP that in view of limited time at disposal and as the RP already have information of all the secured lenders based on the submitted documents along with the claim of the respective lenders, he could assist them with a proposed distribution amount as per security interest and he could provide the same with disclaimer that the same would be suggestive one only and the secured creditor would have discretion to modify and accept the same based on the actual position and understanding among themselves. RP agreed to the same but requested to arrive at a decision on distribution at the earliest.

• It was discussed in the meeting that another CoC meeting might be called around on 5th or 7th May 2022 so that revised Resolution Plans could be put for voting on or before 8th May 2022."

9. After the decision of the CoC taken in the 14th CoC Meeting, the RP

circulated email dated 06.05.2022 to all Financial Creditors incorporating

the proposed distribution as per lender wise. Along with email dated

06.05.2022 the RP has annexed a Chart, annexing the distribution matrix

among secured creditors in the Resolution Plan. It is useful to extract the

distribution matrix as circulated by RP is to the following effect:

"Distribution matrix secured creditors in Resolution Plan for BKM Industries Ltd

Amount offered to SFC in the resolution plan in Cr. 32 Assumption Assumption 1 2

Company Appeal (AT) (Insolvency) No.405 of 2023 9 Lender wise Ratio of As per distribution SFC security Voting Admitted Amounts per of Bank admitted interest - see Shares claim outstanding liquidation claim working value as per only below Sec 53(1) SBI 30.11% 46.29 33.88% 10.84 8.76 11.76 Indian Bank 18.77% 28.86 21.12% 6.76 5.46 7.33 ACRE 15.79% 24.27 17.76% 5.68 0.15 6.17 ICICI Term loan 13.04 9.55% ICICI WCDL 10.10% 2.48 1.82% 3.64 13.51 3.95 IDBI 9.21% 14.15 10.36% 3.31 2.68 3.60 BOB 4.91% 7.55 5.52% 1.77 1.43 1.92 JP Fin 4.93% 7.58 Trimurty 4.91% 7.55 Manaksia Steel 0.12% 0.19 Manaksia Ltd. 0.65% 1.00 Vajra 0.48% 0.74 Total 99.99% 153.71 100.00% 32.00 32.00 34.72"

10. The Appellant immediately objected to the distribution matrix vide

email dated 10.05.2022. However, the distribution mechanism as

circulated by RP came for consideration in the 15th CoC Meeting held on

10.05.2022. The discussion and voting as captured in the Minutes are as

follows:

"2. Discussion and voting on the distribution of the amount offered in the resolution plan to the secured creditors of BKM Industries Ltd.

• Representatives of ICICI Bank, together with their legal representative raised their objection on the calculation of distribution of liquidation value terms of section 53(1) of the IBC 2016 done by RP. Representatives of ICICI Bank highlighted that interpretation of the explanation to Sec 53 of the IBC 2016 by the RP is inaccurate and a complete

Company Appeal (AT) (Insolvency) No.405 of 2023 10 reading of the statutory provision indicates that payment in equal proportion can only be made in respect of a class of recipients ranking equally. Similarly, the ambit of sub-section (2) of Section 53 is limited to recipients who enjoy equal ranking whereas ICICI Bank enjoys a priority/ first charge over the assets located at Medak and Silvassa. In the event of failure by the RP to re-calculate the liquidation value due to secured financial creditor, ICICI Bank shall be constrained to initiate legal proceedings to safeguard their rights. To this RP replied that the calculation was as per his understanding of the particular section and further the distribution under sec 53(1) of IBC, 2016 does not have any relevance unless the resolution plan is voted upon by the CoC members. To which other CoC members mainly representatives of SBI and Indian Bank replied that since the legal counsel/ team of other CoC members and that of RP are not and, this legal interpretations should not be discussed in today's CoC meeting. They requested RP to stick to the agenda as circulated by the RP in the notice and the voting item. RP took note of the same.

• Keeping the paucity of time involved, the RP suggested for a voting on the agenda during the meeting itself. Some CoC members mainly Mr. Saurav Sharma from SBI and Mr. AK Jha from Indian bank informed the RP that they are ready to vote in the meeting itself. However, Mr. Rahul Saraff of ICICI Bank raised his concern that they would be requiring the approval from their higher

Company Appeal (AT) (Insolvency) No.405 of 2023 11 authority for voting in this matter. After considering the CoC members requests RP announced in the meeting that he would initiate an e-voting for voting by the CoC members on the voting agenda and requested all the members to case their votes as soon as possible. • RP informed the CoC members that the e-voting platform would be opened from today late afternoon for the minimum hours as prescribed in IBC, 2016, in the context of time constrained.

3) Discussion on the voting of the final resolution plans submitted by the two prospective resolution applicants

• RP informed the CoC members that once the voting on the distribution mechanism of amount offered for secured creditors in the resolution plan had been voted & decided by a majority of 66% of the CoC members, then both the resolution applicants would be requested to incorporate the same in their resolution plans and the same would be put for final voting by the CoC members subsequently even if the is no separate CoC meeting for the voting on the resolution plan. That voting would be considered as final voting for approval of resolution plan by the CoC members with at least 66% voting in favour of a particular plan. • CoC members informed the RP that both the plans submitted by both the resolution applicants were feasible and viable in term of their implementation

4) Voting agenda

Company Appeal (AT) (Insolvency) No.405 of 2023 12 Following voting agenda would be put for voting by the CoC members Sl. No. Voting Items Yes No Abstain

1. CoC approves the distribution of the amount offered for the secured financial creditors by the successful resolution applicant (to be decided in a separate voting) based on the proportion of admitted claim of the respective secured lenders

2. CoC approves the distribution of the amount offered for the secured financial creditors by the successful resolution applicant (to be decided in a separate voting) based on the security inte4rest over assets of the corporate debtor available with the respective secured lenders"

11. The voting as per Agenda Item was conducted on 11.05.2022 by e-

voting, Item No.1 of the Voting Agenda was approved by 78.79% voting

share and the Item No.2 of the Agenda Item was rejected by 88.63% vote

share. Meaning thereby that CoC approved the Agenda for distribution of

the amount offered for the secured Financial Creditors by the admitted

claim of the respective secured creditors. Subsequent to the aforesaid, in

16th CoC Meeting the Plan came for consideration, which was approved in

Company Appeal (AT) (Insolvency) No.405 of 2023 13 the Meeting dated 17.05.2022 with vote share of 78.79%. After the said

approval of the Plan, IA No.471 of 2022 was filed by the Appellant.

12. From the Minutes of the 14th and 15th CoC, it is clear that specific

Agenda Item was placed before the CoC for consideration as to whether

distribution has to be made as per the admitted claim of the secured

lenders or on the basis of security interest over assets of the Corporate

Debtor. When the CoC approved the voting at Agenda Item No.1, i.e.,

distribution based on the proportion of admitted claim of the respective

secured lenders, which was also in accordance with the Resolution Plan

submitted by the Resolution Applicant, no challenge by the Appellant can

be entertained. It is useful to notice paragraph 2.1 (d) of the Resolution

Plan, which dealt with debt owed to the Financial Creditors. Paragraph

2.1.3 (d) is as follows:

"2.1.3 (d) The amount proposed for payment towards Secured Financial Creditors shall be distributed amongst them based on the proportion of their admitted claim."

13. The Resolution Plan was approved in the 16th CoC Meeting. Thus,

distribution to the Appellant is as per the decision of the CoC. Now the

submission of the Appellant that distribution is not in accordance with

Section 30, sub-section (2) (b) and the Appellant has not been paid the

liquidation value needs to be considered. Section 30, sub-section (2) (b)

provides as follows:

Company Appeal (AT) (Insolvency) No.405 of 2023 14 "30(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 than-

(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 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 purpose 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

Company Appeal (AT) (Insolvency) No.405 of 2023 15 barred under any provision of law for the time being in force; or

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

14. As per Section 30, sub-section (2)(b), the Financial Creditor, who do

not vote in favour of the Resolution Plan are entitled for payment of debt,

which shall not be less than the amount to be paid to such creditors in

accordance with sub-section (1) of Section 53, which provides as follows:

"53. Distribution of assets.- (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 such period 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 creditor 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;

Company Appeal (AT) (Insolvency) No.405 of 2023 16

(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 India and 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

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

15. When we look into Section 53, sub-section (1) (b), debt owed to a

secured creditor has to be distributed equally between and amongst

workmen's dues and debts owed to a secured creditors. The debt owed to

the secured creditor is a debt as admitted in the CIRP. Admittedly, the

claim as submitted by the Appellant was admitted in the CIRP and debt

owed to Appellant is as per admitted claim. The distribution of the debt

has to be as per the debt of the Financial Creditors. The 'debt' is defined

in Section 3(11) of the IBC, which is as follows:

"3(11) "debt" means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt;"

Company Appeal (AT) (Insolvency) No.405 of 2023 17

16. Section 3, sub-section (6) defines the 'claim', which claim is to be

filed by a Financial Creditor as per Regulation 8, sub-section (1) of the CIRP

Regulations, 2016. Thus, the scheme of Section 53, sub-section (1), clearly

indicates distribution as per the debt and in the legislative scheme there is

no scope of distribution of assets among the Financial Creditors as per

security interest. The issue which has been raised by the Appellant, came

for consideration before this Tribunal in Small Industries Development

Bank of India vs. Vivek Raheja and Ors. where also the Appellant had

claimed distribution of assets as per security interest. An IA was filed by

the Appellant (SIDBI), seeking a direction to distribute as per security

interest. In paragraph 2, following case of the SIDBI has been noticed:

"2. Brief facts of the case giving rise to this Appeal are:-

• Oriental Bank of Commerce had filed a Section 7 Application under the Insolvency and Bankruptcy Code, 2016 (IBC in short) against the Corporate Debtor - M/s. Gupta Exim (India) Pvt. Ltd. which was admitted by the Adjudicating Authority vide Order dated 29th October, 2019. In the 'Corporate Insolvency Resolution Process' in 16th Meeting of 'Committee of Creditors', Resolution Plans were discussed. Revised Resolution Plans were submitted by the prospective Resolution Applicants. Resolution Plan was put to e-Vote between 07th August, 2021 and 16th August, 2021 and by majority of 97.97%, the Resolution Plan of 'Lotus Textiles' and Mr. Vijayant Mittal was approved. Appellant sent an Objection dated 16th

Company Appeal (AT) (Insolvency) No.405 of 2023 18 August, 2021 to the distribution to the Appellant under the Resolution Plan.

• An I.A. No. 581 of 2021 was filed by the Appellant for direction to the Resolution Professional to distribute the proceeds of the Resolution Plan where following prayers were made:

1. The present application may kindly be allowed and the directions be issued to the Respondent No. 1 modify/clarify the distribution to dissenting members as per the Resolution Plan and distribute the proceeds of the resolution plan to Applicant SIDBI for an amount of Rs.

5,64,97,893/- in priority in accordance with provisions of IBC 2016 in the interest of justice and equity.

2. Interim stay be granted on distribution of the resolution plan amount by the Resolution Professional to the CoC members till the present application is decided."

• The case of the Appellant in the Application was that as per security interest of the Appellant, the Appellant is entitled to 6.93 % i.e. the amount of Rs. 5,64,97,893/- and as per voting share as approved by the CoC, the Appellant is entitled to 2.03% i.e. Rs. 1,65,47,078/-. The case of the Appellant set up in the Application is that he is entitled for his distribution of plan amount as per value of the security interest of the Appellant. The Application was objected by the Resolution Professional. The Adjudicating Authority by the Impugned Order dated 17th March, 2022 rejected the I.A. No. 581 of 2021 upholding the decision of

Company Appeal (AT) (Insolvency) No.405 of 2023 19 the CoC for distribution of proceeds of the Resolution Plan as per the voting share. Appellant aggrieved by the said Order, has come up in this Appeal."

17. This Tribunal after taking into consideration the judgment in India

Resurgence Arc Private Limited Vs. M/s. Amit Metaliks Limited &

Anr., upheld the judgment of the Adjudicating Authority, who rejected the

IA, which was filed by SIDBI for distribution as per security interest. In

paragraphs 20 and 25 of the judgment, following was held:

"20. When we look into above statement of objects and reasons, it is made clear that financial creditors who do not vote in favour of the resolution plan shall receive an amount that is not less than the liquidation value of their debt. The above statement of objects and reasons also makes it clear that the entitlement of dissenting financial creditor is to receive liquidation value of their debt and not the distribution as per their security value as is sought to be contended by the Learned Counsel for the Appellant before us. The statement of objects and reasons by which amendments in Section 30(2)(b) has been made, makes it clear that entitlement of dissenting financial creditor is the liquidation value of their debt which also clearly negate the submissions raised by the Learned Counsel for the Appellant before us.

25. In view of the foregoing discussion, we do not find any error in the Order dated 17.03.2022 of the Adjudicating Authority rejecting I.A. No. 581 of 2021 filed by the Appellant. The decision of the Committee of

Company Appeal (AT) (Insolvency) No.405 of 2023 20 Creditors and the Adjudicating Authority deciding to distribute the proceeds of the plan value as per voting share of the secured creditor in no manner contravenes the provisions of Section 30(2)(b) of the Code. None of the submissions raised by the Learned Counsel for the Appellant has any substance. In result, the Appeal is dismissed."

18. Now we come to the judgment of the Hon'ble Supreme Court in India

Resurgence Arc. Pvt. Ltd. Vs. M/s. Amit Metaliks Ltd. & Anr. In

paragraph 3 of the judgment, facts were noticed, which is to the following

effect:

"3. When the resolution plan submitted by the respondent No. 1 was taken up for consideration by the CoC, the appellant expressed reservations on the share being proposed, particularly with reference to the value of the security interest held by it; and chose to remain a dissentient financial creditor. The dissention on the part of the appellant and response thereto by the resolution professional as also by other members of CoC was noted in the 14th meeting of CoC dated 31.07.2020 in the following words : -

"Representative from Religare Finvest/India Resurgence ARC, Mr. Shakti inquired about the lower share they are getting as per Resolution Plan whereas the security interest held by them is far more. He also raised question about the fair market value and liquidation value of the CD. On this the RP informed him that the valuation exercise has been done by registered valuers of

Company Appeal (AT) (Insolvency) No.405 of 2023 21 IBBI who were appointed by the erstwhile IRP and he do not find any inconsistency in the same. Other members also agreed on the same. Mr. Shakti then raised the point that in the present scenario it will be better for them if the company goes into Liquidation and they will realize their security interest by exercising option u/s 52(1)(b). The RP then replied that Liquidation option may be beneficial to one creditor but is definitely detrimental to other secured lenders who are having majority stake of around 96%. Further the RP also said that the objective of IBC is resolution and revival of a distressed company and is not a recovery procedure.""

19. The Hon'ble Supreme Court after hearing the parties and referring to

the provisions of Section 30 of the IBC, laid down following in paragraph

13, 14, 16 and 17:

"13. 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 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 of appeal.15

14. The provisions of amended sub-section (4) of Section 30 of the Code, on which excessive reliance is placed on behalf

Company Appeal (AT) (Insolvency) No.405 of 2023 22 of the appellant, in our view, do not make out any case for interference with the resolution plan at the instance of the appellant. The purport and effect of the amendment to sub- section (4) of Section 30 of the Code, by way of sub-clause (b) of Section 6 of the Amending Act of 2019, was also explained by this Court in Essar Steel (supra), as duly taken note of by the Appellate Authority (vide the extraction hereinbefore).The NCLAT was, therefore, right in observing that such amendment to sub-section (4) of Section 30 only amplified the considerations for the Committee of Creditors while exercising its commercial wisdom so as to take an informed decision in regard to the viability and feasibility of resolution plan, with fairness of distribution amongst similarly situated creditors; and the business decision taken in exercise of the commercial wisdom of CoC does not call for interference unless creditors belonging to a class being similarly situated are denied fair and equitable treatment.

16. The repeated submissions on behalf of the appellant with reference to the value of its security interest neither carry any meaning nor any substance. What the dissenting financial creditor is entitled to is specified in the later part of sub- section (2)(b) of Section 30 of the Code and the same has been explained by this Court in Essar Steel as under:--

"128. When it comes to the validity of the substitution of Section 30(2)(b) by Section 6 of the Amending Act of 2019, it is clear that the substituted Section 30(2)(b) gives operational creditors something more than was given earlier as it is the higher of the figures mentioned in sub-clauses (i) and (ii) of sub-clause (b) that is now to be paid as a minimum amount to operational creditors. The same goes for the latter part of sub-

Company Appeal (AT) (Insolvency) No.405 of 2023 23 clause (b) which refers to dissentient financial creditors. Ms. Madhavi Divan is correct in her argument that Section 30(2)(b) is in fact a beneficial provision in favour of operational creditors and dissentient financial creditors as they are now to be paid a certain minimum amount, the minimum in the case of operational creditors being the higher of the two figures calculated under sub-clauses (i) and (ii) of clause (b), and the minimum in the case of dissentient financial creditor being a minimum amount that was not earlier payable. As a matter of fact, pre- amendment, secured financial creditors may cramdown unsecured financial creditors who are dissentient, the majority vote of 66% voting to give them nothing or next to nothing for their dues. In the earlier regime it may have been possible to have done this but after the amendment such financial creditors are now to be paid the minimum amount mentioned in sub-section (2). Ms. Madhavi Divan is also correct in stating that the order of priority of payment of creditors mentioned in Section 53 is not engrafted in sub-section (2)(b) as amended. Section 53 is only referred to in order that a certain minimum figure be paid to different classes of operational and financial creditors. It is only for this purpose that Section 53(1) is to be looked at as it is clear that it is the commercial wisdom of the Committee of Creditors that is free to determine what amounts be paid to different classes and subclasses of creditors in accordance with the provisions of the Code and the Regulations made thereunder."

(underlining supplied for emphasis)

Company Appeal (AT) (Insolvency) No.405 of 2023 24

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."

20. The issue raised in the Appeal, is fully covered by the judgment of

the Hon'ble Supreme Court. The Hon'ble Supreme Court in India

Resurgence ARC Private Ltd. (supra) also referred to its earlier judgment

in Jaypee Kensington Boulevard Apartments Welfare Association v.

NBCC (India) Ltd. while coming to the conclusion.

21. The learned Counsel for the Appellant during his submissions has

relied on the judgment of the Hon'ble Supreme Court in Vistra ITCL (India)

Ltd. and Ors. vs. Dinkar Venkatasubramanian and Anr. - (2023) 7

SCC 324. There are several distinguishable facts in the judgment of Vistra

ITCL (India) Ltd. and in the present case. In the case of Vistra, the claim

of Financial Creditor was not admitted. Whereas in the present case the

debt of the Appellant was admitted. In Vistra, the claim of Vistara to be

secured creditor was rejected as has been noticed in paragraphs 2 to 10 of

the judgment itself. Whereas, the Appellant in the present case has been

recognized as a dissenting Financial Creditor and was part of the CoC and

in the present case, the CoC by its decision has approved both the

distribution mechanism as well as the Resolution Plan, which proposed

distribution based on proportion of admitted claim. Vistra was never

Company Appeal (AT) (Insolvency) No.405 of 2023 25 treated as secured creditor or given its minimum entitlement as secured

creditor as per Section 53(1). The judgment of Vistra is a judgment of the

Hon'ble Supreme Court, which is referable to Article 142 of the

Constitution, which jurisdiction was exercised and ultimately the Hon'ble

Supreme Court has held Vistra to be a secured creditor. The present is a

case where ICICI Bank was accepted and recognized as Financial Creditor

and its full claim was accepted and distribution to the Appellant was as per

Section 30, sub-section (2)(b) of the IBC.

22. In view of the forgoing discussions, we are of the view that no error

has been committed by the Adjudicating Authority in rejecting IA No.471

of 2022. There is no merit in the Appeal. The Appeal is dismissed. No

order as to costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Mr. Arun Baroka] Member (Technical)

NEW DELHI

6th November, 2023

Ashwani

Company Appeal (AT) (Insolvency) No.405 of 2023 26