Iifcl Mutual Fund vs Committee Of Creditors Of Gvr Infra & Ors

IIFCL Mutual Fund ...Appellant

Versus

Committee of Creditors of GVR Infra & Ors. ...Respondents

Present: For Appellant: Mr. Anand Varma, Mr. Dhairya Madan and Mr. Swagat Baruah, Advocates. For Respondents: Mr. P. V. Dinesh and Mr. Ashwini Kumar Singha, Advocates for R-1. Mr. Robin Sirohi, Advocate for R-2. Ms. Shraddha Chaudhri, Mr. Aslam Ahmed, Mr. Sumant Nayak and Ms. Isha J. Kumar, Advocates for R-3.

ORDER

(Through Virtual Mode)

02.11.2020: Appellant - 'IIFCL Mutual Fund', who had 3.94% voting share as

member of the Committee of Creditors in the Resolution Process of 'GVR Infra

Projects Pvt. Ltd.' (Corporate Debtor) and who voted in favour of the approval of

the Resolution Plan submitted by 'UVARC' (Successful Resolution Applicant) has

filed the instant appeal assailing the approval of the Resolution Plan of the

Successful Resolution Applicant as regards distribution mechanism. The

Appellant in terms of the impugned order is also aggrieved of dismissal of its

application being MA No. 99 of 2020 in C.P. No. 941/IB/2018 seeking revision

of share proportion of the resolution fund amongst the Secured Financial

Creditors equally which also came to be dismissed in terms of the same

impugned order.

-2-

2. It is submitted on behalf of the Appellant that the revised resolution plan

of Successful Resolution Applicant was approved by the Committee of Creditors

with 67.97% of the Members voting in favour of the Resolution Plan during the

16th meeting of Committee of Creditors. It is submitted that the Appellant had

raised objections to the allocation of Rs.135 Crores in favour of only four Secured

Creditors resulting in inequitable distribution of the proceeds of the Resolution

Fund amongst the similarly placed five Financial Creditors. It is submitted that

such allocation contravened provisions of Section 53 of Insolvency and

Bankruptcy Code, 2016 (in short the 'I&B Code'). It is further submitted that

M.A. No. 99 of 2020 filed by the Appellant seeking revision of share proportion

of Resolution Fund amongst the Secured Financial Creditors equally has been

arbitrarily dismissed in terms of the impugne d order on the ground that the

Appellant had consented to approval of the revised Resolution Plan of the

Successful Resolution Applicant and he cannot object to the distribution of

proceeds of the Resolution Fund by the Resolution Professional as approved by

the Committee of Creditors.

3. After hearing Shri Anand Varma, Advocate representing the Appellant and

wading through the impugned order and the record, we find that 'UVARC'

emerged as Successful Resolution Applicant. Admittedly, the Appellant as a

member of Committee of Creditors, voted in favour of the approval of Resolution

Plan of the Successful Resolution Applicant. The Appellant appears to be

Company Appeal (AT) (Insolvency) No. 938 of 2020 -3-

aggrieved of allocation of Rs.135 Crores by the Resolution Professional in regard

to uninvoked Bank Guarantees. From the record, it comes to fore that the total

admitted claims of the Financial Creditors of Rs.2271.08 Crores were to be

settled for an amount of Rs.352 Crores. This included claim for a total amount

of 86,09,59,759/- submitted by Appellant which had been admitted by the

Resolution Professional. It further appears that it is post -approval of the

Resolution Plan submitted by the Successful Resolution Applicant that the

Appellant filed M.A. 99 of 2020 seeking direction from the Adjudicating Authority

for revision of share proportion of the Resolution Fund amongst the Secured

Financial Creditors equally. Reference is made to page 109-110 of the appeal

paper book to demonstrate that the Appellant had raised the issue with the

Resolution Professional and the Resolution Professional had taken the stand that

the pay-out of Rs.135 Crores was essentially a contingent payment, regard being

had to certain eventualities. The Resolution Professional iterated that if the

contingencies do not arise, these amounts will not be required to be refunded/

released. She further stated that such pay-out was a business decision to keep

the Corporate Debtor a going concern. She further stated that this was a

business decision of the Committee of Creditors which cannot be commented

upon by her.

4. In 'K. Shashidhar Vs. Indian Overseas Bank and Ors.' reported in

2019 SCC Online SC 257, Hon'ble Apex Court observed that the decision in

Company Appeal (AT) (Insolvency) No. 938 of 2020 -4-

regard to approval or rejection of the Resolution Plan by the Committee of

Creditors is taken collectively after due negotiation between the Financial

Creditors who are constituents of the Committee of Creditors and express their

opinion on the proposed resolution plan through the process of voting. The

proposed resolution plan is discussed threadbare and only thereafter the

constituents of the Committee of Creditors exercise their opinion to approve or

reject the proposed resolution plan. The commercial/ business decision of the

Financial Creditors taken collectively or their individual opinions are not open to

challenge. In 'Committee of Creditors of Essar Steel India Limited Vs.

Satish Kumar Gupta and Others' (Civil Appeal No. 8766-67 of 2019)', (2019)

SCC OnLine SC 1478, the Hon'ble Apex Court held that the limited judicial

review available under section 30(2) to the Adjudicating Authority and under

Section 61(3) to the Appellate Tribunal cannot trespass upon the business

decision of the majority of the Committee of Creditors. The parameters of limited

judicial review stand clearly laid down in K. Shashidhar's case (supra).

5. Taking a holistic view of the provisions of the successful resolution plan

into account, the Adjudicating Authority was of the view that the same was not

in conflict with the provisions of Section 30(2) of the I&B Code. Thus, the

resolution plan in question came to be approved. As noticed elsewhere in this

judgment, the claim of the Appellant as Financial Creditor has been admitted by

Company Appeal (AT) (Insolvency) No. 938 of 2020 -5-

the Resolution Professional during the Corporate Insolvency Resolution Process

and the Appellant, as a constituent of the Committee of Creditors having voting

right of 3.94%, has assented to the approval of the resolution plan of the

Successful Resolution Applicant. After admission of Appellant's claim by the

Resolution Professional he can hardly have a grievance against the Resolution

Professional. Though, the Appellant appears to have raised an objection in

regard to inclusion of uninvoked Bank Guarantees in the admitted claim, its

approval of the resolution plan as an assenting Financial Creditor would estop

it from questioning the same resolution plan, though only in regard to

distribution mechanism, which admittedly rests upon commercial wisdom of the

Committee of Creditors, who set apart amount of Rs.135 Crores as contingency

fund to take care of certain eventualities which in itself was a business decision

based on commercial wisdom of Committee of Creditors binding all constituents

of Committee of Creditors including the Appellant. This is astonishing that while

approving the resolution plan as an assenting creditor at the culminating stage

of insolvency resolution process, the Appellant should call in question the action

of Resolution Professional, who had no role to play when the proposed Resolution

Plan emanating from the Successful Resolution Applicant was put to vote by the

Committee of Creditors. The scope of judicial review under Section 61(3) of I&B

Code being limited to grounds enumerated therein and no material irregularity

Company Appeal (AT) (Insolvency) No. 938 of 2020 -6-

having been shown to have occurred during the Corporate Insolvency Resolution

Process before approval of the Resolution Plan by the Committee of Creditors, we

are of the considered opinion that the Appellant has no case. It is not the

Appellant's grievance that he has been discriminated against as a dissenting

Financial Creditor or that his admitted claim has not been taken into

consideration while allocating the amount in terms of the distribution

mechanism found perfectly in order by the Adjudicating Authority.

6. In the given facts and circumstances of the instant case, we are of the

considered opinion that no case for judicial interference is made out. The appeal

is accordingly dismissed at the very threshold stage being devoid of merit. There

shall be no orders as to costs.

[Justice Bansi Lal Bhat] Acting Chairperson

[Justice Anant Bijay Singh] Member (Judicial)

[Dr. Ashok Kumar Mishra] Member (Technical) am/gc

Company Appeal (AT) (Insolvency) No. 938 of 2020