Rosariod Souza vs Mahesh Chand Gupta & Ors

(Arising out of the Order dated 03.08.2021 passed by the National Company Law Tribunal, Mumbai Bench, Court-V in C.P. No. 1352/(IB)-MB-V/2020)

IN THE MATTER OF:

Rosario D'Souza, member of the Suspended Board of Directors of Dolphin Marine Foods and Processors (India) Private Limited, having his address at Sea Breeze Towers, T-6, 301, Sector 16, Palm Beach Road, Nerul (W), Navi Mumbai - 400706 ...Appellant Versus

1. Union Bank of India, through Asset Recovery Management Branch, Mumbai (South), Union Bank of India Building, 5th Floor, 66/80, Mumbai Samachar Marg, Mumbai - 400 023 ...Respondent No. 1

2. Dolphin Marine Foods and Processors (India) Private Limited, having address at FE-202, Salt Lake City, Sector -III, 1st Floor, Kolkata, West Bengal - 700 106 ...Respondent No. 2

Present

For Appellant: Mr. Swaroop George & Mr. Dhaval Deshpande, Advocates. For Respondents: Mr. Rishi K S Gautam & Ms. Nirupama Kar, for R2.

With

Comp. App. (AT) (Ins) No. 233 of 2023 & I.A. No. 830, 831, 832 of 2023

(Arising out of the Order dated 19.01.2023 passed by the National Company Law Tribunal, Mumbai Bench, Court-V in I.A. No. 1736 of 2022 IN C.P. No. 1352 of 2020) -2- Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

IN THE MATTER OF:

Rosario D'Souza, member of the Suspended Board of Directors of Dolphin Marine Foods and Processors (India) Private Limited, having his address at Sea Breeze Towers, T-6, 301, Sector 16, Palm Beach Road, Nerul (W), Navi Mumbai - 400706 ...Appellant Versus

1. Mr. Mahesh Chand Gupta Former Resolution Professional of Dolphin Marine Foods and Processors (India) Private Limited FE-202, Salt Lake City, Sector -III, Ist Floor, Kolkata, West Bengal ,700106 ...Respondent No. 1

2. Union Bank of India, through Asset Recovery Management Branch, Mumbai (South), Union Bank of India Building, 5th Floor, 66/80, Mumbai Samachar Marg, Mumbai - 400 023 ...Respondent No. 2

3. Mrs. Lalita S Powle in consortium with Suyog Agro & Poultry Products Pvt. Ltd., Resolution Applicant with office address at 8, National Home,3rd Floor, 27, Raughunath Dadaji St, Fort, Mumbai - 400 001 ...Respondent No. 3

4. Dolphin Marine Foods and Processors (India) Private Limited, having address at FE-202, Salt Lake City, Sector - III, 1st Floor, Kolkata, West Bengal - 700 106 Also, at 8, National Home, 3rd Floor, 27, Raughunath Dadaji St, Fort, Mumbai - 400 001 ...Respondent No. 4

Present

For Appellant: Mr. Swaroop George & Mr. Dhaval Deshpande, Advocates. -3- Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

For Respondents: Mr. Rishi K S Gautam & Ms. Nirupama Kar, for R2. Ms. Aroshi Pal, Mr. Anuj Tiwari & Ms. Monika, for R-3/SRA. JUDGEMENT

(12.02.2024)

NARESH SALECHA, MEMBER (TECHNICAL)

Comp. App. (AT) (Ins) No. 111 of 2022

1. The present Appeal i.e., Company Appeal (AT) (Insolvency) No. 111 of

2022 has been filed by under Section 61 of the Insolvency & Bankruptcy Code,

2016 (in short 'Code') being aggrieved by the Impugned Order dated 03.08.2021

passed by the National Company Law Tribunal, Court No. V, Mumbai Bench (in

short 'Adjudicating Authority') in C.P. No. 1352/(IB)-MB-V/2020, whereby

the Respondent No. 2/ Dolphin Marine Foods and Processors (India) Private

Limited and who is the Corporate Debtor ordered to undergo to the Corporate

Insolvency Resolution Process (in short 'CIRP'). The Appellant is the Member

of Suspended Board of Directors of the Corporate Debtor.

2. Heard the Counsel for the Parties and perused the records made available

including the cited judgements.

3. It is the case of the Appellant that the Corporate Debtor was established on

12.12.1996 as MSME company and was engaged in the business of fish

processing and exporting to various countries. The Corporate Debtor obtained -4- Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

cash credit facilities from time to time from the Respondent No. 1 and also repaid

part amount to the Respondent No. 1. However, during financial year 2017-18,

the Corporate Debtor faced financial problem due to notice by the Maharashtra

Pollution Control Board, hence, the processing plant of the Corporate Debtor was

stopped.

4. It is the case of the Appellant that during the financial stress of the

Corporate Debtor, the Respondent No. 1 approved 'Holding of Operation' with

15% cutback from 31.10.2018 to 28.02.2019 further approved the 'Holding of

Operation' with 25% cut back from 23.04.2019 to 30.06.2019 and in continuation,

the Respondent No. 1 finally approved 'Holding of Operation' with 30% cutback

from 20.07.2019 to 30.09.2019. It has been brought out that the Respondent No.

1 issued a Recall Notice dated 03.07.2019 seeking to recall facilities granted to

the Corporate Debtor and also declared the account of the Corporate Debtor as

NPA account with effect from 30.04.2018.

5. It is the case of the Appellant that despite Recall Notice, the Respondent

No. 1 continued to allow the Corporate Debtor to operate the account as 'Holding

of Operation' accounts and also made recoveries towards dues, hence, there was

not default at the time of filing of the application under Section 7 of the Code.

6. The Appellant also submitted that according to the RBI Prudential Norms

published on 01.07.2015 as amended from time to time, the Corporate Debtor was -5- Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

not in default and therefore, the Respondent No. 1 could not have preferred the

application under Section 7 of the Code.

7. The Appellant assailed the Impugned Order which is perverse because

none of his arguments were taken into account and despite no debt and default

established, the CIRP order was passed vide Impugned Order dated 03.08.2021.

8. It is the case of the Appellant that the Adjudicating Authority erred in

ignoring the facts that the Corporate Debtor was making payments to the

Respondent No. 1 regularly and his balance never exceeded the sanctioned credit

limits.

9. The Appellant submitted that the Code is meant to help the Corporate

Debtor in its revival by encouraging all stakeholders to take necessary steps in

this direction rather than forcing the Corporate Debtor into liquidation.

10. Concluding his remarks the Appellant requested to allow his Appeal and

set-aside the Impugned Order

11. Per Contra, the Respondent No. 1 refuted all the averments made by the

Appellant treating these to be as misleading, mischievous, frivolous and without

any substantial basis.

12. The Respondent No. 1 submitted that the Corporate Debtor has availed

various credit facilities during August 2008 to July 2017 including, cash credit

facilities, FDBP/ FUDBP, Term Loan etc., which were renewed/ modified/ -6- Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

enhanced from time to time the last sanction being vide letter dated 30.03.2017

with total facility availed by the Corporate Debtor was Rs. 11 Crores. The

Respondent No. 1 stated that the Corporate Debtor failed to repay the outstanding

dues from time to time despite all encouragement from the Respondent No. 1 and

due to failure of the Corporate Debtor in making payments, the account of the

Corporate Debtor was declared NPA on 30.04.2018.

13. The Respondent No. 1 submitted that due to Corporate Debtor's non-

payments, the Respondent No. 1 was compelled to initiate under SARFAESI Act,

2002 on 19.06.2018 and issued notice to the Corporate Debtor for outstanding

amount of Rs. 13,26,33,585.12/- .

14. The Respondent No. 1 refuted the charge of the Appellant that the

Respondent No. 1 is trying to drag the Corporate Debtor into unnecessary CIRP

and subsequently into liquidation and mentioned that on the contrary he was

trying to facilitate the revival of the Corporate Debtor and extended permission

for 'Holding on Operations' with 25% cut-back on 23.04.2019, however, there

was not much improvement in situation and therefore, the Respondent No. 1

issued a Recall Notice on 03.07.2019 to the Corporate Debtor for failure of

'Holding on Operations' and took symbolic position of the Secured assets on

06.01.2020 under Section 13(4) of the SARFAESI Act, 2002 and finally, to -7- Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

protect his financial interest, the Respondent No. 1 moved an application under

Section 7 of the Code before the Adjudicating Authority on 03.08.2021.

15. The Respondent No. 1 categorically refuted the allegations of the Appellant

regarding non compliance of RBI Circular on Prudential Norms dated 01.07.2015

as amended from time to time in declaring the accounts of the Corporate Debtor

being in default. The Respondent No. 1 clarified that the accounts of the

Corporate Debtor was declared as NPA on 30.04.2018 which was strictly in

accordance with the guidelines issued by the RBI on Prudential Norms dated

01.07.2015.

16. The Respondent No. 1 submitted that the Corporate Debtor never raised

any grievances regarding declaring accounts of the Corporate Debtor as NPA

rather requested for extension of permission for 'Holding on Operations' with

25% cut-back up to 23.04.2019 but the Corporate Debtor failed to hold operations

and last date of cut back was over on 30.06.2019 and therefore, the Respondent

No. 1 issued a Recall Notice on 03.07.2019.

17. The Respondent No. 1 amplified that the Corporate Debtor failed time and

again to regularise its account before the Respondent No. 1 declaring the account

of the Corporate Debtor as NPA as per the RBI Norms.

18. The Respondent No. 1 emphasised that his sanctioning or continuing to

allow the Corporate Debtor to operate the accounts under 'Holding on Operation' -8- Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

with cut-back, do not affect anyway the legal rights of the Respondent No. 1 to

recover the outstanding dues payable by the Corporate Debtor.

19. The Respondent No. 1 also clarified the correct position regarding wrong

averments made by the Appellant regarding wrongful charging penal interest and

interest retrospectively by the Respondent No. 1 and submitted that since the

accounts of the Corporate Debtor was declared as NPA on 30.04.2018, the

Respondent No. 1 was required to reverse the interest amount of last 90 days i.e.,

February 2018 to April 2018 and accordingly the interest amount was reversed

and debited to the ledger account of the Corporate Debtor. The Respondent No.

1 clarified that there was no case of charging penal interest as well as normal

interest retrospectively without considering the amount paid towards the recovery

as wrongful alleged by the Appellant.

20. The Respondent No. 1 also submitted that the calculation of interest are

performed electronically by centralised computer system of the Bank and there is

no human intervention therefore, the Appellant's allegation regarding erroneous

calculation of interest is misleading.

21. Concluding his arguments, the Respondent No. 1 submitted that the

Impugned Order has been passed by the Adjudicating Authority after due

consideration of all facts and the law and taking into account that there was clear

debt of more that Rs. 1 Crore which resulted into default and therefore the -9- Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

Adjudicating Authority through well reasoned speaking order, admitted his

application filed under Section 7 of the Code.

22. The main issue before this Appellate Tribunal is whether the Adjudicating

authority was right in admitting the application under Section 7 of the Code of the

Respondent No. 1 or the application should have been rejected on the ground that

there was no debt and default by the Corporate Debtor.

23. From the averments made before us, we have noted that the Corporate

Debtor has been availing the credit facilities from the Respondent No. 1 since

2008 and there has been instances of default by the Corporate Debtor to the extent

of Rs. 12,38,92,192/- for which the Respondent No. 1 filed the application under

Section 7 of the Code before the Adjudicating Authority. We have also noted that

for various credit facilities/ loans, the Corporate Debtor had executed several

security documents in favour of the Respondent No. 1 including various letters of

guarantee, hypothecation agreement of goods and debt, mortgaged deeds, etc.

This is admitted fact that the Corporate Debtor has been making withdrawals and

utilising credit facilities from time to time and also making payments to the

Respondent No. 1, however, was unable to pay its debt on time as per schedule.

24. We also note that the Appellant made averments before us that the

Corporate Debtor faced financial distress due to notice by Maharashtra Pollution

Control Board which stopped the processing plant of the Corporate Debtor. -10-

Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

However, the facts remains that due to financial reasons, the Corporate debtor

could not make timely payments and as a result his account were declared as NPA

by the Respondent No. 1 on 30.04.2018 in accordance with the Circular of RBI

on Prudential Norms dated 01.07.2015 as amended from time to time.

25. We also note the arguments of the Appellant about erroneous calculation

of interest by the Respondent No. 1 Bank. We note from the submissions of the

Respondent No. 1 that these calculations are made automatically by centralised

programming of the bank and no such error has been committed. We do not find

any logic in refuting the submission made by the Respondent No. 1 and therefore,

the plea of the Appellant regarding wrongful calculations of the interest and

charging penal interest is not found to be valid.

26. We also considered the contentions of the Appellant that after declaring the

account of the Corporate Debtor as NPA, by allowing the sanction or renewing

'Holding on Operation' with various cut-back portions of the Respondent No. 1

could not treated on part of any debt and default. We are of the opinion that

permission by the Respondent No. 1 such 'Holding on Operations' are being

conducted as normal baking practices and does not give any right to the Corporate

Debtor in denying the repayment of debt and default on such account have to be

factored into consideration by the Adjudicating Authority. We find from the -11- Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

Impugned Order that the Adjudicating Authority has gone into these aspects and

thereafter correctly came to the conclusion of debt and default.

27. We note that total outstanding principals amount was Rs. 8.77 Crores and

outstanding interest component were Rs. 3.61 Crores thus the total outstanding

dues payable by the Corporate Debtor to the Respondent No. 1 was Rs. 12.38

Crores, which is more than the threshold limit of Rs. 1 Crore as provided in the

Code for accepting the application filed under Section 7 of the Code.

28. We also note that the Corporate Debtor has indeed acknowledged and

confirmed the loans credit facilities availed by it from the Respondent No. 1.

29. After careful consideration of the averments made before us by both the

parties and after going through the record made available including the Impugned

Order, we do not find any error in the Impugned Order.

30. The Appeal is therefore found to be devoid of any merit and is hereby

dismissed.

Company Appeal (AT) (Insolvency) No. 233 of 2023

31. Mr. Rosario D' Souza, the Appellant herein, is the Suspended Board of the

Corporate Debtor and Mr. Mahesh Chand Gupta is the Respondent No. 1 who is

formerly the Resolution Professional of the Corporate Debtor, Union Bank of

India is the Respondent No. 2, Mrs. Lalita S Powle in consortium with Suyog

Agro & Poultry Products Pvt. Ltd. is the Respondent No. 3 who is the Successful -12- Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

Resolution Application (in short 'SRA') and Dolphin Marin Foods and

Processors (India) Pvt. Ltd. is the Corporate Debtor as the Respondent No. 4.

32. This Appeal has been filed by the Appellant challenging the approval of

the Resolution Plan approved by the Adjudicating Authority in I.A. No. 1736 of

2022 in C.P. No. 1352 of 2020.

33. We have already noted the facts in Company Appeal (AT) (Insolvency)

No. 111 of 2022 regarding the case including the history of the Corporate Debtor,

business of the Corporate Debtor, credit facilities availed by the Corporate Debtor

from the Respondent No. 2 i.e., Financial Creditors i.e, Union Bank of India and

the admission of the Corporate Debtor into the CIRP.

34. In this connection, we have already held the Impugned Order dated

03.08.2021 to be in order which was challenged by the same Appellant in C.P.

No. 1352/(IB)-MB-V/2020 discussed in earlier part of this judgment's preceding

paragraphs.

35. In the present Appeal, the issue is regarding challenge of approval of

Resolution Plan by the Appellant and we shall deal accordingly.

36. The Appellant submitted that subsequent to the CIRP of the Corporate

Debtor, the Resolution Professional prepared Information Memorandum on

04.10.2021 and published public commencement inviting EOI in Form G against

which five perspective Resolution Applicants submitted their bids. -13-

Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

37. The Appellant also stated that the Union Bank of India i.e. the Respondent

No. 2 was the Sole CoC Member and approved the revised resolution plan

submitted by the is the Respondent No. 3 i.e., Mrs. Lalita S Powle in consortium

with Suyog Agro & Poultry Products Pvt. Ltd. on 13.04.2022 with 100% voting

rights. According to the approved Resolution Plan, the Respondent No. 3

provided of Rs. 1 Crore to the Respondent No. 2 as "upfront interest payment

from the CIRP commencement date till April 2022" over and above its admitted

claim.

38. It is the case of the Appellant that this additional payment of Rs. 1 Crore to

the Respondent No. 2 is not conformity with any provision of the Code. The issue

before us, therefore, is primarily limited as to whether the Respondent No. 2 is

entitled to this additional amount of Rs. 1 Crore which is provided by the

Respondent No. 3 under Resolution Plan over and above admitted claim of the

Respondent No. 2.

39. We note that the Resolution Professional filed an in I.A. No. 1736 of 2022

in C.P. No. 1352 of 2020, under Section 31 of the Code for approval of the

Resolution Plan which was favourably considered by the CoC and approved by

the Adjudicating Authority.

40. It is the case of the Appellant that there is no provision in the Code for such

additional provision of interest over and above the admitted claims. The -14- Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

Appellant submitted that even during process of the CIRP, Rs. 55 Lakhs was

available in current account of the Corporate Debtor which could have been used

for making the payment of CIRP cost and statutory dues and remaining money

could have been used to pay to the Shareholders of the Corporate Debtor, whereas

in the present case after the Resolution Plan was approved, the Respondent No. 2

is getting more than its admitted claim and Shareholder are not getting anything

out of Resolution Plan which is not fair.

41. It is the case of the Appellant that the purpose of the Code is the Resolution

of the Corporate Debtor and not for recovery mechanism for the banks.

42. Per contra, the Contesting Respondent No. 2 i.e., Union Bank of India

denied of the averments made by the Appellant.

43. The Respondent No. 2 pointed out that the Appellant always tried to derail

the CIRP proceedings and did not render any cooperation to the Resolution

Professional. The Respondent No. 2 also submitted that there is no violation of

any law while making the payment of Rs. 1 Crore to the Respondent No. 2

towards the accrued interest for a period from 03.08.2021 (CIRP commencement

date) till 31.03.2022.

44. The Respondent No. 2 further submitted that the Financial Creditor is

entitled to recover, accrued interest on the claims amount post CIRP

commencement date till realisation of dues over and above the admitted claims. -15-

Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

45. The Respondent No. 2 also countered the wrongful averments made by the

Appellant regarding nil benefit of the existing Shareholders of the Corporate

Debtor and submitted that the Resolution Applicant has allotted preference shares

to the Promoters/ Shareholders of the Corporate Debtor in lieu of the equity

shares. Therefore, there has been no contravention of Section 13(2) of the Code

w.r.t. the approval of the Resolution Plan.

46. The Respondent No. 2 submitted that it is the settled law that the Corporate

Debtor has no right over the distribution of the amount in the Resolution Plan

which is proposed by the Resolution Applicant as per his commercial decision

and is required to be approved by the CoC based on their commercial wisdom.

The Adjudicating Authority finally approves the same, if it is in compliance with

all the provisions of the Code. The Respondent No. 2 stated that this same

happened in this case also.

47. The Respondent No. 2 stated that in the present case the Resolution

Applicant provided amount along with accrued interest which was approved by

the CoC with 100% voting right and was finally approved by the Adjudicating

Authority after satisfying itself regarding compliance of the provisions of the

Code and therefore, there is no error in approving the Resolution Plan.

48. The Respondent No. 2 reiterated that admitted claims of the Respondent

No. 2 already provided the accrued interest in the Resolution Plan accordingly -16- Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

Rs. 1 Crore was paid over and above its admitted claim, in the Resolution Plan by

the Respondent No. 3 in accordance with his own commercial decision and

nothing illegal can be attributed to such lawful decision.

49. The Respondent No. 2 concluded his arguments and stating that the

Resolution Plan was approved by the CoC with 100% voting right in, its

commercial wisdom and was correctly and legally approved by the Adjudicating

Authority through well reason speaking order.

50. The Respondent No. 3 i.e., Mrs. Lalita S Powle in consortium with Suyog

Agro & Poultry Products Pvt. Ltd. is the SRA of the Corporate Debtor, also

countered all averments of the Appellant and opposed the Appeal.

51. The Respondent No. 3 specifically countered the averments of the

Appellant regarding non consideration of the claims of the other Creditors i.e.,

other then the Financial Creditor and stated that the Form F of the Schedule of the

CIRP Regulation, 2016 need to be filed by any other Creditors with Resolution

Professional with proof and may also submit supplementary documents of

clarification in support of such claims. The Respondent No. 3 submitted that the

Appellant has not filed any such claim to the Resolution Professional in

accordance with the Regulation 9A of Insolvency Bankruptcy Bord of India

(CIRP) Regulations 2016.

-17-

Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

52. The Respondent No. 3 stated that the Resolution Plan submitted by her was

approved by the CoC with 100% voting rights which was also approved by the

Adjudicating Authority in I.A. No. 1736 of 2022 in C.P. No. 1352 of 2020 dated

19.01.2023.

53. The Respondent No. 3 also cited judgment delivered by the Hon'ble

Supreme Court of India in case of India Resurgence Arc Private Limited Vs.

Amit Metaliks Limited and Ors. decided on 13.05.2021 in support of their case.

54. It is submitted that in the above-mentioned case, the process of

consideration and approval of the resolution plan is essentially within the

commercial wisdom of the CoC. The scope of judicial review remains limited

under Section 30(2) of the Code, 2016 by which the court would examine that the

resolution plan does not contravene any statutory provisions and it conforms to

such other requirements as may be specified by the Board.

55. The Respondent No. 3 clarified that in the Resolution Plan submitted by

her, it was clearly mentioned that Secured Financial Creditor would be paid in

full and amount of Rs. 14,46,47,273.47/- was provided in the Resolution Plan.

56. The Respondent No. 3 submitted that since there was only one Secured

Financial Creditor i.e., the Respondent No. 2 with admitted claim of Rs.

13,46,47,273.47/-, therefore, in terms of the approved Resolution Plan for making

100% payment to the Respondent No. 2 included the accrued interest of Rs. 1 -18- Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

Crore to the Respondent No. 2 from the CIRP commencement date and the same

was within the Resolution Plan amount of Rs. 14,46,47,273.47/- for such Secured

Financial Creditor.

57. The Respondent No. 3 submitted in absence of any express violation of any

specific provision under the Code, the upfront interest in way of accrued interest

on admitted claims of the Financial Creditor post CIRP till the approval of the

CIRP, is appropriate and permissible and is not hit by provisions of Section 30(2)

of the Code.

58. The Respondent No. 3 also submitted that the Appellant has not provided

any supporting documents or evidence which proves any mala-fide intentions on

the part of the Respondent No. 3 in making such payments.

59. Thus, the main issue in this Appeal raised by the Appellant before us is

regarding payment of Rs. 1 Crore over and above the admitted claims of the

Respondent No. 2 which allegedly was done at the cost of the Shareholders of the

Corporate Debtor i.e., Promoters.

60. We have noted the averments and found in catena of the judgments the

Hon'ble Supreme Court of India had categorically stated limited scope of judicial

review over the commercial domain of the CoC.

61. The financial debt always has the time value and such time values continues

till the debts are paid.

-19-

Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

62. The Financial Creditor has submitted its claim in accordance with the

provisions of the Code and IBBI Regulations, 2016 at the relevant period of filing

of Form C but the intent of the Financial Creditor is always to realise full

outstanding dues along with interest on the original debt.

63. It is up to the Resolution Applicant who tries to revive the Corporate Debtor

as per his own scheme and provide the amount in the Resolution Plan which

should be sufficient to meet the CIRP costs, the payment to the Financial

Creditors, Operational Creditors, Statutory dues, workmen dues employees dues

and payment towards dues of the other creditors to the extent possible. Such

Resolution Plan is submitted for consideration of the CoC which applies its

commercial wisdom and send the same through the Resolution Professional for

approval of the Adjudicating Authority.

64. This Appellate Tribunal in the matter of Sabine Hospital and Research

Centre Pvt. Ltd. & Ors. [Company Appeal (AT) (CH) (Insolvency) No. 320 of

2022], decided on 19.10.2022, discussed issues regarding commercial wisdom of

the CoC. The relevant portion of the said judgment is reproduced as under :-

"23. ...This Appellate Tribunal is conscious of catena of Judgment of Hon'ble Supreme Court of India including K. Sashidhar Vs. Indian Overseas Bank, Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors. and Vallal RCK Vs. Siva Industries & Holding Ltd. where, the Apex Court has -20- Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

given clear verdict that `commercial wisdom' of the 'Committee of Creditors' is supreme and there should be minimum judicial intervention by NCLAT/NCLT.

24. Not only the legislature has been clear with primacy of creditors over the 'Adjudicating Authority' for `Approval' of `Plan', but even the Judiciary through several Judgments has stated that no 'Adjudicating Authority' or `Appellant Authority' i.e. `National Company Law Appellate Tribunal' ('NCLAT') has been empowered to question the decision makers of the `Plan'. Hence, the `NCLT'/`NCLAT' have to abide by the "commercial wisdom of the CoC" and do generally nothing else, except `Approve' or `Reject' the `Plan', after ensuring that the plan fulfills the criteria under section30(2) of the Code. This concept was set as a bed-rock in one of the landmark judgments of I & B Code, 2016 i.e. K. Sashidhar v. Indian Overseas Bank, wherein the Apex Court held that

"52. ......There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination oftheproposedresolutionplanandassessmentmad ebytheirteamofexperts. The opinion on the subject matter expressed by them after due deliberations in the CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective -21- Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

decision before the adjudicating authority. That is made non-justiciable."

64........There solution 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. At best, the Adjudicating Authority (NCLT) may cause an enquiry into the "approved"

resolution plan on limited grounds referred to in Section 30(2) read with Section 31(1) of the I&B Code. It cannot make any other inquiry nor is competent to issue any direction in relation to the exercise of commercial wisdom of the financial creditors be it for approving, rejecting or abstaining,

As the case may be. Even the inquiry before the Appellate Authority (NCLAT) is limited to the grounds under Section 61(3) of the I&B Code. It does not postulate jurisdiction to undertake scrutiny of the justness of the opinion expressed by financial creditors at the time of voting"

[emphasis supplied]

65. The relevant portion of the judgement passed by the Hon'ble Supreme

Court of India in the matter of India Resurgence Arc Private Limited (Supra) is

reproduced herein under :-

"... the process of judicial review cannot be stretched if all the above-mentioned requirements have been duly complied with and that dissenting financial creditor, expressing dissent -22- Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

over the value of security interest held by it, cannot seek to challenge an approved Resolution Plan. Lastly, it was held that Section 30 of the IBC, 2016 only amplified the considerations for the CoC while exercising its commercial wisdom so as to take an informed decision in regard to the viability and feasibility of the resolution plan, with fairness of distribution amongst similarly situated creditors; and that 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..."

(Emphasis Supplied)

66. We observe that original Resolution Plans were submitted by the

perspective Resolution Applicants i.e, Forstar Frozen Foods Pvt. Ltd., Mrs. Lalita

S Powle in consortium with Suyog Agro and Poultry Products Pvt. Ltd., Rizwan

Ice & Cold Storage, Mr. Neeraj Gupta Rakesh Fisheries, finally the revised

Resolution Plan of the Respondent No. 3 i.e., Mrs. Lalita S Powle in consortium

with Suyog Agro & Poultry Products Pvt. Ltd. was approved for which provided

for 100% claims of the Secured Financial Creditor. Thus, the SRA/ Respondent

No. 3 consciously and judicially considered appropriate, fair and equitable to

provide Rs. 1 Crore as accrued interest payment over and above admitted claims

to the Respondent No. 2.

-23-

Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

67. We note that the total amount provided under the approved Resolution Plan

was Rs. 25,39,57,466.47/- which provided for 100% CIRP costs, 100% payment

for the Operational Creditors, 100% payment to the workmen, employees, 100%

payment to Secured Financial Creditor along with upfront accrued interest

payment from CIRP commencement date till April 2022 of Rs. 1 Crore to Secured

Financial Creditor. The Resolution Plan also provided a provision of Rs. 2 Crores

towards redeemable preference shares to existing Promoters.

68. We would also like to take into consideration the relevant portion of the

Impugned Order regarding the aspect of payment with the Financial Creditor

including Rs. 1 Crore as accrued interest which reads as under :- -24-

Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

69. Thus, we note that the Resolution Plan has fairly distributed the amount

and taken care of almost all Stakeholders strictly in accordance with the

provisions of the Code.

70. We also find that the Adjudicating Authority has carefully analysed various

facts and laws while approving the Resolution Plan of the Respondent No. 3

including the aspect of payment of Rs. 1 Crore over and above the admitted claims

for the Respondent No. 2 as seen above.

-25-

Comp. App. (AT) (Ins.) No. 233 of 2023 and Comp. App. (AT) (Ins.) No. 111 of 2022

71. Thus, we do not find any error in the Impugned Order. The appeal is devoid

of any merit, therefore, it deserves to the dismissed.

72. In fine both the Appeals fail and stand dismissed. No Costs. Interlocutory

Application(s), if any are Closed.

[Justice M. Venugopal] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

Sim