Rplan-Payment-Manner of distribution in Resolution Plan

Any clause in Resolution Plan which requires Creditors to take a hair-cut cannot be construed as being violative of Section 30(2) of the IBC | When Resolution Plan has been approved by CoC, irrespective of whether a single-member CoC or multi-member CoC, the decision becomes a collective business decision – Yogesh Kelkar and Ors. Vs. RP of Anudan Properties Pvt. Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that:

(i) When the resolution plan has been approved by the CoC with requisite majority and after holding due deliberations, the decision becomes a collective business decision.
(ii) A matter relating to approval of resolution plan which is indubitably distinct and unrelated to a scheme of compromise or arrangement contemplated under the Companies Act.
(iii) As regards approval of resolution plan is concerned, the IBC provides for 66% vote share and once this threshold is met, the decision of the CoC, irrespective of whether it is a single-member or multi-member, the decision of the CoC becomes sacrosanct and binding on all stakeholders.
(iv) The Adjudicating Authority cannot substitute its views with the commercial wisdom of the CoC in rejecting the resolution plan simply because the Appellants are aggrieved by the amounts proposed to be paid to them under the resolution.
(v) Merely because there is a reduction in the claim of any creditor does not make the resolution plan fall foul of law. Any clause in the resolution plan which requires creditors to take a hair-cut cannot be construed as being violative of Section 30(2) of the IBC.
(vi) Once the CoC has approved the resolution plan by requisite majority and the same is in consonance with applicable provisions of law and nothing has come to light to show that any material irregularities have been committed in the conduct of the CIRP proceedings, the same cannot be a subject matter of judicial review and modification.

Any clause in Resolution Plan which requires Creditors to take a hair-cut cannot be construed as being violative of Section 30(2) of the IBC | When Resolution Plan has been approved by CoC, irrespective of whether a single-member CoC or multi-member CoC, the decision becomes a collective business decision – Yogesh Kelkar and Ors. Vs. RP of Anudan Properties Pvt. Ltd. – NCLAT New Delhi Read Post »

In a real estate project, CoC in its commercial wisdom can take appropriate decision to satisfy the claim of class of creditors in a reasonable and fair manner and different treatment of two sets of Homebuyers in view of the allotment to Homebuyer with/without NOC of the mortgagee is justified – Sabari Realty Pvt. Ltd. Vs. Sivana Realty Pvt. Ltd. – NCLAT New Delhi

In this landmark judgment, Hon’ble NCLAT held that:
(i) Appellant, who is a dissatisfied minority, a single homebuyer has to sail alongwith the view of the majority in terms of the scheme of IBC.
(ii) Appellant as a class of homebuyers cannot be allowed to challenge the Resolution Plan which has received approval of class of homebuyers on the basis of majority of votes of homebuyers.
(iii) In a real estate project when the project spread into several units and several projects which are at different stages of construction the CoC in its commercial wisdom can take appropriate decision to satisfy the claim of class of creditors in a reasonable and fair manner.
(iv) Different treatment of two sets of homebuyers in view of the allotment to the homebuyer with/without NOC of the Mortgagee has rational for separate treatment
(v) Commercial wisdom of the Committee of Creditors, which has approved the Resolution Plan under which different treatment has been given to ‘Affected Homebuyers’ and ‘Unaffected Homebuyers’, cannot be faulted.

In a real estate project, CoC in its commercial wisdom can take appropriate decision to satisfy the claim of class of creditors in a reasonable and fair manner and different treatment of two sets of Homebuyers in view of the allotment to Homebuyer with/without NOC of the mortgagee is justified – Sabari Realty Pvt. Ltd. Vs. Sivana Realty Pvt. Ltd. – NCLAT New Delhi Read Post »

Both the distribution methods for Secured Creditors, one based on ‘value of security’ and the other based on ‘voting share’ are legal and not in violation of Section 30(2)(b) of IBC as along as the Committee of Creditors in its commercial wisdom approve one of the methods – Manav Investment & Trading Company Ltd. Vs. Sri Pratim Bayal, RP of Birla Tyres Ltd. – NCLT Kolkata Bench

In this case, NCLT Kolkata Bench held that:
(i) No provision in the Code or Regulations which provides the bid of any Resolution Applicant has to match liquidation value.
(ii) If the CoC chooses to approve the distribution based on value of security held as provided in Section 30(4) of the I&B Code, even that would be legal and cannot be faulted.
(iii) Both the distribution methods, one based on value of security and the other based on voting share is legal and not in violation of Section 30(2)(b) as along as the Committee of Creditors in its commercial wisdom approve one of the methods.
(iv) Whether excess cash if any and proceeds if any receivable on account of avoidance proceedings under PUFE provisions to be shared only to assenting shareholders.
(v) Whether interest amount would be clubbed with the principal amount to admit the Applicant’s claim in full in case of MSMED.
(vii) Approved the Resolution Plan offered jointly by Dalmia Bharat and Himadri Specialty Chemical.

Both the distribution methods for Secured Creditors, one based on ‘value of security’ and the other based on ‘voting share’ are legal and not in violation of Section 30(2)(b) of IBC as along as the Committee of Creditors in its commercial wisdom approve one of the methods – Manav Investment & Trading Company Ltd. Vs. Sri Pratim Bayal, RP of Birla Tyres Ltd. – NCLT Kolkata Bench Read Post »

Whether CoC is empowered to decide the distribution methodology where the Successful Resolution Applicant provided only Financial Package? Interpretation/meaning of the term ‘Business/Commercial Decision’ of CoC? – Devi Trading & Holding Pvt. Ltd. Vs. Mr. Ravi Shankar Devarakonda RP of Meenakshi Energy Ltd. – NCLAT Chennai

In this case, the Resolution Plan submitted by Successful Resolution Applicant provides that the CoC will decide the manner in which the total financial package would be distributed to Creditors.

In this important judgment, Hon’ble NCLAT interpretated the meaning of ‘commercial decision/business decision of CoC’ the term is also not defined in the Code, and held that:

(i) A deliberated ‘Business Decision’ of the CoC includes deliberations on the feasibility and viability, the financial and operational aspects of the Corporate Debtor, and therefore, the question of only ‘considering’ the proposal put forth by the Resolution Applicant cannot be viewed in a ‘rigid manner’.

(ii) The CoC is a pivotal decision-making body which decides all critical decision-making functions regarding Resolution Plans, Liquidation, Management etc., essential to the success of the CIRP.

(iii) Though the IBC does not have a specific provision that uses the term ‘Business Decision’ of the CoC, the Code contains several provisions that detail the powers and functions of the CoC, which encompass various decision-making responsibilities relating to the Insolvency Resolution Process, which definitely includes distribution methodology of the Resolution Plan.

(iv) The distribution/amount to be paid to different classes or sub-classes of Creditors in accordance with the provisions of the Code essentially lies within the domain of the commercial wisdom of the CoC.

(v) CoC in its commercial wisdom can propose, consider and decide on the distribution mechanism under the Resolution Plan, as long as it is within the domain of Section 30(2) of the Code.

Whether CoC is empowered to decide the distribution methodology where the Successful Resolution Applicant provided only Financial Package? Interpretation/meaning of the term ‘Business/Commercial Decision’ of CoC? – Devi Trading & Holding Pvt. Ltd. Vs. Mr. Ravi Shankar Devarakonda RP of Meenakshi Energy Ltd. – NCLAT Chennai Read Post »

There can be difference in payment to the secured and unsecured creditors in a Resolution Plan approved as per the commercial wisdom of the CoC – Ganesh Ores Pvt. Ltd. Vs. Vijaykumar V. Iyer & Anr. – NCLAT New Delhi

In this case, the Appellant submits that the distribution is unjust as unsecured creditors has been allocated less amount than secured creditors. NCLAT held that there can be difference in payment to the secured and unsecured creditors in the plan approved as per the commercial wisdom of the CoC. Appeal is dismissed.

There can be difference in payment to the secured and unsecured creditors in a Resolution Plan approved as per the commercial wisdom of the CoC – Ganesh Ores Pvt. Ltd. Vs. Vijaykumar V. Iyer & Anr. – NCLAT New Delhi Read Post »

Any increase in the claim amount of the Assenting Financial Creditors due to the invocation of a Bank Guarantee cannot be a ground for challenge by the Dissenting Financial Creditors on discrimination basis – Union Bank of India Vs. Ms. Vandana Garg (Erstwhile RP/Monitoring Committee Chairperson of Jyoti Structures Ltd.) – NCLT Mumbai Bench

The Adjudicating Authority observed that Section 30(2)(b) of the Code provides for the payment of debts of the Dissenting FCs 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 Section 53(1) of the Code in the event of liquidation. Any increase in the claim amount of the Assenting FCs due to the invocation of such BG cannot be a ground for challenge by the Dissenting FCs on grounds of discrimination. Further, the decision to include the invoked amount of the BG to the fund-based debts is a commercial decision of the CoC. Further, Resolution Plan once approved by the AA shall stand frozen and binding on all stakeholders including FCs

Any increase in the claim amount of the Assenting Financial Creditors due to the invocation of a Bank Guarantee cannot be a ground for challenge by the Dissenting Financial Creditors on discrimination basis – Union Bank of India Vs. Ms. Vandana Garg (Erstwhile RP/Monitoring Committee Chairperson of Jyoti Structures Ltd.) – NCLT Mumbai Bench Read Post »

IBC is subsequent law, with Section 238 giving overriding effect. When COC has the discretion as mentioned, Resolution Professional could not have relied on Section 48 of Transfer of Property Act, which is in context of contractual rights, to hold back the Resolution Plan from COC – Indian Renewable Energy Development Agency Ltd. Vs. Bhuvesh Maheshwari, Resolution Professional, Shree Kedarnath Sugarand Agro Products Ltd – NCLAT New Delhi

NCLAT holds that considering decision of the COC that the distribution would be in proportion to the share of voting rights, being commercial decision of the COC to see through the CIRP proceedings so as to reach a resolution, we would not like to interfere. We do not find that there is any substance in the submission that the Resolution Plan itself was hit by Transfer of Property Act which required the same not to be placed before COC. The law as existing under IBC, elaborately discussed by the Hon’ble Supreme Court in the matter of “Essar Steel”, brings out the discretions regarding distribution which the COC has and which it exercised. IBC is subsequent law, with Section 238 giving overriding effect. When COC has the discretion as mentioned, Resolution Professional could not have relied on Section 48 of Transfer of Property Act, which is in context of contractual rights, to hold back the Resolution Plan from COC. We thus do not find any substance in the Appeal. The Appeal deserves to be dismissed.(p13)

IBC is subsequent law, with Section 238 giving overriding effect. When COC has the discretion as mentioned, Resolution Professional could not have relied on Section 48 of Transfer of Property Act, which is in context of contractual rights, to hold back the Resolution Plan from COC – Indian Renewable Energy Development Agency Ltd. Vs. Bhuvesh Maheshwari, Resolution Professional, Shree Kedarnath Sugarand Agro Products Ltd – NCLAT New Delhi Read Post »

Landmark judgment of Supreme Court in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors. – Supreme Court

Landmark judgment of Supreme Court on various issues such Role of the Resolution Professional, Role of the Prospective Resolution
Applicant, Role of CoC in CIRP, Jurisdiction of the AA and NCLAT, Secured and Unsecured Creditors, The constitution of sub-committee by the CoC, Extinguishing of rights of creditors against guarantors, Claims, Utilisation of profits of the CD during CIRP, Constitutional validity of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, Constitutional validity of amendment in section 12 of the Code, Constitutional validity of amendment in section 30 of the Code., The resolution plan of ArcelorMittal.

Landmark judgment of Supreme Court in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors. – Supreme Court Read Post »

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