Insolvency and Bankruptcy Code, 2016:
s. 31 – Corporate Insolvency Resolution Process (CIRP) – Resolution plan which provided upfront payment of Rs. 477 crores was approved by the Adjudicating Authority – Appellate Tribunal directed the successful resolution applicant to increase the upfront payment amount of Rs. 477 crores to Rs. 597.54 crores i.e. equal to average liquidation value – Appeal to Supreme Court – Held: There is no provision in the Code or the Regulations which requires that bid of a resolution applicant has to match liquidation value – The Adjudicating Authority has not committed breach of provisions u/s.
31 – Appellate Authority ought not to have interfered with the order of the Adjudicating Authority in directing the successful resolution application to enhance their fund inflow upfront.
s. 12-A – Applicability of – Held: The exit route prescribed u/s. 12-A is not applicable to resolution applicant – The procedure envisaged therein only applies to applicants invoking ss. 7, 9 and
10 of the Code.
Allowing the appeals, the Court
HELD: 1.1 No provision in the Insolvency and Bankruptcy Code, 2016 or Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 has been brought to the notice of the Court under which the bid of any Resolution Applicant has to match liquidation value arrived at in the manner provided in Clause 35 of the Regulations. [Para 26][1179 F-G]
1.2 The object behind prescribing such valuation process is to assist the Committee of Creditors (CoC) to take decision on a resolution plan properly. Once, a resolution plan is approved by the CoC, the statutory mandate on the Adjudicating Authority under Section 31(1) of the Code is to ascertain that a resolution plan meets the requirement of sub-sections (2) and (4) of Section
30 thereof. Thus, there is no breach of the said provisions in the order of the Adjudicating Authority in approving the resolution plan. [Para 27][1179 G-H; 1180 A-B]
1.3 The Appellate Authority has proceeded on equitable perception rather than commercial wisdom. On the face of it, release of assets at a value 20% below its liquidation value arrived at by the valuers seems inequitable. Here, the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. Such is the scheme of the Code. Section 31(1) of the Code lays down in clear terms that for final approval of a resolution plan, the Adjudicating Authority has to be satisfied that the requirement of sub-section (2) of Section 30 of the Code has been complied with. The proviso to Section 31(1) of the Code stipulates the other point on which an Adjudicating Authority has to be satisfied. That factor is that the resolution plan has provisions for its implementation. The Appellate Authority ought not to have interfered with the order of the Adjudicating Authority in directing the successful Resolution Applicant to enhance their fund inflow upfront. [Para 28][1180 B-F]
2. So far as the IA taken out by the MSL is concerned, they cannot withdraw from the proceeding in the manner they have approached this Court. The exit route prescribed in Section 12A is not applicable to a Resolution Applicant. The procedure envisaged in the said provision only applies to applicants invoking Sections 7, 9 and 10 of the Code. In the present case, having appealed against the NCLAT order with the object of implementing the resolution plan, MSL cannot be permitted to take a contrary stand in an application filed in connection with the very same appeal. Moreover, MSL has raised the funds upon mortgaging the assets of the corporate debtor only. In such circumstances, the Court is not engaging in the judicial exercise of determining the question as to whether after having been successful in a CIRP, an applicant altogether forfeits their right to withdraw from such process or not. [Para 29][1180 F-H]
3. The Resolution Professional is directed to take physical possession of the assets of the corporate debtor and hand it over to the resolution applicant within a period of four weeks. The police and administrative authorities are directed to render assistance to the Resolution Professional to enable him to carry out these directions. [Para 32][1181 E-F]
Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta (2019) SCC OnLine SC 1478 – relied on.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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