Case Law Details
Pacific World Shipping PTE Ltd. Vs Dadi Impex Pvt. Ltd. (NCLAT)
The main grievance of the Appellant is that the Operational Creditors have been given only token 2% of their claims admitted while the Financial Creditors are given 100% of their claims.
The learned Counsel for the Bank has then relied on Regulation 37 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Process) Regulations 2016 (“Regulations” in short) to submit that for achieving maximization of values of assets, a Resolution Plan can provide reduction in the amount payable to the Creditors. It is claimed that there is no bar to reduce dues payable to Operational Creditors. Referring to the two Judgments in the matter of “K. Shashidhar & Indian Overseas Bank & Ors.” [Civil Appeal No. 10673 of 2018] and Judgment in the matter of “Essar Steel” (supra), passed by the Hon’ble Supreme Court of India it is argued that this Tribunal cannot enter into commercial wisdom of the COC and disturb the business decision taken by COC.
It can be seen that the Adjudicating Authority diverted Rs. 7.36/- Crores for the Operational Creditors as it found that the CIRP cost calculated by the RP was exorbitant and unfair. The Minutes of the Meetings of the 15th meeting dated 01.03.2019 shows that when the Resolution Plan was being discussed the Operational Creditors had objected to the 2% allocation for Operational Creditors and in the discussion were expecting allocation of 33% of their claim amount and the minutes show that the Resolution Applicants had expressed that it will not be possible for them to pay such a high amount. Thus, the issue was discussed in the COC meetings and it appears that the lead Bank, State Bank of India got modifications made in the Resolution Plan and ultimately approved the same. It is noticed that the MSME has proposed paying of 100% debts of the Financial Creditors not as upfront. The COC has accepted some restructuring keeping in view the outstanding debts and the liquidation value just to keep the Corporate Debtor a going concern. When the lead Bank has shown concern to accept adjustments to keep the MSME a going concern, it does not appear appropriate to us to push the same to liquidation. It would benefit nobody. Reading the Resolution Plan as a whole and considering the Minutes of the Meetings and the Impugned Order shows that in facts of the matter, the Resolution Plan as accepted by COC & approved by Adjudicating Authority should not be disturbed and it would not be appropriate to interfere in the commercial decision of COC which discussed the objections of the Appellant and still did not accept the same and Adjudicating Authority has also approved the same.
We are not interfering with the Impugned Order approving the Resolution Plan, except using following words for enforcing modification ‘b’ referred in paragraph 13 (Supra). We direct that Monitoring Committee will enforce the modifications made by the Adjudicating Authority & add the part of money diverted from the head of CIRP costs to the dues payable to Operational Creditors so as to proportionately increase the 2% payable to each Operational Creditor against their respective claims admitted & pay on priority in terms of Regulation 38 (1) of the Regulation (Note 5 – Page 46 of Resolution Plan r/w Section 8 at Page 53 – Diary No. 17213.)
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