JAYPEE KENSINGTON BOULEVARD APARTMENTS WELFARE ASSOCIATION & ORS. v. NBCC (INDIA) LTD. & ORS.

74 A 39B. Meeting liquidation cost.-(1) While approving a resolution plan under sub-section (4) of section 30 or deciding to liquidate the corporate debtor under sub-section (2) of section 33, the committee may make a best estimate of the amount required to meet liquidation costs, in consultation with the resolution professional, in the event an order for liquidation is passed under B section 33. (2) The committee shall make a best estimate of the value of the liquid assets available to meet the liquidation costs, as estimated in sub-regulation (1). C (3) Where the estimated value of the liquid assets under sub- regulation (2) is less than the estimated liquidation costs under sub-regulation (1), the committee shall approve a plan providing for contribution for meeting the difference between the two. (4) The resolution professional shall submit the plan approved under sub-regulation (3) to the Adjudicating Authority while filing the approval or decision of the committee under section 30 or 33, as the case may be. Explanation.- For the purposes of this regulation, ‘liquidation costs’ shall have the same meaning as assigned to it in clause (ea) of sub-regulation (1) of regulation (2) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. 60.We would hasten to reiterate that in the foregoing extractions of the provisions, we have indicated the amendments/substitutions/ F insertions in the related footnotes to the extent relevant for the present purpose; and not necessarily all the changes as brought about from time to time. JIL’s CIRP: Chronicle of complications

61Copy pinpoint61. The factual and background aspects relating to this batch of matters make it evident that the insolvency resolution of the corporate debtor JIL carries with it vexed and strikingly intricate issues where twice over this Court had exercised its plenary powers under Article 142 of the Constitution of India to ensure complete justice in the cause 74 H This sub-regulation was inserted w.e.f. 25.07.2018.

JAYPEE KENSINGTON BOULEVARD APARTMENTS WELFARE 737 ASSOCIATION v. NBCC (INDIA) LTD. [DINESH MAHESHWARI, J.]

and yet, for a variety of reasons, the insolvency resolution is eluding the corporate debtor JIL; and even when the resolution plan is said to have been approved by a vast majority of 97.36% of the voting share of Committee of Creditors, several issues are still hovering over with an assortment of grievances of different stakeholders and role players. Even the very process taken up by the Committee of Creditors has been questioned apart from several questions over one or the other stipulation in the resolution plan. Further, several questions have spurt up on the order passed by the Adjudicating Authority, wherein some of the objections have been accepted and the plan has been modified while a few other objections have been rejected. Modification of the resolution plan by the Adjudicating Authority has given the resolution applicant and even IRP C several causes to be discontented with and at the same time, rejection of some of the objections has also been challenged by the objectors. This apart, some of the stakeholders, who did not raise objections before the Adjudicating Authority, have also raised their grievances against the plan. Put in a nutshell, this process of resolution is yet to pass through a maze D of hurdles. 61.1. Having regard to the peculiar circumstances of this case, we had withdrawn all the appeals pending before NCLAT to this Court and have heard the entire matter at sufficient length, while extending opportunity of making oral and written submissions to practically all the parties who wished to put their say on record. E

61.2. We have examined the submissions so made as also the material placed on record with reference to the law applicable and have given anxious consideration to the relevant submissions, which are reflected in the points for determination formulated hereinbefore. F

62Copy pinpoint62. Before proceeding further, we may also recapitulate that while entertaining these matters and transferring the cases pending before NCLAT to this Court by order dated 06.08.2020, we had directed that the IRP shall continue to manage the affairs of the subject company i.e., JIL. We may point out that the IRP has filed an affidavit dated 05.09.2020, stating the status of the corporate debtor and the major part of activities G relating to construction of flats and issuing Offers of Possession which, according to the IRP, has resulted in reduction of liability to the real estate allottees. The relevant paragraphs of this affidavit read as under:- “I state that as part of management of the affairs of the Corporate Debtor, the Deponent inter alia is continuing the H

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A construction of residential and commercial dwelling units forming part of the real estate projects of the Corporate Debtor. I further state during the corporate insolvency resolution process (hereinafter, “CIR Process”), the IRP continued construction of residential and commercial dwelling units and has issued Offer of Possessions (OOPs) for 7996 units based on occupancy B certificates received from the NOIDA Authority, from time to time. That out of these OOPs issued, sub-lease registration of 6,429 has been completed. The process of issuance of OOPs as started by the Deponent after the receipt of such occupancy certificates continues. C I further state that for approximately 2,688 allottees to whom OOPs providing for delay rebate was issued prior to 17.12.2019, either the Sub-Lease Deed is still to be executed or the Sub- Lease Deed is pending for registration before the Registrar of Assurances of Noida. D I state that the delivery of units and their transfer by way of sub-lease registration has resulted in a reduction of Financial Creditors’ (Real-Estate Allottees) liability by more than Rs. 2,250 Crores since commencement of the CIR Process in the Corporate Debtor.” E The objectives and scheme of IBC

63Copy pinpoint63. For dealing with the questions involved, worthwhile it would be to begin the discussion broadly on the scheme of the Code and assignments of some of the relevant role players in the corporate insolvency resolution process. F 63.1. As noticed from the Preamble, the Code came to be enacted to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner; the objectives, inter alia, being for maximisation of the value of assets of such persons and balance of interests of all the stakeholders. The Preamble reads as under: - “An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the

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A beneficiary of the resolution scheme—workers are paid, the creditors in the long run will be repaid in full, and shareholders/investors are able to maximise their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development of credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development of the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern. (See ArcelorMittal76 at para 83, fn 3)

28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests…..” (emphasis in bold supplied) F

64Copy pinpoint64. Keeping in view the objectives of the Code and observations of this Court, we may now take an overview of the scheme and structure of the relevant parts of the Code. Part I thereof contains the provisions regarding title, extent, commencement and application of the Code as also the definition and meaning of various expressions used in the Code. G Different provisions have come into force on different dates, as permissible under proviso to sub-section (3) of Section 1. Part II of the Code deals with insolvency resolution and liquidation for corporate persons. Chapter I of Part II makes provision for its applicability and also defines various expressions used in this Part (Sections 4 and 5). 76 H ArcelorMittal (India) (P) Ltd. v. Satish Kumar Gupta & Ors: (2019) 2 SCC 1.

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Chapter II of Part II contains the provisions for corporate insolvency resolution process in Sections 6 to 32 whereas Chapter III of this Part II contains the provisions for liquidation process in Sections 33 to 54 77. 64.1. A glance at Chapter II of Part II would inform that it contains the blueprint for the process of insolvency resolution in relation to the corporate debtors to whom this Part applies, while specifying the persons who could initiate the process; the manner and impact of such initiation; the roles and rights as also duties of key persons and entities to be involved in the resolution process like the resolution professional, the Committee of Creditors, the authorised representative of financial creditors and the resolution applicant; the matters essential for preparation of the resolution plan; the submission and approval of the resolution plan; and the appeal against approval of the resolution plan. Approval of resolution plan: Crucial steps and role players

65Copy pinpoint65. As noticed, as per the requirements of the Code read with the orders passed by this Court in the cases of Chitra Sharma and D Jaiprakash Associates Ltd. (supra), the insolvency resolution process in relation to the corporate debtor JIL has already passed through the stages of initiation, appointment of interim resolution professional, constitution and reconstitution of the Committee of Creditors, submission and resubmission of resolution plans, approval of the resolution plan of NBCC by the Committee of Creditors, submission of the said resolution plan to the Adjudicating Authority, and its approval by the Adjudicating Authority, albeit with some modifications. 65.1. The issues now raised before us basically relate to the contents of the resolution plan in question; its approval by the Committee of Creditors; and the order passed by the Adjudicating Authority in its approval with modifications. Thus, on the issues raised and points arising for determination, the focus in the present case is on the dispensation governing the process of approval of the resolution plan by CoC who, under Section 30(4) of the Code, considers and votes at the resolution plan after it has been verified by the resolution professional as being compliant with the statutory requirements specified in Section 30(2) of the Code; and on the approval of resolution plan by the Adjudicating Authority in terms of Section 31 of the Code. Having regard to the 77 Sections 4 to 32 came into force on 01.12.2016 whereas Section 33 to 54 came into force on 15.12.2016. H

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A issues involved, we may usefully take note of the relevant principles enunciated by this Court in relation to these crucial steps of CIRP.

66Copy pinpoint66. The relevant aspects relating to the steps in CIRP for approval of the resolution plan have come up for interpretation before this Court in at least three major decisions, in the cases of K. Sashidhar v. Indian B Overseas Bank and Ors.: (2019) 12 SCC 150 (decided on 05.02.2019), Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Ors.: (2020) 8 SCC 531 (decided on 15.11.2019), and Maharashtra Seamless Limited v. Padmanabhan Venkatesh and Ors.: (2020) 11 SCC 467 (decided on 22.01.2020). The contesting parties have also relied upon these decisions in support of their respective contentions. We shall be referring to these cases in a little detail in the later part of this judgment while determining Point A concerning the scope of the jurisdiction of the Adjudicating Authority in dealing with the resolution plan approved by the Committee of Creditors. At this juncture, we may only indicate the importance of a few essential role players in the process, as discernible from the relevant provisions of the Code and as exposited by this Court. 66.1. In the scheme of IBC, the script of corporate insolvency resolution process, to a large extent, revolves around the resolution professional. When CIRP gets initiated with admission of the application by the Adjudicating Authority as per Sections 7, 9 or 10, as the case may be, an interim resolution professional is appointed by the Adjudicating Authority in terms of Section 13(1)(c) and in the manner laid down in Section 16. Collating and admitting the claims of all creditors; appointing and convening the meetings of the Committee of Creditors; and running the business of the corporate debtor as a going concern during the intermediate period are the key tasks assigned to the interim resolution professional, as distinctly appears from Sections 15, 17, 18 and 20 of the Code. Further, in the scheme of IBC, the Committee of Creditors, in its first meeting to be held within seven days of its constitution, has to resolve to appoint the interim resolution professional as a resolution professional or to replace him by another resolution professional (vide Section 22 IBC). In terms of Section 23, the resolution professional is to conduct the entire CIRP and manage the operations of the corporate debtor during the period of CIRP. His duties and responsibilities extend to the conduct of all the meetings of the Committee of Creditors, giving notice of such meetings to the members of CoC, to the members of the suspended H

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Board of Directors and to the operational creditors, if amount of their A aggregate dues is not less than 10% of the debt. Akin to the duties of the interim resolution professional under Section 18 of the Code, the resolution professional is also required to preserve and protect the assets of the corporate debtor while continuing with the business operations and while undertaking the actions contemplated by Section 25(2) of the Code. B Significantly, the resolution professional is also required to prepare the information memorandum in terms of Section 29 of the Code; invite prospective resolution applicants; and present the resolution plans at the meeting of the Committee of Creditors, while duly examining them as required by Section 30 of the Code. These compliances are duly regulated by Regulations 35, 36, 36A and 36B of the CIRP Regulations. C 66.1.1. Taking note of the relevant provisions, this Court in the case of Essar Steel (supra) summed up the key role of the resolution professional in the following terms: - “48. The detailed provisions that have been stated hereinabove make it clear that the resolution professional is a person who is not only to manage the affairs of the corporate debtor as a going concern from the stage of admission of an application under Sections 7, 9 or 10 of the Code till a resolution plan is approved by the Adjudicating Authority, but is also a key person who is to appoint and convene meetings of the Committee of Creditors, so that they may decide upon resolution plans that are submitted in accordance with the detailed information given to resolution applicants by the resolution professional. Another very important function of the resolution professional is to collect, collate and finally admit claims of all creditors, which must then be examined for payment, in full or in part or not at all, by the resolution applicant and be finally negotiated and decided by the Committee of Creditors.” 66.2. Further, the role of prospective resolution applicant has also been explained in Essar Steel with reference, inter alia, to UNCITRAL Legislative Guide as also Regulations 37 and 38 of the CIRP Regulations on the contents of a resolution plan, while pointing out the rights of a G prospective resolution applicant to receive necessary information as also its duty to prepare the resolution plan providing for necessary measures for insolvency resolution of the corporate debtor with maximisation of the value of its assets. H

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A Committee of Creditors: the protagonist of CIRP

67Copy pinpoint67. While in their representative roles, the resolution professional and the resolution applicant are duty bound to ensure that the resolution plan is prepared in conformity with the requirements of the Code and the CIRP Regulations and is properly presented for consideration, the B central role in taking the decision as to whether a resolution plan be adopted or not, in the same form as presented to it or in a modified form; and as to whether the attempt for revival of corporate debtor be made or not, ultimately rests with the pivotal body, comprising of the financial creditors of the corporate debtor and termed as “Committee of Creditors”. As noticed from the provisions above-quoted, the final decision on a C resolution plan is taken by the Committee of Creditors; and, for approval, a resolution plan is required to be voted in favour by not less than 66% of the voting share of the financial creditors, as per Section 30(4) of the Code. It is also relevant to point out that though the resolution professional is to run the business of the corporate debtor as a going concern during the corporate insolvency resolution process but, as per Section 28(3) of the Code, he cannot take certain decisions relating to the management of the corporate debtor without prior approval of the Committee of Creditors by a vote of at least 66% of the voting shares78. 67.1. It is, therefore, evident that corporate insolvency resolution, with approval of the plan of resolution, is ultimately in the exclusive domain of the Committee of Creditors. Even during the resolution process, major decisions as regards management and finances of the corporate debtor are in the control of the Committee of Creditors. As per the composition delineated in Section 21 of the Code, the Committee of Creditors is comprised of all financial creditors of the corporate debtor; and the frame of Section 21 puts it beyond doubt that the voting share of each financial creditor is determined on the basis of financial debt owed to it. It is also clear from Section 30(4) as also Section 28(3) that the major decisions of approval are to be taken by the Committee of Creditors by a vote of at least 66% of the voting share of the financial creditors and not by a simple majority. The reasons and purpose for assigning such a unique and decisive role in corporate insolvency resolution to the Committee of Creditors and for that matter, to a substantial block of not 78 This percentage of minimum votes of CoC, for approval of resolution plan as also for prior approval of certain actions, was ‘seventy-five’ in the Code as originally enacted and was altered to ‘sixty-six’ by way of an amendment with effect from 06.06.2018.

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less than 2/3rd of voting share of the financial creditors, were extensively delineated in the report of the Bankruptcy Law Reforms Committee of November, 2015 while remarking on the essential theme that the ‘appropriate disposition of a defaulting firm is a business decision, and only the creditors should make it’. 67.2. In the case of K. Sashidhar (supra), while setting out the relevant extracts from the said Report, this Court exposited on the primacy of the commercial wisdom of the Committee of Creditors in the corporate insolvency resolution process in the following terms: - “52. As aforesaid, upon receipt of a “rejected” resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I&B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) E failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of the Sick Industrial Companies Act, 1985 or under other such enactments which has now been forsaken. Besides, the commercial wisdom of CoC has been given paramount status without any judicial intervention, for ensuring completion of the stated processes within the timelines prescribed by the I&B Code. 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 of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject- matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a H

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

B 53. In the report of the Bankruptcy Law Reforms Committee of November 2015, primacy has been given to CoC to evaluate the various possibilities and make a decision. It has been observed thus: “The key economic question in the bankruptcy process C When a firm (referred to as the corporate debtor in the draft law) defaults, the question arises about what is to be done. Many possibilities can be envisioned. One possibility is to take the firm into liquidation. Another possibility is to negotiate a debt restructuring, where the creditors accept D a reduction of debt on an NPV basis, and hope that the negotiated value exceeds the liquidation value. Another possibility is to sell the firm as a going concern and use the proceeds to pay creditors. Many hybrid structures of these broad categories can be envisioned.

E The Committee believes that there is only one correct forum for evaluating such possibilities, and making a decision: a creditors committee, where all financial creditors have votes in proportion to the magnitude of debt that they hold. In the past, laws in India have brought arms of the Government (legislature, executive or judiciary) into this F question. This has been strictly avoided by the Committee. The appropriate disposition of a defaulting firm is a business decision, and only the creditors should make it.” (emphasis in bold supplied; emphasis in italics is in original) 67.3. In Essar Steel (supra), a 3-Judge Bench of this Court G surveyed almost all the relevant provisions concerning corporate insolvency resolution process; and, as noticed above, explained the assignments of different role players in this process. In that context, this Court again explained the primacy endowed on the commercial wisdom of the Committee of Creditors and reasons therefor, with a further detailed reference to the aforesaid report of the Bankruptcy Law Reforms

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Committee of November, 2015. Apart from the passage from the said report that was noticed in K. Sashidhar (reproduced hereinabove), the Court noticed various other passages from this report in Essar Steel; and one part thereof, which further underscores the rationale for only financial creditors handling the process of resolution, could be usefully reproduced as under (part of paragraph 56 at p. 578 of SCC): - B “5.3.1. Steps at the start of the IRP ***

4. Creation of the creditors committee The creditors committee will have the power to decide the C final solution by majority vote in the negotiations. The majority vote requires more than or equal to 75 per cent of the creditors committee by weight of the total financial liabilities. The majority vote will also involve a cram down option on any dissenting creditors once the majority vote is obtained. … D The Committee deliberated on who should be on the creditors committee, given the power of the creditors committee to ultimately keep the entity as a going concern or liquidate it. The Committee reasoned that members of the creditors committee have to be creditors both with the capability to assess viability, as well as to be willing to modify terms of existing liabilities in negotiations. Typically, operational creditors are neither able to decide on matters regarding the insolvency of the entity, nor willing to take the risk of postponing payments for better future prospects for the entity. The Committee concluded that, for the process to be rapid and efficient, the Code will provide that the creditors committee should be restricted to only the financial creditors.” (emphasis in italics is in original) 67.4. In Essar Steel, the Court referred to the above-quoted and other passages from the judgement in K. Sashidhar (supra) and explained the decisive role of the commercial wisdom of the Committee of Creditors, inter alia, in the following passages: - “54. Since it is the commercial wisdom of the Committee of Creditors that is to decide on whether or not to rehabilitate the corporate debtor by means of acceptance of a particular H

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A resolution plan, the provisions of the Code and the Regulations outline in detail the importance of setting up of such Committee, and leaving decisions to be made by the requisite majority of the members of the aforesaid Committee in its discretion.…… B *** *** ***

59. Even though it is the resolution professional who is to run the business of the corporate debtor as a going concern during the intermediate period, yet, such resolution professional cannot take certain decisions relating to management of the corporate debtor without the prior approval of at least 66% of the votes of the Committee of Creditors…….

60. Thus, it is clear that since corporate resolution is ultimately in the hands of the majority vote of the Committee of Creditors, nothing can be done qua the management of the corporate debtor by the resolution professional which impacts major decisions to be made in the interregnum between the taking over of management of the corporate debtor and corporate resolution by the acceptance of a resolution plan by the requisite majority of the Committee of Creditors. Most importantly, under Section 30(4), the E Committee of Creditors may approve a resolution plan by a vote of not less than 66% of the voting share of the financial creditors, after considering its feasibility and viability, and various other requirements as may be prescribed by the Regulations. F *** *** ***

64. Thus, what is left to the majority decision of the Committee of Creditors is the “feasibility and viability” of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of G creditors. As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution applicant to the effect that such dues ought to be paid in full, so that the carrying on of the business of the corporate debtor does not become impossible for want of a H

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most basic and essential element for the carrying on of such business, namely, electricity. This may, in turn, be accepted by the resolution applicant with a consequent modification as to distribution of funds, payment being provided to a certain type of operational creditor, namely, the electricity distribution company, out of upfront payment offered by the proposed resolution applicant which may also result in a consequent reduction of amounts payable to other financial and operational creditors. What is important is that it is the commercial wisdom of this majority of creditors which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place.” C (emphasis in bold supplied) 67.5. In the case of Maharashtra Seamless Ltd. (supra), again, a 3-Judge Bench of this Court referred extensively to the enunciations in Essar Steel (supra) and reiterated the primacy assigned to the commercial wisdom of the Committee of Creditors in the matter of D corporate insolvency resolution.

68Copy pinpoint68. For what has been noticed hereinabove, it would not be an exaggeration in terms that, in corporate insolvency resolution process, the role of Committee of Creditors is akin to that of a protagonist, giving finality to the process (subject, of course, to approval by the Adjudicating E Authority), who takes the key decisions in its commercial wisdom and also takes the consequences thereof. As noticed, the process is aimed at bringing the corporate debtor back on its feet and it is acknowledged that appropriate disposition of a defaulting corporate debtor and the choice of solution, to keep the corporate debtor as a going concern or to liquidate F it, is to be made by the financial creditors, who could assess the viability and may take decisions in modification of the terms of the existing liabilities. In other words, the decision as to whether the corporate debtor be resurrected or not, by acceptance of a particular resolution plan, is essentially a business decision and hence, is left to the committee consisting of the financial creditors, that is, the Committee of Creditors G but, with the requirement that the resolution plan, for its approval, ought to muster not less than 66% votes of the voting share of the financial creditors.

69Copy pinpoint69. The significance of primacy of the Committee of Creditors in the process of corporate insolvency resolution unfolds itself when we H

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A examine the contours of the jurisdiction of Adjudicating Authority dealing with a resolution plan after the same has been voted at by the Committee of Creditors. We have formulated the questions relating to such contours as the first point for determination in view of the fact that most of the other questions involved in this batch of matters revolve around the order dated 03.03.2020 as passed by the Adjudicating Authority in approval of the resolution plan of NBCC with certain modifications. The decision on legality and validity of the order passed by the Adjudicating Authority on any particular objection or issue would largely depend on the question as to whether the Adjudicating Authority has acted within its jurisdiction or has overstepped its jurisdiction or has acted illegally or with material irregularity in exercise of its jurisdiction. In fact, contours of the jurisdiction of the Adjudicating Authority are also delineated by this Court in the aforesaid decisions, as shall be noticed infra.

70Copy pinpoint70. With the foregoing observations and while keeping the aforementioned enunciations in view, we may now take up the points arising for determination in this case. Point A Contours of the jurisdiction of Adjudicating Authority in dealing with a resolution plan

71Copy pinpoint71. As noticed, the resolution plan in relation to the corporate debtor JIL, as propounded by NBCC, has been approved by the Committee of Creditors with the votes of 97.36% of the voting share of financial creditors. However, the Adjudicating Authority (NCLT), while passing the impugned order dated 03.03.2020, has modified some of the terms of the resolution plan while also declining modification in relation F to some other terms of the resolution plan. In relation to either of the events, whether of modifying the terms of the plan or declining the prayer for modification, invariably the question pertaining to the jurisdiction of the Adjudicating Authority would arise for consideration.

72Copy pinpoint72. The contours of the powers and jurisdiction of Adjudicating G Authority dealing with a resolution plan approved by the Committee of Creditors have been clearly defined, delineated and described by this Court in the aforesaid decisions in K. Sashidhar, Essar Steel and Maharashtra Seamless Ltd. Appropriate it would be to take note of the principles emanating from these decisions with a brief reference to the relevant factual aspects of each of these cases. H

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73Copy pinpoint73. The first in this series of judgments relating to the process of approval of resolution plan in CIRP proceedings had been the case of K. Sashidhar (supra) where the matters in issue related to two different corporate debtors, Kamineni Steel & Power (India) (P) Ltd. (‘KSPIPL’) and Innovative Industries Ltd. (‘IIL’). 73.1. Shorn of unnecessary details, the relevant factual aspects of the case of KSPIPL had been that the said company had filed a petition under Section 10 of the Code seeking initiation of CIRP that was admitted on 10.02.2017 by NCLT, Hyderabad and IRP was appointed with directions to constitute CoC. Accordingly, CoC was constituted and there had been a few rounds of consideration of the matter by CoC, where different propositions were mooted for insolvency resolution. C Ultimately, on 30.10.2017, the voting share of consenting banks expressly approving the proposed resolution plan was 66.67% and the voting share of dissenting lender banks was 26.97%. Bank of Maharashtra, having 6.36% voting share, neither approved nor rejected the plan nor abstained from voting but conveyed that they remained ‘open to consider the resolution plan’. Be it noted that at the relevant time, the requirement for approval of the resolution plan, as per Section 30(4) of the Code, was that it ought to be approved by a vote of not less than 75% of voting share of the financial creditors. 73.1.1. The position as obtainable after the aforesaid voting was that the resolution plan fell short of receiving minimum 75% votes of the voting share of the financial creditors. IRP filed an affidavit of the outcome before the Adjudicating Authority (NCLT, Hyderabad) on 03.11.2017. However, the Managing Director of the corporate debtor submitted before the Adjudicating Authority that the majority ought to be counted without taking into account the voting share of the financial creditor who chose not to participate in the voting. It was the submission that with such exclusion, the percentage of voting share in approval of the plan would be 78.63% and, therefore, the plan could be taken as approved by the CoC. The NCLT, by its order dated 20.11.2017, allowed the petition so filed and approved the resolution plan with certain directions. The G three dissenting financial creditors, including the said Bank of Maharashtra, filed an appeal before NCLAT against the order of NCLT in approving the resolution plan despite the same having not received the approval of minimum 75% votes of the voting share of financial creditors. The Managing Director of the corporate debtor also filed an appeal H

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A challenging the observation made by NCLT regarding the corporate guarantee to be proceeded with. 73.2. The factual aspects relating to the other corporate debtor IIL had been that its lender bank filed insolvency application that was admitted by NCLT, Mumbai on 17.01.2017. In the CoC meeting relating to this corporate debtor, the financial creditors holding 66.57% voting share voted in favour of approving the proposed resolution plan, whereas dissenting financial creditors, having 33.43% voting share, voted against. Resultantly, the proposed plan was not approved for want of support of the requisite percentage of voting share. The resolution applicant filed an application seeking permission to submit a revised resolution plan and to invite fresh votes. The impending liquidation proceedings were objected to by the workers’ union too. The NCLT, however, rejected the applications and directed initiation of liquidation proceedings by its order dated 23.11.2017. An appeal was filed challenging the order so passed by the NCLT. D 73.3. The Appellate Authority (NCLAT) took up both the appeals relating to KSPIPL and IIL together and the same were disposed of by a common judgment dated 06.09.2018, wherein it was held that the statutory requirement of approval of resolution plan by vote of not less than 75% of the voting share of financial creditors, as laid down under E Section 30(4) of the Code, was mandatory and the plans in question were not approved by the requisite majority. Therefore, the appeals were dismissed. 73.4. The common judgment so passed by NCLAT was in challenge before this Court. During the pendency of appeals in this Court, F the aforesaid amendment to Section 30(4) was made and the requisite voting share for approval of resolution plan was reduced to 66% with effect from 06.06.2018. 73.5. After examining the long length of rival submissions, this Court proceeded to determine the questions as to whether the percentage G of voting share of the financial creditors specified in Section 30(4) of IBC was mandatory; as to whether the votes of the financial creditors who had abstained from voting were required to be ignored for the purpose of computing the required percentage of voting share; as to whether the amendments brought into force during the pendency of appeals were applicable to those cases; and as to whether it was open H

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to the Adjudicating Authority/Appellate Authority to reckon any factor other than those specified in Sections 30(2) or 61(3) of IBC, as the case may be, for rejection of the resolution plan? 73.6. This Court analysed the entire scheme of the Code, particularly concerning the resolution plan and its approval by the Committee of Creditors and then by the Adjudicating Authority; and held that the percentage of voting share was not directory and in the light of the provisions contained in the Code and the CIRP Regulations, the approving votes must fulfil the requisite percentage of voting share. The Court also held that the amendment to Section 30(4), prescribing new qualifying standard for approval of resolution plan was neither retrospective in operation nor was having retroactive effect. The Court C also rejected the suggestion for different percentage of voting share in the case of KSPIPL. These aspects are not much relevant for the present purpose. The aspects relevant are the enunciations in relation to the respective roles of the Committee of Creditors and the Adjudicating Authority. As already noticed, this Court explained in detail the primacy D given to the commercial wisdom of the Committee of Creditors and such commercial wisdom being made non-justiciable. Having said so, this Court also proceeded to define the strict limits of the jurisdiction of NCLT/NCLAT while dealing with the matter relating to approval of resolution plan in the following passages: - E “55. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan “as approved” by the requisite per cent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated requirements. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides: (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) does not contravene any of the provisions of the H

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A law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board. The Board referred to is established under Section 188 of the I&B Code. The powers and functions of the Board have been delineated in Section 196 of the I&B Code. None of the specified functions of the Board, directly or indirectly, pertain to regulating the manner in which the financial creditors ought to or ought not to exercise their commercial wisdom during the voting on the resolution plan under Section 30(4) of the I&B Code. The subjective satisfaction of the financial creditors at the time of voting is bound to be a mixed baggage of variety of factors. To wit, the feasibility and viability of the proposed resolution plan and including their perceptions about the general capability of the resolution applicant to translate the projected plan into a reality. The resolution applicant may have given projections backed by normative data but still in the opinion of the dissenting financial creditors, it would not be free from being speculative. These aspects are completely within the domain of the financial creditors who are called upon to vote on the resolution plan under Section 30(4) of the I&B Code.

56. For the same reason, even the jurisdiction of NCLAT being in continuation of the proceedings would be circumscribed in that regard and more particularly on account of Section 32 of the I&B Code, which envisages that any appeal from an order approving the resolution plan shall be in the manner and on the grounds specified in Section 61(3) of the I&B Code…….

57. On a bare reading of the provisions of the I&B Code, it would appear that the remedy of appeal under Section 61(1) is against an “order passed by the adjudicating authority (NCLT)”, which we will assume may also pertain to recording of the fact that the proposed resolution plan has been rejected or not approved by a vote of not less than 75% of voting share of the financial creditors. G Indubitably, the remedy of appeal including the width of jurisdiction of the appellate authority and the grounds of appeal, is a creature of statute. The provisions investing jurisdiction and authority in NCLT or NCLAT as noticed earlier, have not made the commercial decision exercised by CoC of not approving the resolution plan or rejecting the same, justiciable. This H

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position is reinforced from the limited grounds specified for instituting an appeal that too against an order “approving a resolution plan” under Section 31. First, that the approved resolution plan is in contravention of the provisions of any law for the time being in force. Second, there has been material irregularity in exercise of powers “by the resolution professional” during the corporate insolvency resolution period. Third, the debts owed to operational creditors have not been provided for in the resolution plan in the prescribed manner. Fourth, the insolvency resolution plan costs have not been provided for repayment in priority to all other debts. Fifth, the resolution plan does not comply with any other criteria specified by the Board. Significantly, the matters or grounds—be it under Section 30(2) or under Section 61(3) of the I&B Code—are regarding testing the validity of the “approved” resolution plan by CoC; and not for approving the resolution plan which has been disapproved or deemed to have been rejected by CoC in exercise of its business decision.

58. Indubitably, the inquiry in such an appeal would be limited to the power exercisable by the resolution professional under Section 30(2) of the I&B Code or, at best, by the adjudicating authority (NCLT) under Section 31(2) read with Section 31(1) of the I&B Code. No other inquiry would be permissible. Further, the jurisdiction bestowed upon the appellate authority (NCLAT) is also expressly circumscribed. It can examine the challenge only in relation to the grounds specified in Section 61(3) of the I&B Code, which is limited to matters “other than” enquiry into the autonomy or commercial wisdom of the dissenting financial creditors. Thus, F the prescribed authorities (NCLT/N CLAT ) have been endowed with limited jurisdiction as specified in the I&B Code and not to act as a court of equity or exercise plenary powers.” (emphasis in bold supplied) G

74Copy pinpoint74. A few months after the decision in the case of K. Sashidhar, the aforesaid provisions relating to the approval of resolution plan came up for further exposition before a 3-Judge Bench of this Court in the case of Essar Steel (supra). H

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A 74.1. On the background aspects, while omitting details, suffice it to notice for the present purpose that in the case of Essar Steel, the NCLT, Ahmedabad admitted the petition filed by a lender bank and after a few rounds of proceedings, the negotiated resolution plan of Arcelor Mittal (India) (P) Ltd. was approved by CoC by a majority of 92.24%. After several further proceedings, the Adjudicating Authority, by its order B dated 08.03.2019, disposed of the application to approve the resolution plan. However, in the appeal, the NCLAT modified the terms of the resolution plan and proceeded to redistribute the proceeds while, inter alia, holding that financial creditors and operational creditors deserve equal treatment under a resolution plan and while further holding that C CoC was not empowered to decide the manner in which distribution was to be made between one or other creditors, as there would be a conflict of interest between financial and operational creditors. The order so passed by the NCLAT was in challenge before this Court. 74.2. In the given backdrop, the roles of resolution professional, D resolution applicant and Committee of Creditors as also the jurisdiction of Adjudicating Authority and Appellate Authority came up for further and fuller exposition by this Court in Essar Steel (supra). We have already noticed the passages from this decision in regard to the scheme of IBC and the pivotal role of Committee of Creditors in the process of insolvency resolution of a corporate debtor. As regards the jurisdiction of Adjudicating E Authority and Appellate Authority in this process of insolvency resolution, in Essar Steel, this Court extensively referred to the principles laid down and explained in K. Sashidhar and thereafter held as under: - “Thus, it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of Section 30(2) of the Code, insofar as the Adjudicating Authority is concerned, and Section 32 read with Section 61(3) of the Code, insofar as the Appellate Tribunal is concerned, the parameters of such review having been clearly laid down in K. Sashidhar.” (emphasis in bold supplied) 74.3. In Essar Steel, it was however argued that sub-section (5) of Section 60 was not considered in K. Sashidhar and in that context, this Court examined the rights of operational creditors and the reasons set forth in the Insolvency Committee Report, 2018 and then, reiterated

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the primacy of Committee of Creditors while declaring the law in no uncertain terms that the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors; the limited judicial review available to it was to see that the Committee of Creditors had taken into account the requirement of keeping the corporate debtor as a going concern with maximisation of the value of assets and the interests of all stakeholders including operational creditors were taken care of. Significantly, in Essar Steel, this Court laid down that if the Adjudicating Authority would find that the requisite parameters had not been kept in view, it may send the resolution plan back to the Committee of Creditors to resubmit the same after satisfying the parameters. This Court laid down as under: - C “73. There is no doubt whatsoever that the ultimate discretion of what to pay and how much to pay each class or sub-class of creditors is with the Committee of Creditors, but, the decision of such Committee must reflect the fact that it has taken into account maximising the value of the assets of the corporate debtor and the fact that it has adequately balanced the interests of all stakeholders including operational creditors. This being the case, judicial review of the Adjudicating Authority that the resolution plan as approved by the Committee of Creditors has met the requirements referred to in Section 30(2) would include judicial review that is mentioned in Section 30(2)(e), as the provisions of the Code are also provisions of law for the time being in force. Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. If the Adjudicating G Authority finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the Committee of Creditors to re- submit such plan after satisfying the aforesaid parameters. The reasons given by the Committee of Creditors while approving H

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A a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal.” (emphasis in bold supplied) B 74.4. Thereafter, this Court dealt with the matter on merits in relation to certain claims and objections which need not be elaborated; suffice it would be to notice that this Court did not approve the impugned order of NCLAT and directed that CIRP of the corporate debtor shall take place in accordance with the amended resolution plan, as accepted C by the Committee of Creditors.

75Copy pinpoint75. Maharashtra Seamless Ltd. (supra) has been yet another decision in which interference with the decision of Committee of Creditors by NCLAT met with total disapproval of this Court. 75.1. In Maharashtra Seamless Ltd., the matter related to CIRP D concerning the corporate debtor United Seamless Tubular Private Ltd. where resolution plans of four different applicants were considered and CoC approved the resolution plan filed by the appellant Maharashtra Seamless Ltd. by a majority of 87.10% of the voting share of financial creditors. Certain differences arose with respect to the liquidation value of the assets of corporate debtor and the CoC took an average of the closest estimate. However, NCLAT ordered re-determination of liquidation value and accordingly, the revised value was arrived at. Thereafter, the CoC again approved the resolution plan of the appellant considering the revised liquidation value. Then, NCLT approved the resolution plan submitted by the appellant which included an upfront payment of INR 477 crores for infusion in the capital of the corporate debtor. A promoter of the corporate debtor and a financial creditor filed appeals before NCLAT contending that the resolution plan gave unfair advantage to the resolution applicant whereupon, the Appellate Authority proceeded to give a direction to the resolution applicant to enhance its fund inflow upfront. 75.2. In the aforesaid backdrop, the matter was considered in appeal filed by the resolution applicant. After having examined the relevant provisions of the Code and the CIRP Regulations as also the enunciations in Essar Steel (supra), this Court observed that there was no provision in the Code or Regulations under which the bid of any H

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resolution applicant has to match the liquidation value; that the object behind such valuation process was to assist the CoC to take a proper decision on the resolution plan; and once the plan was approved by CoC, the Adjudicating Authority was only to ascertain if the resolution plan was meeting the requirements of sub-sections (2) and (4) of Section 30. The Court observed that in the given case, the Appellate Authority had proceeded on equitable perceptions rather than commercial wisdom. Even while observing that release of assets at the value 20% below the liquidation value arrived by valuers appeared inequitable, this Court observed that the adjudicatory process ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. While disapproving interference by the Appellate Authority, this Court observed and held as under: - “27. Now the question arises as to whether, while approving a resolution plan, the adjudicating authority could reassess a resolution plan approved by the Committee of Creditors, even if the same otherwise complies with the requirement of Section 31 of the Code. D The learned counsel appearing for Indian Bank and the said erstwhile promoter of the corporate debtor have emphasised that there could be no reason to release property valued at Rs 597.54 crores to MSL for Rs 477 crores. The learned counsel appearing for these two respondents have sought to strengthen their submission on this point referring to the other resolution applicant E whose bid was for Rs 490 crores which is more than that of the appellant MSL.

28. No provision in the Code or Regulations has been brought to our notice under which the bid of any resolution applicant has to match liquidation value arrived at in the manner provided in F Regulation 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. This point has been dealt with in Essar Steel. We have quoted above the relevant passages from this judgment.

29. It appears to us that the object behind prescribing such valuation G process is to assist the 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. H

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A We, per se, do not find any breach of the said provisions in the order of the adjudicating authority in approving the resolution plan.

30. The appellate authority has, in our opinion, proceeded on equitable perception rather than commercial wisdom. On the face of it, release of assets at a value 20% below its B liquidation value arrived at by the valuers seems inequitable. Here, we feel 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 C 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 scope of interference by the adjudicating authority in limited judicial review has been laid down in Essar Steel, the relevant passage (para 54) of which we have reproduced in earlier part of this judgment. The case of MSL in their appeal is that they want to run the company and infuse more funds. In such circumstances, we do not think the appellate authority ought to have interfered with the order of the adjudicating authority in directing the successful resolution applicant to enhance their fund inflow upfront.” (emphasis in bold supplied)

76Copy pinpoint76. The expositions aforesaid make it clear that the decision as to whether corporate debtor should continue as a going concern or should be liquidated is essentially a business decision; and in the scheme of IBC, this decision has been left to the Committee of Creditors, comprising of the financial creditors. Differently put, in regard to the insolvency resolution, the decision as to whether a particular resolution plan is to be accepted or not is ultimately in the hands of the Committee of Creditors; and even in such a decision making process, a resolution plan cannot be taken as approved if the same is not approved by votes of at least 66% of the voting share of financial creditors. Thus, broadly put, a resolution plan is approved only when the collective commercial wisdom of the financial creditors, having at least 2/3rd majority of voting share in the H Committee of Creditors, stands in its favour.

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77Copy pinpoint77. In the scheme of IBC, where approval of resolution plan is A exclusively in the domain of the commercial wisdom of CoC, the scope of judicial review is correspondingly circumscribed by the provisions contained in Section 31 as regards approval of the Adjudicating Authority and in Section 32 read with Section 61 as regards the scope of appeal against the order of approval. B 77.1. Such limitations on judicial review have been duly underscored by this Court in the decisions above-referred, where it has been laid down in explicit terms that the powers of the Adjudicating Authority dealing with the resolution plan do not extend to examine the correctness or otherwise of the commercial wisdom exercised by the CoC. The limited judicial review available to Adjudicating Authority lies C within the four corners of Section 30(2) of the Code, which would essentially be to examine that the resolution plan does not contravene any of the provisions of law for the time being in force, it conforms to such other requirements as may be specified by the Board, and it provides for: (a) payment of insolvency resolution process costs in priority; (b) D payment of debts of operational creditors; (c) payment of debts of dissenting financial creditors; (d) for management of affairs of corporate debtor after approval of the resolution plan; and (e) implementation and supervision of the resolution plan. 77.2. The limitations on the scope of judicial review are reinforced by the limited ground provided for an appeal against an order approving a resolution plan, namely, if the plan is in contravention of the provisions of any law for the time being in force; or there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period; or the debts owed to the operational creditors have not been provided for; or the insolvency resolution process costs have not been provided for repayment in priority; or the resolution plan does not comply with any other criteria specified by the Board. 77.3. The material propositions laid down in Essar Steel (supra) on the extent of judicial review are that the Adjudicating Authority would see if CoC has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors have been taken care of. And, if the Adjudicating Authority would find on a given H

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A set of facts that the requisite parameters have not been kept in view, it may send the resolution plan back to the Committee of Creditors for re- submission after satisfying the parameters. Then, as observed in Maharashtra Seamless Ltd. (supra), there is no scope for the Adjudicating Authority or the Appellate Authority to proceed on any equitable perception or to assess the resolution plan on the basis of quantitative analysis. Thus, the treatment of any debt or asset is essentially required to be left to the collective commercial wisdom of the financial creditors. 77.4. During the course of submissions, one of the parties (YEIDA), seeking to support modification of the resolution plan concerning some of the terms and stipulations, has referred to a decision by a learned Single Judge of the Allahabad High Court in the case of Pradumna Kumar Jain v. U.P. Secondary Education Service Commission, Allahabad and Ors.: (1997) 30 ALR 339 to submit that the power to approve or disapprove includes the power to modify; and it has been strongly argued that the power to modify is inherent in the power of approval in terms of Section 31 of the Code. It is noticed that the questions involved in the cited decision related to the powers under Regulation 8 of the U.P. Secondary Education Services Commission (Procedure for Approval of Punishment) Regulations, 1985, which provided that ‘the Commission shall after due consideration approve or disapprove the punishment proposed or may issue any other directions deemed fit in the case’. While interpreting the said provision, where the Commission was to act as a superior authority and the provision itself postulated that the said authority could ‘issue any other directions deemed fit’, the Court held that the expressions indicated the existence of the power to modify. We are afraid, the principles stated in the said decision or in other decisions of like nature cannot be imported to read the power to modify the resolution plan into Section 31 of the Code. 77.5. In fact, the power of approval conferred on the Adjudicating Authority in Section 31 of the Code is required to be visualised with reference to the overall scheme of the Code and the purposes for which such powers have been conferred. The power of judicial review in Section 31 is not akin to the power of a superior authority to deal with the merits of the decision of any inferior or subordinate authority. As succinctly stated in Essar Steel (supra), the limited judicial review available is to see that the Committee of Creditors has adhered to the specified parameters, of keeping the corporate debtor going as a going

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concern during the resolution process; maximisation of the value of its assets; and taking care of the interests of all stakeholders. This Court has, in no uncertain terms, held that if the specified parameters have not been kept in view, the Adjudicating Authority may send a resolution plan back to the Committee of Creditors to re-submit such plan after satisfying the parameters. The reasons given by the Committee of Creditors are, thus, looked at by the Adjudicating Authority only from this point of view. It is not a jurisdiction to decide as to what ought to be the terms of the resolution plan. That jurisdiction, in the scheme of IBC, is conferred on the Committee of Creditors alone, who has to take such a decision in its commercial wisdom, while keeping in view the applicable provisions and the specified parameters; of course, its decision of approval has to be by the requisite majority of minimum 66% of the voting share. 77.6. In yet another set of submissions, on behalf of the erstwhile director of JIL and JAL, it has been repeatedly asserted that the Committee of Creditors had failed in its statutory duty to ensure maximisation of JIL’s assets and protecting the interests of all stakeholders; and it is submitted that the Committee of Creditors failed to visualise that there was no justification for NBCC seeking to acquire JIL on a meagre amount of INR 120 crores despite the net worth of JIL being much higher. 77.6.1. The assessment about maximisation of the value of assets, in the scheme of the Code, would always be subjective in nature and the question, as to whether a particular resolution plan and its propositions are leading to maximisation of value of assets or not, would be the matter of enquiry and assessment of the Committee of Creditors alone. When the Committee of Creditors takes the decision in its commercial wisdom and by the requisite majority; and there is no valid reason in law to question the decision so taken by the Committee of Creditors, the adjudicatory process, whether by the Adjudicating Authority or the Appellate Authority, cannot enter into any quantitative analysis to adjudge as to whether the prescription of the resolution plan results in maximisation of the value of assets or not. The generalised submissions and objections made in relation to this aspect of value maximisation do not, by themselves, make out a case of interference in the decision taken by the Committee of Creditors in its commercial wisdom.

78Copy pinpoint78. To put in a nutshell, the Adjudicating Authority has limited jurisdiction in the matter of approval of a resolution plan, which is well- H

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A defined and circumscribed by Sections 30(2) and 31 of the Code read with the parameters delineated by this Court in the decisions above- referred. The jurisdiction of the Appellate Authority is also circumscribed by the limited grounds of appeal provided in Section 61 of the Code. In the adjudicatory process concerning a resolution plan under IBC, there is no scope for interference with the commercial aspects of the decision B of the CoC; and there is no scope for substituting any commercial term of the resolution plan approved by the CoC. Within its limited jurisdiction, if the Adjudicating Authority or the Appellate Authority, as the case may be, would find any shortcoming in the resolution plan vis-à-vis the specified parameters, it would only send the resolution plan back to the Committee C of Creditors, for re-submission after satisfying the parameters delineated by Code and exposited by this Court.

79Copy pinpoint79. The other points arising in this batch of matters, particularly with reference to the findings and directions by the Adjudicating Authority in the impugned order dated 03.03.2020 and with reference to the other D related aspects, may now be examined within the framework of the parameters aforesaid and the principles laid down by this Court. Point B Simultaneous voting over two resolution plans by CoC

80Copy pinpoint80. While dealing with a plethora of disputes and objections concerning the resolution plan of NBCC and the process of its approval, we deem it appropriate to deal, first of all, with a part of objections that approval of the resolution plan of NBCC by CoC is vitiated because of the fact that two resolution plans, of Suraksha Realty and NBCC, were put to simultaneous voting whereas such simultaneous voting on the F resolution plans was not permissible. If this part of objections is accepted, perhaps, nothing more would require consideration.

81Copy pinpoint81. It has been argued on behalf of the objectors that at the time of voting by CoC in the present matter, there was no provision in the Code permitting the voting by CoC at more than one resolution plan at a G time and in the very scheme of the Code and the requirements of due consideration, it was necessary that one plan was considered at one point of time. The process of simultaneous voting in the present case has vitiated the decision of CoC. It has also been argued that Regulation 39(3B), permitting the CoC to put more than one resolution plan to vote, was inserted to CIRP Regulations only with effect from 07.08.2020 and H

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being prospective in operation, would not apply to the present process. A Per contra, it is contended by the parties standing with the approval of the plan in question that there had not been any prohibition or restriction in the Code for putting more than one resolution plan to vote at the same time. On behalf of IRP, it has also been contended that in terms of sub- section (3) of Section 30, he was required to present the CoC such resolution plans, which were conforming to the conditions referred in sub-section (2); and as per sub-section (4) of Section 30, the CoC ‘may approve a resolution plan’. It is, therefore, submitted that in the present process, both the plans were rightly placed before the CoC; and the CoC rightly voted on such plans and approved one of them. It is submitted that the amendment brought about with effect from 07.08.2020 is clarificatory in nature and only gives out the methodology for putting more than one resolution plan to vote.

82Copy pinpoint82. Having examined the objection against simultaneous voting with reference to the material on record and the law applicable, we are unable to find any substance whatsoever in this objection. D

83Copy pinpoint83. It is noteworthy that there has not been any prohibition in the scheme of IBC and CIRP Regulations that CoC could not simultaneously consider and vote upon more than one resolution plan at the same time for electing one of the available options. It has rightly been contended on behalf of IRP that in terms of sub-section (3) of Section 30 of the Code, E he was obliged to place both the plans before CoC when they were found conforming to the conditions referred to in sub-section (2) of Section 30; and thereafter, it was for the CoC to consider the plans and to vote upon the same. Of course, the CoC could have approved only one resolution plan; and that has precisely been done in the present case. There does not appear any flaw or fault in the process adopted in the present case as regards voting over the resolution plans by the CoC. 83.1. Moreover, as noticed, the legislature itself has made the position clear by way of a later amendment with effect from 07.08.2020, by specifically making stipulations for simultaneous voting over more than one resolution plan by the CoC, particularly with amendment of sub-regulation (3) of Regulation 39 of CIRP Regulations and insertion of sub-regulations (3A) and (3B) thereto. 79 Such an amendment could only be visualised as clarificatory in nature; and, in any case, even before 79 vide second footnote to sub-regulation (3) of Regulation 39 of CIRP Regulations, ibid. H

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A amendment, there had not been any prohibition in putting two or more conforming resolution plans to vote simultaneously.

84Copy pinpoint84. It is also noticeable that when the matter was considered in the second round of litigation and this Court issued various necessary directions in the order dated 06.11.2019 in exercise of its plenary powers under Article 142 of the Constitution of India, it was specifically provided that the two applicants viz., Suraksha Realty and NBCC would be invited to submit revised plans for consideration. The minutes of CoC meeting have also been placed before us by IRP and it appears that this very aspect was duly deliberated in the meeting where IDBI Bank proposed for simultaneous voting over the two plans and this suggestion was accepted by almost all CoC members except ICICI Bank Ltd. and Axis Bank Ltd., who were having together the voting share of only about 2.3%. Due deliberations in this regard, in the meeting of Committee of Creditors dated 07.12.2019, read as under: - “The IRP enquired from CoC about the Resolution Plan that need to be put for voting by CoC. IDBI Bank on behalf of lenders proposed that given the unique nature of this case both plans should be put to vote as this will provide equal opportunity for individual members of COC to select their preferred Resolution Plan. The main reason for proposing joint vote on both plans was - E -Specific directions of Hon’ble Supreme Court under its special powers (Article 142) where COC/IRP was required to consider Resolution Plans from only NBCC and Suraksha in accordance with law and regulation. -Ideally it would like to propose the H1 Resolution Plan to vote, but since the total overall evaluation scores were very close and there is no consensus amongst members of COC on the evaluation methodology used. -Giving equal opportunity to all members of COC (including Home buyers and FD holders) to approve the plan most preferred by them. -Given the unique and complex nature of this Resolution process. All CoC members except ICICI Bank Limited, Axis Bank Limited (together having vote share of approx. 2.3%) agreed with H

JAYPEE KENSINGTON BOULEVARD APARTMENTS WELFARE 767 ASSOCIATION v. NBCC (INDIA) LTD. [DINESH MAHESHWARI, J.]

the suggestion made by IDBI Bank and decided to put both the A Resolution Plans simultaneously to vote. Accordingly, it was decided that both the Resolution Plans will be put to vote simultaneously and in the event both secure the minimum threshold of 66% votes, the plan securing overall higher vote will be considered as the preferred resolution plan. The IRP agreed to follow the COC’s instructions and organise the voting. It was pointed out by CAM in the CoC meeting that since both the Resolution Plans are being put to vote, we might end up in a situation where both the Resolution Plans will receive more than 66% votes, thus creating doubts as to whether both resolution applicants are equally entitled to have their plans submitted to the adjudicating authority for approval. Therefore, to avoid such a situation, the CoC members should be allowed to vote on either of the two Resolution Plans only. The Authorised Representative of the Home Buyers informed that almost all home buyer does not want liquidation of the corporate debtor. In case there is a spilt of vote between Home Buyers and other members of COC, there are more chances of no resolution plan getting approved and situation of liquidation may arise. Majority of home buyers who have written to AR of Home Buyers have indicated NBCC as its preferred choice. Home Buyers are also fully aware that without support of other members of COC, none of the resolution plan will get approved by COC. Para 21(i) of Hon’ble Supreme Court judgment dated 06.11.2019 also directed to “place the revised plan(s) before the CoC, if so required, after negotiations and submit report to the adjudicating authority NCLT within such time.” F To avoid scenario of liquidation or non-compliance of Hon’ble Supreme Court direction, AR of Home Buyers insisted that both the Resolution Plans should be put to vote and the CoC members should be allowed to vote on both the Resolution Plans and in the event that both the Resolution Plans receive more than G 66% votes, then the successful Resolution Applicant will be decided basis (sic) the Resolution Plan that has received higher number of votes.”

85Copy pinpoint85. In view of the above, we are unable to find any fault in simultaneous consideration and voting over two resolution plans by CoC H

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A for electing one of them; and we would have no hesitation in giving our imprimatur to such a process. The baseless objection in this regard has rightly been rejected by the Adjudicating Authority. Point C Matters related with the land providing agency YEIDA B

86Copy pinpoint86. We may now enter into the first major point for determination in this batch of matters; and that relates to the stipulations in the resolution plan concerning the land providing agency YEIDA. The frontal aspect of this issue is about the provision made in the resolution plan for meeting with the contingent liability of additional compensation for land acquisition. C The other aspect pertains to the directions by the Adjudicating Authority for execution of tripartite agreement amongst YEIDA, the corporate debtor JIL and the SPVs proposed to be set up in terms of the resolution plan. An ancillary aspect relates to certain reliefs and concessions sought for by the resolution applicant.

87Copy pinpoint87. As noticed, the rights under the land in question were provided to the original concessionaire under the Concession Agreement dated 07.02.2003 and later on, JIL was recognised as the concessionaire. In the broad framework, one chunk of land was provided to the concessionaire for constructing the Expressway and its allied facilities, E for which the CA provided, inter alia, as under: - “4.1 Land for construction of Expressway shall be provided by TEA to the Concessionaire, generally in a width of 100 meters along the alignment of the Expressway with additional land width, where required, for developing other facilities like Toll Plazas etc., F on following terms & conditions. *** *** *** b. The land shall be leased for a period starting from the date of transfer till the end of the Concession Period through such lease deed as may be mutually agreed between the Parties. G *** *** *** d. The sole premium of the transferred land shall be equivalent to the acquisition cost plus a lease rent of Rs. 100.00 (Rupees one hundred) only per hectare per year. The acquisition cost shall be the actual compensation paid to the land owners without any H

JAYPEE KENSINGTON BOULEVARD APARTMENTS WELFARE 769 ASSOCIATION v. NBCC (INDIA) LTD. [DINESH MAHESHWARI, J.]

additional charge and shall be payable by the Concessionaire as A per applicable rules. The lease rent shall be payable annually.” Another chunk of land was provided to the concessionaire for commercial exploitation, for which the CA provided, inter alia, as under:- “4.3 Land for development shall be transferred by TEA to the Concessionaire free from all Encumbrances on following terms B & conditions: a. It shall be on lease for a period of 90 (ninety) years from the date of transfer through such lease deeds as may be mutually agreed between the Parties. *** *** *** C c. The sole premium of the transferred land shall be equivalent to the acquisition cost plus a lease rent of Rs. 100.00 (Rupees one hundred) only per hectare per year. The acquisition cost shall be the actual compensation paid to the land owners without any additional charge and shall be payable by the Concessionaire as per applicable rules. The rent shall be payable annually for 90 (Ninety) years from the date of transfer of land. d. The Concessionaire shall be entitled to further sub-lease developed / undeveloped land to sub-lessees / end-users in its sole discretion without any further consent or approval or payment of any charges / fee etc. to TEA or any other relevant authority. e. After sub-lease of part of the land by the Concessionaire, the same can be transferred / assigned without requiring any consent or approval of or payment of any additional charges, transfer fee, premiums etc. to TEA or to any other relevant authority and/or there can be subsequent multiple sub-leases of the land in smaller parts. The lease rent of the respective sub-leased portion of land shall be paid by the sub-lessees / transferees to TEA directly on pro-rata basis @ Rs. 100.00 (Rupees one hundred) per hectare per year. The Concessionaire shall be required to pay lease rent to TEA for the portion of land remaining in its possession after sub-lease, on pro-rata basis at the aforesaid prescribed rate. Total lease rent paid by the Concessionaire and various sub-lessees / transferees shall be Rs. 100.00 (Rupees one hundred) per hectare per year. *** *** *** H

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A g. The Concessionaire may make a request to TEA to execute the lease deed directly in favour of Concessionaire’s subsidiaries, assigns, transferees etc. in respect of any portion of the land on the same terms and conditions as mentioned above, and on receipt of such request TEA shall execute the lease deed in respect of such portion of land directly in favour of such subsidiaries, assigns B and transferees. h. In case TEA and the Concessionaire consider it appropriate, tripartite agreement for sub-lease deed may be executed between the TEA, Concessionaire and the Sub-Lessee. C 4.4 The Concessionaire shall be free to decide the purpose for which transferred land will be used i.e. for commercial, amusement, industrial, institutional, residential etc. and also for the area of land to be allocated for different uses. The Concessionaire shall also be free to decide whether the sub-leased land shall be in the form of plots or constructed properties. No D permission of TEA shall be required either for the land use or for transfer of leasehold / sub-leasing / multiple sub-leasing of land. The land use shall however be as per applicable Master Plan and other regulations.” Another stipulation, in Clause 18.1 of the CA, which has its own relevance to the present case, may also be taken note of as under:- “TRANSFER OF CONCESSIONAIRE’S RIGHTS AND OBLIGATIONS TO SPV 18.1 In case the Concessionaire and the TEA consider it necessary to transfer Concessionaire’s rights and obligations under this Agreement to a SPV, the Concessionaire shall, in a reasonable time, transfer all its rights and obligations under this Agreement to a SPV for which documents as may be required shall be executed between the Concessionaire, the TEA and the SPV without additional cost to the Concessionaire or the SPV.” 87.1. It is not in dispute that under the said Concession Agreement, JIL got the rights: (a) to construct and operate the Expressway and collect toll for a period of 36 years; and (b) to use the land along the Expressway for commercial exploitation for a period of 90 years. H

JAYPEE KENSINGTON BOULEVARD APARTMENTS WELFARE 771 ASSOCIATION v. NBCC (INDIA) LTD. [DINESH MAHESHWARI, J.]

88Copy pinpoint88. The issue pertaining to additional amount of land acquisition compensation cropped up in the wake of a decision of the Full Bench of Allahabad High Court dated 21.10.2011 in the case of Gajraj and Ors. v. State of U.P. and Ors.: 2011 SCC OnLine All 1711, wherein the High Court ruled in favour of payment of additional compensation to the land owners involved therein. The said decision in Gajraj was upheld by this Court in the case of Savitri Devi v. State of U.P. & Ors.: (2015) 7 SCC 21. In sequel, a spate of litigation in Allahabad High Court concerning other parcels of land came up and several other land owners, including whose land stood acquired for the project in question, demanded additional compensation. It is stated by YEIDA that looking to such litigations and agitations, the Government of U.P. proceeded to set up a C committee called the ‘Chaudhary Committee’; and the said committee recommended for grant of additional compensation (to the extent of 64.7%) to the land owners whose land had been acquired. While accepting these recommendations, the Government of U.P. proceeded to issue G.O. dated 29.08.2014, directing YEIDA to ensure payment of additional D compensation to all the land owners. In this turn of events, YEIDA demanded the amount of additional compensation from JIL to the tune of INR 2591.78 crores by its communication dated 20.01.2015 and yet another amount of approximately INR 247 crores by its communication dated 31.05.2017. 88.1. The aforesaid communications of YEIDA and the said G.O. E dated 29.08.2014 were challenged by JIL by way of a writ petition before the High Court of Allahabad but, later on, JIL sought permission to withdraw with a view to seek recourse to the alternative remedy of arbitration, as provided in the CA. The High Court of Allahabad, by its order dated 03.11.2016, permitted JIL to withdraw and to pursue the F alternative remedy of arbitration80. Thereafter, the concessionaire JIL took up the matter in arbitration which led to the arbitral award dated 02.11.2019 in its favour, holding that the demand made by YEIDA was not sustainable. This award has been challenged by YEIDA under Section 34 of the Arbitration and Conciliation Act, 1996 and those proceedings, being Arbitration Case No. 3 of 2020, are pending in the Court of District G Judge, Gautam Budh Nagar. It has also been pointed out that the said G.O. was struck down by the Allahabad High Court in other petitions;

80 As per the facts stated, the said order of High Court was challenged by YEIDA in this Court in D. No. 15058 of 2017, which was dismissed on 01.09.2017. H

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A and the order so passed by the High Court has been challenged in SLP (Civil) No. 10015-10034 of 2020, pending in this Court.

89Copy pinpoint89. At the stage of drawing up the resolution plan in question, the said arbitral award had been made with the result that the liability towards the amount of additional compensation was not standing against JIL. B However, for the reason that the matter was sub judice, the resolution applicant considered it appropriate to make a provision for meeting with the contingency, in case this liability would ultimately get fastened on JIL; and proposed in the resolution plan as under: - “1.2 Treatment of creditors C As part of the Resolution Plan, it is proposed that: (i) As mentioned in this Plan, this Resolution Plan assumes that no amount is payable by the Corporate Debtor in relation to the Landowner Compensation Debt in view of the Award. However, if the said position changes on account of the Award being D overruled then in relation to the Landowner Compensation Debt, the amounts payable to the landowners shall be collected directly by YEIDA in the following manner for the following parcels of lands (in relation to which such debt accrues), from the ultimate end-users: E (i) Land under development (real estate projects) – the compensation in this regard shall be collected by YEIDA from the Home Buyers; (ii) Land already subleased to other entities by the Corporate Debtor – the compensation shall be collected from the F respective sub-lessees to whom the lands have been subleased by the Corporate Debtor either directly or indirectly; (iii) Unutilized land parcels – the compensation shall be collected from the end users in whose favour such land shall be transferred/subleased by the Corporate Debtor; and G (iv) Yamuna Expressway – Yamuna Expressway is a project of public utility and the ultimate owner of the project land is YEIDA, who will get the ultimate ownership of the Yamuna Expressway after the expiry of the concession period under the Concession Agreement and accordingly the compensation in this regard shall be payable by YEIDA.”

JAYPEE KENSINGTON BOULEVARD APARTMENTS WELFARE 773 ASSOCIATION v. NBCC (INDIA) LTD. [DINESH MAHESHWARI, J.]

90Copy pinpoint90. Apart from the above, the resolution applicant also proposed to set up two separate SPVs, one being Expressway SPV and another being Land Bank SPV. It was proposed that the assets and liabilities pertaining to Expressway shall be transferred to the Expressway SPV by way of transfer of 100% shareholding and the concession rights under the CA; and that out of the unutilised parcels of land available with the corporate debtor, 1,526 acres shall be transferred to Land Bank SPV; and that Land Bank SPV will also take over the admitted financial debt to the tune of INR 5,100 crores. In the resolution plan, the applicant also stated about the approvals required and its assumptions in that regard in the following terms: - “BUSINESS PLAN / FINANCIAL PROJECTIONS C

*** *** *** (d) Provisions for the Approvals required and the timeline for the same *** *** *** D (ii) The Resolution Applicant is of the view that the approval of this Resolution Plan by the Adjudicating Authority shall be deemed to have waived all the requirements in relation to transfer of Yamuna Expressway and land bank asset by way of business transfer and no approval/consent shall be necessary from any other person (including Yamuna Expressway Industrial Development Authority (“YEIDA”) or any other Governmental Authority), in this regard.”

91Copy pinpoint91. Moreover, in Clauses 4, 14 and 27 of Schedule 3 of the resolution plan, while seeking ‘reliefs and concessions’, the resolution applicant mooted a few more propositions concerning YEIDA and the Concession Agreement, which have also contributed to the intricacies of the matter. 91.1. In Clause 4 of Schedule 3 of the resolution plan, NBCC expected that YEIDA shall withdraw its challenge to another award dated 23.01.2017, pertaining to the issue of additional FAR, in the following terms: - “4. YEIDA to withdraw the appeal filed in the District Court, Gautam Budh Nagar being Arbitration Case No. 69 of 2017 challenging the award dated January 23, 2017 passed by arbitral H

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A tribunal pertaining to additional FAR and the Corporate Debtor to get the right to use additional FAR as per details contained in Annexure-P at all five land parcels immediately (on withdrawal of such appeal) without any additional payment for the same. However, the Resolution Applicant shall make a payment of INR 1 Cr in consideration of full and final settlement of YEIDA’s claim if any arising out of such appeal, considering YEIDA’s claim as Operational Debt in terms of IBC and to ensure equitable treatment to all the Operational Creditors.” 91.2. Further, in Clause 14 of Schedule 3 of the plan, the resolution applicant sought extinguishment of liability towards capital cost pertaining to Noida-Greater Noida Expressway in the following terms: - “14. The liability arising out of the Concession Agreement, to repay the capital cost pertaining to Noida-Greater Noida Expressway (treated as interest free loan from YEIDA to the Corporate Debtor) shall stand extinguished, on account of failure of YEIDA to allow the Corporate Debtor to collect and retain toll/fee from the users of the Noida-Greater Noida Expressway during the term of the Concession Agreement, as agreed under Clause 3.7 of the Concession Agreement.” 91.3. Yet further, in Clause 27 of Schedule 3, the resolution applicant expected an extension of the period under the CA by 10 years. This Clause reads as under: - “27. To ensure feasibility and viability of this Resolution Plan, YEIDA and other concerned authorities shall extend the concession period (currently 36 years) under the Concession F Agreement for an additional period of ten years.”

92Copy pinpoint92. YEIDA took exception to several parts of the stipulations aforesaid before the Adjudicating Authority and essentially submitted that the liability towards the amount of additional compensation, in relation to the land acquired and leased to JIL, was that of JIL, although such a G question was sub judice in challenge to the arbitral award under Section 34 of the Arbitration Act. It was submitted on behalf of YEIDA that in case the liability is ultimately mulcted on JIL, YEIDA cannot be driven to collect the amount of additional compensation from the end-users as proposed in the plan. It was asserted that the terms of CA provided for two payment components: one being of acquisition cost payable by the H

JAYPEE KENSINGTON BOULEVARD APARTMENTS WELFARE 775 ASSOCIATION v. NBCC (INDIA) LTD. [DINESH MAHESHWARI, J.]

concessionaire and other being of leased rent to be paid by the sub- A lessee/end-user; and given such components, it could not have been provided that YEIDA would collect the acquisition cost directly from the end-users. 92.1. It was also submitted that the resolution applicant was not entitled to split the transferred land into two, and to say that the payment of additional compensation would be applicable only towards the land used for development and not for the land used for Expressway. 92.2. As regards the expected exemption to pay the acquisition cost pertaining to the land utilised for Expressway, it was submitted that even if Expressway was to revert to YEIDA after 36 years, JIL was allowed to collect toll for this period and there could be no exemption as regards cost of acquisition for the land of Expressway.

93Copy pinpoint93. Another part of objection was that if the concessionaire’s rights and obligations were proposed to be transferred to SPVs, proper documentation was required, so that YEIDA could exercise its rights over the SPVs concerned. It was yet further submitted that withdrawal of the arbitration case could not be thrust upon YEIDA.

94Copy pinpoint94. As noticed, the Adjudicating Authority observed in regard to these issues concerning YEIDA that looking to the terms of CA, the Committee of Creditors should not have approved the resolution plan stating that the compensation, if awarded, shall be collected from the end-users. However, the Adjudicating Authority proceeded to modulate such terms ‘to make the plan viable’ and provided that the resolution plan be read to mean that YEIDA shall have a right to collect acquisition cost through the SPVs concerned. With regard to the issue of additional compensation concerning the land of Expressway, the Adjudicating F Authority considered it appropriate to read the resolution plan in the way that it is left open to both the parties to have proper recourse over this issue before a competent forum when the time would come for payment of additional compensation. As regards transfer of concessionaire’s rights and obligations to SPVs, the Adjudicating Authority was of the view G that, when JIL as concessionaire was, for the first time, proposing to transfer its rights and obligations to SPVs, the documents involving the concessionaire JIL, YEIDA and the SPV concerned were required to be executed. The NCLT also observed that the CA was based on the statute created by the State Government and, therefore, violation of its H

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