GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR & ORS.

The Judgment of the Court was delivered by G B. R. GAVAI, J.

1Copy pinpoint1. Leave granted in Special Leave Petition (Civil) Nos. 11232 of 2020 and 7147-7150 of 2020.

2Copy pinpoint2. The short but important questions, that arise for consideration H in this batch of matters, are as under:-

GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 753 SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD. THROUGH THE DIRECTOR [B. R. GAVAI, J.] (i) As to whether any creditor including the Central A Government, State Government or any local authority is bound by the Resolution Plan once it is approved by an adjudicating authority under sub-section (1) of Section 31 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘I&B Code’)? B (ii) As to whether the amendment to Section 31 by Section 7 of Act 26 of 2019 is clarificatory/declaratory or substantive in nature? (iii) As to whether after approval of resolution plan by the Adjudicating Authority a creditor including the Central C Government, State Government or any local authority is entitled to initiate any proceedings for recovery of any of the dues from the Corporate Debtor, which are not a part of the Resolution Plan approved by the adjudicating authority? D

3Copy pinpoint3. We will first refer to the facts in each of these matters. CIVIL APPEAL NO.8129 OF 2019 [GHANASHYAM MISHRA AND SONS PRIVATE LIMITED Vs. EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED & OTHERS] E

4Copy pinpoint4. Orissa Manganese & Minerals Limited (hereinafter referred to as “Corporate Debtor” or “OMML”) was engaged in the business of mining iron ore, graphite, manganese ore and agglomerating iron fines into pellets through its facilities in Orissa and Jharkhand. The Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) was F initiated in respect of the Corporate Debtor by an application under Section 7 of I&B Code filed by the State Bank of India (hereinafter referred to as “SBI”) before the National Company Law Tribunal, Kolkata Bench, Kolkata (hereinafter referred to as “NCLT”).

5Copy pinpoint5. Vide order dated 3.8.2017, Company Petition (I.B.) No. 371/ G KB/2017 filed by SBI was admitted. Shri Sumit Binani was appointed as Interim Resolution Professional (hereinafter referred to as “IRP”). Upon admission of the said Company Petition, CIRP was initiated with effect from 3.8.2017. The appointment of IRP was confirmed by the Committee of Creditors (hereinafter referred to as “CoC”) in their meeting held on 4.9.2017. The Resolution Professional (hereinafter referred to as “RP”) H

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A continued with the resolution process by inviting Expression of Interest (hereinafter referred to as “EOI”) and applications for resolution plan in accordance with the provisions of the I&B Code and the Regulations framed thereunder. The initial period of CIRP of 180 days expired on 29.1.2018. At the request of CoC, RP moved an application for extension of CIRP period, which came to be extended by 90 days i.e. till 29.4.2018. B

6Copy pinpoint6. In response to the invitation, three Resolution Plans were received by RP each from, Edelweiss Asset Reconstruction Company Limited (hereinafter referred to as “EARC”), respondent No.1 herein, Orissa Mining Private Limited (hereinafter referred to as “OMPL”) and Ghanashyam Mishra & Sons Private Limited (hereinafter referred C to as “GMSPL”), the appellant herein, respectively. In the 8 th meeting of the CoC held on 14.3.2018, EARC was declared as H1 Bidder. However, EARC failed to satisfy CoC in the negotiations and as such, the resolution plan submitted by EARC came to be rejected in the 9th meeting of CoC held on 31.3.2018.

7Copy pinpoint7. CoC thereafter proceeded for negotiations with the H2 Bidder i.e. GMSPL. However, the resolution plan of GMSPL was also found to be unacceptable to CoC and therefore, in its 10th meeting held on 3.4.2018, it decided to annul the existing process and initiate a fresh process for invitation of Resolution Plan only from the applicants, which had earlier E submitted their EOI. Accordingly, a communication was sent to the applicants, which had submitted their EOI. In response to the said invitation, three Resolution Plans were received each from GMSPL, EARC and Srei Infrastructure Finance Limited (hereinafter referred to as “SIFL”) respectively. These Resolution Plans were considered by CoC in its 11th meeting held on 13.4.2018. After evaluation of the F Resolution Plans, CoC ranked GMSPL as the H1 bidder.

8Copy pinpoint8. Further negotiations were held by CoC with GMSPL. After several rounds of negotiations, the Resolution Plan of GMSPL was considered by CoC for its approval. In its 12th meeting held on 21.4.2018, CoC unanimously took a decision to convene a meeting of CoC on G 25.4.2018 at 6 PM, for voting on the Resolution Plan proposed by GMSPL. After being satisfied, that the Resolution Plan submitted by GMSPL meets all the requirements under sub-section (2) of Section 30 of the I&B Code, the same was placed before the Members of CoC for voting, and the Resolution Plan came to be approved by more than H 89.23% of the voting share of financial creditors of the Corporate Debtor.

GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 755 SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD. THROUGH THE DIRECTOR [B. R. GAVAI, J.]

9Copy pinpoint9. Accordingly, a Company Application being C.A (IB) No. 402/ A KB/2018 came to be filed by RP for approval of the Resolution Plan submitted by GMSPL. One application being C.A. (IB) No. 398/KB/ 2018 came to be filed by EARC-respondent No.1 herein, challenging the approval of the Resolution Plan of GMSPL. One more application came to be filed by EARC being C.A. (IB) No. 470/KB/2018 challenging the decision of RP in not admitting its claim. The said application was filed, contending, that its claim stood on the strength of corporate guarantee provided by the Corporate Debtor against the take-out facility provided to Adhunik Power and Natural Resources Limited (hereinafter referred to as “APNRL”), being sister concern of the Corporate Debtor. It was contended, that in not admitting the claim on the strength of corporate guarantee, RP violated Regulations 13 and 14 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as “the Regulations”). It was prayed in the application for a direction to the successful resolution applicant i.e. GMSPL, to undertake to pay the full amount due and payable under the said corporate guarantee and further to issue directions for protecting the rights of the lenders of APNRL as pledgee. One more Application being C.A. (IB) No.509/KB/2018 was filed by the District Mining Officer, Department of Mining and Geology, Jharkhand challenging non-admission of its claim to the tune of Rs.93,51,91,724/- and Rs.760.51 crore. E

10Copy pinpoint10. NCLT by an elaborate order dated 22.6.2018 approved the Resolution Plan of GMSPL, which was duly approved by CoC by voting share of more than 89.23%. Rest of the applications including the two filed by EARC, the respondent No.1 herein, came to be rejected.

11Copy pinpoint11. Being aggrieved by the order passed by NCLT, EARC preferred F Company Appeal being Company Appeal (AT) (Insolvency) Nos. 437/ 2018 and 444/2018 before the National Company Law Appellate Tribunal, New Delhi (hereinafter referred to as “NCLAT”). Company Appeal (AT) (Insolvency) No. 437/2018 was against the rejection of claims of EARC as Financial Creditor and thereby its non-inclusion in CoC. G Company Appeal (AT) (Insolvency) No. 444/2018 came to be filed with the grievance, that RP and CoC had erroneously held, that the plan of GMSPL was better than that of EARC. One more Company Appeal being Company Appeal (AT) (Insolvency) No. 500/2018 came to be filed by Sundargarh Mines & Transport Workers Union (hereinafter H

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A referred to as “SMTWU”) on behalf of the workmen of the Corporate Debtor. One another Company Appeal being Company Appeal (AT) (Insolvency) No.438/2018 came to be filed by one Deepak Singh, an employee of APNRL, claiming dues of his salary.

12Copy pinpoint12. By the impugned judgment and order dated 23.4.2019, NCLAT B while holding, that RP was justified in not accepting the claim of EARC and that NCLT had rightly rejected the application filed by EARC, however, observed that the rejection of the claim for the purpose of collating and making it part of the Resolution Plan will not affect the right of EARC to invoke the Bank Guarantee against the Corporate Debtor, in case the principal borrower failed to pay the debt amount, C since the moratorium period had come to an end. NCLAT on comparison of the plans submitted by EARC and GMSPL further held, that the resolution plan submitted by GMSPL was a better one than the one submitted by other applicants and there was no illegality in accepting the resolution plan of GMSPL.

13Copy pinpoint13. Insofar as the Company Appeal (AT) (Insolvency) No. 500/ 2018 is concerned, the grievance was, that though there were around 1,476 workmen, RP ignored their rightful wages, statutory dues and other benefits. NCLAT, in the said order, observed, that after the period of moratorium, it was open for the persons to move before a civil court or to move an application before the court of competent jurisdiction against the Corporate Debtor. NCLAT therefore observed, that the appellant therein may move before the civil court or a court of competent jurisdiction and may file an application before the Labour Court for appropriate reliefs in favour of the concerned workmen or against the Corporate Debtor, if they have actually worked and had not been taken care of in the Resolution Plan.

14Copy pinpoint14. Insofar as Company Appeal (AT) (Insolvency) No. 438/2018 is concerned, it was the claim of Deepak Singh, appellant therein, that he had joined APNRL, the holding Company of the Corporate Debtor, as the President-Group Head HR from 2.6.2014 to 9.3.2015. It was his claim, that he had an amount of Rs.17,03,000/- recoverable from the said APNRL and as such, was an Operational Creditor. It was submitted, that though the claim of the said appellant was valid, it was illegally rejected by RP. NCLAT held, that insofar as the said appeal is concerned, no ground as is permissible under sub-section (3) of Section 61 of I&B H Code is made out and as such, relief could not be granted in the appeal.

GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 757 SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD. THROUGH THE DIRECTOR [B. R. GAVAI, J.] However, it was observed, that the said order passed in the appeal would not come in the way of appellant to move the appropriate forum for appropriate relief.

15Copy pinpoint15. GMSPL, thus, aggrieved by the observations made by NCLAT to the effect, that the claims of the parties, which are not included in the Resolution Plan could be agitated by them before the other forums, has preferred the present appeal. CIVIL APPEAL ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO.11232 OF 2020 [ULTRATECH NATHDWARA CEMENT LIMITED VS. STATE OF UTTAR PRADESH AND OTHERS C

16Copy pinpoint16. The appellant is a wholly owned subsidiary of UltraTech Cement Limited and is engaged in the business of manufacturing and marketing of cement and allied products.

17Copy pinpoint17. On 19.12.2015, the Additional Commissioner, Commercial Tax, D Ghaziabad passed an order in the appeal preferred by M/s Binani Cement Limited, thereby, allowing the appeal filed by Binani Cement and setting aside the order of imposition of fine of Rs.24,71,885/-. Vide another order dated 22.12.2015, passed in the appeal filed by Binani Cement, the order of imposition of fine of Rs.59,61,445/- also came to be set aside. Vide order dated 2.8.2017, the Deputy Commissioner, Commercial Tax, E Division-10, Ghaziabad held, that Binani Cement was liable to pay Entry Tax of Rs.40,47,344/- for the Assessment Year 2003-2004. By another order dated 2.8.2017, the Deputy Commissioner, Commercial Tax, Division-10, Ghaziabad further held, that Binani Cement was liable to pay Entry Tax of Rs.43,06,715/- for the Assessment Year 2004-2005. F

18Copy pinpoint18. Since the said Binani Cement was unable to pay the debt to Bank of Baroda, the Bank of Baroda filed an application being C.A. (IB) No. 359/KB/2017 before NCLT, Kolkata Bench under Section 7 of I&B Code. Vide order dated 25.7.2017, NCLT admitted the petition for initiating the CIRP process. Vide the said order, NCLT also declared G moratorium for the purposes referred to in Section 14 of I&B Code.

19Copy pinpoint19. Vide communication dated 10.11.2017, the authorities were informed about the initiation of the CIRP. However, the authority by an endorsement made on the application of the appellant herein stated, that there was no stay granted by NCLT on tax assessment process. It was H

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A observed, that if there was any clear order passed by NCLT, the same should be produced or the Binani Cement should appear on the next date i.e. 27.11.2017 for hearing of tax assessment process.

20Copy pinpoint20. On 28.7.2017, RP made a public announcement inviting claims from all the creditors of the Corporate Debtor, as is required under Section B 15 of I&B Code. The last date for submission of claims was 8.8.2017. RP upon receipt of the claims maintained a list of creditors alongside the amount claimed by them and the security interest. RP also invited EOI. In response, various entities including the present appellant submitted their EOI as well as resolution plans. CoC in its meeting dated 28.5.2018, unanimously approved the Resolution Plan submitted by the present appellant. Pursuant to the approval by CoC, NCLAT granted approval to the Resolution Plan of appellant vide order dated 14.11.2018. The said order came to be challenged before this Court in Civil Appeal No. 10998/2018, which was dismissed by this Court vide order dated 19.11.2018.

21Copy pinpoint21. On 13.12.2018, the name of the Corporate Debtor was changed to UltraTech Nathdwara Cement Limited from Binani Cement Limited and the management of the Corporate Debtor was taken over by Ultratech Cement Limited w.e.f. 20.11.2018. Thereafter, the appellant addressed various communications to the tax authorities, who are respondents herein informing them, that after the Resolution Plan was approved by NCLT, all proceedings instituted against the Corporate Debtor, arising and pending before the transfer date shall stand withdrawn. It was also informed, that all the liabilities towards operational creditors shall be deemed to have been settled by discharge and payment of the resolution amount by the Corporate Debtor. However, it was insisted by the tax authorities, that since there was no specific stay, proceedings could not be dropped. After various communications addressed by the appellant to the Joint Commissioner, Commercial Tax (Corporate Circle), Ghaziabad dated 26.4.2019, the following endorsements came to be made by the authority on 29.4.2019:- “After consideration on application presented by you, it is found that, by Hon’ble NCLT/NCLAT after transfer, neither stay is imposed on tax assessment nor on creation of demand. So the created demand is payable by you. If you are not agree with it, preferring appeal before higher authority, present its copy to us. Disposal is done of application presented by you.” H _______

GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 759 SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD. THROUGH THE DIRECTOR [B. R. GAVAI, J.]

22Copy pinpoint22. The Commercial Tax Department of the State of Rajasthan A filed Civil Appeal No. 5889/2019 challenging the Resolution Plan. However, the said appeal came to be dismissed vide order of this Court dated 26.7.2019. The appeals being Civil Appeal Nos. 630-634/2020 were also preferred by the Commissioner of Central Excise, Goods and Services Tax, Jodhpur challenging the Resolution Plan. The same also came to be dismissed by this Court vide order dated 24.1.2020.

23Copy pinpoint23. The appellant therefore filed a Civil Miscellaneous Writ Petition No. 354/2020 before the High Court of Allahabad challenging the order passed by the Additional Commissioner Grade 2 (Appeal) dated 30.1.2020, to the effect, that the proceedings in the State of U.P. would remain unaffected irrespective of the approval of the Resolution Plan of the appellant by NCLT. The appellant also prayed for a declaration, that all the proceedings pending before different authorities stand abated in terms of the approval of the Resolution Plan by NCLT. A prayer was also made for refund of Rs.248.92 lakhs deposited by the appellant under protest and for return of the Bank Guarantee. D

24Copy pinpoint24. The Division Bench of the Allahabad High Court vide order dated 6.7.2020 observed, that the contention of the appellant with regard to the approval of the Resolution Plan by NCLT has been dealt with by the Assessing Authority as well as by the Appellate Authority and therefore, it was in the fitness of things that the appellant should avail of E the alternative remedy of filing a second appeal available under the VAT Act. Being aggrieved by the same, the appellant has filed the present appeal. WRIT PETITION (CIVIL) NO. 1177 OF 2020 M/S MONNET ISPAT & ENERGY LIMITED AND ANOTHER VS. F STATE OF ODISHA AND ANOTHER

25Copy pinpoint25. The petitioner Company is a Corporate Debtor in respect of which CIRP proceedings commenced in July 2017 and ended in July 2018, when NCLT approved the Resolution Plan submitted by a Consortium of Aion Investment Private Limited and JSW Steel Limited G (“Aion-JSW” for short). Prior to approval by NCLT, CoC had granted approval to the said Resolution Plan by a voting majority of 98.97%. It is the contention of the petitioner, that in accordance with the provisions of I&B Code, RP had made a public announcement thereby, inviting claims

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A from Creditors. Contending, that the demand notices issued by the respondents for recovery of Service Tax towards Royalty, District Mineral Foundation (“DMF” for short) and National Mineral Exploration Trust (“NMET” for short) against the iron ore purchased by the petitioner Company are contrary to the law laid down by this Court in the case of Committee of Creditors of Essar Steel India Limited Through B Authorized Signatory v. Satish Kumar Gupta and Others 1, the petitioner has directly approached this Court by filing a writ petition under Article 32 of the Constitution of India. CIVIL APPEALS ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NOS.7147-7150 OF 2020 C [ELECTROSTEEL STEELS LIMITED, BOKARO, JHARKHAND VS. STATE OF JHARKHAND AND OTHERS]

26Copy pinpoint26. The appellant is a Corporate Debtor in respect of which the proceedings under Section 7 were initiated by the SBI. Vide order dated D 21.7.2017 of NCLT, the application filed by SBI was admitted and Mr. Dhaivat Anjaria was appointed as Interim Resolution Professional (IRP). In its meeting dated 21.8.2017, CoC approved the appointment of IRP as RP. In response to the invitation for submission of resolution plans, four applicants had submitted their Resolution Plans. CoC had approved the Resolution Plan of Vedanta Limited by 100% voting share. NCLT E vide order dated 17.4.2018 approved the Resolution Plan of Vedanta Limited. The appeal being Company Appeal (AT) (Insolvency) No. 175/ 2018 filed by one Renaissance Steel India Private Limited challenging the order of NCLT came to be dismissed by NCLAT vide order dated 10.8.2018. Challenging the notices issued by the respondent State F Authorities and the order of SBI asking it to pay an amount of Rs.37,41,41,602/- on account of tax penalty due under the Jharkhand VAT Act for the period 2011-12 and 2012-13, the appellant approached the High Court of Jharkhand. The appellant had also challenged the letter dated 22.11.2019 issued by State Tax Officer, Bokaro to deposit the amount of Rs.75,57,000/-. As in the other matters, it is contended by G the appellant, that in view of Section 31 of I&B Code, since the claim made by the respondent was not a part of the Resolution Plan, it would get extinguished on the Resolution Plan being approved by NCLT. The said writ petition came to be rejected by the High Court on the ground,

1 H (2020) 8 SCC 531

GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 761 SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD. THROUGH THE DIRECTOR [B. R. GAVAI, J.] that the petitioner had no locus and that the Resolution Plan was not A binding on the State Government since it had not participated in the CIRP proceedings. SUBMISSIONS IN CIVIL APPEAL NO.8129 OF 2019 [Ghanashyam Mishra and Sons Private Limited vs. Edelweiss Asset Reconstruction Company Limited & Others] B

27Copy pinpoint27. Dr. A.M. Singhvi, learned Senior Counsel appearing for GMSPL submitted, that as held by this Court in a catena of decisions, the commercial wisdom of CoC in accepting or rejecting the Resolution Plan is paramount. He submitted, that the interference would be warranted within the limited parameters of judicial review that are available under the Statute. The learned Senior Counsel further submitted, that once the adjudicating authority approves the Resolution Plan, it shall be binding on everyone including Corporate Debtor and its employees, Members, Creditors including the Central Government, any State Government or any local authority, to whom a debt is owed in respect of the payment of dues arising under any law for the time being in force, guarantors and other stake-holders, involved in the Resolution Plan. He submitted, that once a Resolution Plan is accepted, if any additional liability is thrust upon the Resolution Plan, the entire plan would become unworkable, resulting into the frustration of the very purpose of the enactment i.e. revival of the Corporate Debtor. E

28Copy pinpoint28. Dr. Singhvi further submitted, that perusal of the Resolution Plan submitted by EARC and particularly Clause 2.1.3 thereof would reveal, that the said Plan also provides, that all the debts and all dues, liability or obligations other than the one, which are included in Resolution Plan, shall be deemed to have been irrevocably waived and permanently F extinguished and written off in full with effect from the effective date. He submitted that a similar provision is also made in the Resolution Plan submitted by GMSPL.

29Copy pinpoint29. The learned Senior Counsel further submitted, that the Resolution Plan submitted by GMSPL is for an amount of Rs.321.19 G crore. If additional liability of Rs.648.89 crore is saddled upon the resolution applicant, the total resolution plan itself would be unworkable.

30Copy pinpoint30. Dr. Singhvi further submitted that NCLT has found the conduct of EARC not to be bona fide. He submitted, that NCLT has categorically found, that the application filed by EARC was a deliberate attempt to H

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A stage manage an objection against the approval of Resolution Plan submitted by an entity, other than it. He submitted, that as a matter of fact, NCLT has imposed costs of Rs. 1 lakh on EARC taking into consideration its conduct.

31Copy pinpoint31. Dr. Singhvi relied upon the judgments of this Court in the B cases of K. Shashidhar vs. Indian Overseas Bank and Others2, Committee of Creditors of Essar Steel India Limited through Authorised Signatory vs. Satish Kumar Gupta & Ors. (supra) Maharashtra Seamless Limited vs. Padmanabhan Venkatesh and others 3 , Karad Urban Cooperative Bank Ltd. vs. Swwapnil Bhingardevay & Ors.4 and Kalpraj Dharamshi and Another vs. C Kotak Investment Advisors Limited and Another5.

32Copy pinpoint32. Mr. Prashant Bhushan, learned Counsel appearing on behalf of the EARC-respondent No.1 submitted, that by the impugned order, NCLAT has only reserved the right of EARC to invoke the Corporate Guarantee in its favour. He submitted, that on account of the erroneous D conduct of the proceedings by RP and CoC, EARC has been put in a precarious condition. He submitted, that on one hand RP has not recognized EARC as a financial creditor thereby, depriving its nomination to CoC and participation in finalization of the proceedings. On the other hand, denying EARC to encash its bank guarantee would leave EARC E high and dry. A substantial claim of EARC would be rendered futile, in the event the order passed by NCLT is to be maintained. He therefore submitted, that no interference is warranted in the appeal.

33Copy pinpoint33. In reply to the submissions of the appellant that EARC has not preferred an appeal against the order of NCLAT though its appeal was disposed of is concerned, the learned Counsel relying on the judgment of this Court in the case of Banarasi and Another v. Ram Phal6 submitted, that since the findings recorded by NCLAT are in its favour, there was no occasion for it to prefer an appeal. He submitted, that in any event, it can raise the grounds insofar as the findings in the impugned order, which are adverse to EARC in addition to supporting the final judgment in its favour.

2 (2019) 12 SCC 150 3 (2020) 11 SCC 467 4 (2020) 9 SCC 729 5 2021 SCC OnLine SC 204 6 H (2003) 9 SCC 606

GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 763 SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD. THROUGH THE DIRECTOR [B. R. GAVAI, J.]

34Copy pinpoint34. Shri Neeraj Kishan Kaul, learned Senior Counsel appearing A on behalf of the appellant submitted, that assuming without admitting that EARC could be considered as the financial creditor, it could have had voting right only to the extent of 9% and even in that eventuality, resolution plan of GMSPL would have been approved by CoC with the majority of more than 80%. B SUBMISSIONS IN CIVIL APPEAL ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO.11232 OF 2020 [UltraTech Nathdwara Cement Limited v. State of Uttar Pradesh and Others]

35Copy pinpoint35. Dr. Singhvi, learned Senior Counsel appearing on behalf of C the appellant-UltraTech Nathdwara Cement Limited submitted, that a conjoint reading of sub-section (10) of Section 3 and sub-sections (20) and (21) of Section 5 would show, that even if there was no amendment to Section 31 of I&B Code by the 2019 Amendment, still the Central Government and any State Government or the local authorities were bound by the same and any statutory dues owed to them by the Corporate D Debtor, which were not included in the resolution plan, shall stand extinguished. He submitted, that the 2019 Amendment, which amends Section 31 is clarificatory in nature and only declares and clarifies the position of law, which has already been in existence i.e. the Central Government, any State Government and local authorities are bound by the CIRP. He submitted, that this Court in the cases of State Bank of India vs. V. Ramakrishnan and Another 7and B.K. Educational Services Private Limited v. Parag Gupta and Associates8 has held the amendment to certain provisions of the I&B Code to be clarificatory in nature. The learned Senior Counsel submitted, that upon perusal of the provisions of the I&B Code, it is clear, that once NCLT grants approval to the Resolution Plan, all proceedings pending insofar as the Corporate Debtor is concerned, which are not included in the Resolution Plan shall stand automatically stayed. He submitted, that perusal of the chart pertaining to the dues of the respondents, clearly reveal that all of the said dues are prior to the admission of the Company Petition filed under Section 7 of I&B Code and therefore, the respondents are not entitled to continue the proceedings in respect thereof since the same do not form part of the approved resolution plan. 7 (2018) 17 SCC 394 8 (2019) 11 SCC 633 H

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36Copy pinpoint36. He submitted, that the orders passed by NCLAT were challenged before this Court by the Revenue Authorities of the Rajasthan State as well as the Commissioner of Central Excise (GST), Jodhpur and this Court had refused to interfere with the order passed by NCLAT. It is submitted, that in this background, the authorities are totally unjustified in continuing the proceedings, which are undisputedly with respect to the dues prior to admission of the application under Section 7 of I&B Code, only on the ground, that there is no specific stay order passed by NCLT.

37Copy pinpoint37. He submitted, that the High Court has erred in refusing to entertain the writ petition of the appellant solely on the ground, that an alternative remedy by way of a second appeal was available to the appellant. He submitted, that in catena of judgments, this Court has held, that non-exercise of jurisdiction under Article 226, despite availability of alternative remedy is a rule of self-restraint and in the appropriate areas carved out by this Court, entertaining a petition under Article 226, despite availability of alternative remedy, would be permissible. He submitted, that applying the said principle, the proceedings before the authority since stand prohibited in view of the provisions of the I&B Code, the High Court erred in refusing to entertain the petition.

38Copy pinpoint38. The learned Senior Counsel further submitted, that despite the pendency of the present appeal, the Joint Commissioner, Commercial Tax, Ghaziabad has passed an Assessment Order dated 2.2.2021 for the period prior to admission of Section 7 petition, as such the appellant has filed IA No.26255/2021 challenging the said assessment order.

39Copy pinpoint39. Dr. Singhvi further submitted, that though the respondent authorities were aware of the Resolution Proceedings, they had failed to submit any claim, in response to the public notices issued by RP.

40Copy pinpoint40. Shri V. Shekhar, learned Senior Counsel appearing on behalf of the State Authorities justified the impugned order and prayed for dismissal of the appeal. He submitted, that the order passed by NCLT G would not come in the way of adjudicatory proceedings, which were continued by the authorities under the provisions of the relevant Statutes. He submitted, that the assessment orders which were passed in accordance with law were duly approved in appeal by the higher authority and therefore, the High Court was justified in observing that the petition was not maintainable, in view of the availability of alternative remedy of filing a second appeal.

GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 765 SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD. THROUGH THE DIRECTOR [B. R. GAVAI, J.]

41Copy pinpoint41. The learned Senior Counsel submitted, that the adjudicatory authorities acting under the relevant statutes being not a part of CoC are not bound by the decision of CoC, which is approved by NCLT. He further submitted, that merely continuation of the adjudicatory proceedings cannot be a part of coercive action.

42Copy pinpoint42. Shri V. Shekhar submitted, that 2019 Amendment cannot be said to be clarificatory in nature and as such, the proceedings, which were pending prior to the date of the amendment to Section 31, would not be affected by the 2019 Amendment to Section 31. He therefore prayed for dismissal of the appeal. SUBMISSIONS IN WRIT PETITION (CIVIL) NO. 1177 C OF 2020 [M/s Monnet Ispat & Energy Limited and Another v. State of Odisha and Another]

43Copy pinpoint43. Shri Kaul, learned Senior Counsel appearing on behalf of the writ petitioner submitted, that in spite of clear legal position as enunciated in various judgments of this Court, various authorities in different parts of the country are continuing with the proceedings in respect of statutory dues existing prior to the date of approval of resolution plan by NCLT. He submitted, that various High Courts have held, relying on the judgments of this Court, that statutory dues prior to the date of admission of Section 7 application and which are not part of the Resolution Plan shall stand extinguished and the proceedings in respect thereof would no more survive. However, in some States, the authorities of the State are flouting the law and as such, the petitioner has approached this Court in its extraordinary jurisdiction under Article 32 of the Constitution so that there is an authoritative pronouncement by this Court. He submitted, that the respondent authorities in the present case had failed to file the claims in response to the statutory public notice issued by RP. The first demand by the authorities raised is only after the plan was approved by CoC on 9.4.2018. He also relied on the speech delivered by the Hon’ble Finance Minister in Rajya Sabha on 29.7.2019, to buttress his submissions that the 2019 Amendment of Section 31 of I&B Code is clarificatory in nature. G SUBMISSIONS IN APPEALS ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NOS.7147-7150 OF 2020 [Electrosteel Steels Limited, Bokaro, Jharkhand vs. State of Jharkhand and Others] H

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44Copy pinpoint44. Dr. Singhvi submitted, that in the present matter though NCLT had approved the Resolution Plan on 17.4.2018 and NCLAT had dismissed the appeal on 10.8.2018, only thereafter on 17.8.2018, the re- assessment order came to be passed for the period 2012-13. He submitted, that immediately after the appellant discovered about the said order, the same was challenged in a writ petition. However, the High B Court has dismissed the petition on erroneous grounds. It is submitted, that one of the grounds on which the petition is dismissed is, that it is the Vedanta Limited, which was an aggrieved party since it was a Resolution Applicant and as such, the petition at the behest of the present appellant, which was a Corporate Debtor was not tenable. He submitted, that the C second ground on which the writ petition is dismissed is that the State Authorities had not participated in CIRP and the order passed by NCLT was binding only on the parties, which have participated in the Resolution process. He submitted, that both the grounds are erroneous inasmuch as, Vedanta Limited is a successful Resolution Applicant. The Resolution process is in respect of the present appellant-writ petitioner, which is the D Corporate Debtor and as such, the petition at the behest of the present appellant was very much tenable in law. Insofar as the second ground of the High Court is concerned, he submitted, that if such a view is accepted, it will frustrate the entire object of I&B Code and the revival of the Debtor Companies would be impossible if the successful resolution E applicants are sprung with the surprise debts, which are not part of the Resolution Plan.

45Copy pinpoint45. Shri Gurukrishna Kumar, learned Senior Counsel appearing on behalf of the respondent submitted, that the entire process conducted by RP and CoC is fraudulent. He submitted, that in accordance with F Section 29 and specifically, clause H of Regulation 36, RP was required to furnish the details of the material litigation and an ongoing investigation or proceedings initiated by Government and Statutory Authorities in the information memorandum. However, the Resolution Applicant had fraudulently used I&B Code by suppressing the vital information with regard to the same and thereby, denying the legitimate dues of public G exchequer.

46Copy pinpoint46. Dr. Singhvi in rejoinder submitted, that it is respondent’s own admission that they have not participated in the proceedings conducted by RP, CoC, NCLT, NCLAT and even this Court. He submitted, that when the other Departments/Ministries had participated in the H

GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 767 SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD. THROUGH THE DIRECTOR [B. R. GAVAI, J.] proceedings and raised their claims, it does not lie in the mouth of respondents to say, that they were not aware about CIRP proceedings.

47Copy pinpoint47. In the said appeal, an intervention application has also been filed on behalf of Tata Steel BSL Limited. It is contended in the intervention application, that though the resolution process in respect of intervener/ applicant was complete, still the Revenue Authorities were continuing with the proceedings with respect to the dues owed prior to the date of approval of resolution plan by NCLT. It is the submission of the intervener/applicant, that as such, legal position needs to be settled by this Court and therefore the intervener/applicant has filed the present intervention application. Shri Jaideep Gupta, learned Senior Counsel appearing on behalf of the said intervenor - applicant has made submissions on similar lines as are advanced by Dr. Singhvi and Shri Kaul, learned Senior Counsel appearing in the other matters. CONSIDERATION

48Copy pinpoint48. We have extensively heard the learned counsel appearing for the parties in all the matters, perused the written submissions and materials on record.

49Copy pinpoint49. The provisions of I&B Code have undergone scrutiny in various judgments of this Court. We would not like to burden the present judgment with the provisions of the statute, which have been duly reproduced and considered in the earlier judgments of this Court. E

50Copy pinpoint50. In the case of Innoventive Industries Ltd. vs. ICICI Bank & Anr.9 after reproducing the ‘Statement of Objects and Reasons’ of I&B Code in paragraph 12, this Court observed thus: “13. One of the important objectives of the Code is to bring the insolvency law in India under a single unified umbrella F with the object of speeding up of the insolvency process. As per the data available with the World Bank in 2016, insolvency resolution in India took 4.3 years on an average, which was much higher when compared with the United Kingdom (1 year), USA (1.5 years) and South Africa (2 years). The World Bank’s Ease G of Doing Business Index, 2015, ranked India as country number 135 out of 190 countries on the ease of resolving insolvency based on various indicia.” [emphasis supplied] 9 (2018) 1 SCC 407 H

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51Copy pinpoint51. This Court thereafter in paragraph 16 reproduced the relevant paragraphs contained in the report of the Bankruptcy Law Reforms Committee Report of 2015. Thereafter, this Court reproduced all the relevant provisions of I&B Code in paragraphs 18 to 26.

52Copy pinpoint52. This Court in the case of Innoventive Industries Ltd. (supra) B thereafter elaborately discussed the scheme of the various provisions of the I&B Code in paragraphs 27 to 32, which read thus: “27. The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in C Section 3(12) in very wide terms as meaning non-payment of a debt once it becomes due and payable, which includes non- payment of even part thereof or an instalment amount. For the meaning of “debt”, we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a “claim” and for the meaning of “claim”, we have to go back to D Section 3(6) which defines “claim” to mean a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section 4). The corporate insolvency resolution process may be triggered by the corporate debtor itself or a financial creditor or operational creditor. A distinction is made by the Code between debts owed to financial creditors and operational creditors. A financial creditor has been defined under Section 5(7) as a person to whom a financial debt is owed and a financial debt is defined in Section 5(8) to mean a debt which is disbursed against consideration for the time value of money. As opposed to this, an operational creditor means a person to whom an operational debt is owed and an operational debt under Section 5(21) means a claim in respect of provision of goods or services.

28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the Explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor — it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule H 4, the application is made by a financial creditor in Form 1

GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 769 SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD. THROUGH THE DIRECTOR [B. R. GAVAI, J.] accompanied by documents and records required therein. Form 1 A is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in Part III, particulars of the financial debt in Part IV and documents, records and evidence of default in Part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the “debt”, which may also include a disputed claim, is not due. A D debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be.

29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre- existing—i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code. H

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A 30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is “due” i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.

31. The rest of the insolvency resolution process is also very important. The entire process is to be completed within a period of 180 days from the date of admission of the application under Section 12 and can only be extended beyond 180 days for a further period of not exceeding 90 days if the committee of creditors by a voting of 75% of voting shares so decides. It can be seen that time is of essence in seeing whether the corporate body can be put back on its feet, so as to stave off liquidation.

32. As soon as the application is admitted, a moratorium in terms of Section 14 of the Code is to be declared by the adjudicating authority and a public announcement is made stating, inter alia, the last date for submission of claims and the details of the interim resolution professional who shall be vested with the management of the corporate debtor and be responsible for receiving claims. Under Section 17, the erstwhile management of the corporate debtor is vested in an interim resolution professional who is a trained person registered under Chapter IV of the Code. This F interim resolution professional is now to manage the operations of the corporate debtor as a going concern under the directions of a committee of creditors appointed under Section 21 of the Act. Decisions by this committee are to be taken by a vote of not less than 75% of the voting share of the financial creditors. Under G Section 28, a resolution professional, who is none other than an interim resolution professional who is appointed to carry out the resolution process, is then given wide powers to raise finances, create security interests, etc. subject to prior approval of the committee of creditors.”

H [emphasis supplied]

GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 771 SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD. THROUGH THE DIRECTOR [B. R. GAVAI, J.]

53Copy pinpoint53. After discussing the relevant provisions of I&B Code, this A Court observed thus: “33. Under Section 30, any person who is interested in putting the corporate body back on its feet may submit a resolution plan to the resolution professional, which is prepared on the basis of an information memorandum. This B plan must provide for payment of insolvency resolution process costs, management of the affairs of the corporate debtor after approval of the plan, and implementation and supervision of the plan. It is only when such plan is approved by a vote of not less than 75% of the voting share of the financial creditors and the adjudicating authority is satisfied C that the plan, as approved, meets the statutory requirements mentioned in Section 30, that it ultimately approves such plan, which is then binding on the corporate debtor as well as its employees, members, creditors, guarantors and other stakeholders. Importantly, and this is a D major departure from previous legislation on the subject, the moment the adjudicating authority approves the resolution plan, the moratorium order passed by the authority under Section 14 shall cease to have effect. The scheme of the Code, therefore, is to make an attempt, by divesting the erstwhile management of its powers and vesting it in a professional E agency, to continue the business of the corporate body as a going concern until a resolution plan is drawn up, in which event the management is handed over under the plan so that the corporate body is able to pay back its debts and get back on its feet. All this is to be done within a period of 6 F months with a maximum extension of another 90 days or else the chopper comes down and the liquidation process begins.” [emphasis supplied]

54Copy pinpoint54. It could thus be seen, that one of the dominant objects of I&B Code is to see to it, that an attempt has to be made to revive the Corporate G Debtor and make it a running concern. For that, a resolution applicant has to prepare a resolution plan on the basis of the Information Memorandum. The Information Memorandum, which is required to be prepared in accordance with Section 29 of I&B Code along with Regulation 36 of the Regulations, is required to contain various details, H

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A which have been gathered by RP after receipt of various claims in response to the statutorily mandated public notice. The resolution plan is required to provide for the payment of insolvency resolution process costs, management of the affairs of the Corporate Debtor after approval of the resolution plan; the implementation and supervision of the resolution plan. It is only after the Adjudicating Authority satisfies itself, that the B plan as approved by CoC with the requisite voting share of financial creditors meets the requirement as referred to in sub-section (2) of Section 30, grants its approval to it. It is only thereafter, that the said plan is binding on the Corporate Debtor as well as its employees, members, creditors, guarantors and other stakeholders involved in the resolution C Plan. The moratorium order passed by the Adjudicating Authority under Section 14 shall cease to operate, once the Adjudicating Authority approves the resolution plan. The scheme of I&B Code therefore is, to make an attempt, by divesting the erstwhile management of its powers and vesting it in a professional agency, to continue the business of the Corporate Debtor as a going concern until a resolution plan is drawn up. D Once the resolution plan is approved, the management is handed over under the plan to the successful applicant so that the Corporate Debtor is able to pay back its debts and get back on its feet.

55Copy pinpoint55. This Court recently in the case of Kalpraj Dharamshi and another vs.Kotak Investment Advisors Ltd. and another (supra) has, E in detail, considered the provisions of Sections 30 and 31 of I&B Code, the Bankruptcy Law Reforms Committee (BLRC) Report of 2015 and the judgments of this Court in the case K. Sashidhar (supra), Committee of Creditors of Essar Steel India Limited through Authorised Signatory vs. Satish Kumar Gupta & Ors. (supra) and Maharashtra F Seamless Limited vs. Padmanabhan Venkatesh and others (supra) and observed thus: “139. It is thus clear, that the Committee was of the view, that for deciding key economic question in the bankruptcy process, the only one correct forum for evaluating such possibilities, and G making a decision was, a creditors committee, wherein all financial creditors have votes in proportion to the magnitude of debt that they hold. The BLRC has observed, that laws in India in the past have brought arms of the Government (legislature, executive or judiciary) into the question of bankruptcy process. This has been strictly avoided by the Committee and it has been provided, that H

GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 773 SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD. THROUGH THE DIRECTOR [B. R. GAVAI, J.] the decision with regard to appropriate disposition of a defaulting firm, which is a business decision, should only be made by the creditors. It has been observed, that the evaluation of proposals to keep the entity as a going concern, including decisions about the sale of business or units, restructuring of debt, etc., are required to be taken by the Committee of the Financial Creditors. It has been provided, that the choice of the solution to keep the entity as a going concern will be voted upon by CoC and there are no constraints on the proposals that the resolution professional can present to CoC. The requirements, that the resolution professional needs to confirm to the Adjudicator, are: (i) that the solution must explicitly require the repayment of any interim finance and costs of the insolvency resolution process will be paid in priority to other payments; (ii) that the plan must explicitly include payment to all creditors not on the creditors committee, within a D reasonable period after the solution is implemented; and lastly (iii) the plan should comply with existing laws governing the actions of the entity while implementing the solutions. E

140. The Committee also expressed the opinion, that there should be freedom permitted to the overall market, to propose solutions on keeping the entity as a going concern. The Committee opined, that the details as to how the insolvency is to be resolved or as to how the entity is to be revived, or the debt is to be restructured will not be provided in the I&B Code but such a decision will F come from the deliberations of CoC in response to the solutions proposed by the market.

141. This Court in the case of K. Sashidhar (supra) observed thus: G “32. Having heard the learned counsel for the parties, the moot question is about the sequel of the approval of the resolution plan by CoC of the respective corporate debtor, namely, KS&PIPL and IIL, by a vote of less than seventy-five per cent of voting share of the financial creditors; and about the correctness of the view taken by NCLAT that the percentage H

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A of voting share of the financial creditors specified in Section 30(4) of the I&B Code is mandatory. Further, is it open to the adjudicating authority/appellate authority to reckon any other factor other than specified in Sections 30(2) or 61(3) of the I&B Code as the case may be which, according to the resolution applicant and the stakeholders supporting B the resolution plan, may be relevant?” (emphasis supplied)

142. After considering the judgment of this Court in the case of Arcelormittal India Private Limited v. Satish Kumar C Gupta46 and the relevant provisions of the I&B Code, this court further observed in K. Sashidhar (supra) thus: “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 D 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) 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

GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 775 SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD. THROUGH THE DIRECTOR [B. R. GAVAI, J.] 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 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.” (emphasis supplied)

143. This Court has held, that it is not open to the Adjudicating C Authority or Appellate Authority to reckon any other factor other than specified in Sections 30(2) or 61(3) of the I&B Code. It has further been held, that 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. This Court thus, in unequivocal terms, held, that 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. It has been held, that the opinion expressed by CoC after due deliberations in the meetings through voting, as per voting shares, is a collective business decision. It has been held, that the legislature has consciously not provided any ground to challenge the “commercial wisdom” of the individual financial creditors or their collective decision before the Adjudicating Authority and that the decision of CoC’s ‘commercial wisdom’ is made non-justiciable.

144. This Court in Committee of Creditors of Essar Steel India Limited through Authorised Signatory (supra) after referring to the judgment of this Court in the case of K. Sashidhar (supra) observed thus: G “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 creditors. As an example, take the case H

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A 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 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.” (emphasis supplied)

145. This Court held, that what is left to the majority decision of CoC is the “feasibility and viability” of a resolution plan, which is required to take into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. It has further been held, that CoC is entitled to suggest a modification to the prospective resolution applicant, so that carrying on the business of the Corporate Debtor does not become impossible, which suggestion may, in turn, be accepted by the resolution applicant with a consequent modification as to distribution of funds, etc. It has been held, that what is important is, the commercial wisdom of the 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.

146. The view taken in the case of K. Sashidhar (supra) and Committee of Creditors of Essar Steel India Limited through Authorised Signatory (supra) has been reiterated by another three Judges Bench of this Court in the case of Maharashtra Seamless Limited (supra).

GHANASHYAM MISHRAAND SONS (P) LTD. THROUGH THE AUTH. 777 SIGNATORY v. EDELWEISS ASSET RECONSTRUCTION CO. LTD. THROUGH THE DIRECTOR [B. R. GAVAI, J.]

147. In all the aforesaid three judgments of this Court, the scope of jurisdiction of the Adjudicating Authority (NCLT) and the Appellate Authority (NCLAT) has also been elaborately considered. It will be relevant to refer to paragraph 55 of the judgment in the case of K. Sashidhar (supra), which reads thus: “55. Whereas, the discretion of the adjudicating authority B (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 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 E 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 H

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