NCLT Approves Resolution Plan for Trimurti Foodtech Pvt. Ltd: Adjudicating Authority Cannot Modify Resolution Plan which CoC has Approved in their Commercial Wisdom

NCLT Approves Resolution Plan for Trimurti Foodtech Pvt. Ltd: Adjudicating Authority Cannot Modify Resolution Plan which CoC has Approved in their Commercial Wisdom

The National Company Law Tribunal (NCLT), Mumbai by its division member bench comprising of Kuldip Kumar Kareer (Judicial Member) and Anuradha Sanjay Bhatia (Technical Member) has approved the resolution plan of Mr. Jitendra Bhandari for Trimurti Foodtech Private Limited (“Corporate Debtor”) under section 31 (1) of the Insolvency and Bankruptcy Code, 2016 (IBC).

The Company/Corporate Debtor- Trimurti Foodtech Pvt. Ltd, was admitted into Corporate Insolvency Resolution Process (“CIRP”) vide an order dated 11 August, 2021.

Trimurti Foodtech Private Limited was engaged in the business of manufacturing of gravy products, canned fruit juice and masala products in Aurangabad with its products being exported to countries like Japan, USA, UAE, and Iran.

The Company had initially received an admitted claim of Rs. 4.92 crore from Secured Financial Creditor, of Rs. 23.11 crore from Unsecured Financial Creditors, of Rs. 4.25 crore from Operational Creditors, but the Resolution Professional reclassified 9 Unsecured Financial Creditors as “Related Party” and removed them from the Committee of Creditors (“CoC”).

The average Liquidation value amounted to Rs. 15.2 crore and Fair value of the assets of the company amounted to Rs. 18.7 crore. The Company received resolution applications from 23 applicants. The CoC approved the Resolution Plan of Mr. Jitendra Bhandari with a voting share of 78.58% in its 9th meeting held on 14th June, 2022.

The resolution plan offered a 100% recovery of Rs. 4.92 crore to the Secured Financial Creditor. It further offered a 45% recovery of Rs. 23.11 crore amounting to Rs. 10.4 crore to Unsecured Financial Creditors. It further offered 16.78% recovery of Rs. 4.25 crores amounting to Rs. 71.37 lakh to Operational Creditors. The resolution plan further offered a 2% recovery of Rs. 10.11 crore amounting to Rs. 20.23 lakh to various government departments. Lastly, it offered a 100% recovery of Rs. 38.29 lakh to the workmen/employees.

The bench noted as per Section 30(2)(b) of the IBC, the Respondent/Corporate Debtor had agreed to pay Operational Creditors an amount which shall not be less than liquidation value or the amount that would have been paid to such creditors if the amount to be distributed under the Resolution Plan is distributed in accordance with priority under Section 53(1), whichever is higher.

Further, it was noted by the bench that the Resolution Applicant had agreed that dissenting financial creditors shall be paid in priority and not less than the value they would have been paid in the event of liquidation of the Corporate Debtor. The Respondent had proposed to pay liquidation value to unsecured financial creditors who dissent from the plan.

The NCLT was of the considered view that the Resolution Plan does not contravene any of the provisions of the law for the time being in force- Resolution Plan provides for the implementation and supervision of the resolution plan as per Section 30(2)(e).

As per Insolvency and Bankruptcy Board of India (IBBI) Guidelines 38(1)(b) - the amount payable under a Resolution Plan -to the financial creditors, who have a right to vote under sub-section (2) of section 21 and did not vote in favor of the Resolution Plan, shall be paid in priority over financial creditors who voted in favor of the plan.

Noting the above provision, the NCLT was satisfied that the Resolution Plan complied with Regulation 38 of the Regulations in terms of Section 30(2)(f).

The bench further referred the decision passed in K. Sashidhar v. Indian Overseas Bank & Others (2019) wherein the Apex Court held that if the CoC had approved the Resolution Plan by requisite percent of voting share, then as per section 30(6) of the Code, it is imperative for the Resolution Professional to submit the same to the Adjudicating Authority (NCLT).

In this regard, the bench observed, “the legislature has given paramount importance to the commercial wisdom of committee of creditors (CoC) and the scope of judicial review by the Adjudicating Authority (AA) is limited to the extent of scrutiny provided under section 31 of Code and the direction of the Appellate Authority is limited to the extent provided under sub-section (3) of Section 61 of the IBC.”

Furthermore, the Tribunal referred the decision passed by the Apex Court in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors. (2019), had clearly laid down that the Adjudicating Authority would not have power to modify the Resolution Plan which the CoC in their commercial wisdom have approved.

Therefore, as per the law settled, the NCLT was of the considered view that the Resolution Plan met the requirements of Section 30(2) of the Code and Regulations 37, 38, 38(1A) and 39(4) of the Regulations.

The NCLT took note of the following facts:

1. Resolution Plan was not in contravention of any of the provisions of Section 29A of the IBC and was in accordance with law.

2. The Resolution Plan was feasible and viable. There were no workers claims.

3. Resolution Applicant had agreed to pay the full CIRP costs and also future costs if any as certified by the Resolution Professional and CoC.

4. The Resolution Plan balanced the interest of all the stakeholders and thus it deserved to be approved.

Accordingly, the NCLT approved the Resolution Plan being satisfied that it was in compliance of IBC, 2016 and its various regulations thereunder.