NCLT New Delhi (07.03.2023) In Mr. Anuj Jain Interim RP Jaypee Infratech Ltd. Vs. Suraksha Realty Ltd. [IA. No. 2836/PB/2021, IA. No. 3457/PB/2021 IA. NO. 3306/PB/2021, and IA. No. 2521/PB/2022 in Company Petition No. (IB)-77(ALD)/2017] while approving the Resolution Plan disposed of the objections filed by different creditors of the CD ;
That a dissenting financial creditor would be receiving the payment of the amount as per his entitlement; and that entitlement could also be satisfied by allowing him to enforce the security interest, to the extent of the value receivable by him.
It has never been laid down that if a dissenting financial creditor is having a security available with him, he would be entitled to enforce the entire of security interest or to receive the entire value of the security available with him.
It is but obvious that his dealing with the security interest, if occasion so arise, would be conditioned by the extent of value receivable by him.”
It is the prerogative of the SRA as to what amount it proposes to pay to its stakeholders and the prerogative is not questionable as long as it satisfies the provisions of the Code by providing the minimum Liquidation value to the Dissenting Financial Creditor(s).
The Successful Resolution Applicant gets the pre-emptive right over the assets of the Corporate Debtor, and as a corollary, it is his prerogative whether it wants to retain or release a particular asset for enforcing security interest.
However, under the provisions contained in Regulation 37(l) of IBBI (CIRP) Regulations, 2016, approval of YEIDA is still required as an Authority, if any of the proposals in the Resolution Plan seeks to alter the term of the Concession Agreement.
In our considered view, what YEIDA cannot get directly as an “Operational Creditor”, it cannot get it indirectly under the attire of being an “Authority”
Further, the proposal regarding extinguishment of claim of YEIDA in the Resolution Plan, because of it being the Operational Creditor, does not amount to violation of the Concession Agreement by the Successful Resolution Applicant, as the same is being effected due to operation of law.
In view of the above, we conclude that this Adjudicating Authority cannot enter into any quantitative analysis to adjudge as to whether the Resolution Plan results in maximisation of the value of assets or not. Hence, we reject the objection in regard to maximisation of the value of assets.
Since the Resolution Applicant has to re-start the functions of the Corporate Debtor on a fresh slate in terms of the Judgement of Hon’ble Supreme Court in Essar Steel (Supra), any fresh proceedings by virtue of subrogation on the Corporate Debtor managed by SRA are contrary to the scheme of IBC.
We find that the Personal Guarantor has no right to subrogation, and to recover its dues from the Corporate Debtor, after approval of the Resolution plan. Hence, we find no illegality in Clause 34.50 of Suraksha’s Resolution Plan.
Excerpts of the order;
# 24. Although the Resolution Applicant and the IRP have averred that the Resolution Plan is compliant in all respects, however, Yamuna Expressway Industrial Development Authority (hereinafter referred to as “YEIDA”), ICICI Bank, Ex-Promoter of JIL, Mr. Manoj Gaur have raised their objections to Approval of the Resolution Plan by filing separate Interlocutory Applications (IAs). Therefore, at this stage, in order to adjudicate whether the Resolution Plan under consideration is compliant in all respects or not, we consider it necessary to visit these objections IA-wise.
VII. I.A. NO. 3457/PB/2021
OBJECTIONS OF ICICI BANK
# 25. First, we consider it appropriate to deal with the objections raised to the Resolution Plan by the Dissenting Financial Creditor (DFC) ICICI Bank (hereinafter, referred to as the “Applicant Bank”) by filing the present I.A.- 3457 of 2021. The prayers made in this IA are reproduced below:
“a. Allow the present application and direct the Resolution Plan to be made compliant with the mandatory requirements under Section 30(2) of the Insolvency & Bankruptcy Code, 2016 and the law laid down by the Hon’ble Supreme Court in Jaypee Kensington Boulevard Apartments Welfare Association & Ors. v. NBCC (India) Limited & Ors. by providing payment of Liquidation Value to the Applicant in its capacity as the dissenting financial creditor either in cash or by permitting it to enforce its security interest over all or any assets of the Corporate Debtor secured in its favour as per Applicant’s own discretion and choice.
b. Pass such other order/orders as it may be deem fit and proper in the facts and circumstances of the face.”
26. In addition to the ICICI Bank, JAL - the Holding Company and the expromoter of the Corporate Debtor have also objected to the Resolution Plan. For the sake of convenience, the ICICI Bank (the Applicant herein), JAL, and Ex Promoter of JIL together, hereinafter, are referred to as “Objectors”.
29. After going through the documents placed on record and hearing submissions made by the Objectors as well as the Supporters of the Resolution Plan, this Bench observes that the Objectors have raised the following main objections to the Resolution Plan:
a) The Resolution Applicant had thrust its choice of land on the Dissenting Financial Creditor for enforcing its Security Interest. The Dissenting Financial Creditor was not given a choice to enforce security interest in its desired property.
b) The proposed Resolution Plan compels the Dissenting Financial Creditor to bear the entire cost of enforcing security interest, which might create a risk for the Dissenting Financial Creditor not to realize even the Minimum Liquidation Value.
c) The manner of computation of the Liquidation value of ICICI Bank itself is erroneous as the entitlement of the ICICI Bank for another Rs. 86 Crore over and above Rs.218 Crore under Section 53(1)(d) i.e., as an Unsecured Financial Creditor, was not considered.
# 30. Per Contra, the Supporters of the Resolution Plan have contended that:
a) There is no provision under the IBC 2016, which stipulates that the Dissenting Financial Creditor can choose the property of its own choice to enforce its Security Interest.
b) The Resolution Applicant has provided the “Shortfall Undertaking” under the plan which shall protect the interest of the Dissenting Financial Creditor. Further, the Liquidation value of the asset for which Security Interest is to be enforced is sufficient to meet the expenses incurred on realizing the Liquidation value. Moreover, the fair market value of the said asset is higher than the Liquidation value.
c) The other Secured Financial Creditors have accepted the mode of calculation of the Liquidation value, in their commercial wisdom. Further, the entitlement of the Liquidation value of ICICI Bank over Rs. 218 Crore is ‘Nil’ in terms of Section 53(1)(e)(ii) of the IBC,2016.
# 31. Now, we would like to examine the contentions of both sides. It is a matter of fact that the Resolution Applicant vide its email dated 02.07.2021 had informed the Applicant ICICI Bank/DFC that it had identified 180 Acres of land at Tappal, UP and requested the Applicant Bank to provide its views/ suggestions. The said email dated 02.07.2021 is reproduced below: . . . .
In response to the abovesaid e-mail, the Applicant ICICI Bank vide letter dated July 08, 2021 raised objections which, inter alia, included the ICICI Bank's grievance of not being permitted to choose the security interest to be enforced by it. In reply to this, the Suraksha vide letter dated July 29, 2021 responded to the objections raised by ICICI Bank. At this stage, we therefore, refer to the said letter, which is reproduced below for immediate reference: Thus, we notice that the Suraksha vide letter dated July 29, 2021 invited the ICICI Bank to choose any land parcel out of the 666 acres of land in Tappal. However, the ICICI Bank did not revert back. Thus, ICICI Bank failed to exercise this right provided by the SRA under the Resolution Plan. Resultantly, the selected 180 acres of land was allotted by Suraksha to the DFC/ICICI Bank.
# 32. The grievance of the ICICI Bank is that it was not given an opportunity to select property of its own choice, for enforcing the Security Interest. We are aware the Hon’ble Supreme Court in the Jaypee Kensington had recognized the enforcement of Security Interest, as a mode of payment of Liquidation value. The relevant extracts of the Judgement are reproduced below:
“124. To sum up, in our view, for a proper and meaningful implementation of the approved resolution plan, the payment as envisaged by the second part of clause (b) of sub-section (2) of Section 30 could only be payment in terms of money and the financial creditor who chooses to quit the corporate debtor by not putting his voting share in favour of the approval of the proposed plan of resolution (i.e., by dissenting), cannot be forced to yet remain attached to the corporate debtor by way of provisions in the nature of equities or securities. In the true operation of the provision contained in the second part of sub-clause (ii) of clause (b) of subsection (2) of Section 30 (read with Section 53), in our view, the expression “payment” only refers to the payment of money and not anything of its equivalent in the nature of barter; and a provision in that regard is required to be made in the resolution plan whether in terms of direct money or in terms of money recovery with enforcement of security interest, of course, in accordance with the other provisions concerning the order of priority as also fair and equitable distribution. We are not commenting on the scenario if the dissenting financial creditor himself chooses to accept any other method of discharge of its payment obligation but as per the requirements of law, the resolution plan ought to carry the provision as aforesaid.” (Emphasis Supplied)
# 33. On perusal of the above, it is observed that the Dissenting Financial Creditor has to be paid in terms of “money” or in terms of “money recovery with enforcement of security interest”. Here, we further refer to the Judgement of the Hon’ble Supreme Court in the matter of India Resurgence Arc Private Limited Vs M/s. Amit Metaliks Limited & Anr. Civil appeal no. 1700 of 2021, wherein the following is held:
“14.1. In Jaypee Kensington (supra), this Court repeatedly made it clear that a dissenting financial creditor would be receiving the payment of the amount as per his entitlement; and that entitlement could also be satisfied by allowing him to enforce the security interest, to the extent of the value receivable by him. It has never been laid down that if a dissenting financial creditor is having a security available with him, he would be entitled to enforce the entire of security interest or to receive the entire value of the security available with him. It is but obvious that his dealing with the security interest, if occasion so arise, would be conditioned by the extent of value receivable by him.” (Emphasis Supplied)
# 34. On perusal of the Judgement (Supra), it is observed that as per the need of the situation, the enforcement of security interest can be conditioned. Since the Code provides for minimum Liquidation value to be paid to the Dissenting Financial Creditor(s), it is the prerogative of the SRA as to what amount it proposes to pay to its stakeholders and the prerogative is not questionable as long as it satisfies the provisions of the Code by providing the minimum Liquidation value to the Dissenting Financial Creditor(s).
# 35. We are aware that the Prospective Resolution Applicants (PRAs) furnish their Resolution Plans based on the Information Memorandum (IM) prepared by the Resolution Professional, where the list of all the Assets of the Corporate Debtor is given. If a DFC is given the option to select an asset for enforcing security interest, then there will be uncertainty, as there will be a surprise loss of that Asset, which formed part of the said Information Memorandum and for which the Prospective Resolution Applicant might have got attracted to submit the Resolution Plan. A prospective Resolution Applicant to a Corporate Debtor having multiple Creditors, cannot anticipate as to which Creditor will dissent to the Resolution Plan. If the plan is approved by the requisite majority, the Successful Resolution Applicant gets the pre-emptive right over the assets of the Corporate Debtor, and as a corollary, it is his prerogative whether it wants to retain or release a particular asset for enforcing security interest.
Here, we refer to the Judgement of the Hon’ble Supreme Court in the matter of Ram Kishun and Ors. vs. State of U.P Civil Appeal No. 6204 of 2009 dated 24.05.2012, wherein the following is observed:
“8. Undoubtedly, public money should be recovered and recovery should be made expeditiously. But it does not mean that the financial institutions which are concerned only with the recovery of their loans, may be permitted to behave like property dealers and be permitted further to dispose of the secured assets in any unreasonable or arbitrary manner in flagrant violation of statutory provisions.” (Emphasis Supplied)
Thus, in our considered view, as long as the minimum Liquidation Value is paid by the Resolution Applicant to the Dissenting Financial Creditor(s), the latter cannot seek any replacement or ask for an alternate property, as a matter of right, for enforcing its Security Interest.
# 36. Further, we are unable to find any provision under the IBC 2016, or any Rule or Regulation framed thereunder providing that the Creditor is entitled to choose the security interest of its own choice.
# 37. Hence, we do not find any fault in Suraksha’s Resolution Plan on the ground that the Dissenting Financial Creditor ICICI Bank has not been given the choice to select a property for enforcing its Security Interest.
# 38. The next objection raised by the plan objectors is that the cost of enforcing security interest has been left to the Dissenting Financial Creditor, which may even result in the non-realization of Liquidation value.
# 39. It is a matter of fact that the SRA vide clause 15.54 of the Resolution Plan has left it on the Dissenting Financial Creditor to bear the cost of enforcing security interest. Further, land admeasuring 180 acres at Tappal, U.P has been allotted to the Dissenting Financial Creditor to enforce its Security Interest (as per the map attached with the application filed by the ICICI Bank and reproduced overleaf): The Liquidation value of the land at Tappal has been calculated @ Rs 1.30 Crore per Acre, as per Clause 15.47 of the Proposed Resolution Plan, details of which as provided in the Resolution Plan are reproduced overleaf for immediate reference:
# 40. Whereas, the Liquidation value of the ICICI Bank has been stated to be Rs. 218 Crores only, the Liquidation value for the 180 Acres of land parcel at Tappal aggregates to (Ac. 180 x Rs. 1.30 Crore per acre) Rs. 234 Crores, which is clearly higher than the liquidation value entitlement of the ICICI Bank. We further observe that the Resolution Applicant has given the “Shortfall Undertaking” in the Plan, as per which it has undertaken to provide additional 2594 Acres of land parcel for enforcing security interest, in the event of any shortfall. Moreover, the fair market value (FMV) of the land is still higher especially, in the backdrop of the ever-rising trend in land prices. In view of the above, we are of the view that the SRA has made sufficient arrangements to enable the Dissenting Financial Creditor/ICICI Bank to achieve its Liquidation value and cover expenses of enforcing security interest. Hence, this objection raised by the Applicant ICICI Bank and other objectors does not merit consideration and therefore, is rejected.
# 41. Another objection raised by the objectors of the plan is with respect to the amount of Liquidation value receivable by the ICICI Bank. It is contended by the ICICI Bank that it has been given entitlement only to the extent of the value of the security available to it, with no further entitlement given to the Applicant’s rights as an unsecured creditor, on the unencumbered and other available assets of the Corporate Debtor. To examine this contention, we refer to Section 30(2) of IBC, 2016, which reads as under:
30. Submission of resolution plan. –
(1)……
(2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan -
(a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the 4 [payment] of other debts of the corporate debtor;
(b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than-
(i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or
ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the corporate debtor.…..” (Emphasis Supplied)
# 42. On perusal of the above, it is observed that the Dissenting Financial Creditor is required to be paid an amount in accordance with the provision under Section 53(1) of the IBC 2016, in the event of Liquidation of a Corporate Debtor, which implies that the principle of deemed fiction of Liquidation has been applied in respect to the entitlement of a dissenting financial creditor in the context of Resolution Plan.
# 43. The ICICI Bank has contended that after availing its entitlement under Section 53(1)(b)(ii) IBC, 2016, it is further entitled under Section 53(1)(d) as an unsecured creditor. Per Contra, the Plan Supporters have contended that ICICI Bank’s further entitlement falls under Section 53(1)(e)(ii) of IBC, 2016, which makes ICICI Bank’s additional entitlement as Nil.
# 44. Here, we consider it appropriate to refer to Section 53(1) of IBC, 2016, which is reproduced below:
# 45. Section 30(2) stipulates that Liquidation value, receivable under Section 53(1) has to be taken into account. The contention of the Supporters of the Plan is that Section 53 has to be read with Section 52 of IBC, 2016 since the Security Interest has been enforced in the instant case. Therefore, at this stage, we would like to visit Section 52 of IBC, 2016 which reads thus:
# 46. When we peruse Section 53, it is observed that it contains the provision for the distribution of assets during the Liquidation proceedings. The reference of Section 53(1) in Section 30(2)(b) has been only for a limited purpose i.e., to define the minimum entitlement of the dissenting financial creditors, which shall not be less than the liquidation value of the Corporate Debtor. When we further refer to Section 53(1)(b)(ii), we observe that the provision therein is meant only for those Secured Creditors, who have relinquished their Security interest. In contrast, there is no such provision under Section 53(1) for the Creditors, who have enforced their security interest. We understand that such Creditors have been left on their own to recover their dues and it is not the Liquidator’s responsibility to distribute the proceeds. But in the case herein, it is the question of calculating the Liquidation value. Since in the context of a Resolution Plan, the enforcement of security interest is nothing but the alternate mode of payment of cash as enunciated by the Jaypee Kensington. Therefore, for calculating the Liquidation value as an entitlement of a Dissenting Financial Creditor in the context of a Resolution Plan, we have to treat the Dissenting Financial Creditor under Section 53(1)(b)(ii) of the IBC, 2016.
# 47. For the remaining entitlement of the ICICI Bank, we observe that the ICICI Bank is the only Creditor, who has dissented to the Resolution Plan. When we visit Form-H submitted by the Applicant, we observe that the ICICI Bank was always classified as a Secured Financial Creditor and not as an Unsecured Financial Creditor. Further, Homebuyers and Fixed Deposit Holders were categorized as Unsecured Creditors, as would be evident from the relevant extracts of the Form-H as reproduced below: . . . . . . .
# 48. In our considered view, the DFC/ICICI Bank cannot sail in two boats, either it can be treated as a Secured Financial Creditor or as an Unsecured Financial Creditor. The wording under Section 53(1)(b)(ii) regarding “relinquished security” will not make the Secured Creditor as an Unsecured Creditor. Since in the context of a Resolution plan, Section 53(1)(b)(ii) has a limited role i.e., only for calculation of minimum entitlement of a DFC in terms of Liquidation value, it does not mean that relinquishment of Security Interest in actual has taken place by the Secured Creditor, the requirement of which only arises when the Corporate Debtor is under Liquidation. Hence, a Secured Creditor cannot be treated as an Unsecured Creditor and will not be entitled to both the benefits under Section 53(1)(b)(ii) and Section 53(1)(d) both simultaneously.
# 49. On perusing Section 53(1)(e)(ii), it is observed that the unpaid entitlement of a Secured Creditor is only recognized below in priority to the payment to an Unsecured Creditor 53(1)(d), which in the present case turns out to be “Nil”. Hence, we find that no error has been committed by the IRP of JIL, while calculating the Liquidation value of the Dissenting Financial Creditor/ ICICI Bank.
# 50. In view of the aforesaid discussion, we find no merit in the IA- 3457/PB/2021 filed by the ICICI Bank and the same is accordingly, Dismissed.
VIII. IA. NO. 3306/PB/2021
OBJECTIONS OF YEDIA
# 51. By filing this IA, the Yamuna Expressway Industrial Development Authority (hereinafter, referred to as “YEIDA”) has raised objections to the CoC-approved Resolution Plan of Suraksha Realty. YEIDA have, however, clarified that their objections are not intended to disrupt or stall the present Resolution Plan, but solely and exclusively for the reason that the SRA/ Suraksha has disregarded the observations and findings of the Judgement of Hon’ble Supreme Court passed in the Jaypee Kensington.
# 54. It is further submitted by YEIDA that it had filed its claims arising on account of different reasons in Form B on 23.08. 2017 and 28.11.2017 with the IRP. The summary of the claims filed by YEIDA and their treatment in the Resolution Plan is reproduced below: The YEIDA has mainly raised objections to the treatment meted out in the Resolution Plan to its claims pertaining to:
i. Pending works and External Development Charges (EDCs) including interest;
ii. Unexecuted External Development Works and Other future Works; and
iii. 64.7% Additional Compensation Payable to farmers.
# 55. Other than the above, YEIDA has raised objections towards certain Reliefs and Concessions sought in the Resolution Plan and to the “Transfer and Monetisation of Beneficial Interest in Land Parcels” to the Assenting Financial Creditors.
# 71. However, when we come to the facts of the present case, we see YEIDA in a dual capacity. Although it is an “Authority” within the meaning and context of Regulation 37(l) but at the same time, in terms of the nature of claim filed by it against the Corporate Debtor in an IBC proceedings, it is also an “Operational Creditor”.
# 72. It is a matter of fact that YEIDA, though an “Authority”, being an “Operational Creditor” is not the part of the CoC of the Corporate Debtor, which alone is empowered under law to consider and approve or reject a Resolution Plan on commercial terms. However, under the provisions contained in Regulation 37(l) of IBBI (CIRP) Regulations, 2016, approval of YEIDA is still required as an Authority, if any of the proposals in the Resolution Plan seeks to alter the term of the Concession Agreement. However, this does not give any right to the Authority (i.e., YEIDA) to negotiate with the Successful Resolution Applicant, that if its claim is not fully discharged, it shall object to the Resolution plan. In our considered view, what YEIDA cannot get directly as an “Operational Creditor”, it cannot get it indirectly under the attire of being an “Authority”.
# 73. In the instant case, if we ignore the reliefs and concessions sought in the Resolution Plan for a moment, then in our view, we find no such provision in the Suraksha’s Resolution Plan, which is in violation of the terms of the Concession Agreement (CA) under reference. Further, the proposal regarding extinguishment of claim of YEIDA in the Resolution Plan, because of it being the Operational Creditor, does not amount to violation of the Concession Agreement by the Successful Resolution Applicant, as the same is being effected due to operation of law.
# 74. Hence, we find no illegality in the Resolution Plan, so far as it relates to provision of Rs. 10 Lakhs towards the operational claim relating to External Development Charges (EDC) of YEIDA.
# 78. During the course of hearing, the Ld. Senior Counsel appearing for the SRA submitted that YEIDA had filed its claim towards additional compensation in the capacity of an Operational Creditor and the Liquidation value owed to the Operational Creditor is ‘Nil’. Against that, even if this liability of additional amount of compensation is fastened on the Corporate Debtor/JIL, the SRA/Suraksha has provided (for this contingency) an amount of Rs. 10 Lakh in the Resolution Plan proposed.
# 79. We find credence in the submissions made by the Ld. Senior Counsel appearing for the SRA that the dues of YEIDA even if found payable, are at the most, in the nature of an Operational Debt. We are aware that the Hon’ble Supreme Court in the matter of New Okhla Industrial Development Authority Versus Anand Sonbhadra in Civil Appeal No. 2222 of 2021, in the context of NOIDA Authority, (which is similar in status as YEIDA) has held vide its Judgement dated 17.05.2022 that NOIDA Authority is an Operational Creditor. The relevant extracts of the Judgement are reproduced below:
“144. The appellant would, in fact, point out that it is not necessary to probe the matter further, in view of the concurrent findings that the appellant is an operational creditor. No doubt, Smt. Madhavi Divan does point out that the words ‘arising under any law’, may not be the same as amounts being made recoverable under a law. Of course, she would point out that as far as the rental part of the claim, it may be relatable to the first limb of an operational debt. When questioned further, as to what her position is, if this Court found that the appellant is not a financial creditor, the appellant may be entitled, at least, to be treated as an operational creditor. We would think that, having regard to the fact that both the NCLT and NCLAT have proceeded on the basis that the appellant is an operational creditor, we need not stretch the exploration further and pronounce on the questions, which may otherwise arise. We must not be oblivious to the following prospect, should we find that the appellant is not an operational creditor, even under the IBC Regulations apart from claims by financial creditors and operational creditors, claims can be made by other creditors. However, there are, undoubtedly, certain advantages, which an operational creditor enjoys over the other creditors. We would proceed on the basis that, while the appellant is not a financial creditor, it would constitute an operational creditor.” (Emphasis Supplied)
# 85. During the course of the hearing, one more objection was raised by YEIDA as well as JAL that the Hon’ble Supreme Court of India in the matter of State Tax Officer v. Rainbow Papers Limited reported as 2022 SCC OnLine SC 1162, observed that the Committee of Creditors comprising of financial creditors cannot secure its own dues at the cost of dues owed to the government or any governmental authority. They relied on the following paragraph of the Judgement:
“52. If the Resolution Plan ignores the statutory demands payable to any State Government or a legal authority, altogether, the Adjudicating Authority is bound to reject the Resolution Plan.”
# 89. We have heard the submissions of both sides and gone through the relevant pleadings. In order to examine the contentions of both parties, we would like to visit the Judgement of the Hon’ble Supreme Court in Rainbow Papers (Supra), the relevant extracts of which reads thus:
“30. The learned Solicitor General rightly argued that in view of the statutory charge in terms of Section 48 of the GVAT Act, the claim of the Tax Department of the State, squarely falls within the definition of “Security Interest” under Section 3(31) of the IBC and the State becomes a secured creditor under Section 3(30) of the Code.
..
57. As observed above, the State is a secured creditor under the GVAT Act. Section 3(30) of the IBC defines secured creditor to mean a creditor in favour of whom security interest is credited. Such security interest could be created by operation of law. The definition of secured creditor in the IBC does not exclude any Government or Governmental Authority.”
On perusal of the above paragraph, it is observed that the Tax Department/Government was categorized as a Secured Creditor, as in that particular case security interest was created by virtue of law under the GVAT Act.
# 90. In order to determine, whether the same can be made applicable to YEIDA, we refer to the definition of the “Secured Creditor” as provided under Section 3(30) of IBC, 2016, which thus: “Secured creditor” means a creditor in favour of whom security interest is created;
Further, the term “Security interest” is defined under Section 3(31) of IBC, 2016, as reproduced below:
“(31) “security interest” means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person: Provided that security interest shall not include a performance guarantee;”
Hence, in order to determine whether any Security Interest is created in favour of YEIDA, we refer to the Claim Form-B dated 28.08.2017 filed by YEIDA with the IRP of Corporate Debtor/JIL, which is reproduced overleaf:
On perusal of column 9 of Form B of YEIDA reproduced above, it is observed that there is no retention of title in respect of any property to which the claim of YEIDA refers. Therefore, while going through the claim Form B (ibid), we find that in respect of the claim, no security interest is found to have been created by YEIDA and therefore, we are of the view that YEIDA cannot be termed as a ‘Secured Creditor’.
Further, even during the course of the hearing, YEIDA was unable to explain that as to how it has created any security interest, in the light of the Judgement of the Hon’ble Supreme Court in the Rainbow Papers Limited (Supra).
# 91. Since, in the instant case, YEIDA has not been able to show any creation of security interest, we find that the Judgement of the Rainbow Papers Limited (Supra) is not applicable to the instant case.
# 92. In view of the foregoing discussion on all the issues raised by YEIDA, the IA-3306/PB/2021 filed by YEIDA is Dismissed.
IX. OBJECTIONS OF M/S JAL AND MR. MANOJ GAUR
# 93. M/s. JAL and Mr. Manoj Gaur, the Personal Guarantor of JIL have raised certain objections towards approval of the proposed Resolution plan. They have submitted that:
# 93.1 The proposed Resolution plan fails to maximize the value of assets. While placing reliance on the Judgement of the Hon’ble Supreme Court in the matter of Committee of Creditors, Essar Steel Vs Satish Gupta, (2020) 8 SCC 531 (Para 73), they contended that it is the duty of the CoC to maximize the value of assets and balance the interest of all the stakeholders. Further, the principles laid down in the Judgement of Essar Steel (Supra) were also recognized in the Jaypee Kensington in Para 77.5.
# 96. In view of the submissions of IRP and the documents placed on record, we find the allegations of M/S JAL and Mr. Manoj Gaur with regard to not including the land parcel of 750 acres in the Resolution Plan and the SRA failing to maximise the value of assets as baseless and hence, in our view, these allegations merit no consideration.
# 97. As regards the role of the Adjudicating Authority, in regard to maximizing the value of assets, we refer to the following observations of the Hon’ble Supreme Court in the Jaypee Kensington (Supra):
“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.” (Emphasis Supplied)
# 98. In view of the above, we conclude that this Adjudicating Authority cannot enter into any quantitative analysis to adjudge as to whether the Resolution Plan results in maximisation of the value of assets or not. Hence, we reject the objection in regard to maximisation of the value of assets.
# 103. Since the Resolution Applicant has to re-start the functions of the Corporate Debtor on a fresh slate in terms of the Judgement of Hon’ble Supreme Court in Essar Steel (Supra), any fresh proceedings by virtue of subrogation on the Corporate Debtor managed by SRA are contrary to the scheme of IBC. Further, if such a right of subrogation is crystalized after the approval of the Resolution Plan, then recovery from the Corporate Debtor managed by SRA under the such right of subrogation is contrary to the Judgement of Hon’ble Supreme Court in the matter of Ghanshyam Mishra and Sons Vs Edelweiss Asset Reconstruction Company, CIVIL APPEAL NO.8129 2019, dated 13.04.2021, which reads thus:
“95. In the result, we answer the questions framed by us as under: i) That once a resolution plan is duly approved by the Adjudicating Authority under sub section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan; …..” (Emphasis Placed)
# 104. Hence, in terms of the Judgement (Supra), we find that the Personal Guarantor has no right to subrogation, and to recover its dues from the Corporate Debtor, after approval of the Resolution plan. Hence, we find no illegality in Clause 34.50 of Suraksha’s Resolution Plan.
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