Page 84 - GSTL_18th June 2020_Vol 37_Part 3

298 GST LAW TIMES [ Vol. 37
on the department or not. In this regard, it is trite to note that as per the amended
Section 31 of the IBC referred to supra, the Central Govt., State Govt. or any other
local authority to whom, a debt in respect of payment of dues arising under any
law for the time being in force are owed, have been brought under the umbrella
of the resolution plan approved by the adjudicating officer which has been made
binding on such governments and local authorities. The purpose of the IBC is
salutary as it has been enacted to ensure that an industry under distress does not
fade into oblivion and can be revived by virtue of the resolution plan. Once the
offer of the resolution applicant is accepted and the resolution plan is approved
by the appropriate authority, the same is binding on all concerned to whom the
industry concern may be having statutory dues. No right of audience is given in
the resolution proceedings to the operational creditors viz. the Central Govt. or
the State Govt. as the case may be.
19. The reply given by Hon’ble the Finance Minister (referred to supra)
emphatically conveys that the revival of the dying industry is of primacy and to
secure this objective, the government would be ready to sacrifice, leaving its in-
terest finally in the hands of the resolution professional and the COC as the case
may be. Precedence in the Scheme of the Act is given to secure the interest of the
financial creditors. On this aspect of the matter, the following extracts ere re-
ferred to in the case of Essar Steel :
“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 in-
to 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
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 debt-
or does not become impossible for want of a most basic and essential ele-
ment for the carrying on of such business, namely, electricity. This may, in
turn, be accepted by the resolution Applicant with a consequent modifica-
tion 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 negoti-
ation with the prospective resolution applicant, as to how and in what
manner the corporate resolution process is to take place.
44. The minimum value that is required to be paid to operational creditors
under a resolution plan is set out Under Section 30(2)(b) of the Code as be-
ing the amount to be paid to such creditors in the event of a liquidation of
the corporate debtor Under Section 53. The Insolvency Committee consti-
tuted by the Government in 2018 was tasked with studying the major issues
that arise in the working of the Code and to recommend changes, if any, re-
quired to be made to the Code. The Insolvency Committee Report, 2018
(hereinafter referred to as “The Committee Report, 2018”), inter alia, delib-
erated upon the objections to Section 30(2)(b) of the Code, inasmuch as it
provided for a minimum payment of a “liquidation value” to the opera-
tional creditors and nothing more, and concluded as follows :
“18. VALUE GUARANTEED TO OPERATIONAL CREDITORS
UNDER A RESOLUTION PLAN
18.1 Section 30(2)(b) of the Code requires the RP to ensure that eve-
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