During an appeal hearing, the National Company Law Appellate Tribunal (NCLAT) in New Delhi, consisting of Justice Rakesh Kumar Jain as the Judicial Member and Dr. Alok Srivastava as the Technical Member, determined that Section 30(2)(b) of the IBC specifies the process for making payments towards the debts of operational creditors.
Brief Facts:
The Appellant Company was undergoing Corporate Insolvency Resolution Process (CIRP) and was an operational creditor of the corporate debtor. The Adjudicating Authority's Impugned Order, which approves the resolution plan filed by Respondents 3 & 4, is being challenged by the Appellant as it differentiates between operational creditors who are in similar circumstances and discriminates between operational creditors and financial creditors with regards to payments under the resolution plan. The Appeal focused on two key issues: (i) whether the Appellant can bring up the matter of reduced claim admission at a later stage, after the resolution plan's approval, and (ii) whether the resolution plan's approval can be contested on the grounds of discrimination between financial and operational creditors concerning payments under the plan.
Contentions of the Appellant:
The Appellant asserted that the Committee of Creditors (CoC) and the Adjudicating Authority have failed to provide a rationale for the differentiation made between operational creditors and financial creditors, and there is also discrimination between the Appellant and other operational creditors. The Learned Counsel for the Appellant while referring to the Judgement of the Hon’ble Supreme Court in the matter of State Tax Officer (1) Vs. Rainbow Papers Limited (2022 SCC OnLine SC 1162) contented that the financial creditors who constitute the CoC cannot secure their dues at the cost of dues owed to government authorities and other creditors.
Contentions of the Respondent:
Respondent's Counsel argued that they must ensure the resolution plan meets the requirements of Section 30(2) and the CoC approved the modified resolution plan on 23.08.2021. The Counsel noted that the Appellant did not provide grounds to suggest RP violated Section 30(2) of the Code. Referring to K. Sashidhar Vs. Indian Overseas Bank & Ors. [(2019) 12 SCC 150], the Counsel emphasized the Adjudicating Authority's jurisdiction is limited to scrutinizing the resolution plan approved by the CoC within the confines of Section 31. Therefore, the Counsel submitted that the Appellant did not raise grounds of infringement of Section 30(2) or any other legal provision in the current Appeal.
Observations by the Court:
The Appellate Authority noted that the Appellant was informed that only Rs. 1,13,63,918/- was admitted against their claim since the power plant had been closed since 30.06.2020. Despite this, the Appellant did not appeal the admission of the reduced claim or discuss the matter with the RP after being informed via email on 02.09.2020. Further, it noted that it can be presumed that the Appellant accepted the admission of the claim at Rs. 1,13,63,918/-. The Authority stated that once a resolution plan has been approved, claims cannot be raised or contested at a later stage.
The Appellate Authority observed that on 15.10.2021, the Respondent had informed the Appellant via email that the resolution plan for the corporate debtor had been approved by the NCLT, Ahmedabad through its order dated 07.10.2021, and the Appellant's admitted claim had been allocated 'NIL' as per the approved resolution plan. The Liquidation Value of the Corporate Debtor was assessed as Rs. 34,22,46,797/-, while the debt of the financial creditors amounted to Rs. 593,68,95,085/-. According to the waterfall mechanism under Section 53 of the IBC, the entire amount of Rs. 34,22,46,797/- would be used to pay the CIRP costs, workmen dues, and dues owed to the secured financial creditors, which exceeded Rs. 34,22,46,797/-. As a result, the Authority noted that no amount would be left for payment to the operational creditors, as required by section 30(2)(b) and the waterfall mechanism of section 53.
The decision of the Court:
The appeal was dismissed.
Case Title: BNK Power Solution Private Limited v. Rajkumar Poddar and Others
Coram: Justice Rakesh Kumar Jain, Judicial Member and Dr. Alok Srivastava Technical Member
Case No.: Company Appeal (AT)(Insolvency) No. 59 of 2022
Advocate for the Applicant: Dr. Swaroop George, Mr. Tanmay Cheema & Mr. Sarthak Gupta, Advocates
Advocate for the Respondent: Mr. Kunal Godhwani, Advocate, Mr. Yashwardhan, Advocate and Mr. Tarun Bhushan, Advocate.
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