There Can’t Be Discrimination Between One Class Of Creditors’; NCLAT Delhi Directs Modification Of Resolution Plan
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), while adjudicating an appeal filed in Akashganga Processors Pvt. Ltd. v Shri Ravindra Kumar Goyal & Ors., has directed the Successful Resolution Applicant to allocate funds to Operational Creditors in the Resolution...
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), while adjudicating an appeal filed in Akashganga Processors Pvt. Ltd. v Shri Ravindra Kumar Goyal & Ors., has directed the Successful Resolution Applicant to allocate funds to Operational Creditors in the Resolution Plan, who were left unpaid while other Operational Creditors were proposed to be paid. “However, when the Successful Resolution Applicant was making payment to other two Operation Creditors, there cannot be any discrimination between payment of one class of Creditors.”
The Resolution Plan was earlier rejected by the NCLT for being violative of Section 30(2)(e) and 30(2)(f) of IBC. However, the NCLAT permitted its implementation post modification.
Background Facts
The Corporate Debtor was admitted into Corporate Insolvency Resolution Process (“CIRP”). The State Tax (Government of Gujrat) and Central Excise (Government of India), being Operational Creditors of the Corporate Debtor, submitted their claims before the Resolution Professional. There were statutory dues of Gujarat Industrial Development Corporation and Surat Municipal Corporation in the capacity of Operational Creditors as well.
A Resolution Plan was submitted by the Successful Resolution Applicant (“SRA”) for the Corporate Debtor, which was approved by the Committee of Creditors with 99.84% voting share. The Resolution Plan proposed to pay Rs.32,78,102/- to Gujarat Industrial Development Corporation and Surat Municipal Corporation, to keep the Corporate Debtor as a going concern. However, no sums were allocated for State Tax (Government of Gujrat) and Central Excise (Government of India).
The Resolution Professional filed an application under Section 30(6) before NCLT, seeking approval of the Resolution Plan. The NCLT refused to approve the plan on the premise that it violates Section 30(2)(e) and 30(2)(f) of IBC.
NCLAT Verdict
The Bench placed reliance on the Supreme Court judgment in Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta & Ors., (2020) 8 SCC 531, where it was held that there can be differential payment in payment of debts of Financial Creditors and Operational Creditors, however, there can be no difference in inter se payment within a class of creditors.
It was opined that the Resolution Applicant was at liberty to not allocate any amount to any of the Operational Creditor in view of Section 53 of IBC. “However, when the Successful Resolution Applicant was making payment to other two Operation Creditors, there cannot be any discrimination between payment of one class of Creditors.”
The Bench directed distribution of Rs.32,78,102/- to all the four Operational Creditors on pro rata basis, in order to save the plan from being invalidated.
“We, thus, are of the view that the Adjudicating Authority having found that there is discrimination in payment of Operational Creditors could have directed for compliance of provision of the Code by distribution of Rs.32,78,102/- without affecting the other terms and conditions of the plan. By this modification the plan shall be able to sail and implemented, which is approved by CoC with 99.84% vote share. The plan need to be implemented with modification as directed above.”
The Bench opined that in place of rejecting the Resolution Plan, the NCLT could have directed for compliance of IBC provisions by distributing the amount of Rs.32,78,102/- amongst the remaining Operational Creditors. This would have ensured compliance without affecting terms and conditions of the Plan.
The appeal has been disposed of.
Case Title: Akashganga Processors Pvt. Ltd. v Shri Ravindra Kumar Goyal & Ors.
Case No.: Company Appeal (AT) (Insolvency) No.1148 of 2022
Counsel for Appellant: Mr. Abhijeet Sinha, Mr. Karan Valecha, Mr. Ravi Pahwa, and Mr. Saikat Sarkar, Advocates.
Counsel for Respondent: Mr. Samaksh Goyal, for R-1 (RP). Mr. Ankit Raj, Mr. Piyush Beriwal and Mr. Shashank Shekhar, Advocates for R-2 (PNB). Mr. Aditya Wadhwa and Mr. Yash Giri, Advocates for R-3.
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