The National Company Law Appellate Tribunal has reconfirmed the principle that the touchstone for judging the benevolence of a resolution plan does not depend upon the manner wherein differently placed creditors are treated therein. Resonating with the judgment passed recently by Supreme Court in the case titled, "Committee of Essar Steel v. Satish Kumar Gupta" passed on 15.11.2019, the NCLAT, in the Appeal titled as, "Pacific World Shipping Pvt. Ltd. v. Dadi Impex Pvt. Ltd.", bearing Company Appeal bearing no. 728 of 2019 has held that when a resolution plan has successfully passed the benchmark prescribed under Section 30 (2) of the Insolvency and Bankruptcy Code (Amendment Act), 2019 the same is sufficient compliance in the eyes of the Code and creditors who may have suffered a greater haircut than other creditors (belonging to the different class altogether) ought not to be permitted to impugn the resolution plan, on the aforesaid ground.
It was argued on behalf of the COC that the 2% of their respective claim amounts allocated to the Operational Creditors under the resolution plan, was more than the amount the Appellant and other Operational Creditors would have received in the event of liquidation [NIL] of the Corporate Debtor and accordingly the resolution plan met the requirement of S.30(2) (b) of the Code [both unamended & amended]. It was stressed that the amount to be paid to the Operational Creditors has to be higher of either the amount to be paid to such Operational Creditors under Section 53 of the Code in the event of liquidation of the Corporate Debtor ["Situation 1"] or the amount under the resolution plan when distributed in accordance with the order of priority in sub-section (1) of Section 53 ["Situation 2"]. In the instant case under Situation 1, the amount payable to the Operational Creditors was NIL and in Situation 2, the amount payable to the Operational Creditors was also NIL. Nonetheless, as far as the debt owed to the Operational Creditors are concerned, the Resolution Plan, as approved, proposed a payment of 2% of their claim.
It was also argued that a Resolution Plan which stands approved u/S. 31(4) of the Code would be binding on all the stakeholders, including all creditors, whatsoever class they may belong to, particularly when the decision of the CoC in approving the Resolution Plan has duly considered in the interest of the stakeholders.
The bench appreciating the arguments advanced on behalf of the COC held that when the Resolution Plan was being discussed the Operational Creditors had objected to the 2% allocation for Operational Creditors and the minutes show that the Resolution Applicant had expressed that it will not be possible for it to pay such a high amount. Thus, the issue was discussed in the COC meetings and it appears that the lead Bank, State Bank of India got modifications made in the Resolution Plan and ultimately approved the same. It is noticed that the MSME has proposed paying of 100% debts of the Financial Creditors not as upfront. The COC has accepted some restructuring keeping in view the outstanding debts and the liquidation value just to keep the Corporate Debtor a going concern. When the lead Bank has shown concern to accept adjustments to keep the MSME a going concern, it does not appear appropriate to the Hon'ble Bench to push the same to liquidation. Holding, as aforesaid the Hon'ble Tribunal was pleased to dismiss the Appeal.
The Bench heard arguments on behalf of the Committee of Creditors, represented by the lead Bank, i.e. State Bank of India, which was represented by Mr. Nakul Sachdeva [Partner– L&L Partners (formerly Luthra & Luthra Law Offices)], Mr. Aakarshan Sahay [Managing Associate– L&L Partners (formerly Luthra & Luthra Law Offices)] and Mr. Damandeep S. Bhalla [Sr. Associate– L&L Partners (formerly Luthra & Luthra Law Offices)]. The Resolution Applicant was represented by Mr. Rahav Sankar, Ms. Arshiya Sharda and Ms. Ekta Bhasin, from Argus, Partners. The Appellant was represented by Mr. Rudreshwar Singh, Mr. Anjur Kashyap, Mr. Kaushik Poddar and Mr. Rohit. The Resolution Professional was represented by Mr. Nitesh Jain.
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