Liquidation Value Is More Than Resolution Plan , NCLT Allahabad Directs SRA To Match Liquidation Value
Pallavi Mishra
15 March 2024 9:15 AM GMT
The National Company Law Tribunal (“NCLT”), Allahabad Bench, comprising of Shri Praveen Gupta (Judicial Member) and Shri Ashish Verma (Technical Member), has directed the Successful Resolution Applicant to consider matching the resolution plan value at par with the liquidation value, which is on a higher side. The Successful Resolution Applicant is the Financial Creditor...
The National Company Law Tribunal (“NCLT”), Allahabad Bench, comprising of Shri Praveen Gupta (Judicial Member) and Shri Ashish Verma (Technical Member), has directed the Successful Resolution Applicant to consider matching the resolution plan value at par with the liquidation value, which is on a higher side. The Successful Resolution Applicant is the Financial Creditor of the Corporate Debtor and also the sole member of Committee of Creditors (“CoC”).
“We are also conscious of the fact that commercial wisdom of the Committee of Creditors in the matter of approval of resolution plan should be regarded. However, in the peculiar circumstances of the case where the financial creditor who is member of CoC itself is the SRA as well, we therefore, find it justifiable in passing such directions to the SRA to consider matching the total plan value at par with the liquidation value with corresponding pro-rata rise in the amount of disbursement.”
Background Facts
Rana Heavy Engineering Ltd. (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”) by the NCLT.
Hadirah Steels Pvt. Ltd. (“Successful Resolution Applicant/SRA”) is a Financial Creditor of the Corporate Debtor, who is also the sole member of Committee of Creditors (“CoC”). The SRA submitted a resolution plan for the Corporate Debtor.
The Resolution Plan was valued at Rs. 6.70 Crores comprising of CIRP Cost, payments to Unsecured Financial Creditors, Unsecured Operational Debt, Operational Debt of Contingent Claims (towards Government Dues of EPFO/ESI, Gratuity Authority etc.). However, the liquidation value of Corporate Debtor was Rs. 7.69 Crores, which is higher than the resolution plan value. The Liquidation Assets comprises of Plant, Machinery, Land and Building.
The resolution plan was approved by the CoC. Therefore, the Resolution Professional filed an application before the NCLT under Section 30(6) of IBC for approval of resolution plan.
NCLT Verdict
The Bench noted that the CoC is solely formed by an Unsecured Financial Creditor, who is also the Successful Resolution Applicant/SRA. Therefore, it would be appropriate to direct the SRA match the resolution plan value with liquidation value of Rs. 7.69 Crores, which is on a higher side.
“We are also conscious of the fact that commercial wisdom of the Committee of Creditors in the matter of approval of resolution plan should be regarded. However, in the peculiar circumstances of the case where the financial creditor who is member of CoC itself is the SRA as well, we therefore, find it justifiable in passing such directions to the SRA to consider matching the total plan value at par with the liquidation value with corresponding pro-rata rise in the amount of disbursement. SRA is at liberty to move an appropriate application, accordingly for consideration of the revised resolution plan by this Adjudicating Authority.”
While considering that though commercial wisdom of CoC in approval of resolution plan must be regarded, the Bench has directed the SRA to consider matching the resolution plan value at par with the liquidation value, with corresponding pro-rata rise in the amount of disbursement. The direction has been given considering the peculiar fact that the sole CoC member is the SRA. Liberty has been granted to the SRA to file an application before the NCLT for consideration of its revised resolution plan.
The application has been disposed of.
Case title: Hadirah Steels Pvt. Ltd. v Rana Heavy Engineering Ltd.
Case No.: CP (IB) No.50/ALD/2022
Counsel for Applicant: Sh. Sumit Shukla along with Sh. Sanjeev Panda, Advs.
