Operational Creditor Can’t Object To Approval Of Resolution Plan Before NCLT: NCLT Mumbai
Pallavi Mishra
6 Nov 2023 8:30 AM GMT
The National Company Law Tribunal (NCLT), Mumbai Bench, comprising of Justice V.G. Bisht (Retd.) (Judicial Member) and Shri Prabhat Kumar (Technical Member), has held that an Operational Creditor whose claim has been admitted by the Resolution Professional, cannot be made a respondent in application for approval of resolution plan pending before the NCLT. Further, the...
The National Company Law Tribunal (NCLT), Mumbai Bench, comprising of Justice V.G. Bisht (Retd.) (Judicial Member) and Shri Prabhat Kumar (Technical Member), has held that an Operational Creditor whose claim has been admitted by the Resolution Professional, cannot be made a respondent in application for approval of resolution plan pending before the NCLT. Further, the Operational Creditor cannot be allowed to object to the approval of resolution plan. The Bench has imposed a cost of Rs. 50,000/- on the Operational Creditor for making such plea.
“As regards prayer for supply of copy of Resolution Plan Application, it is trite law that the Resolution Plan is a confidential document till it is approved by this Tribunal and only the financial creditors are eligible to receive copy of such plan. There is no doubt on this legal proposition. Further, the applicant being an operational creditor whose claim has been admitted by the Resolution professional cannot be made a Respondent and given opportunity to object to the approval of the plan.”
Background Facts
Reliance Communications Ltd. (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”) by the NCLT.
On 21.05.2018, the Interim Resolution Professional (“IRP”) of the Corporate Debtor issued a Public Notice for inviting claims of creditors. In the meanwhile, the NCLAT stayed the CIRP of the Corporate Debtor and the stay was vacated on 30.04.2019. Therefore, the IRP issued a fresh notice dated 07.05.2019 for inviting claims from the stakeholders/creditors.
M/s Best Towers Private Limited (“Applicant/Operational Creditor”) being an Operational Creditor of the Corporate Debtor, submitted its claim and the same was admitted. Thereafter, a resolution plan was approved by the Committee of Creditors (“CoC”). The Resolution Professional filed an application before NCLT seeking approval of the Resolution Plan.
The Operational Creditor filed an application before the NCLT seeking (i) setting aside of notice dated 07.05.2019; (ii) rejection of the Resolution Plan pending approval before NCLT; and (iii) impleadment in the plan approval application as Respondent.
The Operational Creditor contended that the direct impact of shifting of the Insolvency Commencement Date to 07.05.2019 in place of 15.05.2018 would be a hike of 15-20% in the sums payable to creditors, in view of additional interest accrued. The creditor having the maximum debt will gain maximum illegal benefit, through application of additional Interest from 15.5.2018 to 07.05.2019.
NCLT Verdict
The Bench opined that the second notice for invitation of claims dated 07.05.2019 was in the interest of the claimants. The said notice allowed the left-out claimants as well as the person(s) who became creditor during the stay period to file their claims.
It was observed that only Financial Creditors are eligible to receive a copy of resolution plan till it is approved by the NCLT. The Operational Creditor cannot be made a party to the application for plan approval and hence cannot be permitted to object to approval of such resolution plan.
“As regards prayer for supply of copy of Resolution Plan Application, it is trite law that the Resolution Plan is a confidential document till it is approved by this Tribunal and only the financial creditors are eligible to receive copy of such plan. There is no doubt on this legal proposition. Further, the applicant being an operational creditor whose claim has been admitted by the Resolution professional cannot be made a Respondent and given opportunity to object to the approval of the plan.”
The Bench dismissed the application and imposed a cost of Rs. 50,000/- on the Operational Creditor.
Case Title: Ericsson India Pvt Ltd v Reliance Communications Ltd.
Case No.: C.P.(IB) No. 1387/MB/2017
Counsel for Applicant: Ms. Priyanka Dadpe i/b Agam Doshi, Advocate
Counsel for Respondent: Mr. Rishabh Jaisani a/w Ms. Kriti Kalyani, Advocate
