The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice AshokBhushan (Chairperson) and Mr. Barun Mitra (Technical Member), while adjudicating an appeal filed in Dharmindra Constructions Pvt. Ltd. & Anr. v Rajendra Kumar Jain, has held that Operational Creditors are only entitled for minimum of the liquidation value.
Kudos Chemie Ltd. & Ors. (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”). Dharmindra Constructions Pvt. Ltd. (“Operational Creditor/Appellant”) is an operational creditor of the Corporate Debtor ho was not allocated any amount in the resolution plan, since the liquidation value of the Appellant/Operational Creditor was NIL. On 17.03.2022 the Adjudicating Authority approved the Resolution Plan submitted by the Successful Resolution Applicant. The Adjudicating Authority observed that as per the Information Memorandum, the operational creditors were segregated into three categories. First being workmen and employees, who have been paid Rs. 20 Lakhs as against their verified claim of Rs. 18.88 crores. Second being Government dues, towards which NIL payment was made as against as verified claim of Rs.295.18 Crores. Third being operational creditors other than workmen & employees and government dues, to whom NIL payment has been made as against a verified claim of Rs.295.18 crores.
The Appellant/Operational Creditor filed an application before the NCLAT, challenging the order dated 17.03.2022 passed by the Adjudicating Authority. It was argued that since the approved resolution plan did not allocate any amount for the operational creditor, the same was violative of the Insolvency and Bankruptcy Code, 2016 (“IBC”). A Resolution Plan requires statement that claims of all the stakeholders have been dealt with. However, there is no consideration in the plan about the claim of the Appellant/Operational Creditor.
The Resolution Professional submitted that the liquidation value of the Operational Creditor was NIL, hence no amount was allocated to it in the Resolution Plan. Further, the claims of all stakeholders were dealt with in the Resolution Plan.
The Bench observed that the Liquidation value of the Appellant/Operational Creditor was Nil. Even the Operational Creditors which are Government and whose verified claim is Rs. 295.18 Crores, were paid NIL. The requirement for the obligation for payment of amount to the Operational Creditor is under Section 30(2)(b) and the plan had not violated the said provision.
“We are of the view that as per the law as exist today, the Operational Creditors are only entitled for minimum of the liquidation value and there being no breach of any of the provisions of the Code, we are unable to interfere with the impugned order.”
The Bench held that the Operational Creditors are only entitled for minimum of the liquidation value. Accordingly, the Appeal was dismissed.
Case Title: Dharmindra Constructions Pvt. Ltd. & Anr. v Rajendra Kumar Jain
Case No.: Company Appeal (AT) (Insolvency) No.1477 of 2022
Counsel for Respondent: Mr. Abhishek Anand, Mr. Nipun Gautam, Mr. Viren Sharma and Mr. Sajal Jain, Advocates for R1 (RP).