When Financial Creditors Have Not Been Paid In Full, Operational Creditors Cannot Claim A Higher Amount: NCLT Ahmedabad
The National Company Law Tribunal (“NCLT”), Ahmedabad Bench, comprising of Dr. Deepti Mukesh (Judicial Member) and Shri Ajai Das Mehrotra (Technical Member), while adjudicating a petition filed in Noble Resource International Pvt. Ltd. v Sona Alloys Pvt. Ltd., has held that when Financial Creditors have not been paid in full in the Resolution Plan, the Operational Creditors cannot claim a higher amount under the same.
Sona Alloys Pvt. Ltd. (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”). M/s MTC Business Private Limited (“Successful Resolution Applicant/SRA”) submitted a Resolution Plan for the Corporate Debtor, which was approved by the Committee of Creditors (“CoC”) with 99.732% votes. The Resolution Plan proposed to pay Rs.365.85 Crores to the secured Financial Creditors as against an admitted claim of Rs.1696.82 Crores. The Operational Creditors were proposed to be paid Rs. 19 Lakhs as against an admitted claim of Rs.114.7 Crores.
M/s Pani Logistics, being an Operational Creditor of the Corporate Debtor, filed an application seeking rejection of the Resolution Plan. It was argued that the Resolution Plan undermines the interest of the Operational Creditors. The Operational Creditors are being paid a meagre amount of 0.096% of their total claim, while the Financial Creditors are being paid 21.56% of their claims in the resolution plan.
The Bench observed that a conjoint reading of Section 30 and Section 53 of IBC shows that the Financial Creditors are placed at a higher priority than Operational Creditors. The Secured Financial Creditors are covered by Section 53(1)(b)(ii), the Unsecured Financial Creditors are covered by Section 53(1)(d). The Operational Creditors are to be considered thereafter having lower priority and are covered by Section 53(1)(f). Since the Financial Creditors have not been paid in full, the Operational Creditors cannot claim a higher amount.
The Bench held that the Resolution Plan did not violate IBC and hence the application has been dismissed.
Case Title: Noble Resource International Pvt. Ltd. v Sona Alloys Pvt. Ltd.,
Case No.: CP (IB) No. 586 of 2019
Counsel For the Applicant: Mr. Karan Sanghani, Adv.
Counsel For the Respondent: Mr. Jaimin Dave, Adv., Mr. Mihir Thakore, Sr. Adv., Mr. Krishnendu Dutta, Sr. Adv.