National Company Law Appellate Tribunal, New Delhi: A Division Bench comprising of Ashok Bhushan, J. and Barun Mitra (Technical Member) held that the allocation in Resolution Plan to Creditors can be questioned when the plan value earmarked for them is less than the liquidation value, but mere allocation of meagre amount cannot be a ground to question the Resolution Plan.
In the instant matter, the Resolution Professional/respondent 1 filed an application before the Adjudicating Authority for approval of the Resolution Plan submitted by the Successful Resolution Applicant (MTC Business Pvt. Ltd.) which was approved by the CoC with more than 99% vote share. The Adjudicating Authority vide order dated 06-02-2023, approved the Resolution Plan and rejected the objection regarding conflict of interest between the Successful Resolution Applicant and the Financial Creditors. Aggrieved by the impugned order passed by the Adjudicating Authority, the appellant who is an unsecured Financial Creditor having a vote share in the CoC, preferred an appeal before NCLAT challenging the same.
The appellant challenged the Resolution Plan regarding distribution of funds and contended that a very limited amount has been paid to the appellant and other creditors that come to 0.0969% of the admitted claim. The appellant further contended that several cases are pending including an Income Tax raid against Rare Asset Reconstruction Ltd., moreover, several materials indicate that Rare Asset Reconstruction Ltd. is a fraudulent company involved in many illegal activities. On the other hand, the respondent refuted the contentions of the appellant and stated that the Adjudicating Authority had already dealt with the objections raised by the appellant and rejected them.
Relying on Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531 where it was held that while approving a resolution plan due regards to be given to the commercial wisdom of the CoCs, the NCLAT observed that the approval of Resolution Plan by the Adjudicating Authority can be questioned on a limited ground that plan is violative of any statutory provision including provision of S. 30(2) IBC.
Negating the contention of the appellant that very limited amount of the admitted claim was paid to the appellant and other creditors, the NCLAT observed that present is not a case where payment to the other creditors/ Operational Creditors is less than the liquidation value. The NCLAT stated that “The allocation in the plan to the creditors can be questioned when the plan value earmarked for them is less than the liquidation value. Mere allocation of meagre amount cannot be a ground to question the resolution plan.”
Regarding the pendency of the cases against ‘Rare Asset Reconstruction Ltd.’, the NCLAT stated that “Be that as it may. The law will take its own course.”
Dismissing the appeal, NCLAT held that since the cases including Income Tax raid against the ‘Rare Asset Reconstruction Ltd.’ are pending and the present is not a case where payment to the other creditors/ Operational Creditors is less than the liquidation value; NCLAT cannot interfere with the Adjudicating Authority’s order to approve the Resolution Plan.
[Pani Logistics v. Vikas G. Jain, 2023 SCC OnLine NCLAT 172, decided on 03-04-2023]
Advocates who appeared in this case :
Mrs. Lakshmy Iyengar, Sr. Advocate with Ms. Vishakha Gupta and Mr. Kshitij Maheshwari, Counsel for the Appellant;
Mr. Sumit Shukla, Counsel for the Respondent No. 1;
Mr. Krishnendu Datta, Sr. Advocate with Mr. Mohd. Shahan Ulla, Mr. Nikunj Mahajan and Mr. Krishan Kumar, Counsel for the Respondent No. 3.
