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2019 (7) TMI 734 - AT - IBCApproval of Resolution plan - Appellant submitted that the Resolution Plan is arbitrary and discriminatory and is against the object of the I B Code - HELD THAT - Admittedly, as per the original distribution, the Operational Creditor has been paid Nil which is much less than the Liquidation value to which the Appellant is entitled. In such case, we hold that the approved plan is in contravention of Section 30(2) (b) of the I B Code - Further, the distribution as made between the Financial Creditor and the Operational Creditor i.e. 27.83% in favour of the Financial Creditor and Nil amount in favour of the Operational Creditor , is also arbitrary and discriminatory. As per the decision of this Appellate Tribunal in Binani Industries Limited Vs. Bank of Baroda Anr (Supra) 2018 (11) TMI 803 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI and the Hon ble Supreme Court in Swiss Ribbon Pvt. Ltd. Anr. v. Union of India Ors. (Supra), the Operational Creditors are to be given roughly the same treatment as the Financial Creditors . Such treatment having not been made instead of rejecting the plan, we modify the plan as proposed by Resolution Applicant which also pass the test of Section 30 (2) (b). The Resolution Applicant is allowed to modify and substitute the Resolution Plan and the re-distribution be made in a manner as proposed by 3rd Respondent - appeal allowed to that extent.
Issues Involved:
1. Approval of the Resolution Plan. 2. Allegations of arbitrariness and discrimination in the Resolution Plan. 3. Violation of Section 30(2)(b) of the Insolvency and Bankruptcy Code, 2016. 4. Distribution of amounts between Financial Creditors and Operational Creditors. 5. Compliance with equitable treatment principles for creditors. Issue-wise Detailed Analysis: 1. Approval of the Resolution Plan: The Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor following an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 by the Financial Creditor. The Committee of Creditors (CoC) approved the Resolution Plan of the Resolution Applicant, which was subsequently approved by the Adjudicating Authority on 13th November 2018. The Operational Creditor challenged this approval. 2. Allegations of Arbitrariness and Discrimination in the Resolution Plan: The Appellant contended that the approved Resolution Plan was arbitrary and discriminatory, failing to align with the objectives of the Insolvency and Bankruptcy Code (I&B Code). The Appellate Tribunal observed that the plan appeared discriminatory as it allocated 27.83% in favor of the Financial Creditors but no amount for the Operational Creditors. 3. Violation of Section 30(2)(b) of the Insolvency and Bankruptcy Code, 2016: The Appellant argued that the approved plan violated Section 30(2)(b) of the I&B Code. The Tribunal noted that the plan did not allocate any amount to the Operational Creditor, which was less than the liquidation value the Appellant was entitled to. This was deemed a contravention of Section 30(2)(b). 4. Distribution of Amounts Between Financial Creditors and Operational Creditors: The Tribunal reviewed the distribution of amounts under the Resolution Plan and found it discriminatory. The Financial Creditors were allocated 27.83% of their claims, while the Operational Creditor received nothing. This was considered arbitrary and discriminatory. 5. Compliance with Equitable Treatment Principles for Creditors: The Tribunal referred to previous judgments, including "Binani Industries Limited Vs. Bank of Baroda & Anr." and "Swiss Ribbon Pvt. Ltd. & Anr. v. Union of India & Ors.," which emphasized that similarly situated creditors should be treated equitably. The Tribunal highlighted that the I&B Code and related regulations do not prescribe differential treatment between Operational Creditors and Financial Creditors. The Tribunal also noted the importance of ensuring equitable treatment as per the UNCITRAL Guidelines. Modification of the Resolution Plan: In light of the discriminatory distribution, the Tribunal allowed the Resolution Applicant to revise the plan to ensure compliance with Section 30(2)(b) and equitable treatment principles. The revised plan proposed a redistribution of amounts, allocating 26.96% to the Operational Creditor, which was in line with the liquidation value entitlement. Conclusion: The Tribunal modified the impugned order dated 13th November 2018 and the Resolution Plan to ensure equitable treatment of creditors. The Resolution Professional, CoC, and other stakeholders were directed to act in accordance with the modified plan. The appeal was allowed with no order as to costs.
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