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2025 (3) TMI 974 - AT - IBCEntitlement of dissenting financial creditor to receive their liquidation value upfront before any payments are made to the assenting financial creditors - true import and interpretation to Clause 21 of the resolution plan - HELD THAT - Adjudicating Authority has rightly taken the view that approved resolution plan is binding on all stakeholders including assenting and dissenting and SRA also. The judgment of this Tribunal in Puro Natural Sugars JV 2023 (11) TMI 1034 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH NEW DELHI which has been relied by the appellant has also been noticed and considered by the Adjudicating Authority. In the above case appeals were filed challenging the Order of the Adjudicating Authority rejecting the resolution plan and the orders passed in the other connected IAs. The objection to the plan was raised by the dissenting financial creditors. The present is a case where Clause 21 of the plan itself contemplates mechanism of payment to the assenting financial creditor and dissenting financial creditor. Liquidation value of dissenting financial creditor is provided to be paid prior to any recovery are made by assenting financial creditor hence there is no indication in the resolution plan that the dissenting financial creditor has to be paid as per instalment i.e. for period of 10 years. The decision by dissenting financial creditor not to approve the plan was on the premise that they were not agreeable to receive the 100% payment of their claim within 10 years period rather they were satisfied to receive only lesser amount i.e. 15% in case of IDBI as liquidation value before any payment is made to the assenting financial creditor. Judgment of this Tribunal in Puro Natural Sugars JV does not come to the aid of the appellant in the facts of the present case where payment to dissenting financial creditor is clearly contemplated in Clause 21 of the resolution plan as noted above and considered by the Adjudicating Authority. Conclusion - The Adjudicating Authority has passed the impugned order after correctly interpreting Clause 21 of the resolution plan and no error has been committed by the Adjudicating Authority in directing for payment to the dissenting financial creditor prior to any recoveries are made by assenting financial creditor. Appeal dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
ISSUE-WISE DETAILED ANALYSIS 1. Entitlement of Dissenting Financial Creditors to Upfront Payment Relevant Legal Framework and Precedents: The legal framework involves the provisions of the Insolvency and Bankruptcy Code (IBC), particularly Section 30(2)(b), which deals with the rights of dissenting financial creditors. The precedent from the case 'Puro Natural Sugars JV' Vs. 'Shree Warana Sahakari Bank Ltd. & Ors.' was considered, which clarified the priority of payments to dissenting creditors but did not mandate upfront payment. Court's Interpretation and Reasoning: The Court interpreted that the dissenting financial creditors are entitled to receive payments in priority over assenting creditors, but this does not necessarily mean upfront payment. The resolution plan's Clause 21 was pivotal, indicating that dissenting creditors should receive their liquidation value before any recoveries by assenting creditors. Key Evidence and Findings: The resolution plan and its Clause 21 were critical pieces of evidence. The dissenting creditors argued that they dissented to receive their liquidation value upfront, while the plan indicated priority in payment but not necessarily upfront payment. Application of Law to Facts: The Court applied the IBC provisions and the resolution plan's terms, emphasizing that while dissenting creditors have priority, the plan does not explicitly require upfront payment. The interpretation of Clause 21 was central to the decision. Treatment of Competing Arguments: The appellant argued that payments should be spread over ten years, consistent with the plan's schedule. In contrast, dissenting creditors claimed their liquidation value should be paid upfront. The Court sided with the interpretation that priority does not equate to upfront payment. Conclusions: The Court concluded that dissenting creditors are entitled to receive their liquidation value before any payments to assenting creditors, but this does not necessitate upfront payment. 2. Interpretation of Clause 21 of the Resolution Plan Relevant Legal Framework and Precedents: Clause 21 of the resolution plan and its interpretation were central, alongside the IBC provisions regarding creditor payments. Court's Interpretation and Reasoning: The Court interpreted Clause 21 as requiring that the liquidation value due to dissenting creditors be made before any recoveries by assenting creditors, aligning with the statutory scheme under the IBC. Key Evidence and Findings: The language of Clause 21 was crucial. It stated that dissenting creditors' liquidation value should be paid before any recoveries by financial creditors who voted in favor of the plan. Application of Law to Facts: The Court applied the clause to the facts, determining that the plan's intent was to ensure priority payment to dissenting creditors, but not necessarily upfront. Treatment of Competing Arguments: The appellant's interpretation that payments should be made over time was weighed against dissenting creditors' claims for upfront payment. The Court found the plan's language supported priority but not upfront payment. Conclusions: The Court concluded that the Adjudicating Authority correctly interpreted Clause 21, affirming that dissenting creditors should be paid before assenting creditors, without requiring upfront payment. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: "The liquidation value due to dissenting financial creditors, if any, will be made (in proportion to the liquidation value arrived as above) before any recoveries are made by the Financial Creditors who voted in favour of the resolution plan." Core principles established:
Final determinations on each issue:
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