Equitable Treatment of Creditors, including OCs in Successful Resolution Applicant’s RP Justified NCLT’s Approval

  • Blog|News|Insolvency and Bankruptcy Code|
  • 3 Min Read
  • By Taxmann
  • |
  • Last Updated on 15 July, 2023

Recent Posts

News, Blog, Account & Audit

Classification and Disclosure of Late Payment Interest in Financial Statements

Blog, News, GST & Customs

Appellate Authority Can’t Dismiss an Appeal on Maintainability Grounds If Alternative Remedy Has Been Directed by the Court | HC

Latest from Taxmann

Equitable Treatment of Creditors

Case Details: SP Coal Resources (P.) Ltd. v. Indus FILA Ltd. - [2023] 152 taxmann.com 16 (NCLAT-Chennai)

Judiciary and Counsel Details

    • M. Venugopal, Judicial Member & Naresh Salecha, Technical Member
    • K. Goutham Shivshankar, Adv. for the Appellant.
    • Ms Sahana Devanathan & Tushar Tyagi, Advs. for the Respondent.

Facts of the Case

In the instant case, the appellant had supplied imported coal to respondent no. 1 (i.e. corporate debtor) over several years and had raised invoices upon the corporate debtor. However, the same remained unpaid, and another operational creditor filed an application under section 9 of the IBC against the corporate debtor, which was admitted by the Adjudicating Authority (NCLT).

Later, the Resolution Professional (RP) made a public announcement inviting claims from creditors and the resolution plan of Respondent No. 2 (i.e. Successful Resolution Applicant-SRA) was approved by the Committee of Creditors (CoC) as well as the NCLT.

The appellant challenged the said approval, stating that there was no provision for any payment of debts owed by the corporate debtor to its operational creditors and that the resolution plan failed to meet two vital requirements i.e., Maximization of Value of Assets of the corporate debtor and Equitable and non-discriminatory treatment of operational creditors.

It was noted that SRA had offered Rs. 50.70 crores as a full and final settlement of all liabilities of the corporate debtor, which was duly approved with the requisite majority of CoC in its commercial wisdom.

Further, it was noted that the entire amount under the resolution plan was fully used in payment of the CIRP costs and dues of financial creditors and workmen and no amount remained to be allotted in respect of dues of other creditors. Therefore, the Liquidation Value payable to operational creditors was Nil.

NCLAT Held

The NCLAT observed that when the ingredient of section 30(2) was satisfied and there was equitable treatment between different classes of creditors and the same was between operational creditors as a class, the distribution was to be treated as fair and equitable.

The NCLAT held that since there was no aspect of discrimination between operational creditors, the resolution plan of SRA was rightly approved by the NCLT, which was free from legal flaws.

List of Cases Reviewed

    • Order of NCLT (Beng.) in CP(IB) No. 136/BB/2017, dated 10-5-2019 (para 78) affirmed.

List of Cases Referred to

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Leave a Reply

Your email address will not be published. Required fields are marked *

«
»

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on Taxmann.com

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied