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

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  • Last Updated on 15 July, 2023

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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

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