Case Law Details
Hadirah Steels Pvt. Ltd. Vs Rana Heavy Engineering Ltd. (NCLT Allahabad)
In a recent application filed under Section 30(6) of the Insolvency and Bankruptcy Code (IBC) for approval of the Resolution Plan, based on the resolution passed by the Committee of Creditors (CoC), the National Company Law Tribunal (NCLT) Allahabad made a significant observation.
Upon review, it was noted that the amount of the Resolution Plan, totaling Rs. 6.70 crore, fell short of the liquidation value of Rs. 7.69 crore. The Liquidation Assets include Plant, Machinery, Land, and Building.
Considering that the CoC consists solely of the Unsecured Financial Creditor, who is also the Successful Resolution Applicant (SRA), the tribunal deemed it appropriate to direct the SRA to match the plan value with the liquidation value. However, the SRA was given the liberty to bring forth reasons if they found it unfeasible to do so.
While acknowledging the commercial wisdom of the CoC in approving resolution plans, the tribunal noted the unique circumstances where the financial creditor, who is a member of the CoC, also serves as the SRA. Thus, it found it justifiable to issue such directions.
IA No.668/2023 was disposed of accordingly.
This decision by NCLT Allahabad underscores the importance of aligning the resolution plan value with the liquidation value, ensuring fair treatment of creditors and maximizing the value of assets during insolvency proceedings.
FULL TEXT OF THE NCLT JUDGMENT/ORDER
1. This application has been filed U/s 30(6) of the Code for approval of the Resolution Plan, based upon the Resolution passed by the CoC.
2. The matter was reserved on 19.01.2024. However, on perusal of the record it was found that the amount of Resolution plan comprises of CIRP Cost, Unsecured Financial Creditors, Unsecured Operational Debt, Operational Debt of Contingent Claims (Towards Government Dues only including by the EPFO/ESI, Gratuity Authority etc.) which amounts to Rs. 6.70 cr. This sum is less than the liquidation value which is to the tune of Rs. 7.69 cr. The Liquidation Assets comprises of Plant, Machinery, Land and Building.
3. Further, considering the fact that CoC is solely formed by the Unsecured Financial Creditor, who is also the Successful Resolution Applicant, this tribunal deems it appropriate to direct the SRA to match the plan value which however is currently not at par with liquidation value of Rs. 7.69 cr. However, if SRA does not find it viable, such reasons may also be brought on record.
4. We are also conscious of the fact that commercial wisdom of the Committee of Creditors in the matter of approval of resolution plan should be regarded. However, in the peculiar circumstances of the case where the financial creditor who is member of CoC itself is the SRA as well, we therefore, find it justifiable in passing such directions to the SRA to consider matching the total plan value at par with the liquidation value with corresponding pro-rata rise in the amount of SRA is at liberty to move an appropriate application, accordingly for consideration of the revised resolution plan by this Adjudicating Authority.
5. IA No.668/2023 stands disposed of accordingly.
Author Bio
