This case involves an Appeal filed under Section 62 of the Insolvency and Bankruptcy Code, 2016 (IBC) by India Resurgence ARC Private Limited (the Appellant) against the NCLAT’s order rejecting the Appeal filed before the NCLAT and upholding the decision of National Company Law Tribunal, Kolkata (the NCLT) approving the Resolution Plan in Corporate Insolvency Resolution Process (CIRP) of VSP Udyog Private Limited (the Corporate Debtor), submitted by the Respondent herein i.e., Amit Metaliks Limited (also, the Resolution Applicant).
Facts of the Case:
NCLAT Decision and Findings:
1. The NCLAT rejected the Appellant’s contentions and upheld the decision of the Adjudicating Authority i.e., NCLT.
2. The NCLAT cited the principles established in the case of Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and ors. which held “the concept of equitable treatment of creditors, including the observations that equitable treatment of creditors meant equitable treatment only within the same class; and that protection of creditors in general was important but it was also imperative that the creditors be protected from each other”.
3. The Appellate Authority made observations that Section 30(4) of the I&B Code provides that the Committee of Creditors may approve a Resolution Plan by a vote which shall not be less than 66% of voting share of Financial Creditors and on a plain reading of this provision it is clear that the considerations regarding feasibility and viability of the Resolution Plan, distribution proposed with reference to the priority amongst creditors as per statutory waterfall distribution mechanism including value of security interest of Secured Creditor are matters which fall within the exclusive domain of Committee of Creditors for consideration before deciding a plan. The decision of NCLT, Kolkata approving the resolution plan was upheld.
4. The NCLAT held that considerations regarding the feasibility, viability, distribution, and the value of security interest were matters fall within the exclusive domain of the CoC and its commercial wisdom. Judicial intervention was unwarranted unless creditors of the same class were not treated fairly and equitably.
5. The NCLAT dismissed the Appeal, finding it devoid of substance.
Contention of the Parties before the Supreme Court:
Decision of the Supreme Court:
The Appellant had a claim of INR 13.38 crore and was offered INR 2.026 crore in the Resolution Plan, without considering the value of their security interest valued at over INR 12 crores. The Supreme Court, however, dismissed the appeal, emphasizing that the CoC’s decisions fall under the realm of commercial wisdom and that the scope of judicial review is limited to the provisions of Section 30(2) of the I&B Code. The Supreme Court stated that as long as the resolution plan fulfils the mandatory requirements, it cannot be subject to detailed quantitative analysis. The Court also noted that a dissenting financial creditor’s security interest does not grant them a right superior to other creditors or allow them to enforce their entire security interest to receive excess amounts. The Court clarified that the value the Appellant should receive was specified in the Resolution Plan and was in proportion to other secured financial creditors. The Appellant’s insistence on a higher amount based on the value of their security interest was deemed irrelevant.
In conclusion, the Supreme Court upheld the importance of proportionate and equal treatment for creditors in a class, emphasizing that the Resolution Plan should be feasible, viable, and just. The Court rejected the appellant’s plea for a higher amount based on the value of their security interest, underscoring the need for a rational and equitable resolution process that maximizes the value of the Corporate Debtor’s assets.