It is, for the matter of reality, that there is no mandate under the I&B Code which provides that whether the Resolution Plan’s value shall be more than the liquidation value of the Corporate Debtor. It is this perplexing issue that the case of Orchid Pharma Insolvency deals with. The situation in the Orchid Pharma Insolvency case is also imperative from the I&B Code point of view as it consequently will throw light on the red flags which have remained unscrutinized. The other substantive practical problem which this case circles around is that can a resolution plan be rejected by the Court after its approval from the CoC. Secondly, can the Court slip into the uncharted territory of ‘commercial wisdom’ of CoC.
> Dhanuka Laboratories (Gurgaon-based)
> Accord Life Spec (Chennai-based)
> Covalent Laboratories (Hyderabad-based)
|Particulars||Amount (in crores)|
|Total Debt||3200 (Approx.)|
|Dhanuka’s Laboratories offer||1116.04|
“…the basic feature of the I&B Code was that an ‘Operational Creditor’ cannot be paid anything less than the ‘Liquidation Value’ and the basic principle is the maximization of the assets of the ‘Corporate Debtor’, balancing all the stakeholders by maximization of their assets, no ‘Resolution Plan’ can offer any amount upfront or by other way, which is less than the ‘Liquidation Value’. It will be against the object of the Code as also the provisions of Section 30(2) of the I&B Code,”
The relevant portion of S.30 has been re-capitulated below:
“30. Submission of resolution plan.—(1) A resolution applicant may submit a resolution plan along with an affidavit stating that he is eligible under section 29A to the resolution professional prepared on the basis of the information memorandum.
(2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan—
xxx xxx xxx
(b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under section 53;
The NCLAT has certainly made its position clear, with respect to the sum which a Resolution Plan should offer. However, this is not the final word on the issue as the Supreme Court is yet to consider this aspect. The appeal has left the question hanging in the air and it still remains to be seen whether the explanation given by the NCLAT will be upheld by the Supreme Court as and when it is called upon to decide the issue.
The main takeaway from this case would be the understanding of whether the Tribunals can transgress into the forte of decision making by the CoC and whether the acceptance of a Resolution Plan below the Liquidation Value is a procedural deviation or not? As long as these questions remain unanswered it will be interesting to see how the provision of the Code are ironed out and the confusion surrounding them reduced. Perhaps the Supreme Court will decide this matter once and for all in the future.
 Lakshmi Villas Bank v. Orchid Pharma Ltd, CP/540/(IB)/CB/2017.
 Accord Life Spec Private Limited v. Orchid Pharma Limited & Ors. CA(AT)(Ins)No. 761 of 2019.