Case: RAHUL JAIN Vs. RAVE SCANS PVT. LTD

counsel for the second respondent-Hero, urged that this court should not interfere with the impugned order. He relied on the observations in Swiss Ribbons and Section 30 of the IBC, to say that creditors falling within one description or class cannot be discriminated against. It was pointed out that the PSU banks dues were given primacy, inasmuch as all of them were given a settlement of 45% of their admitted claims; however, the dissenting Financial Creditor (Hero) was provided with 32.34% of its admitted claim which is plainly discriminatory and contrary to the letter and spirit of the IBC. 9. Mr. Sibal relied on the observations of this court in Swiss Ribbons (supra) that: 72. The aforesaid Regulation further strengthens the rights of operational creditors by statutorily incorporating the principle of fair and equitable dealing of operational creditors rights, together with priority in payment over financial creditors. 10. Section 30, which is relied upon by the respondents, and which was interpreted by the NCLAT, reads as follows: 30. (1) A resolution applicant may submit a resolution plan 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— (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the repayment of other debts of the corporate debtor; (b) provides for the repayment of the 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; (c) provides for the management of the affairs of the Corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; (e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be specified by the Board. (3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub- section (2). (4) The committee of creditors may approve a resolution plan by a vote of not less than seventy-five per cent. of voting share of the financial creditors. (5) The resolution applicant may attend the meeting of the committee of creditors in which the resolution plan of the applicant is considered: Provided that the resolution applicant shall not have a right to vote at the meeting of the committee of creditors unless such resolution applicant is also a financial creditor. (6) The resolution professional shall submit the resolution plan as approved by the committee of creditors to the Adjudicating Authority. 11. Section 30 lays out the duties of the resolution professional and the various steps that she or he has to take, as well as the considerations that are to weigh, in examining a resolution plan. The principle of fairness engrafted in the provision is that the plan should make a provision for repayment of debts of operational creditors having regard to the value, which shall not be less than what is prescribed by the Board (i.e. the Insolvency Board), repayable in the event of liquidation, spelt out in Section 53. Section 30(3) requires the resolution professional to present the resolution plan to the committee of creditors and Section 30(4) stipulates that approval shall be by a vote not less than 75% of the voting share of the financial creditors. Regulation 38, as it stood before the amendment and its substitution, read as follows: 38. Mandatory contents of the resolution plan.— (1) A resolution plan shall identify specific sources of funds that will be used to pay the- (a) insolvency resolution process costs and provide that the [insolvency resolution process costs, to the extent unpaid, will be paid] in priority to any other creditor; (b) liquidation value due to operational creditors and provide for such payment in priority to any financial creditor which shall in any event be made before the expiry of thirty days after the approval of a resolution plan by the Adjudicating Authority; and (c) liquidation value due to dissenting financial creditors and provide that such payment is made before any recoveries are made by the financial creditors who voted in favour of the resolution plan. 12. After its amendment, Regulation 38 now reads as follows: 38. Mandatory contents of the resolution plan.— (1) The amount due to the operational creditors under a resolution plan shall be given priority in payment over financial creditors. (1-A) A resolution plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the corporate debtor. 13. In the present case, it is noticeable that no doubt, Hero was provided with 32.34% of its admitted claim as it has dissented with the plan. On the other hand, Tata Capital Financial Services Ltd. was provided with 75.63% of its admitted claim; other financial creditors (Indian Overseas Bank, Bank of Baroda and Punjab National Bank) were provided with 45% of their admitted claims. Given that the resolution process began well before the amended regulation came into force (in fact, January, 2017) and the resolution plan was prepared and approved before that event, the wide observations of the NCLAT, requiring the appellant to match the pay-out (offered to other financial creditors) to Hero, was not justified. The court notices that the liquidation value of the corporate debtor was ascertained at 36 crores. Against the ? said amount, the appellant offered 54 crores. The plan was ? approved and, except the objections of the dissenting creditor (i.e Hero), the plan has attained finality. Having regard to these factors and circumstances, it is held that the NCLATs order and directions were not justified. They are hereby set aside; the order of the NCLT is hereby restored.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]13. In the present case, it is noticeable that no doubt, Hero was provided with 32.34% of its admitted claim as it has dissented with the plan. On the other hand, Tata Capital Financial Services Ltd. was provided with 75.63% of its admitted claim; other financial creditors (Indian Overseas Bank, Bank of Baroda and Punjab National Bank) were provided with 45% of their admitted claims. Given that the resolution process began well before the amended regulation came into force (in fact, January, 2017) and the resolution plan was prepared and approved before that event, the wide observations of the NCLAT, requiring the appellant to match the pay-out (offered to other financial creditors) to Hero, was not justified. The court notices that the liquidation value of the corporate debtor was ascertained at 36 crores. Against the ? said amount, the appellant offered 54 crores. The plan was ? approved and, except the objections of the dissenting creditor (i.e Hero), the plan has attained finality. Having regard to these factors and circumstances, it is held that the NCLATs order and directions were not justified. They are hereby set aside; the order of the NCLT is hereby restored.