NCLAT held that the dissenting financial creditors are entitled to payment not less than what they would receive in case of liquidation.
The NCLAT upheld the approval of the Resolution Plan, emphasizing that dissenting financial creditors are entitled to payment not less than what they would receive in liquidation, as per Section 30(2) of the Insolvency and Bankruptcy Code (IBC). It clarified that the distribution of assets among financial creditors does not follow security interests but is determined by the commercial wisdom of the Committee of Creditors.
In this case, an appeal was filed against the order dated 28.04.2022 passed by the National Company Law Tribunal (NCLT), Principal Bench at New Delhi. The order approved the Resolution Plan submitted by the Value Infra Buyers Association, as requested by the Resolution Professional (RP). The appellant, a financial creditor of the corporate debtor, challenged this order.
The dispute stemmed from events starting on 17.09.2014 when the appellant extended a loan to the corporate debtor, creating a memorandum of equitable mortgage over the debtor's properties. Subsequently, the Corporate Insolvency Resolution Process (CIRP) commenced against the debtor in 2018. The appellant filed a claim in the CIRP, which the RP admitted. However, no resolution plan was submitted after an Expression of Interest (EoI) was filed by another party.
The CIRP deadline was extended by the NCLT after considering the involvement of the Flat Buyers Association in completing the unfinished project. Eventually, a resolution plan was submitted by the Value Infra Buyers Association, which was approved by the Committee of Creditors (CoC).
The appellant challenged the approval, arguing that the plan did not adhere to CIRP regulations and did not offer adequate payment based on the liquidation value. However, the RP and the Successful Resolution Applicant defended the plan, stating that it met the requirements and was in the best interest of all stakeholders, especially given the involvement of the Flat Buyers Association in completing the project.
The NCLAT, after considering the submissions, concluded that the plan met the requirements of the Insolvency and Bankruptcy Code (IBC) and was fair to all creditors. Appellate Authority emphasized that dissenting financial creditors were entitled to payment not less than what they would receive in case of liquidation, as specified under Section 30(2) of the IBC. Â The Appellate Authority noted that the involvement of the Flat Buyers Association in completing the project was deemed beneficial, and the plan was found to meet the requirements of the IBC. Therefore, the appeal was dismissed, and each party was directed to bear its costs.
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