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2024 Supreme(Online)(NCLAT) 239
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Hon'ble Justice Rakesh Kumar Jain (Member(Judicial)) , Hon'ble Mr. Indevar Pandey (Member (Technical)) , Hon'ble Mr. Naresh Salecha (Member (Technical)) ,
West Coast Mills Limited – Appellant
Versus
BIJAY MURMURIA – Respondent
1272/ND/2019 COMPANY APPEAL(AT)(INS)
Related party financial creditors can be treated differently from unrelated financial creditors under the IBC, and the resolution plan's provisions are subject to the commercial wisdom of the Committee of Creditors.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 9, 30(6), 53(1)(d) and 53(1)(h) - Appeal against the order of NCLT rejecting the claim of a related party financial creditor for equal treatment with unrelated financial creditors in the resolution plan - The court held that related party creditors can be treated differently under the IBC, and the resolution plan's provisions for payment are subject to the commercial wisdom of the Committee of Creditors. (Paras 9, 10, 12, 41, 52, 54)
(B) Related Party Creditors - The court affirmed that related party financial creditors are not entitled to parity with unrelated financial creditors in the resolution plan, as per the principles established in M.K. Rajagopalan case. (Paras 10, 18, 54)
Facts of the case:
The appellant, a related party financial creditor, claimed that it should be treated equally with other financial creditors in the resolution plan of the corporate debtor, which was rejected by the NCLT. The appellant had made significant payments on behalf of the corporate debtor and sought inclusion in the distribution of claims.
Findings of Court:
The court found that the appellant was correctly classified as a related party and thus not entitled to equal treatment with unrelated financial creditors under the IBC.
Issues: The main issues were whether the appellant was treated as an equity shareholder and whether there was discrimination against the appellant compared to other financial creditors.
Ratio Decidendi: The court ruled that the IBC allows for differential treatment of related party creditors, affirming that the resolution plan's provisions are subject to the commercial wisdom of the Committee of Creditors.
Result: Appeal dismissed.
JUDGEMENT
(13th May, 2024) INDEVAR PANDEY, MEMBER (TECHNICAL) This appeal has been filed under Section 61(3) of Insolvency and Bankruptcy Code (in short ‘IBC’) challenging the impugned order of National Company Law Tribunal, Kolkata Bench, Kolkata (in short ‘Adjudicating Authority) in CA (IB) No. 736/KB/2019 in CP (IB) No. 61/KB/2018 (in short main Insolvency application) passed on 27th September, 2019. By this order, Adjudicating Authority rejected the claim of the Appellant to be treated on par with other Financial Creditors and to make the Appellant eligible for distribution of claims as per Resolution Plan.
2. One Jayanta Kumar Panja, an ex-employee of Fort Gloster Industries Limited (Corporate Debtor) filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (in short IBC) for initiation of the Corporate Insolvency Resolution Process on account of default in payment of Rs.1,13,946/- towards his gratuity. The said application bearing CP (IB) No.61/KB/2018 was admitted by the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Kolkata) on 09.08.2018. Manish Jain was appointed as the Interim Resolution Professional (IRP) who was replaced by Bijay Murmuria as the Resolution Professional (RP) in the second meeting of Committee of Creditors (CoC) held on 04.12.2018.
3. The RP published Form-G on 05.02.2019 in financial express (English) and in Aajkaal (Bengali) for the purpose of inviting Expression of Interests (EOIs) in which the last date for submission of EOIs was 20.02.2019. The RP received EOI from two Prospective Resolution Applicants (PRAs) on 20.02.2019 i.e. Prudent ARC Limited and Gloster Limited. In the meanwhile, M/s Hooghly Infrastructure Pvt. Ltd. also filed an application towards EOI. The said application was allowed by the Adjudicating Authority vide order dated 01.04.2019. Thereafter, two resolution plans from M/s Gloster Limited and M/s Hooghly Infrastructure Pvt. Ltd. were received by the RP till the last date of submission of resolution plan i.e. 06.04.2019 (17:00 PM). The RP received the forensic audit/due diligence report of the Corporate Debtor from the Auditor, namely, V. Singhi & Association, Chartered Accountants on 10.04.2019 in which it was stated that there were no preferential transactions, undervalued transactions, transaction defrauding creditors, extortionate credit transactions, fraudulent trading or wrongful trading. The RP apprised the members of the CoC in the 6th meeting about the plans received from the PRAs. It was also brought to their notice that the resolution plan received from M/s Hooghly Infrastructure Pvt. Ltd. had certain inconsistencies in terms of the provisions of the Code. Both the Resolution Applicants submitted their updated resolution plan by 5:00 PM on 19.04.2019 and the corresponding hard copies by 12:00 noon on 20.04.2019. A certificate was given by Saumendra Kabiraj, Advocate that both the Resolution Applicants were eligible in terms of the provisions of Section 29A of the Code but Gloster Limited scored 51 in the terms of qualitative criteria and quantitative criteria of the evaluation matrix as against the score of 30 obtained by M/s Hooghly Infrastructure Pvt. Ltd. And thus, the members of the CoC unanimously declared Gloster Limited as H1 bidder for the Corporate Debtor. The resolution plan of the Gloster Limited, having been declared as H1 was put to vote through e-voting which was approved by 73.21% voting in which Pegasus Asset Reconstruction Pvt. Ltd., Punjab National Bank & Andhra Bank voted in favour of plan whereas Stressed Assets Stabilization Fund with 26.79% voting share voted against it.
4. The RP filed an application bearing CA (IB) No. 584/KB/2019 under Section 30(6) of the Code before the Adjudicating Authority for seeking approval of the resolution plan of the Fort Gloster Industries Ltd. (CD) submitted by Successful Resolution Applicant (SRA). Adjudicating Authority by a single order dated 27.09.2019 (Impugned Or
