Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2024 Supreme(Online)(NCLAT) 1419

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Rakesh Kumar Jain, J
Merina Commotrade Pvt. Ltd. – Appellant
Versus
Anand Sonbhadra Resolution Professional for Shubhkamna Buildtech Pvt. Ltd. & Ors. – Respondent
I.A. No. 4180 of 2022

Advocates:
For the Appellants/Petitioners: Mr. Shashank Agarwal, Mr. Abhishek Taneja
For the Respondents: Mr. Abhishek Anand, Mr. Nipun Gautam

Dissenting financial creditors cannot dictate payout amounts based on security interest, as the Committee of Creditors holds commercial decisional authority in resolution plans under the Code.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 30(2)(b) - Financial creditors’ voting rights - The appellant, a dissenting financial creditor, challenges the approved resolution plan, arguing the liquidation value calculation was erroneous, and their due amount not properly addressed - The court found the CoC’s decision within its commercial wisdom and upheld valuation process. (Paras 7-20)

(B) Evidentiary Standards - The court emphasized that the valuation adhered to IBBI regulations and the creditors’ commercial wisdom governs the resolution plan, which shall not be interfered without substantial justification. (Paras 10-20)

Facts of the case:
The Appellant, a secured financial creditor with a claim of approximately 10.2 million INR, opposed a resolution plan allowing lesser payments than calculated liquidation values, asserting the process violated statutory requirements.

Findings of Court:
The court ruled there was no error in the approval of the resolution plan based on commercial wisdom of creditors and affirmed the procedural integrity in liquidation value calculations.

Issues: The court addressed whether a dissenting creditor could challenge the fairness of a resolution plan based on valuation, and the interpretation of minimum payout provisions for dissenting creditors under the code.

Ratio Decidendi: The judgment reiterated that dissenting creditors cannot demand more payout based on security interest when a resolution plan is passed, hence reaffirming the dominance of CoC's voting outcome and commercial assessments over creditors’ objections.

Result: Appeal dismissed.

Table of Content
1. appellant's dissent and claims. (Para 1 , 2 , 3)
2. contentions raised by both parties. (Para 6 , 9)
3. court's analysis of objections and voting. (Para 7 , 10 , 11 , 12 , 13)
4. conclusions on creditor rights and coc authority. (Para 14 , 15 , 16 , 17 , 18)
5. final dismissal of the appeal. (Para 19)

JUDGMENT

Per: Justice Rakesh Kumar Jain

The Appellant is a secured financial creditor who dissented with the resolution plan of Sunil Kumar Agarwal and Surendra Kumar Singhal, is aggrieved against the order dated 12.09.2022 passed in I.A. No. 485 of 2019, filed by the Resolution Professional of Shubhkamna Buildtech Pvt. Ltd. (Corporate Debtor) for approval of the resolution plan, which has been approved by the Adjudicating Authority (National Company Law Tribunal, New Delhi, Court No. IV).

2. In brief, M/s Concord Infrastructure Pvt. Ltd. filed an application under Section 9 as an Operational Creditor against M/s Shubhkamna Buildtech Pvt. Ltd. (Corporate Debtor) bearing C.P. No. IB-1059/ND/2018 before the Adjudicating Authority which was admitted on 26.11.2018.

3. Shorn of unnecessary details, the appellant was the part of the CoC having 1.67 % voting share. The table depicting the voting percentage alongwith the claim of the creditors admitted in each class/entity of the CD is as under:-

Name of the Class/Entity	Voting Share	Claim Admitted (INR)
Homebuyers/Allottees 87.6%		536,70,62,437
Merina Commotrade Pvt. Ltd.	1.67%	102,125,000
Canara Bank	0.11%	6,815,374
DHFL	3.51%	215,039,400
Rishi Kapoor	1.82%	111,221,500
UCO Bank	5.16%	316,377,832

Corporation Bank	0.13%	7,920,250
Total	100%	612,65,61,793/-

4. The resolution plan submitted by the SRA was approved by the CoC with an affirmative voting percentage of 87.60%. The detail of the dissenting financial creditors alongwith liquidation value is as under:-

Liquidation Value for Dissenting Financial Creditors
Particulars of Dissenting Creditor	Voting Status	Admitted Claim	Provided in Plan	Liquidation Value
Secured Financial Creditors
Dewan Finance Limited	Abstained	21.5	1.5	0
Canara Bank	Abstained	0.68	0.2	0.1820000
Merina Commotrade	Dissent	10.21	1	0.7955513

Pvt. Ltd.
Unsecured Financial Creditors
UCO	Dissent	31.64		Delivery of Units Against borrower’s allotment & BBA
Corp. Bank	Abstained	0.79		Delivery of Units against Borrower’s allotment & BBA
Rishi Kapoor	Dissent	11.12	0.9	1.5231208

6. In the application bearing CA No. 485 of 2019 filed by the RP for approval of the resolution plan, the Appellant filed the objection as dissenting financial creditor on 04.12.2019. The grounds taken by the Appellant are noticed by the Adjudicating Authority in the impugned order which read as under:-

“a. The objector no. 2 submits that the liquidation value of Rs. 82.66 Cr. of the CD as reported by the RP is wrong, baseless, misconceived, erroneous and should be rejected. The objector no. 2 adds that the calculation of the liquidation value is not in accordance with the provisions of the Code, 2016.

b. The objector no. 2 further submits that the amount of Rs. 0.7955513 Cr. that has been offered to the objector no. 2 being the dissenting financial creditor is wrong and baseless. The objector no. 2 further submits that the liquidation value which the objector no. 2 is entitled is way beyond Rs. 1.38 Cr.”

7. The Adjudicating Authority dealt with the objection of the Appellant in para 7 of the impugned order which read as under;-

“With regard to the Objector No. 2’s objections, we find that the resolution professional on receipt of the confidentiality undertaking from the objector no. 2 had shared the fair value and liquidation value with the objector no. 2. We further find that the valuation of all the three classes of assets of the CD were conducted by the IBBI panel registered valuer in compliance with the provisions of the Code, 2016 and the Regulation 35A of the CIRP Regulations made thereunder. We are further of the view that as per Section 30 (2)(b) of the Code, 2016, the liquidation value required to be paid to the financial creditor is only qua the se

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2024 Supreme(Online)(NCLAT) 1419

NATIONAL COMPANY LAW APPELLATE TRIBUNALRakesh Kumar Jain, JMerina Commotrade Pvt. Ltd. – AppellantVersusAnand Sonbhadra Resolution Professional for Shubhkamna Buildtech Pvt. Ltd. & Ors. – RespondentI.A. No. 4180 of 2022

Dissenting financial creditors cannot dictate payout amounts based on security interest, as the Committee of Creditors holds commercial decisional authority in resolution plans under the Code.

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Rakesh Kumar Jain, J
Merina Commotrade Pvt. Ltd. – Appellant
Versus
Anand Sonbhadra Resolution Professional for Shubhkamna Buildtech Pvt. Ltd. & Ors. – Respondent
I.A. No. 4180 of 2022