Dissenting Financial Creditors are Entitled to Receive Payments on Pro-Rata Basis of Resolution Plan Value: NCLAT [Read Order]

The National Company Law Appellate Tribunal ( NCLAT ) Chennai bench ruled that, instead of receiving the liquidation value, dissident financial creditors should be paid on pro- Rata Basis of the resolution plan.

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On February 29, 2022, the Committee of Creditors (CoC) approved the Resolution Plan that Sical Logistics Limited (Successful Resolution Applicant/SRA) had presented. On December 8, 2022, the National Company Law Tribunal (NCLT) confirmed this decision. The appellant was entitled to Rs. 42.09 crores, or 9.88% of the Rs. 425.93 crores total payout under the Resolution Plan of RBL Bank. But just Rs. 9.38 Crores, or 9.88% of the available Rs. 94.93 Crores, were given to it. The appellant contended that, in accordance with the plan and the Code's rules, it ought to be paid in full before Assenting Financial Creditors (FCs).

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According to Clause 1.2.9(b) of the Resolution Plan, the Adjudicating Authority determined that the Dissenting Creditor is only entitled to the sum specified in Section 53(1) of the Code. The appellant claimed that, as a Dissenting Financial Creditor, he should receive Rs. 42.09 crores, or 9.88% of the Rs. 425 crore Resolution Plan value, since he is entitled to a share of that amount.

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It was further contended that as a dissenting Creditor he should get priority in payment and therefore as Rs. 54.32 Crores has been remitted by the SRA as the 1st tranche of the Resolution amount he should have been paid Rs. 42.09 Crores in full, but instead he has been paid Rs. 9.38 Crores only.

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The bench of Justice Sharad Kumar Sharma (Judicial Member) and Mr. Jatindranath Swain (Technical Member) observed that the Adjudicating Authority committed a mistake in holding that a dissenting financial creditor is entitled only to the minimum amount prescribed under section 30(2) of the code based on the liquidation value under section 53 of the code.

It further added that 30(2)(b)(ii) of the code mandates that the amount must not be less than the liquidation value and the amount should also be fair and equitable. Since the resolution value exceeds the liquidation value in the present case, the dissenting financial creditor should receive a pro rate share of the resolution plan.

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According to the Tribunal, priority in payment requires that the Dissenting Creditor be paid first, on a pro rata basis, whenever the Successful Resolution Applicant (SRA) transfers cash to Financial Creditors (FCs). It additionally mandated that the Dissenting Creditor be paid first, followed by the other FCs, in the event that the SRA pays the entire resolution plan sum up front. Disbursements, however, will also take place in phases when the SRA makes payments in increments. The Dissenting Creditor must be given priority in all distributions, even if it may not always be feasible to pay them in full before others.

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In compliance with section 30(20(b) of the code read with Regulation 38, the Tribunal came to the conclusion that Respondent No. 1 must send the sum allocated to the RP under the Resolution Plan. According to the Resolution Plan's guidelines and the terms of this ruling, the SRA will divide the sum among the financial creditors. After SRA has received complete payment, the financial creditor will provide the Resolution Professional the title deeds to the corporate debtor's assets, who will then give them to SRA.

To Read the full text of the Order CLICK HERE

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