The National Company Law Appellate Tribunal, Principal Bench while upholding the National Company Law Tribunal ( NCLT ) has held that the Insolvency Bankruptcy Code ( IBC ), 2016 does not provide Mandate treatment of the related party at par with an unrelated party.
Jayant Kumar Panja, ex-employee of Fort Gloster Industries Limited (“Corporate Debtor”) initiated CIRP on account of default in payment of Rs.1,13,946/- towards his gratuity. Bijay Murmuria New Interim Resolution Professional (IRP) was appointed to replace the old IRP.
An application was filed by the Resolution Professional for the approval of the Resolution Plan of Fort Gloster Industries Ltd. which was approved.
West Coast Paper Mills Ltd. (Appellant) submitted that an amount of Rs. 7,15,41,918/- was paid by them on behalf of the Corporate Debtor to KDCC Bank Ltd., due to default by the Corporate Debtor and Corporate Guarantee Bond executed by the Appellant. The appellant filed its claim amounting to Rs. 89,20,02,003.54/- after the initiation of CIRP against the Corporate Debtor.
It was submitted by the appellant that he should be treated on par with other Financial Creditors and should be eligible for equal pro rata distribution as per the Resolution Plan. It was submitted that he has been equated with equity shareholders rather than being treated on par with unrelated Secured Financial Creditors. It was also argued that the Resolution Plan is contrary to the provision of IBC and is liable to be rejected.
It was contended by the respondent that a resolution plan can provide for differential payment to different classes of creditors. It was further argued that the appellant cannot seek payment under the resolution plan in parity with secured financial creditors. It was submitted that the appellant is a related party of a Corporate Debtor and unsecured Financial Creditor.
It was observed by the tribunal that the resolution plan reflecting the status of the Appellant as a related party unsecured financial creditor has been approved by the CoC and Adjudicating Authority. So, the appellant has not been treated as equivalent to an equity shareholder. Further, the NIL amount has been given to the appellants on account of them being related parties.
The two members comprising Justice Rakesh Kumar Jain (Judicial Member), Naresh Salecha and Indevar Pandey ( Technical Members ) held that the Committee of Creditors and Adjudicating Authority were well within their rights not to treat a related party unsecured creditor on par with secured financial creditors.
West Coast Paper Mills Ltd.
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