NCLAT Upholds Resolution Plan Payout to GNIDA, Rejects Objections on Section 30(2) and Valuation [Read Order]

The National Company Law Appellate Tribunal (NCLAT) Principal Bench at New Delhi, has refused to interfere with the approval of a resolution plan providing a higher payout to Greater Noida Industrial Development than to secured financial creditors.

The appeals were filed challenging an order which approved a resolution plan in the CIRP initiated in March 2021. The appellant authority had submitted claims exceeding ₹45 crore and objected to the plan on several grounds including - the proposed payout not being adequate, valuation of the corporate debtor being incorrect, lease premium accruing during the CIRP period to be treated as CIRP cost, and proceeds from an application under Section 66 of the Code getting assigned without permission.

A Bench comprising Justice Ashok Bhushan, Chairperson, and Barun Mitra (Technical Member) noted that in view of the Supreme Court’s ruling in Prabhjit Singh Soni, the appellant was required to be treated as a secured creditor by virtue of statutory charge under the relevant legislation.

The Tribunal observed that the approved resolution plan provided ₹16.50 crore to the appellant against an admitted claim of approximately ₹26.45 crore, which was higher than the amount allocated to secured financial creditors. In this context, the tribunal held that the payout satisfied the requirements of Section 30(2) of the Code.

On the issue of valuation, the tribunal held that the valuation exercise was conducted in accordance with Regulation 35 of the CIRP Regulations and had been accepted by the Committee of Creditors. It reiterated that valuation cannot be reopened at the stage of approval of the resolution plan.

With respect to the claim that lease premium falling due during the CIRP period should be treated as CIRP cost, the Tribunal relied on its earlier decisions and held that the issue stood settled.

The tribunal also dismissed the challenge relating to the assignment of proceeds arising from a Section 66 application to the resolution applicant, observing that the decision was taken by the Committee of Creditors in exercise of its commercial wisdom and could not be interfered with.

Accordingly, the NCLAT upheld the order approving the resolution plan and disposed of the appeal, reaffirming that equitable distribution under a resolution plan requires compliance with statutory safeguards under the Insolvency and Bankruptcy Code rather than parity with admitted claims.

The National Company Law Appellate Tribunal (NCLAT) Principal Bench at New Delhi, has refused to interfere with the approval of a resolution plan providing a higher payout to Greater Noida Industrial Development than to secured financial creditors.

The appeals were filed challenging an order which approved a resolution plan in the CIRP initiated in March 2021. The appellant authority had submitted claims exceeding ₹45 crore and objected to the plan on several grounds including - the proposed payout not being adequate, valuation of the corporate debtor being incorrect, lease premium accruing during the CIRP period to be treated as CIRP cost, and proceeds from an application under Section 66 of the Code getting assigned without permission.

A Bench comprising Justice Ashok Bhushan, Chairperson, and Barun Mitra (Technical Member) noted that in view of the Supreme Court’s ruling in Prabhjit Singh Soni, the appellant was required to be treated as a secured creditor by virtue of statutory charge under the relevant legislation.

The Tribunal observed that the approved resolution plan provided ₹16.50 crore to the appellant against an admitted claim of approximately ₹26.45 crore, which was higher than the amount allocated to secured financial creditors. In this context, the tribunal held that the payout satisfied the requirements of Section 30(2) of the Code.

On the issue of valuation, the tribunal held that the valuation exercise was conducted in accordance with Regulation 35 of the CIRP Regulations and had been accepted by the Committee of Creditors. It reiterated that valuation cannot be reopened at the stage of approval of the resolution plan.

With respect to the claim that lease premium falling due during the CIRP period should be treated as CIRP cost, the Tribunal relied on its earlier decisions and held that the issue stood settled.

The tribunal also dismissed the challenge relating to the assignment of proceeds arising from a Section 66 application to the resolution applicant, observing that the decision was taken by the Committee of Creditors in exercise of its commercial wisdom and could not be interfered with.

Accordingly, the NCLAT upheld the order approving the resolution plan and disposed of the appeal, reaffirming that equitable distribution under a resolution plan requires compliance with statutory safeguards under the Insolvency and Bankruptcy Code rather than parity with admitted claims.

The National Company Law Appellate Tribunal (NCLAT) Principal Bench at New Delhi, has refused to interfere with the approval of a resolution plan providing a higher payout to Greater Noida Industrial Development than to secured financial creditors.

The appeals were filed challenging an order which approved a resolution plan in the CIRP initiated in March 2021. The appellant authority had submitted claims exceeding ₹45 crore and objected to the plan on several grounds including - the proposed payout not being adequate, valuation of the corporate debtor being incorrect, lease premium accruing during the CIRP period to be treated as CIRP cost, and proceeds from an application under Section 66 of the Code getting assigned without permission.

A Bench comprising Justice Ashok Bhushan, Chairperson, and Barun Mitra (Technical Member) noted that in view of the Supreme Court’s ruling in Prabhjit Singh Soni, the appellant was required to be treated as a secured creditor by virtue of statutory charge under the relevant legislation.

The Tribunal observed that the approved resolution plan provided ₹16.50 crore to the appellant against an admitted claim of approximately ₹26.45 crore, which was higher than the amount allocated to secured financial creditors. In this context, the tribunal held that the payout satisfied the requirements of Section 30(2) of the Code.

On the issue of valuation, the tribunal held that the valuation exercise was conducted in accordance with Regulation 35 of the CIRP Regulations and had been accepted by the Committee of Creditors. It reiterated that valuation cannot be reopened at the stage of approval of the resolution plan.

With respect to the claim that lease premium falling due during the CIRP period should be treated as CIRP cost, the Tribunal relied on its earlier decisions and held that the issue stood settled.

The tribunal also dismissed the challenge relating to the assignment of proceeds arising from a Section 66 application to the resolution applicant, observing that the decision was taken by the Committee of Creditors in exercise of its commercial wisdom and could not be interfered with.

Accordingly, the NCLAT upheld the order approving the resolution plan and disposed of the appeal, reaffirming that equitable distribution under a resolution plan requires compliance with statutory safeguards under the Insolvency and Bankruptcy Code rather than parity with admitted claims.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates