Resolution Plan does not discriminate based on Type of creditors to give preference to secured creditors both having first charge or having residual charges: NCLAT [Read Order]

The Appellants i.e. Shankar Mukherjee & Badri Kumar Tulsyan who are the Suspended Board of Directors of Suasth Healthcare Foundation (hereafter referred to as "Corporate Debtor") under Section 61 of the Insolvency and Bankruptcy Code, 2016 (Code), challenging the Impugned Order dated 18.12.2023 passed by the National Company Law Tribunal, Kolkata Bench (“Adjudicating Authority”) in I.A. (IB) No. 1733/KB/2023 ("said Application") in C.P. (IB) No. 204/ KB/ 2021.

Ravi Sethia, who is Resolution Professional of Suasth Healthcare Foundation, is the Respondent No.J.C. Flowers Asset Reconstruction Private Limited, who is a member of the Committee of Creditors (‘CoC’) of Suasth Health Care Foundation, is the Respondent No.2. Axis Bank Limited, who is also another member of the CoC of Suasth Health Care Foundation, is the Respondent No.3. Consortium of Nishkala Healthcare Private Limited & Ujin Pharma Chem, who is the Successful Resolution Applicant is the Respondent No.4 herein.

Complete Ready to Use PDFs of 200+ Agreements Click here

The Appellants submitted that the Corporate Debtor, was admitted into the Corporate Insolvency Resolution Process (“CIRP”) on 31.08.2021. The Appellants submitted that they attended CoC meetings under Section 24 of the Code as members of the Suspended Board of Directors, qualifying as “participants” under Regulation 2(1)(l) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations).

The Appellant further submitted that the Resolution Professional provided them with an amended and restated resolution plan submitted by Respondent No. 4 on 03.09.2022, which was placed before the CoC in its 15th meeting on 21.09.2022 and approved on 06.10.2022 with 100% voting share. The Appellants asserted that the Resolution Professional disclosed the approved resolution plan to them as “participants” under the CIRP Regulations, entitling them to receive notices and documents relevant to CoC meetings under Regulations 19, 20, and 21.

The Appellants admitted they relied in good faith on the Resolution Professional’s certification that the resolution plan complied with applicable laws, given the Appellant’s lack of expertise in insolvency law and the Resolution Professional’s professional obligation to provide such certification.

Also Read:NCLAT Dismisses Appeal by Suspended Company Director: Upholds Insolvency Against the Company [Read Order]

The grievance of the Appellants is that the dues of employees and workers have not been provided for in the Resolution Plan adequately and stated that against employee claims of Rs. 1,53.83,821/-, the employees have been allocated only Rs. 73 Lakhs. The Appellants also submitted that the Resolution Plan is noncompliance to the Code in so much so that the specific amount and the manner of distribution has not been provided in the approved Resolution Plan. The Appellants also argued that discretion has been given to the Respondent No. 4 to distribute the such funds to the employees which has again the spirit of the Code.

Step by Step Guide of Preparing Company Balance Sheet and Profit & Loss Account Click Here

A three-member bench of Justice Rakesh Kumar Jain, Member (Judicial) , Mr. Naresh Salecha,Member (Technical) and Mr. Indevar Pandey, Member (Technical) observed that it is important to understand that the Resolution Plan cannot be approved by the Adjudicating Authority under Section 30 (2) (b) r/w Section 31 of the Code unless a minimum payment is made to the Operational Creditor, dissenting Financial Creditors, which cannot be less than as per Section 53 i.e., related to liquidation value.

The other categories i.e., unsecured financial creditors, other creditors and shareholders have been provided NIL value in the approved Resolution Plan. The bench found that the Resolution Plan does not discriminate based on the type of creditors to give preference to secured creditors both having first charge or having residual charges.

The bench held that “ We need to appreciate that the Resolution Plan does not discriminate against the Unsecured Financial due to its classification as a related party, but rather allocates treatment based on its status as an unsecured financial creditor, with such distribution being determined by the CoC in its commercial wisdom and in compliance with the Code. In this connection, it has been brought to our notice that all unsecured financial creditors have been given Nil allocation in the Resolution Plan. Thus, the allegations of the Appellant are legally not tenable.”

As regard, another point submitted by the Appellant regarding lack of transparency since the exact amount and the manner of distribution of such funds among the employee/ workers has not been provided in the approved Resolution Plan and discretion has been granted to the SRA.

The other point raised by the Appellant that the Resolution Professional could not protect the assets of the Corporate Debtor during CIRP is without any basis. Only point that since, hospital was shut down during CIRP does not tantamount to violation of the Code/ Regulation by the Resolution Professional. The Appeal devoid of any merit stand rejected. No cost. I.A., if any, are closed.

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