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2018 (7) TMI 2251 - Tri - Insolvency and BankruptcyApproval of the resolution plan - section 30(6) of the Insolvency and Bankruptcy Code 2016 - HELD THAT:- On perusal of the resolution plan, it appears that the Resolution Professional had given the details of the Resolution applicants and its connected persons as per regulation 38(3) of the IBBI (Insolvency Resolution Process) Regulation 2017. In this list, the name of the resolution applicant Rajasthan Liquor Ltd. is on the top of the list and the names of Corporate Debtor Swadisth Oils Pvt. Ltd. as related party of Resolution Applicant, i.e. RLL. It is also important to point out that the name of unsecured Financial Creditor M/s. Jya Finance & Investment Co. Ltd. is also shown as a related party of Resolution Applicant, i.e. RLL. The approved Resolution Plan secure financial creditor State Bank of India which has 86.18% vote share in the COC is not getting anything from the distribution of liquidation estate. Approved plan provides that SBI shall enhance the working capital limits from present limit of ₹ 20 crores to ₹ 30 crores. It is also clear that in 2016 the corporate debtor paid ₹ 50 crores to SBI and after that State bank of India issued no dues certificate DT. 18 October 2016 in favour of corporate debtor. Thus it is clear that SBI, which has 86.18% vote share in the COC was not aggrieved at all. Therefore they have proposed to enhance working capital limits from ₹ 20 crores to ₹ 30 crores - Since approval of resolution plan was mainly dependent on its approval by SBI. Since you SBI was not aggrieved therefore they have not taken care of the dues of other unsecured operational creditors. Since debt of Jya Finance and investment Ltd. is an intragroup debt. The Jya finance and investment Ltd. has always acted as a financial arm of the corporate debtor. In UNCITRAL legislative guide on insolvency law, such type of debt has been treated as an equity contribution rather than as an intragroup loan, with the consequence that intragroup obligations will rank lower priority than the same obligation between unrelated parties - Therefore they can be treated in the waterfall as provided in section 53(1)(h) of the code in the category of "the equity shareholders and partners, as the case may be" which is below the rank of both the unsecured financial creditors and as well as other debts and dues. Keeping in view the global practices, especially UNCITRAL legislative guide to insolvency law, we are of the view that claim of a related party, i.e. Jya Finance And Investment Company Limited should rank subordinate to the claim of operational creditors and treated at par with equity shareholders are partners under waterfall principle under section 53(1)(h) of the Code - the debt of ₹ 36.6643 crore of Jay Finance & Investment Co. Ltd. Crores, which is admittedly a related party of corporate debtor should fall in the category of "equity shareholders are partners" as provided in section 53(1)(h) of the Code. Their claim will be treated at par with equity shareholders are partners, who are other unsecured creditors they rank below the operational creditors of the corporate debtor. List the matter on 31st July, 2018 for further consideration.
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