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TMI Blog2019 (11) TMI 449X X X X Extracts X X X X X X X X Extracts X X X X ..... (hereafter the "Corporate Debtor") under Section 10 of the Insolvency and Bankruptcy Code, 2016 ("IBC" or "the Code" for short). The revised resolution plan submitted by the appellant was approved by the NCLT on 17th October, 2018. The second respondent, M/s Hero Fincorp Ltd. (hereafter the "Financial Creditor" or "Hero") appealed against the NCLT's order on grounds of discrimination between financial creditors, which resulted in the NCLAT modifying the NCLT's final order. The question urged by the appellant is whether the finding that the financial creditor was discriminated against, leading the NCLAT to modify the adjudicating authority's directions, and consequently imposing greater financial burdens on the resolution applicant, is justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a resolution plan. 3. The NCLAT in its impugned order which set aside the NCLT's directions and required the appellant to increase the liquidation value of the offer to Hero, relied on Central Bank of India v. Resolution Professional of the Sirpur Paper Mills Ltd. & Ors., Company Appeal (AT) (Insolvency) No. 526 of 2018 and Binani Industries Ltd. v. Bank of Baroda & Anr., Company Appeal (AT) (Insolvency) No. 82 of 2018, and noticed that Regulation 38 had been held to be discriminatory in these cases. Accordingly, an amendment was made on 5th October, 2018, and the provision in Regulation 38(1)(c) on liquidation value payable to financial creditors was deleted. The amended regulation was also considered by the Supreme Court in Swiss Ribbon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Creditors'. 5. The NCLAT further observed that under Section 30(2)(b) (ii), such differential treatment must only be made in such a manner as may be specified by the Board, which shall not be less than the amount to be paid to these creditors in accordance with Section 53(1) in the event of liquidation of the corporate debtor. The NCLAT held that the amended Regulation 38 would still be applicable, and the Corporate Debtor could not take advantage of the repealed provision. In light of this reasoning, the NCLAT held the resolution plan to be discriminatory and violative of Section 30(2)(e) of the IBC, and directed that the successful resolution applicant remove the discrimination by providing similar treatment to the appellant before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take in the total claim value and liquidated value of assets, having security of fixed assets, plant and machinery, debtors, inventory and personal guarantee, etc. On the other hand, NBFCs only had security against specific plant & machinery and the personal guarantee of the promoters. It was also argued that the resolution plan has been fully implemented and financial creditors (except Hero) have released security to the Corporate Debtor. Further, the senior counsel appearing on behalf of the Corporate Debtor argued that under Section 30(2)(b)(ii), the resolution plan allows separate treatment of financial creditors who do not vote in favour of the resolution plan. 8. Mr. Amit Sibal, learned senior counsel for the second Respondent Hero, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of the debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under section 53; (c) provides for the management of the affairs of the Corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; (e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be specified by the Board. (3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndatory contents of the resolution plan.- (1) A resolution plan shall identify specific sources of funds that will be used to pay the - (a) insolvency resolution process costs and provide that the [insolvency resolution process costs, to the extent unpaid, will be paid] in priority to any other creditor; (b) liquidation value due to operational creditors and provide for such payment in priority to any financial creditor which shall in any event be made before the expiry of thirty days after the approval of a resolution plan by the Adjudicating Authority; and (c) liquidation value due to dissenting financial creditors and provide that such payment is made before any recoveries are made by the financial creditors who voted in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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