TMI Blog2023 (7) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon ble Supreme Court in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT ] where the Hon ble Supreme Court has laid down that equality in the payment under the Resolution Plan has to be under some class of creditors. The principle of equality is applicable only in same class of creditors. This Tribunal in a case arising out of similar facts in DAMODAR VALLEY CORPORATION VERSUS DIMENSION STEEL AND ALLOYS PRIVATE LIMITED, BIJOY MURMURIA, RESOLUTION PROFESSIONAL OF THE CORPORATE DEBTOR, C/O SUMEDHA MANAGEMENT SOLUTION PRIVATE LIMITED, C.P. ISPAT PRIVATE LIMITED [ 2022 (5) TMI 1365 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI ] where Electricity Dues were unpaid by the Corporate Debtor, Resolution Plan was approved where operational creditors of the Damodar Valley Corporation were provided less than 1% - This tribunal had noticed about the meagre payment to Operational Creditor in most of the Resolution Plan. Tribunal has made observations in the said judgment drawing attention to the fact of the legislative scheme and to consider as to whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal, Cuttack Bench by which order the Application filed by the Resolution Professional for approval of the Resolution Plan has been allowed and the Resolution Plan submitted by the Resolution Applicant has been approved. 3. Company Appeal (AT) Ins. No. 795 of 2022 has been filed against the Order dated 07th April, 2022 passed by National Company Law Tribunal, Kolkata Bench by which order the Resolution Plan submitted by the Resolution Applicant has been approved by the Adjudicating Authority. 4. We may now proceed to notice the brief facts giving rise to these Appeals. 5. Company Appeal (AT) Insolvency No. 613/2022: -Corporate Insolvency Resolution Process was initiated against the Corporate Debtor by Order dated 16.12.2019 in CP.(IB) No. 44/CTB/2019. In response to the Public Announcement made by the Interim Resolution Processional in the CIRP, the Appellant submitted its claim in Form-B in the capacity of the Operational Creditor for total amount of Rs. 8,59,08,466/-. Resolution Professional admitted the claim of Appellant of Rs. 6,68,51,466/-. Successful Resolution Applicant in CIRP submitted a Resolution Plan which was approved by the Committee of Creditors on 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial Creditors have been given much higher amount. It is further submitted that Resolution Plan is in contravention of the OERC Distribution (Conditions of Supply) Code, 2019. It is submitted that Electricity Charge is a charge under the premises which is recoverable from the licensee/supplier. It is submitted that payment of electricity charge thus can not be denied as per the Regulations framed under the Electricity Act, 2003. Electricity Charge is statutory dues. The challenge for Commercial Wisdom of the CoC can be entertained by this Court in exercise of its jurisdiction. This Court can interfere in the Impugned Order to protect the interest of the Operational Creditors. 9. Learned Counsel appearing for Respondents refuting the submissions of Learned Counsel for the Appellants submits that Appellants in both the Appeals have filed their claim as Operational Debt under Form B and as Operational Creditor, the Appellant were entitled to receive not less than their liquidation value and it is not the case of the Appellants that amount paid to them under the plan is less than the Liquidation Value. There is no discrimination in payment to Operational Creditor in plan. The Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 88. By reading paragraph 77 (of Swiss Ribbons) de hors the earlier paragraphs, the Appellate Tribunal has fallen into grave error. Paragraph 76 clearly refers to the UNCITRAL Legislative Guide which makes it clear beyond any doubt that equitable treatment is only of similarly situated creditors. This being so, the observation in paragraph 77 cannot be read to mean that financial and operational creditors must be paid the same amounts in any resolution plan before it can pass muster. On the contrary, paragraph 77 itself makes it clear that there is a difference in payment of the debts of financial and operational creditors, operational creditors having to receive a minimum payment, being not less than liquidation value, which does not apply to financial creditors. The amended Regulation 38 set out in paragraph 77 again does not lead to the conclusion that financial and operational creditors, or secured and unsecured creditors, must be paid the same amounts, percentage wise, under the resolution plan before it can pass muster. Fair and equitable dealing of operational creditors rights under the said Regulation involves the resolution plan stating as to how it has dealt with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 6. Other Debts and Dues Total Quite clearly, secured and unsecured financial creditors are differentiated when it comes to amounts to be paid under a resolution 98 plan, together with what dissenting secured or unsecured financial creditors are to be paid. And, most importantly, operational creditors are separately viewed from these secured and unsecured financial creditors in S.No.5 of paragraph 7 of statutory Form H. Thus, it can be seen that the Code and the Regulations, read as a whole, together with the observations of expert bodies and this Court s judgment, all lead to the conclusion that the equality principle cannot be stretched to treating unequals equally, as that will destroy the very objective of the Code - to resolve stressed assets. Equitable treatment is to be accorde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the major issues that arise in the working of the Code and to recommend changes, if any, required to be made to the Code. The Insolvency Committee Report, 2018 (hereinafter referred to as the Committee Report, 2018 ), inter alia, deliberated upon the objections to Section 30(2)(b) of the Code, inasmuch as it provided for a minimum payment of a liquidation value to the operational creditors and nothing more, and concluded as follows: 18. value guaranteed to operational creditors under a resolution plan 18.1. Section 30(2)(b) of the Code requires the RP to ensure that every resolution plan provides for payment of at least the liquidation value to all operational creditors. Regulation 38(1)(b) of the CIRP Regulations provides that liquidation value must be paid to operational creditors prior in time to all financial creditors and within thirty days of approval of resolution plan by NCLT. The BLRC Report states that the guarantee of liquidation value has been provided to operational creditors since they are not allowed to be part of the CoC which determines the fate of the corporate debtor. (BLRC Report, 2015). 18.2. However, certain public comments received by the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... staggered manner after payment to financial creditors, easing the burden of the 30- day mandate provided under Regulation 38 of the CIRP Regulations. However, the same was modified by NCLT and operational creditors were required to be paid prior in time, due to the quantum of debt and nature of the creditors. Similarly, the approved resolution plan in Alchemist Asset Reconstruction Co. Ltd. v. Hotel Gaudavan (P) Ltd. [Alchemist Asset Reconstruction Co. Ltd. v. Hotel Gaudavan (P) Ltd., 2017 SCC OnLine NCLT 13223] provided for payment of all existing dues of the operational creditors without any write-off. The Committee felt that the interests of operational creditors must be protected, not by tinkering with what minimum must be guaranteed to them statutorily, but by improving the quality of resolution plans overall. This could be achieved by dedicated efforts of regulatory bodies including the IBBI and Indian Banks' Association. 18.5. [Ed.: The matter between two asterisks has been emphasised in original.] Finally, the Committee agreed that presently, most of the resolution plans are in the process of submission and there is no empirical evidence to further the argument th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame recovery percentage as financial creditors. So long as the provisions of the Code and the Regulations have been met, it is the commercial wisdom of the requisite majority of the Committee of Creditors which is to negotiate and accept a resolution plan, which may involve differential payment to different classes of creditors, together with negotiating with a prospective resolution applicant for better or different terms which may also involve differences in distribution of amounts between different classes of creditors. 16. This tribunal had noticed about the meagre payment to Operational Creditor in most of the Resolution Plan. Tribunal has made observations in the said judgment drawing attention to the fact of the legislative scheme and to consider as to whether any changes are required or not. Following has been observed in Paragraph 31 of above Judgment: 31. The Operational Creditors normally had claims pertaining to supply made to the Corporate Debtor, which amounts normally as compared to the Financial Creditors claim are less. Operational Creditors consist of various type of industries including MSMEs, public sector organization and small entities. Altogether ..... X X X X Extracts X X X X X X X X Extracts X X X X
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