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Issues: Whether the approved resolution plan was liable to be interfered with on the grounds that no amount was provided to promoter-shareholders and that the treatment of personal guarantees and other securities under the plan was discriminatory or contrary to law.
Analysis: The promoters were not creditors and had no entitlement to be placed on par with financial or operational creditors in the distribution under the resolution plan. The insolvency framework suspends the rights of promoters and related parties, including voting rights, and does not permit them to regain control or benefit from the corporate insolvency resolution process. The plan's treatment of securities and personal guarantees was held not to be illegal, as guarantees are independent contracts and the liability of guarantors is co-extensive with that of the borrower; the approval of the plan did not amount to a recovery proceeding or discharge creditors from enforcing lawful remedies. The differential treatment between promoter-shareholders and other equity holders was therefore not discriminatory in the context of the insolvency resolution regime.
Conclusion: The challenge to the approved resolution plan failed. The treatment of promoter-shareholders and personal guarantors under the plan was upheld, and the appeal was dismissed.
Ratio Decidendi: In a corporate insolvency resolution process, promoter-shareholders have no vested right to receive any distribution or to object to the plan merely because personal guarantees are treated as having no liability vis-a -vis the company, and the validity of the plan is judged within the insolvency framework rather than by treating it as a debt recovery proceeding.
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