Tribunal Upholds Resolution Plan, Nil Payment to Creditors Justified

The Tribunal dismissed the Operational Creditor's challenge to the Resolution Plan, upholding the 'nil' payment to Operational Creditors as justified under the amended I&B Code. It also rejected the Financial Creditor's application to protect its rights against guarantors, affirming the CoC's decision to extinguish such rights. The Tribunal emphasized the CoC's commercial wisdom in approving the plan and the legislative intent to ensure the revival of the Corporate Debtor.

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Issues Involved:
1. Challenge to the Resolution Plan by an Operational Creditor.
2. Rights of Operational Creditors under the Resolution Plan.
3. Performance Bank Guarantee by the Resolution Applicant.
4. Commercial Viability of the Resolution Plan.
5. Rights of Financial Creditors against Guarantors.

Issue-wise Detailed Analysis:

1. Challenge to the Resolution Plan by an Operational Creditor:
The Operational Creditor, Indian Oil Corporation Limited (IOCL), filed a Miscellaneous Application challenging the Resolution Plan approved by the Committee of Creditors (CoC) for EPC Constructions India Limited. IOCL argued that the plan was arbitrary and discriminatory because it provided 'nil' payment to Operational Creditors. The applicant contended that the resolution plan was not fair and equitable as required by the Insolvency & Bankruptcy Code (I&B Code).

2. Rights of Operational Creditors under the Resolution Plan:
IOCL's claim of Rs. 464.37 Crore was rejected by the Resolution Professional (RP) on the grounds that it was uncrystallized and pending arbitration. IOCL argued that the 'nil' liquidation value assigned to Operational Creditors was incorrect, citing valuation reports that provided substantial liquidation values. IOCL also referenced the NCLAT judgment in Standard Chartered Bank Vs. Satish Kumar Gupta, which stated that Operational Creditors should not be paid less than what they would receive in liquidation. However, the Tribunal held that the recent amendment to Section 30(2)(b) of the I&B Code clarified that Operational Creditors should be paid the higher of the liquidation value or the amount distributed under the resolution plan. The Tribunal concluded that the 'nil' payment to Operational Creditors was justified as the liquidation value available to them was also 'nil'.

3. Performance Bank Guarantee by the Resolution Applicant:
IOCL contended that the Resolution Applicant, Royal Partners Investment Fund Limited (RPIF), had not furnished the required Performance Bank Guarantee of Rs. 90 Crore, providing only Rs. 42 Crore. The Tribunal noted that the remaining security deposit was yet to be deposited, but held that IOCL had no locus to question the understanding between the CoC and the Resolution Applicant. The Tribunal suggested that it could order the Resolution Applicant to deposit the remaining amount if it approved the plan.

4. Commercial Viability of the Resolution Plan:
IOCL argued that the Resolution Plan was commercially unviable, offering only Rs. 420 Crore upfront and the rest based on projections, which was less than what was offered by another bidder, Arcelormittal. The Tribunal, however, found that the total payment to revive the Corporate Debtor was Rs. 901.74 Crore, with a significant portion being deferred payments. It held that the contention of discrimination against Operational Creditors was incorrect as Financial Creditors were also receiving only about 12% of their debt.

5. Rights of Financial Creditors against Guarantors:
Export-Import Bank of India (EXIM Bank), a Financial Creditor, filed a separate application seeking to protect its rights against the guarantors of the Corporate Debtor. The Resolution Plan provided for the release and extinguishment of all guarantees and securities provided by the promoters. EXIM Bank argued that this provision defeated its statutory right to proceed against the guarantors. The Tribunal noted that the resolution plan had been approved by a majority of 73.17% of the CoC members and that the extinguishment of guarantors' rights was a settlement between the Resolution Applicant and the creditors. It held that allowing creditors to claim remaining dues from guarantors would create a never-ending cycle, contrary to the intent of the I&B Code. The Tribunal upheld the commercial wisdom of the CoC and rejected EXIM Bank's application.

Conclusion:
The Tribunal dismissed IOCL's application, holding that the 'nil' payment to Operational Creditors was justified under the amended I&B Code. It also rejected EXIM Bank's application, affirming the CoC's decision to extinguish guarantors' rights. The Tribunal emphasized the importance of the CoC's commercial wisdom in approving the Resolution Plan and the legislative intent to ensure the revival and continuation of the Corporate Debtor.

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