Resolution plan approved after ensuring equal treatment of operational creditors under Section 30(2)(e) and (f) IBC

The NCLAT overturned the adjudicating authority's refusal to approve a resolution plan that violated Section 30(2)(e) and (f) of the IBC by discriminating between operational creditors. The plan proposed payment to two operational creditors (Gujarat Industrial Development Corporation and Surat Municipal Corporation) while excluding two others (State Tax, Government of Gujarat and Central Excise, Government of India). Following the Supreme Court's precedent in Essar Steel, the NCLAT held that while differential payment between financial and operational creditors is permissible, discrimination within the same class is prohibited. The tribunal modified the plan to distribute Rs.32,78,102 proportionally among all four operational creditors, allowing the resolution plan approved by 99.84% CoC vote share to proceed with implementation.

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Issues involved:
The judgment deals with the rejection of a Resolution Plan by the Adjudicating Authority under the I&B Code, specifically on grounds of violation of Section 30(2)(e) and (f) of the Code.

Operational Creditor's Allocation:
The Appellant challenged the rejection of the Resolution Plan based on the Operational Creditor not being allocated any amount, arguing that the creditors did not object or file appeals. Payments made to certain entities to keep the Corporate Debtor operational were defended as necessary and not in violation of the law. The Financial Creditor's admitted claims were compared to the allocated amount, highlighting the lack of entitlement for other creditors under Section 53 of the Code.

Resolution Professional's Support:
The Resolution Professional supported the Appellant's position, emphasizing that payments made were essential for the Corporate Debtor's operation and in line with the Section 53 waterfall mechanism. The Resolution Professional's application for plan approval was deemed appropriate.

Dissenting Financial Creditor's Opposition:
A Dissenting Financial Creditor opposed the Appellant and Resolution Professional's stance, arguing against discrimination in payment to Operational Creditors and citing lack of notice for a CoC meeting as a reason for rejecting the plan.

Judgment Details:
The Tribunal considered the submissions and facts presented, noting the claims of Operational Creditors and the necessity of payments to certain entities for the Corporate Debtor's operation. Referring to legal precedent, the Tribunal highlighted the need for fair treatment within classes of creditors.

Decision and Modification:
The Tribunal modified the Adjudicating Authority's order, directing the distribution of a specific amount to all Operational Creditors to rectify discrimination in payment. The plan was approved with this modification to ensure implementation without affecting other terms. The Tribunal also addressed the issue of notice for the CoC meeting, finding no fault in the proceedings.

Conclusion:
The Resolution Plan was approved with the modification of distributing a specified amount among Operational Creditors to uphold fairness and compliance with the I&B Code. The Tribunal's decision aimed to serve the ends of justice and ensure the plan's successful implementation as approved by the CoC.

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