Operational creditor receives nothing under approved resolution plan when liquidation value is nil

NCLAT dismissed an operational creditor's appeal challenging a resolution plan that allocated no amount to the appellant. The tribunal found the liquidation value was nil as per Form H submitted by the resolution professional, with even government operational creditors having verified claims of Rs. 295.18 crores receiving nothing. NCLAT held no error existed in the allocation since operational creditors are only entitled to minimum liquidation value under Section 30(2)(b), and no breach of statutory provisions was demonstrated. The appeal was dismissed with no interference warranted in the approved resolution plan.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Approval of the Resolution Plan by the Adjudicating Authority.
3. Allocation of amount to the Operational Creditor in the Resolution Plan.
4. Compliance with Section 30(2)(b) of the Insolvency and Bankruptcy Code (I&B Code).
5. Consideration of previous judgments, specifically "Hammond Power Solutions Pvt. Ltd. vs. Mr. Sanjit Kumar Nayak" and "Essar Steel India Ltd. Committee of Creditors vs. Satish Kumar Gupta".

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appellant filed an application (I.A. No. 4658 of 2022) for condonation of a 13-day delay in filing the appeal, citing COVID-19 restrictions as the cause. The tribunal found the cause sufficient and allowed the application, thereby condoning the delay.

2. Approval of the Resolution Plan by the Adjudicating Authority:
The appeal challenged the order dated 17.03.2022, where the Adjudicating Authority approved the Resolution Plan submitted by the Resolution Professional. The appellant, an Operational Creditor, contended that the plan did not allocate any amount to them, arguing it was not in accordance with the I&B Code.

3. Allocation of Amount to the Operational Creditor in the Resolution Plan:
The appellant's primary contention was the lack of allocation in the Resolution Plan. The Resolution Professional countered that the liquidation value of the appellant was Nil, justifying the non-allocation. The tribunal noted that the Resolution Plan categorized operational creditors into three groups: workmen and employees, government dues, and other operational creditors. It was observed that the government dues, amounting to Rs. 295.18 crores, were also allocated Nil, supporting the decision for the appellant's Nil allocation.

4. Compliance with Section 30(2)(b) of the Insolvency and Bankruptcy Code (I&B Code):
The tribunal examined whether the Resolution Plan complied with Section 30(2)(b) of the I&B Code, which mandates that operational creditors receive at least the liquidation value. The tribunal found no breach of this provision, as the liquidation value for the appellant was Nil. The tribunal emphasized that the commercial decision of the Committee of Creditors (CoC) to allocate Nil to certain creditors cannot be questioned if it adheres to the I&B Code.

5. Consideration of Previous Judgments:
The appellant relied on the judgment in "Hammond Power Solutions Pvt. Ltd. vs. Mr. Sanjit Kumar Nayak," where a resolution plan was remitted back due to non-consideration of operational creditors. However, the tribunal distinguished this case from the current one, noting that all stakeholders were dealt with in the present Resolution Plan, and there was no statutory requirement to make payments to all stakeholders.

The tribunal also referred to the Supreme Court judgment in "Essar Steel India Ltd. Committee of Creditors vs. Satish Kumar Gupta," which emphasized that the CoC's commercial decisions should consider the interests of all stakeholders, including operational creditors. The tribunal reiterated that judicial review is limited to ensuring compliance with Section 30(2) of the I&B Code and that the CoC's commercial decisions should not be interfered with on merits.

Conclusion:
The tribunal concluded that the Operational Creditors are only entitled to the minimum liquidation value, which in this case was Nil. Finding no breach of the I&B Code provisions, the tribunal dismissed the appeal, upholding the Resolution Plan approved by the Adjudicating Authority.

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