NCLAT upholds resolution plan dismissing operational creditor's discrimination claim over payment distribution under IBC Section 30(2)(b)

The NCLAT dismissed an appeal challenging a resolution plan approval. The appellant, an operational creditor, claimed discrimination in payment distribution under the plan, arguing that while operational creditors with claims up to Rs. 3 lakhs received 100% payment, it was treated unfairly. The NCLAT held that operational creditors were paid according to Section 30(2)(b) of IBC 2016 and Regulation 38 of CIRP Regulations, with Committee of Creditors having discretion in classification and distribution. The tribunal noted the appellant's claim related to arbitration proceedings under a Gas Sale Agreement for take-or-pay obligations, not goods/services for going concern. Finding no material irregularity or patent illegality in the adjudicating authority's order, the appeal was dismissed as lacking merit.

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Issues Involved:
1. Approval of the Resolution Plan by the Committee of Creditors (CoC).
2. Discrimination against Operational Creditors in the Resolution Plan.
3. Compliance of the Resolution Plan with the Insolvency and Bankruptcy Code (IBC) and related regulations.
4. Validity of the claims made by the Appellant under the Gas Sale Agreement.
5. Jurisdiction and authority of the Adjudicating Authority and Appellate Tribunal in evaluating the Resolution Plan.

Detailed Analysis:

1. Approval of the Resolution Plan by the Committee of Creditors (CoC):
The CoC approved the Resolution Plan submitted by JM Financial Reconstruction Company Limited and Reliance Industries Limited on 20.06.2018 with a 72.192% majority. The plan was subsequently filed for approval under Section 30(6) read with Section 31(1) of the IBC. The Adjudicating Authority observed that the Resolution Plan complied with the requirements of Section 30(2) of the Code and Regulation 38 of the CIRP Regulations. The plan included a detailed financial outlay and distribution mechanism, prioritizing insolvency resolution process costs, workmen dues, and financial creditors.

2. Discrimination against Operational Creditors in the Resolution Plan:
The Appellant argued that the Resolution Plan discriminated against operational creditors by providing 100% payment to those with claims under Rs. 3 lakhs while offering 'NIL' to those with claims over Rs. 3 lakhs. The Adjudicating Authority referred to the Supreme Court's judgment in Swiss Ribbons Pvt. Ltd. v. Union of India, which distinguished between financial and operational creditors. The plan was deemed non-discriminatory as it adhered to Section 30(2)(b) of the IBC, which mandates that operational creditors receive at least the liquidation value. In this case, the liquidation value for operational creditors was 'NIL'.

3. Compliance of the Resolution Plan with the Insolvency and Bankruptcy Code (IBC) and related regulations:
The Resolution Professional confirmed that the plan met the requirements of Section 30(2) and Regulation 38. The Adjudicating Authority emphasized that the plan should not contravene any existing laws and must be implemented in a manner specified by the Code. The plan was approved, subject to certain observations regarding legal proceedings and reliefs sought by the Resolution Applicants, which were to be addressed by competent authorities.

4. Validity of the claims made by the Appellant under the Gas Sale Agreement:
The Appellant's claim under the Gas Sale Agreement was categorized as an operational debt. The Resolution Professional rejected the claim, stating it did not pertain to goods or services used for production. The Adjudicating Authority upheld this view, noting that the claim was related to a 'take or pay' obligation, which did not qualify as an operational debt under the IBC.

5. Jurisdiction and authority of the Adjudicating Authority and Appellate Tribunal in evaluating the Resolution Plan:
The Adjudicating Authority's role is to ensure compliance with the Code and regulations, not to interfere with the commercial decisions of the CoC. The Supreme Court in K. Sashidhar v. Indian Overseas Bank emphasized that the Adjudicating Authority cannot question the CoC’s commercial wisdom. The Tribunal reiterated this principle, stating that the Adjudicating Authority's jurisdiction is limited to verifying compliance with Section 30(2) of the IBC.

Conclusion:
The appeal was dismissed, with the Tribunal affirming that the Resolution Plan complied with the IBC and related regulations. The Appellant's claims were not upheld, as they did not qualify as operational debts under the Code. The Tribunal emphasized the limited jurisdiction of the Adjudicating Authority in commercial decisions made by the CoC.

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