Financial creditor treatment in CIRP bars fixed deposit holders from claiming preferential repayment outside the resolution plan.

In a CIRP for a financial service provider, fixed deposit holders were treated as financial creditors and could not preferential or full repayment merely by relying on the National Housing Bank Act or the RBI Act. The Insolvency and Bankruptcy Code, 2016 and the FSP Rules governed the resolution process, and no legal basis was shown to create a separate class of deposit holders for higher distribution. The tribunal's review remained confined to statutory limits and it could not replace the commercial decision of the Committee of Creditors with its own view. The challenge to the approved resolution plan therefore failed, and interference was refused.

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Issues: Whether the resolution plan approved in the CIRP of a financial service provider could be interfered with on the ground that fixed deposit holders were entitled to full repayment or preferential treatment under the National Housing Bank Act and the Reserve Bank of India Act, and whether the differential treatment of deposit holders in the approved plan was legally unsustainable.

Analysis: The deposits placed with the corporate debtor were treated as financial debt, and the deposit holders participated in the process through their authorised representative as financial creditors. The statutory framework governing the CIRP of a financial service provider under the Insolvency and Bankruptcy Code, 2016, together with the FSP Rules, required the resolution plan to satisfy the Code, while the challenge based on the NHB Act and the RBI Act had to yield where the Code applied. The provisions relied upon by the appellants did not confer an absolute right to full repayment in insolvency, and the record did not show any legal basis to carve out a separate class or sub-class of deposit holders for preferential payment. The tribunal's role was confined to the statutory limits of review and it could not substitute its view for the commercial decision of the Committee of Creditors.

Conclusion: The challenge to the resolution plan and to the treatment of fixed deposit holders failed. The approved plan was held not to call for interference and the appeals were dismissed.

Ratio Decidendi: In a CIRP governed by the Insolvency and Bankruptcy Code, 2016, financial creditors who are fixed deposit holders cannot preferential or full repayment merely by invoking the NHB Act or the RBI Act, and the approved commercial decision of the Committee of Creditors is not open to substitution by equity-based judicial review.

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