2020 (8) TMI 461 - AT - Insolvency and Bankruptcy

Tribunal Upholds Resolution Plan with Emphasis on Creditor Equity

The Tribunal upheld the Resolution Plan, noting the disparity in payment percentages between Financial and Operational Creditors as a result of the ... Maintainability of application - initiation of CIRP - Financial Creditors - It is claimed that the Appellant deserve similar treatment as the Secured Financial Creditors - whether the Appellant required separate treatment at par with Secured Financial Creditors on the basis of the claim that it was Secured Operational Creditor? HELD THAT:- What appears is that the COC has consciously taken decision so as to persuade the SRA to increase the worth of the Resolution Plan to the extent of ₹ 235.86 Crores but in the process, accepted portions payable to the Operational Creditors to be reduced. As regards the contention of the Appellant in Appeal No.688 of 2019 that its claim was accepted by RP to the extent of ₹ 73,07,76,273/-, the RP has in Reply (Diary No.14497 of Appeal No.688 of 2019), accepted that in this regard, there was clerical/typographical error which can be rectified. What is apparent from the Appeal No.688 of 2019 itself is that the RP had initially accepted the claim of the Appellant – IOC (Indian Oil Corporation Limited) only of ₹ 39,09,99,828/- which after correspondence was accepted to the extent of ₹ 73,07,76,273/-. It seems that subsequently, the earlier RP – Mohan Lal Jain was replaced. In the process, the error may have occurred but now the RP has fairly accepted that this was an error which needs to be rectified. There are no substance in the Company Appeal (AT) (Ins) No.680 of 2019 to interfere with the Impugned Order or the Resolution Plan which has been approved - appeal disposed off. Issues Involved:1. Disparity in payment percentages between Financial Creditors and Operational Creditors.2. Claim of the Appellant being a Secured Operational Creditor.3. Clerical/typographical error in the admitted claim of Indian Oil Corporation Ltd.Detailed Analysis:1. Disparity in Payment Percentages:The primary grievance of the appellants, Power2SME Pvt. Ltd. and Indian Oil Corporation Ltd., was the significant disparity in the payment percentages proposed in the Resolution Plan. Financial Creditors were proposed to be paid 13.69% of their admitted claims, whereas Operational Creditors were proposed to be paid only 0.46%. The appellants argued that such disparity was unfair and discriminatory.The judgment noted that the Insolvency and Bankruptcy Code (IBC) and its amendments, including the amendments to Section 30(2) and Section 30(4), were considered. The judgment also referenced the Supreme Court's ruling in the 'Essar Steel' case, which emphasized that equitable treatment depends on the class to which a creditor belongs: secured or unsecured, financial or operational. The Tribunal concluded that the disparity in payment percentages was a result of the commercial wisdom of the Committee of Creditors (COC) and did not warrant interference.2. Claim of the Appellant Being a Secured Operational Creditor:Power2SME Pvt. Ltd. claimed that it was a Secured Operational Creditor and deserved similar treatment as Secured Financial Creditors. The appellant relied on a hypothecation deed dated 01.12.2016 and an agreement dated 19.07.2017 to support its claim. However, the Tribunal noted that the appellant had not provided these documents for review. Additionally, the hypothecation deed was subsequent to the charge created in favor of the banks, making it subservient to the banks' charge.The Tribunal observed that the appellant had already retrieved the hypothecated goods and, therefore, could not seek parity with Secured Financial Creditors. The judgment emphasized that the equality principle cannot be stretched to treat unequals equally, as it would undermine the objective of the IBC to resolve stressed assets.3. Clerical/Typographical Error in the Admitted Claim of Indian Oil Corporation Ltd.:Indian Oil Corporation Ltd. (IOC) raised an issue regarding a clerical/typographical error in the admitted claim amount. Initially, the claim was admitted for Rs. 39,01,99,828/-, but after correspondence, it was accepted to the extent of Rs. 73,07,76,273/-. The Tribunal acknowledged this error and directed that the admitted claim amount be corrected to Rs. 73,07,76,273/-, and the proportionate amount payable in the Resolution Plan to IOC be calculated accordingly.Conclusion:The Tribunal found no substance in the appeal by Power2SME Pvt. Ltd. and upheld the Resolution Plan approved by the Adjudicating Authority. However, the appeal by Indian Oil Corporation Ltd. was partially allowed to rectify the clerical error in the admitted claim amount. The judgment emphasized the commercial wisdom of the COC and the equitable treatment principle as per the class of creditors.