Operational Creditor Appeal Dismissed: Payment Disparity in Resolution Plan Upheld

The National Company Law Appellate Tribunal, New Delhi, dismissed the appeal by an Operational Creditor challenging payment disparity in a Resolution Plan. The Tribunal upheld the order approving the plan, noting that Operational Creditors are entitled to a minimum payment not less than the liquidation value, unlike Financial Creditors. Emphasizing the discretion of the Committee of Creditors, the Tribunal found no arbitrariness in the differential payment percentages accepted by different creditor classes. The judgment highlighted the commercial considerations and differentiation between Operational and Financial Creditors in insolvency proceedings.

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Issues:
1. Disparity in payment between Operational Creditors and Financial Creditors in a Resolution Plan.

Analysis:
The judgment by the National Company Law Appellate Tribunal, Principal Bench, New Delhi, involved an appeal against an order approving a Resolution Plan where the Appellant, an Operational Creditor, challenged the inequality in payment terms. The Appellant argued that Financial Creditors were offered 25.74% while Operational Creditors were only offered 1.24%, alleging clear inequality and arbitrariness. The Respondent countered, stating that the CoC, dominated by Unsecured Financial Creditors, had accepted less than 1% payment, indicating no inequality or arbitrariness. The Respondent emphasized that the Appellant was not receiving less than the liquidation value entitled under Section 53.

The Tribunal considered the arguments and examined the payment percentages to different creditors. Referring to a previous Supreme Court judgment, it was noted that equality should be assessed within the same class of creditors, distinguishing between Operational and Financial Creditors. The Tribunal highlighted that operational creditors must receive a minimum payment not less than the liquidation value, which does not apply to financial creditors. The judgment cited specific principles from the Supreme Court decision, emphasizing the discretion of the Committee of Creditors in negotiating and accepting resolution plans, which may involve differential payments to various classes of creditors.

Ultimately, the Tribunal concluded that the Appellant could not claim parity in payment with Financial Creditors, especially since Unsecured Creditors had agreed to a minimal payment percentage. The Tribunal found no arbitrariness or inequality in the order passed by the Adjudicating Authority and dismissed the Appeal, upholding the Resolution Plan. The judgment highlighted the commercial wisdom of the CoC in negotiating terms with prospective resolution applicants and the differentiation between Operational and Financial Creditors under the insolvency framework.

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