Tribunal upholds Resolution Plans, emphasizes fair treatment among creditors

The Tribunal affirmed the approval of the Resolution Plans by the Adjudicating Authority, dismissing appeals challenging the distribution of amounts to Operational Creditors and alleging non-compliance with the Insolvency and Bankruptcy Code. It held that equality in payment is required within the same class of creditors, emphasizing fair treatment rather than equal payment between Financial and Operational Creditors. The Tribunal also ruled that electricity charges do not override the I&B Code provisions. The appeals were dismissed, upholding the Resolution Plans' approval and CoC's commercial wisdom.

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Issues Involved:
1. Approval of the Resolution Plan by the Adjudicating Authority.
2. Alleged discrimination in the distribution of amounts to Operational Creditors vis-à-vis Financial Creditors.
3. Compliance with the Insolvency and Bankruptcy Code (I&B Code) and related regulations.
4. Consideration of electricity charges as statutory dues.

Summary:

Issue 1: Approval of the Resolution Plan by the Adjudicating Authority
- The appeals challenge orders by the National Company Law Tribunal (NCLT) approving the Resolution Plans submitted by the Resolution Applicants. In Company Appeal (AT) Ins. No. 613 of 2022, the NCLT Cuttack Bench approved the Resolution Plan on 03.02.2022. In Company Appeal (AT) Ins. No. 795 of 2022, the NCLT Kolkata Bench approved the Resolution Plan on 07.04.2022.

Issue 2: Alleged Discrimination in Distribution to Operational Creditors
- The appellants argued that the Resolution Plans approved by the Adjudicating Authority were not in consonance with the I&B Code, 2016, particularly Section 30 and Regulation 38, which mandate fair and equitable treatment for Operational Creditors. They contended that the amounts allocated to them were significantly lower (0.5% and 1% of their claims) compared to Financial Creditors, which they claimed was discriminatory.
- The Tribunal referred to the Supreme Court's judgment in CoC of Essar Steel India Ltd. Vs. Satish Kumar Gupta & Ors., stating that equality in payment is only required within the same class of creditors. The principle of equitable treatment does not mandate equal payment to Financial and Operational Creditors, but rather fair treatment within their respective classes.

Issue 3: Compliance with the Insolvency and Bankruptcy Code (I&B Code)
- The Tribunal noted that the appellants' claims were admitted by the Resolution Professional, and the amounts allocated to them were not less than their liquidation value, as required by the I&B Code. The Tribunal emphasized that the commercial wisdom of the Committee of Creditors (CoC) in approving the Resolution Plan should not be interfered with unless it violates the provisions of the Code.
- The Tribunal also cited its previous judgment in Damodar Valley Corporation Vs. Dimension Steel and Alloys Pvt. Ltd., where similar arguments regarding meager payments to Operational Creditors were rejected, reiterating that the legislative scheme does not mandate equal payment to Financial and Operational Creditors.

Issue 4: Consideration of Electricity Charges as Statutory Dues
- The appellants argued that electricity charges should be considered statutory dues and should be recoverable as per the OERC Distribution (Conditions of Supply) Code, 2019. The Tribunal, however, held that such regulations do not override the provisions of the I&B Code and do not affect the distribution scheme under Section 53 of the Code.
- The Tribunal concluded that the approval of the Resolution Plans could not be faulted on these grounds and dismissed both appeals.

Conclusion:
- The Tribunal dismissed both appeals, affirming the approval of the Resolution Plans by the Adjudicating Authority and rejecting the claims of discrimination and non-compliance with the I&B Code. The Tribunal reiterated that the commercial wisdom of the CoC in approving the Resolution Plans is paramount and should not be interfered with unless it contravenes the Code.

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