Tribunal affirms Resolution Plan validity and security interest extinguishment under Insolvency Code

The Tribunal upheld the rejection of the Appellant's claim as a Financial Creditor and the approval of the Resolution Plan by the Adjudicating Authority. The Tribunal determined that the extinguishment of the Appellant's security interest in the immovable asset was valid under the Insolvency and Bankruptcy Code and CIRP Regulations, distinguishing previous judgments and emphasizing the inclusion of the security interest in the CIRP process. The Appeals were dismissed, affirming the validity of the Resolution Plan and the extinguishment of the security interest.

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Issues Involved:
1. Validity of the rejection of the Appellant's claim as a Financial Creditor.
2. Approval of the Resolution Plan by the Adjudicating Authority.
3. Extinguishment of the Appellant's security interest in the immovable asset.

Summary of Judgment:

1. Validity of the rejection of the Appellant's claim as a Financial Creditor:
The Appellant's claim as a Financial Creditor was rejected by the Resolution Professional on 19.10.2020, as there was no default by the Principal Borrower (BGPPL). The claim was categorized as "˜Other Creditors' with a notional value of Re.1. The Appellant did not challenge this classification. The Tribunal upheld this rejection, referencing the Supreme Court's judgment in "Anuj Jain, Interim Resolution Professional for Jaypee Infratech Ltd. vs. Axis Bank Ltd. & Ors.," which clarified that a person with only security interest over the assets of the corporate debtor does not qualify as a Financial Creditor.

2. Approval of the Resolution Plan by the Adjudicating Authority:
The Resolution Plan submitted by Respondent No.3 was approved by the Adjudicating Authority on 31.03.2023. The Appellant challenged this approval, arguing that their security interest in the immovable asset (Choudwar land) should not be extinguished. The Tribunal found that the security interest was part of the CIRP process and could be dealt with in the Resolution Plan. The Tribunal referenced Regulation 37 of the CIRP Regulations, 2016, which allows for the sale of assets whether subject to any security interest or not, and concluded that the Resolution Plan's treatment of the security interest was valid.

3. Extinguishment of the Appellant's security interest in the immovable asset:
The Appellant argued that their security interest could not be extinguished without their consent, citing the Supreme Court's judgment in "Jaypee Kensington Boulevard Apartments Welfare Association and Ors. vs. NBCC (India) Ltd. & Ors." The Tribunal distinguished this case, noting that in "Jaypee Kensington," the security interest was not part of the resolution process, whereas in the present case, the Appellant's security interest was part of the CIRP process. The Tribunal also referenced the Supreme Court's judgment in "Vistra ITCL (India) Ltd.," but concluded that the judgment was rendered under Article 142 of the Constitution and did not lay down a binding precedent under Article 141.

Conclusion:
The Tribunal upheld the Adjudicating Authority's orders rejecting the Appellant's I.A. No. 1311 of 2022 and approving the Resolution Plan. The Appeals were dismissed, affirming that the extinguishment of the Appellant's security interest was valid under the IBC and CIRP Regulations.

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