2023 (10) TMI 293 - AT - Insolvency and Bankruptcy

Appeal dismissed in challenge to liquidation scheme approval

Ethenic Agencies Pvt. Ltd. Versus Mr. K.G. Somani, Erstwhile Liquidator – Delicious Coco Water Pvt. Ltd. & Anr.

The appeal was filed against the rejection of an application challenging the approval of a scheme in a liquidation proceeding. The Appellant, claiming to ... Liquidation proceedings - waterfall mechanism - rejection of claim of appellant - appellant is Financial Creditor or not - claim reflected in the Balance Sheet. It is submitted that even though the claim of the Appellant was rejected in the liquidation proceeding but since it was reflected in the balance sheet, Appellant is a Financial Creditor. HELD THAT:- The claims of all creditors are to be considered in the liquidation proceedings and examined by the Liquidator and in event of any dispute, matter is required to be adjudicated by the Adjudicating Authority. There is no dispute to the fact that the claim was filed by the Appellant as Financial Creditor which stood rejected by the Liquidator as well as the Adjudicating Authority. The rejection of the claim of the Appellant clearly lead to the conclusion that the claim cannot be accepted in the liquidation proceedings nor Appellant is entitled for any claim in the water fall mechanism. Present is a case where a scheme was submitted in the liquidation proceeding in which scheme also the payment to the Appellant has been shown as a ‘nil’ and the scheme was approved by SIDBI who according to the Liquidator was a 100% Financial Creditor. When the Appellant’s claim was rejected, he cannot claim that he is a Financial Creditor whose consent was required for approval of the scheme - It is after the reflection in the balance sheet that in the liquidation proceeding, the claim was filed by the Appellant and adjudicated rejecting the claim of the Appellant. The proceeding which undertook in the liquidation proceedings cannot be ignored nor can be washed out only on the ground that in the balance sheet of the Corporate Debtor the name of the Appellant was reflected. Proceeding in the adjudication which culminated in the rejection of the claim has to be given effect to in the liquidation proceeding. The scheme was also a part of the liquidation proceeding, hence no error has been committed by the Adjudicating Authority rejecting the application of the Appellant - Appeal dismissed. Issues involved: Appeal against rejection of application challenging scheme approval in liquidation proceeding.Summary:Issue 1: Rejection of Application Challenging Scheme ApprovalThe appeal was filed against the rejection of an application by the Adjudicating Authority challenging the approval of a scheme in a liquidation proceeding. The Appellant claimed to be a Financial Creditor whose consent was required for the scheme approval. Despite the Appellant's name being included in the balance sheet of the Corporate Debtor, the claim was rejected in the liquidation proceedings. The scheme proposed nil payment to the Appellant, and it was approved by SIDBI as the 100% Financial Creditor. The Adjudicating Authority rejected the application, emphasizing that the claim of the Appellant had been previously rejected. The Tribunal upheld the rejection, stating that the claim rejection in the liquidation proceedings must be given effect, and the Adjudicating Authority did not err in rejecting the application. The Appeal was dismissed as there was no merit in it.This summary highlights the issues involved in the legal judgment and provides a detailed explanation of the proceedings and decisions made by the National Company Law Appellate Tribunal.