2023 (11) TMI 375 - AT - Insolvency and Bankruptcy

NCLAT upholds proportionate distribution in resolution plan, rejects secured creditor's claim for priority distribution under Section 30(2)(b)

NCLAT dismissed an appeal by a dissenting financial creditor seeking priority distribution based on security interest. The appellant, recognized as a ... Recovery of dues - first charge on the assets of the Corporate Debtor - Seeking direction to the Resolution Professional (RP) to take into account the priority of distribution of the Plan realizations and taking into account the priority assigned to the dissenting Financial Creditor, who are also secured creditors - HELD THAT:- This Tribunal after taking into consideration the judgment in India Resurgence Arc Private Limited Vs. M/s. Amit Metaliks Limited & Anr. [2021 (6) TMI 684 - SUPREME COURT], upheld the judgment of the Adjudicating Authority, who rejected the IA, which was filed by SIDBI for distribution as per security interest. In the case of Vistra [2023 (5) TMI 303 - SUPREME COURT], the claim of Financial Creditor was not admitted. Whereas in the present case the debt of the Appellant was admitted. In Vistra, the claim of Vistara to be secured creditor was rejected as has been noticed in paragraphs 2 to 10 of the judgment itself. Whereas, the Appellant in the present case has been recognized as a dissenting Financial Creditor and was part of the CoC and in the present case, the CoC by its decision has approved both the distribution mechanism as well as the Resolution Plan, which proposed distribution based on proportion of admitted claim. Vistra was never treated as secured creditor or given its minimum entitlement as secured creditor as per Section 53(1). The judgment of Vistra is a judgment of the Hon’ble Supreme Court, which is referable to Article 142 of the Constitution, which jurisdiction was exercised and ultimately the Hon’ble Supreme Court has held Vistra to be a secured creditor. The present is a case where ICICI Bank was accepted and recognized as Financial Creditor and its full claim was accepted and distribution to the Appellant was as per Section 30, sub-section (2)(b) of the IBC. Thus, no error has been committed by the Adjudicating Authority in rejecting the application - appeal dismissed. Issues Involved:1. Priority of Distribution of Plan Realizations.2. Entitlement of Dissenting Financial Creditor.3. Calculation Methodology for Distribution Amongst Secured Creditors.4. Applicability of Section 30(2)(b) of the Insolvency and Bankruptcy Code, 2016 (IBC).Summary:Issue 1: Priority of Distribution of Plan RealizationsThe appellant, ICICI Bank Ltd., challenged the order dated 01.03.2023, which rejected their application seeking direction for the Resolution Professional (RP) to consider the priority of distribution of plan realizations, particularly for dissenting financial creditors who are also secured creditors. The Adjudicating Authority rejected the IA, leading to this appeal.Issue 2: Entitlement of Dissenting Financial CreditorThe appellant argued that as a dissenting financial creditor with a first charge on the assets of the corporate debtor, they were entitled to receive the liquidation value as per their security interest. They claimed that their admitted claim of Rs.15.52 crores should result in a payment of Rs.13.52 crores based on the liquidation value of secured assets. The appellant contended that the RP's proposal to pay Rs.4.54 crores was incorrect.Issue 3: Calculation Methodology for Distribution Amongst Secured CreditorsThe RP proposed a distribution methodology based on the proportion of admitted claims of secured creditors, which was approved by the Committee of Creditors (CoC) with a 78.79% vote share. The appellant objected, arguing that the distribution should consider the security interest. The CoC approved the distribution methodology as per the admitted claims, rejecting the appellant's objections.Issue 4: Applicability of Section 30(2)(b) of the Insolvency and Bankruptcy Code, 2016 (IBC)The appellant argued that under Section 30(2)(b) of the IBC, dissenting financial creditors are entitled to receive at least the liquidation value. The RP and CoC contended that the distribution methodology was consistent with the resolution plan and the statutory provisions. The court noted that the CoC's commercial wisdom in approving the distribution methodology could not be challenged by the dissenting financial creditor.Conclusion:The tribunal upheld the CoC's decision, emphasizing that the distribution based on the proportion of admitted claims was in line with the resolution plan and Section 30(2)(b) of the IBC. The appellant's claim for distribution based on security interest was rejected, aligning with the Supreme Court's judgment in India Resurgence ARC Pvt. Ltd. v. Amit Metaliks Ltd. The appeal was dismissed, affirming the Adjudicating Authority's order.