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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: (i) Whether a related party of the corporate debtor could challenge the resolution plan on the ground of discriminatory treatment and alleged non-compliance with the insolvency framework. (ii) Whether the resolution plan could be faulted for the manner of distribution to creditors and for alleged clubbing of workers and employees with operational creditors, and whether the claim-related challenge by the second appellant survived for consideration.
Issue (i): Whether a related party of the corporate debtor could challenge the resolution plan on the ground of discriminatory treatment and alleged non-compliance with the insolvency framework.
Analysis: The appellants were related parties of the corporate debtor. A related party is not entitled to claim parity with unrelated creditors in the resolution plan merely on the basis of alleged discrimination. The governing principle is that the treatment of creditors in a resolution plan, including differential payment among classes, remains within the commercial wisdom of the Committee of Creditors so long as the plan complies with the Code and Regulations. The plan was already approved and implemented, and no independent stakeholder entitled to distribution had challenged the arrangement.
Conclusion: The challenge on the ground of discriminatory treatment by a related party was not sustainable and was rejected.
Issue (ii): Whether the resolution plan could be faulted for the manner of distribution to creditors and for alleged clubbing of workers and employees with operational creditors, and whether the claim-related challenge by the second appellant survived for consideration.
Analysis: The grievance regarding distribution on the basis of vote share did not assist the appellants because the first appellant, being a related party, was not entitled to any distribution. The objection based on workers and employees was unsupported, as no worker or employee had challenged the plan and the record showed that the plan earmarked sufficient funds for their dues. The objection based on Section 25FF of the Industrial Disputes Act, 1947 was also held inapplicable. As to the second appellant, its claim rejection had already been separately challenged, and after dismissal of that challenge it no longer had a surviving stakeholder grievance to press against the approved plan.
Conclusion: The objections to plan distribution and the claim-related challenge did not survive, and no ground was made out to interfere.
Final Conclusion: The impugned orders approving the resolution plan and rejecting the connected applications were upheld, and both appeals failed.
Ratio Decidendi: A related party of the corporate debtor cannot insist on parity with unrelated creditors in a resolution plan, and differential treatment of creditor classes remains a matter of the Committee of Creditors' commercial wisdom, provided the plan otherwise complies with the Code and Regulations.
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