NCLAT upholds escrow order limiting protection to Rs.1 lakh from resolution plan despite Rs.132 crore claim under Section 30(2)

The NCLAT dismissed an appeal challenging the interpretation of an escrow account order dated 30.11.2023. The appellant claimed the entire Rs.132 crores should be held in escrow, but the tribunal held that only the amount allocated in the resolution plan (Rs.1 lakh) against the admitted claim needed escrow protection. The court emphasized that commercial wisdom of the Committee of Creditors in approving resolution plans receives paramount importance, and appellate interference is limited to statutory violations under Section 30(2) of the Insolvency Code. No such violations were established by the appellant.

---

---

Issues Involved:
1. Qualification of the Appellant's claim as "financial debt" or "other debt".
2. Legality of admitting only Rs.1 against the Appellant's claim of Rs.132,89,52,568/-.
3. Approval of the Resolution Plan by the Adjudicating Authority.

Summary:

Issue 1: Qualification of the Appellant's claim as "financial debt" or "other debt"
The Adjudicating Authority held that the Appellant cannot be considered a Financial Creditor but should be allowed as an "Other Creditor" since the debt arises from a foreign award. The Appellant is not entitled to participate in the Committee of Creditors (CoC) meetings during the CIRP process.

Issue 2: Legality of admitting only Rs.1 against the Appellant's claim of Rs.132,89,52,568/-
The Adjudicating Authority disapproved the Resolution Professional's action of admitting the Appellant's claim for a notional value of Rs.1. It was directed that the value provided against the Appellant's claim in the Resolution Plan should be held in an escrow account, subject to the outcome of the execution petition pending before the Delhi High Court. The provision in the plan against the claim made by the Appellant should be made on a fair and equitable basis, balancing the interests of all stakeholders.

Issue 3: Approval of the Resolution Plan by the Adjudicating Authority
The Appellant challenged the approval of the Resolution Plan, arguing that it did not balance the interests of all stakeholders and that the amount of Rs.132,89,75,268/- should be kept in an escrow account. The Resolution Professional and the Successful Resolution Applicant contended that the plan allocated Rs.1 Lakh for the Appellant, and there was no direction to keep the entire amount in escrow. The commercial wisdom of the CoC in approving the plan was emphasized, and it was noted that the liquidation value of the Corporate Debtor was insufficient to discharge the debts of Secured Financial Creditors, making the Appellant's entitlement "Nil" under the waterfall mechanism u/s 53 of the Code.

Conclusion:
The Appellate Tribunal found no violation of statutory provisions u/s 30(2) of the Code in the allocation of Rs.1 Lakh against the Appellant's claim. The order dated 04.01.2024 approving the Resolution Plan was upheld, and the appeal was dismissed.

---