NCLAT Chennai orders Rs.543.28 crore escrow deposit to protect appellants' rights pending resolution plan appeal

The NCLAT Chennai directed respondents to deposit Rs.543.28 crores in an escrow account, representing the differential amount between appellants' entitlement and the resolution plan value. The tribunal ordered this deposit to safeguard appellants' interests pending final determination of the main company appeal, ensuring no serious prejudice occurs to their rights. The plan approval proceedings were made subject to the appeal's final outcome. The tribunal emphasized fair play and good conscience to prevent aberration of justice. The appeal was disposed of with these interim protective measures in place.

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Issues Involved:

1. Entitlement of Petitioners/Appellants u/s 30(2)(b) of the I&B Code, 2016.
2. Distribution mechanism for Resolution Plan Proceeds.
3. Approval and implementation of the Resolution Plan.
4. Protection of Petitioners/Appellants' interests pending final adjudication.

Summary:

Issue 1: Entitlement of Petitioners/Appellants u/s 30(2)(b) of the I&B Code, 2016

The Petitioners/Appellants, as Financial Creditors, sought an order directing the Respondents to place Rs.543.28 Crores in an Escrow Account or with the Appellate Tribunal until the final adjudication of the appeal. This amount represented the difference between their entitlement calculated in compliance with Section 30(2)(b) of the I&B Code, 2016, and the amounts computed by the 1st Respondent with the approval of the Committee of Creditors (CoC).

Issue 2: Distribution mechanism for Resolution Plan Proceeds

The Petitioners/Appellants contended that the Resolution Plan submitted by Adani Power Limited and other consortia was put to vote in the 69th CoC Meeting. Despite their suggestions to reconsider the distribution mechanism for Resolution Plan Proceeds, the CoC and Resolution Professional decided to proceed with the distribution, which was under challenge in the appeal.

Issue 3: Approval and implementation of the Resolution Plan

The Petitioners/Appellants argued that the Resolution Plan was approved by the requisite majority of the CoC, but they had either abstained from voting or dissented. They feared that once the proceeds from the Resolution Plan were distributed, there would not be any proceeds left for them if they succeeded in the appeal.

Issue 4: Protection of Petitioners/Appellants' interests pending final adjudication

The Petitioners/Appellants emphasized the need to protect their interests and ensure that their rights were not prejudiced pending the appeal's outcome. They requested that the differential amount be placed in an Escrow Account to secure their entitlement.

Submissions of R1/Resolution Professional

The 1st Respondent/Resolution Professional did not file a reply but contended that the Petitioners/Appellants' interests were protected by an interim order dated 21.11.2023, which made any order in CP No. (IB) No. 420/7/HYD/2018 subject to the final outcome of the appeal.

Gist of Memo of Objections filed on behalf of R2 to R9 & R12

R2 to R9 and R12 (majority of CoC) argued that the Petitioners/Appellants' interests were protected by the interim order and that the Petitioners/Appellants could only claim an incremental sum of Rs.277 Crores, not Rs.543.28 Crores. They highlighted that the Plan Approval Application was pending and that the issue of depositing any money would arise only after the proceeds were remitted by the Successful Resolution Applicant.

Tribunal's Decision

The Tribunal, after considering the respective contentions and the interim order dated 21.11.2023, directed the Respondents to place Rs.543.28 Crores in an Escrow Account to safeguard the Petitioners/Appellants' interests pending the final determination of the main appeal. The IA No. 353 of 2024 was accordingly disposed of with no costs.

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