Insolvency waterfall and contingent claims: nil payment to operational creditors and notional admission of an uncrystallised claim were upheld.

A resolution plan may provide nil payment to operational creditors where the available value is exhausted by insolvency resolution process costs and dues of secured financial creditors, because the statutory distribution scheme leaves no surplus for lower-ranking claims and the committee of creditors' commercial wisdom is not ordinarily open to interference absent legal contravention. A disputed claim that has not yet crystallised, and depends on the outcome of a pending appeal, may be admitted at a notional value pending final determination rather than as a quantified debt. The commentary states that such treatment is consistent with settled insolvency practice, and no interference was warranted with the plan or the claim classification.

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Issues: (i) Whether the resolution plan could be interfered with on the ground that operational creditors were provided nil payment after application of the priority under the insolvency waterfall. (ii) Whether the resolution professional was justified in treating the appellant's claim as contingent and admitting it at a notional value of Rs. 1 pending the outcome of the related appeal.

Issue (i): Whether the resolution plan could be interfered with on the ground that operational creditors were provided nil payment after application of the priority under the insolvency waterfall.

Analysis: The plan value was found to be insufficient even to meet the insolvency resolution process costs and the dues of secured financial creditors. On that footing, nothing remained for operational creditors under the statutory distribution scheme. The plan was therefore held to satisfy the minimum payment requirement applicable to operational creditors, and the commercial wisdom of the committee of creditors was not open to interference absent any legal contravention.

Conclusion: The challenge to the resolution plan on the ground of nil payment to operational creditors failed.

Issue (ii): Whether the resolution professional was justified in treating the appellant's claim as contingent and admitting it at a notional value of Rs. 1 pending the outcome of the related appeal.

Analysis: The claim depended on the outcome of a pending appeal and had not yet crystallised. In such circumstances, the resolution professional was justified in assigning a notional value to the claim rather than treating it as an admitted quantified debt. The treatment was consistent with the settled approach that disputed or uncrystallised claims may be taken at a notional value until they become definite.

Conclusion: The classification of the appellant's claim as contingent and its admission at Rs. 1 was upheld.

Final Conclusion: No interference was warranted with the approval of the resolution plan or with the treatment of the appellant's claim, and the appeal failed in full.

Ratio Decidendi: A resolution plan cannot be disturbed where operational creditors receive nil value because the available amount is exhausted by insolvency resolution process costs and higher-ranking creditors, and a disputed claim pending adjudication may be admitted at a notional value until it crystallises.

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