Shareholder appeal dismissed as Resolution Professional entitled to redetermine creditor claims during insolvency proceedings

NCLAT Principal Bench dismissed an appeal challenging approval of a resolution plan. The appellant, a shareholder and promoter of the corporate debtor, contested the redetermination of Pegasus's claim at 14.85% by the Resolution Professional (RP). The tribunal held that the RP was entitled to redetermine claims based on subsequent facts, particularly since Pegasus itself requested the redetermination. Following SC precedent in Tulip Star Hotels, the tribunal ruled that claim reworking/verification does not impact resolution plan implementation. The Adjudicating Authority properly approved the resolution plan as compliant with the statutory scheme.

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Issues Involved:
1. Challenge to the orders dated 26.04.2023 passed by NCLT, Mumbai Bench.
2. Approval of the Resolution Plan in the CIRP of the Corporate Debtor.
3. Redetermination of the claim of Pegasus Asset Reconstruction Company Pvt. Ltd.
4. Impact of the reduced claims of secured Financial Creditors on the Resolution Plan.
5. Compliance with the statutory provisions of the Insolvency and Bankruptcy Code (IBC), 2016.

Detailed Analysis:

1. Challenge to the Orders Dated 26.04.2023 Passed by NCLT, Mumbai Bench:

The Appellants, who are the Shareholder/Promoter and Suspended Director of the Corporate Debtor, filed two appeals challenging the orders dated 26.04.2023 passed by the National Company Law Tribunal (NCLT), Mumbai Bench. The first appeal (Company Appeal (AT) (Insolvency) No. 1127 of 2024) challenged the order in IA No.111 of 2024 and part of the order in IA No.5606 of 2023. The second appeal (Company Appeal (AT) (Insolvency) No. 1129 of 2024) challenged the order in IA No.2830 of 2023, which approved the Resolution Plan in the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor.

2. Approval of the Resolution Plan in the CIRP of the Corporate Debtor:

The CIRP against the Corporate Debtor commenced on an application filed by Asset Reconstruction Company (India) Ltd. (ARCIL), a Financial Creditor. The Resolution Professional (RP) appointed two registered valuers who assessed the Average Fair Value and Average Liquidation Value of the Corporate Debtor. The RP published Form-G and invited claims, admitting claims from both secured and unsecured Financial Creditors and Operational Creditors. The Committee of Creditors (CoC) approved the Resolution Plan submitted by Macrotech Developers Ltd. (MDL) with a 100% vote share in its meeting held on 26.06.2023.

3. Redetermination of the Claim of Pegasus Asset Reconstruction Company Pvt. Ltd.:

The Promoter and Shareholder of the Corporate Debtor objected to the computation of interest by the Financial Creditors, particularly the 22% interest claimed by ARCIL. The NCLT accepted the RP's interpretation, but this Tribunal later reduced ARCIL's claim to an interest rate of 14.85%. Following this, Pegasus also requested the RP to redetermine its claim in line with ARCIL's revised interest rate. The RP filed an IA No.5606 of 2023 for permission to redetermine Pegasus's claim, which was approved by the NCLT.

4. Impact of the Reduced Claims of Secured Financial Creditors on the Resolution Plan:

The Appellants argued that the reduction in the claim of ARCIL should have led to a substantial reduction in Pegasus's claim, which would materially affect the terms of the Resolution Plan. They contended that without redetermining Pegasus's claim, the CoC should not have approved the Addendum or the Resolution Plan. However, the Respondents argued that the redetermination of claims did not affect the financial proposal in the Resolution Plan. The CoC approved the Addendum and the reverified claim of Pegasus, which was placed before it in the 32nd Meeting held on 13.12.2023. The CoC resolved to distribute the amounts proposed for secured Financial Creditors on a pro-rata basis.

5. Compliance with the Statutory Provisions of the IBC, 2016:

The Adjudicating Authority examined the Resolution Plan and found it compliant with the provisions of the IBC, 2016, including Sections 30(2), 29A, and relevant CIRP Regulations. The Authority noted that the Resolution Plan provided for the payment of CIRP costs, debts of Operational Creditors, management of the Corporate Debtor's affairs, and implementation and supervision of the Resolution Plan. The Authority also referenced judgments from the Hon'ble Supreme Court, which limited the scope of judicial review of the CoC's commercial decisions.

Conclusion:

The Tribunal found no error in the Addendum or the Resolution of the CoC approving the same. The claim of Pegasus was redetermined as per the agreed interest rate, and the CoC was aware of the revised claim. The Hon'ble Supreme Court also clarified that the reworking/verification of claims would not impact the Resolution Plan or its implementation but may affect the distribution among creditors of the same class. The Tribunal dismissed both appeals, affirming the orders passed by the Adjudicating Authority on 26.04.2024, and found the Resolution Plan compliant with the statutory scheme of the IBC, 2016. There was no merit in the appeals, and no order as to costs was made.

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