NCLAT upholds resolution plan denial of payment to operational creditors when liquidation value is nil under IBC Sections 30(6) and 31

NCLAT dismissed the appeal challenging resolution plan approval under IBC Sections 30(6) and 31. The operational creditor appellant was denied payment under the resolution plan. NCLAT held that statutory protection under Section 30(2)(b) only ensures operational creditors receive minimum amounts as specified, but when liquidation value is nil, operational creditors receive no payment. Following precedent in Rajat Metaal Polychem case, NCLAT ruled that courts cannot deviate from current legislative scheme despite operational creditors being denied payment when liquidation amount is zero, stating legislative amendment is required to address this issue.

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Issues:
Challenge to order approving Resolution Plan with nil payment to Operational Creditor under IBC Section 30(2)(b).

Detailed Analysis:
The judgment involves an Appeal by an Operational Creditor challenging the approval of a Resolution Plan with nil payment to the Operational Creditor under Sections 30(6) and 31 of the Insolvency and Bankruptcy Code (IBC). The Adjudicating Authority had approved the Resolution Plan, leading to the filing of this Appeal. The Appellant's claim was admitted during the Corporate Insolvency Resolution Process (CIRP), but the Resolution Plan proposed zero payment to the Operational Creditor, which was the primary contention raised in the Appeal.

The key argument put forth by the Counsel for the Appellant was that despite the admission of the operational claim, the Resolution Plan did not offer any payment to the Operational Creditor, contravening the requirement to consider all stakeholders' claims. On the other hand, the Respondents contended that the Resolution Plan was compliant as the liquidation value would have resulted in no payment to the Appellant even in a liquidation scenario. The Respondents argued that the Resolution Plan adhered to Section 30(2) of the IBC and did not violate the operational creditor's entitlement.

The Tribunal examined the submissions from both parties and reviewed the record, noting the admission of the Appellant's operational claim alongside other operational creditors. The Resolution Plan proposed nil payment to all operational creditors, including government dues. Section 30(2)(b) of the IBC stipulates that operational creditors should receive not less than the amount in a liquidation scenario. The Tribunal referenced a previous judgment to support its decision, emphasizing that current laws do not mandate payment to operational creditors if the amount in a liquidation scenario is nil.

The Tribunal cited a specific case to reinforce its decision, highlighting that until legislative amendments address the issue, courts are bound by existing laws. The judgment emphasized the need for potential legislative changes to ensure equitable treatment of operational creditors, including government dues. Ultimately, the Tribunal dismissed the Appeal, aligning with the previous judgment's stance and affirming the approval of the Resolution Plan with nil payment to the Operational Creditor.

In conclusion, the Tribunal's decision was based on the existing legal framework and precedents, underscoring the limitations imposed by current legislation regarding the payment to operational creditors in Resolution Plans. The judgment highlighted the necessity for legislative review to address the concerns raised by operational creditors, emphasizing the need for equitable distribution in insolvency proceedings.

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