NCLAT upholds resolution plan approval despite Rs. 79 lakh liquidation value dispute under Section 30(4)(2)

NCLAT dismissed appeal challenging resolution plan approval involving wrongful allocation of Rs. 79 lakhs as liquidation value. Following SC precedent in Amit Metaliks Limited, tribunal held that Committee of Creditors' commercial wisdom in approving resolution plans should not be interfered with unless creditors of similar class are denied fair treatment. Court rejected appellant's claim for liquidation value payment as dissenting financial creditor, upholding tribunal's decision based on established jurisprudence regarding Section 30(4)(2) and Section 53 considerations.

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Issues Involved:

1. Validity of the liquidation value as calculated by the Resolution Professional (RP).
2. Entitlement of the dissenting financial creditor to a higher liquidation value.
3. Commercial wisdom of the Committee of Creditors (CoC) in the approval of the resolution plan.
4. Judicial review of the CoC's decision regarding the resolution plan.
5. Interpretation of Section 30(2)(b) of the Insolvency and Bankruptcy Code (IBC) concerning dissenting financial creditors.

Issue-wise Detailed Analysis:

1. Validity of the Liquidation Value:
The appellant, a secured financial creditor, challenged the liquidation value of Rs. 82.66 crore reported by the RP, claiming it was incorrect and not in accordance with the IBC provisions. The appellant argued that the liquidation value should be higher, around Rs. 166.54 crore, as initially reported by the valuers before adjustments were made for dues payable to development authorities. The Adjudicating Authority found that the valuation was conducted by IBBI panel registered valuers in compliance with the Code and Regulations, and the liquidation value was shared with the appellant after obtaining a confidentiality undertaking.

2. Entitlement to a Higher Liquidation Value:
The appellant contended that the amount of Rs. 79,55,513 allocated as liquidation value was inadequate and not proportional to their admitted claim. The appellant insisted that the liquidation value should reflect the total value of their security interest. However, the Adjudicating Authority held that under Section 30(2)(b) of the IBC, the liquidation value payable to a dissenting financial creditor is limited to the secured interest, not the total liquidation value of the corporate debtor.

3. Commercial Wisdom of the CoC:
The resolution plan was approved by the CoC with an 87.60% affirmative vote. The CoC's decision, based on its commercial wisdom, was deemed paramount and beyond judicial intervention. The respondent argued that the CoC's decision on distribution of assets and approval of the resolution plan could not be questioned, as it fell within the CoC's commercial discretion.

4. Judicial Review of CoC's Decision:
The Tribunal emphasized that the commercial wisdom of the CoC, as endorsed by the Supreme Court in cases like "K. Sashidhar Vs. Indian Overseas Bank," is paramount and not subject to judicial review. The Tribunal cited several judgments affirming that the CoC's decisions regarding the resolution plan and distribution of assets are final, provided they comply with the IBC provisions.

5. Interpretation of Section 30(2)(b) of the IBC:
The appellant's argument centered on receiving a higher amount based on their security interest. However, the Tribunal, relying on the Supreme Court's decision in "India Resurgence ARC Pvt. Ltd. Vs. Amit Metaliks Limited," held that dissenting financial creditors are entitled only to the minimum liquidation value as per Section 30(2)(b), not the full value of their security interest. The Tribunal noted that the interpretation of this section is under review by a larger bench of the Supreme Court, but the current standing decision supports the Tribunal's view.

In conclusion, the appeal was dismissed, affirming the CoC's commercial wisdom in approving the resolution plan and the Tribunal's interpretation of the IBC provisions regarding the liquidation value for dissenting financial creditors. The decision underscores the limited scope of judicial intervention in the CoC's business decisions under the IBC framework.

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