Dissenting financial creditor cannot challenge CoC's decision to deduct Rs.34 crores from their payout under approved Resolution Plan

NCLAT dismissed appeal by dissenting financial creditor challenging CoC's decision to deduct Rs.34 crores from their payout under approved Resolution Plan. The CoC approved the plan with 70.07% vote share while appellant held 6.64% and voted against. Tribunal held that commercial wisdom of CoC in approving distribution manner is binding on all stakeholders including dissenting creditors, citing Supreme Court precedents. The appellant could not challenge CoC's decision taken in 31st meeting regarding deduction from their payout as dissenting financial creditors are bound by majority decisions under the Resolution Plan.

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Issues Involved:

1. Non-admission of the claim by the Resolution Professional.
2. Deduction of Rs.34 Crores from the payout of the Appellant.
3. Treatment of the amount deducted as interim finance or recovery.
4. Commercial wisdom of the Committee of Creditors (CoC).
5. Binding nature of the Resolution Plan on dissenting financial creditors.
6. Jurisdiction and authority of the CoC and Resolution Professional.

Detailed Analysis:

1. Non-admission of the claim by the Resolution Professional:

The Appellant, Union Bank of India, filed a claim for Rs.876,42,09,926, which included Rs.39,61,54,488 under Non-Fund Based (Letter of Credit/Bank Guarantee Facility). The Resolution Professional did not admit the claim for Rs.39,61,54,488 as it had not crystallized by the Insolvency Commencement Date. The Appellant did not challenge this decision initially, indicating acceptance of the Resolution Professional's verification process.

2. Deduction of Rs.34 Crores from the payout of the Appellant:

The CoC decided to deduct Rs.34 Crores from the Appellant's payout under the Resolution Plan, arguing that this amount was recovered from the corporate debtor's account during the CIRP period. The Appellant contended that this recovery should be treated as interim finance. However, the CoC, exercising its commercial wisdom, resolved to deduct this amount from the Appellant's payout, as it was deemed a recovery of pre-CIRP dues.

3. Treatment of the amount deducted as interim finance or recovery:

The CoC was presented with two options: to treat the Rs.34 Crores as interim finance or to deduct it from the Appellant's payout. The CoC opted for the latter, concluding that the amount was not interim finance as it related to LCs/BGs issued pre-CIRP. The Appellant's request to treat the amount as interim finance was rejected, as it was not approved by the CoC.

4. Commercial wisdom of the Committee of Creditors (CoC):

The CoC's decision to deduct Rs.34 Crores was based on its commercial wisdom, which is binding on all stakeholders, including dissenting financial creditors. The CoC's decision-making process involved deliberations and voting, where the Appellant, with a 6.64% voting share, was a dissenting member. The commercial wisdom of the CoC is protected under the Insolvency and Bankruptcy Code (IBC) and has been upheld by the Supreme Court in several judgments.

5. Binding nature of the Resolution Plan on dissenting financial creditors:

The Resolution Plan, approved by a 70.07% vote share of the CoC, is binding on all creditors, including dissenting ones like the Appellant. The Appellant's challenge to the CoC's decision was dismissed as it was bound by the approved Resolution Plan, which included the deduction of Rs.34 Crores from its payout.

6. Jurisdiction and authority of the CoC and Resolution Professional:

The CoC has the authority to decide on the distribution of funds and the treatment of claims during the CIRP. The Resolution Professional's role is to verify claims and facilitate the CoC's decision-making. The Appellant's challenge to the CoC's decision was dismissed as the CoC acted within its jurisdiction under the IBC.

Conclusion:

The appeal was dismissed, and the order of the Adjudicating Authority rejecting IA No.222 of 2020 was upheld. The CoC's decision to deduct Rs.34 Crores from the Appellant's payout was deemed valid, based on its commercial wisdom and the binding nature of the Resolution Plan. The Appellant, as a dissenting financial creditor, was bound by the CoC's decision, and no grounds were found to interfere with the adjudicating authority's order.

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