Equitable Treatment can be claimed only by similarly situated Creditors: NCLAT

Equitable Treatment can be claimed only by similarly situated Creditors: NCLAT

The Appeal filed by the Operational Creditors of the Corporate Debtor - Reliance Infratel Limited was dismissed at the very threshold stage by the National Company Law Appellate Tribunal (NCLAT).

Herein, the appellants being the Operational Creditors of the Corporate Debtor - Reliance Infratel Limited, had been aggrieved of the impugned order passed by the Adjudicating Authority (National Company Law Tribunal, Court-I, Mumbai Bench) by virtue whereof Resolution Plan in respect of Corporate Debtor submitted by the Resolution Applicant Reliance Projects and Property Management Services Limited (formerly known as Reliance Digital Platform and Project Services Limited) came to be approved.

The impugned order was assailed primarily on the ground that the Appellants were kept unaware of the Corporate Insolvency Resolution Process (CIRP) qua the Corporate Debtor, thus being wholly unaware of the progress of Resolution Process with no details provided by the Resolution Professional as regards disbursal of fund towards their claims and that their claims have not received a fair and equitable treatment.

It was contended that the fair market value as also the liquidation value of the Corporate Debtor had not been taken into account and such amount consisting of Rs.800 crores did not form part of the corpus of payments to the Operational Creditors.

It was also contended on behalf of the Appellants that the Adjudicating Authority approved the Resolution Plan of Successful Resolution Applicant overlooking the material irregularities in the accumulation and disbursal of funds constituting the corpus of the Corporate Debtor for the purpose of making distribution to the creditors.

Respondents submitted that the Appellants had been treated fairly and allocated 19.62% as against 10.32% allocated to Financial Creditors out of an upfront payment of Rs.3,720 crores under the approved Resolution Plan. It was further pointed outthat the Appellants had participated in the Resolution Process and their being unaware of the CIRP and its outcome was factually incorrect.

The Appellate Tribunal found that the Appellants, admittedly being Operational Creditors cannot claim that they have been treated unfairly or inequitably as regards distribution of funds provided under the approved Resolution Plan.

According to the NCLAT, it was not the case of the Appellants that they have been completely ignored or left out of consideration while distributing the upfront money provided under the plan approved by the Committee of Creditors with the requisite majority and finally passing the muster under Section 30(2) of the Insolvency and Bankruptcy Code, 2016 (I&B Code), which stands approved by the Adjudicating Authority.

From the records, it was found that the Operational Creditors other than related parties and Statutory Creditors (the Class to which the Appellants belong) had been allocated 19.62% of the upfront payment of Rs.3,720 crores while the Financial Creditors have been paid only 10.32% of the upfront payment.

The NCLAT also pointed out that it should not lie in the mouth of the Appellants that they had been discriminated against and treated unfairly. The approved Resolution Plan ensured restructuring and revival of the Corporate Debtor.

The Appellate Tribunal held that the appellants were not justified in claiming that they have been excluded from the Resolution Process proceedings. Admittedly they had filed claims during CIRP proceedings and their claims had been partly admitted. In the face of this factual position, it was of no avail on their part to allege being excluded from CIRP proceedings.

The NCLAT observed that the Operational Creditors stand at a different footing as compared to Financial Creditors. They are entitled to receive a minimum payment being not less than liquidation value, which does not apply to Financial Creditors.

The NCLAT held that Appellants are Operational Creditors and being different from the Financial Creditors and Secured Creditors, they were not entitled to the same treatment. Their claim to proceeds of sale of preference shares, not being part of the assets value or a component of upfront payment was not warranted as the Corporate Debtor had been restructured and revived and protected from being pushed into liquidation.

The NCLAT concluded that it was futile to contend on their behalf that the Financial Creditors being lenders having huge financial resources can take abigger hair cut as compared to the financial condition of the Appellants. The distribution mechanism adopted in the instant case being not only conformable to the mechanism envisaged under Section 53 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) but also according priority in upfront payment to Operational Creditors could not be termed unfair or inequitable qua the Appellants-Operational Creditors.