Whether distribution to Secured Creditor has to be made as per the admitted claim/debt or on the basis of security interest over assets of the Corporate Debtor – ICICI Bank Limited Vs. BKM Industries Ltd. – NCLAT New Delhi
In this case, Resolution Applicant had proposed that amount for payment towards secured creditors shall be distributed amongst them based on proportion of their admitted claim. The Appellant raised objection and claimed distribution as per security interest.
In this important decision, Hon’ble NCLAT held that:
(i) As per Section 53(1)(b), debt owed to a secured creditor has to be distributed equally between and amongst workmen’s dues and debts owed to a secured creditors. The debt owed to the secured creditor is a debt as admitted in the CIRP.
(ii) The distribution of the debt has to be as per the debt of the Financial Creditors.
(iii) The scheme of Section 53(1), clearly indicates distribution as per the debt and in the legislative scheme there is no scope of distribution of assets among the Financial Creditors as per security interest.
(iv) Vistra ITCL (India) (2023) ibclaw.in 62 SC judgment on Article 142 of the Constitution, which jurisdiction was exercised and ultimately the Hon’ble Supreme Court has held Vistra to be a secured creditor.
(v) Upheld the decision of the NCLT Kolkata Bench.