30 (2) (b)

Whether period of 14 days as mentioned in Section 11A(3) of IBC, is mandatory or directory? | Whether in a plan u/s 54K of IBC (PPIRP), dissenting Financial Creditor has to be paid the amount in accordance with Section 30 (2) (b) of the IBC? – Bank of Baroda Vs. Shree Rajashthan Syntex Ltd. – NCLAT New Delhi

In this Important judgment, the Hon’ble NCLAT has clarified the following important issues:

(i) Whether period of 14 days as referred to in Section 11A(3) of the IBC is a ‘directory’?
(ii) Whether an Application under Section 54C is filed even after 14 days of filing of Section 7 Application, the Adjudicating Authority can proceed to decide Section 54C Application first?
(iii) Whether the payment to the dissenting Financial Creditor in the Resolution Plan (under PPIRP) is in accordance with Section 30 (2) (b) of the IBC?
(iv) Is Adjudicating Authority expected to go into account and investigate if and in which category an application falls under Section 7 examining Notifications under the MSME Act?

Whether period of 14 days as mentioned in Section 11A(3) of IBC, is mandatory or directory? | Whether in a plan u/s 54K of IBC (PPIRP), dissenting Financial Creditor has to be paid the amount in accordance with Section 30 (2) (b) of the IBC? – Bank of Baroda Vs. Shree Rajashthan Syntex Ltd. – NCLAT New Delhi Read Post »

As per Section 30(4) of the IBC, the CoC has the jurisdiction to decide on the distribution of the amount either based on the vote share of the Financial Creditors or as per their security interest – HDFC Bank Ltd. Vs. Pratim Bayal, RP of Birla Tyres Ltd. and Ors. – NCLAT New Delhi

The Hon’ble NCLAT referring various judgments held that after amendments made in Section 30(4), the CoC have been given jurisdiction to take a decision as to distribute the amount as per vote share of the financial creditor or as per the security interest which is in their commercial wisdom and decision taken by requisite vote share by the CoC is final and binding on all including the dissenting financial creditors and dissenting financial creditors at best is entitled for minimum of liquidation value. The use of expression “may” in Section 30(4) clearly indicate the discretion vested in the CoC to take into account of the matter of security interest of the secured creditors in approving the Resolution Plan.

As per Section 30(4) of the IBC, the CoC has the jurisdiction to decide on the distribution of the amount either based on the vote share of the Financial Creditors or as per their security interest – HDFC Bank Ltd. Vs. Pratim Bayal, RP of Birla Tyres Ltd. and Ors. – NCLAT New Delhi Read Post »

Dissenting Financial Creditors get payment in full before any payment is made to assenting Financial Creditors – IDBI Bank Ltd. and Ors. Vs. Mr. Anjanee Kumar Lakhotia and Anr. – NCLT Kolkata Bench

It is well settled law that an approved Resolution plan is binding on  all the stake holders and in this case, the Hon’ble Tribunal is of the view the resolution plan has been approved with payments in instalments only to the assenting financial creditors whereas the dissenting financial creditors will have to be paid in full before the assenting financial creditors are paid. We have also considered the explanation 1 of Section 30 (2) of IB Code which says that distribution in accordance with provisions of this clause shall be fair and equitable to such creditors (Operational creditors and dissenting financial creditors).

Dissenting Financial Creditors get payment in full before any payment is made to assenting Financial Creditors – IDBI Bank Ltd. and Ors. Vs. Mr. Anjanee Kumar Lakhotia and Anr. – NCLT Kolkata Bench Read Post »

Whether separate class of creditors can be created under the broad category of Operational Creditors | Whether, differential treatment inter-se the same class of creditors is permissible | Whether the provisions of MSMED give protection to MSME status Operational Creditors in CIRP proceedings under the Code and Regulations – NCC Ltd. Vs. Golden Jubilee Hotels Pvt. Ltd. and Ors. – NCLAT New Delhi

Hon’ble NCLAT held that:
(i) No word like “special Operational Creditor” has been defined under Section 3 or 5 of the Code or anywhere else or even in the regulations.
(ii) The role of the Adjudicating Authority is to ensure that the Resolution Plan complies with the requirements of the Code especially under Section 30(2) of the Code.
(iii) CoC has no role in deciding the position of the creditor either as financial or Operational Creditor and such decision in true sense cannot be treated as commercial wisdom.
(iv) While the Code does not categorize any operational creditors as “special,” it does recognize different classes of operational creditors based on their claims. For instance, operational debts can include dues related to the supply of goods and services, employment-related obligations, and statutory dues payable to government authorities. However, all operational creditors are treated under the same legal framework without special distinctions within their category.
(v) The legislative intent is clear that MSMEs creditors have no special rights over other creditors.
(vi) NCLT had no jurisdiction to impose such conditions with regard to amounts as may be recoverable by the corporate debtor in future. Any amount receivable by the corporate debtor, being an asset of the company, would continue to remain with the Corporate Debtor upon implementation of the resolution plan.

Whether separate class of creditors can be created under the broad category of Operational Creditors | Whether, differential treatment inter-se the same class of creditors is permissible | Whether the provisions of MSMED give protection to MSME status Operational Creditors in CIRP proceedings under the Code and Regulations – NCC Ltd. Vs. Golden Jubilee Hotels Pvt. Ltd. and Ors. – NCLAT New Delhi Read Post »

Whether units allotted to commercial space buyers prior to initiation of CIRP, required to be excluded from the assets of the Corporate Debtor and can the buyers claim to have become owners of the commercial spaces? – Praveen Arya and Ors. Vs. Anju Aggarwal RP of Corporate Debtor and Anr. – NCLAT New Delhi

The Hon’ble NCLAT held that:

(i) The Hon’ble Supreme Court had occasion to consider a homebuyer’s project in Jaypee Kensingston Boulevard Apartment Welfare Association & Ors. v. NBCC (India) Ltd. & Ors. (2021) ibclaw.in 63 SC, where Hon’ble Supreme Court has held that Resolution Plan has to comprehensively deals with all the assets and liabilities of the Corporate Debtor and no housing project could be segregated for the reason that the same has been completed or is nearing completion.
(ii) Alok Sharma v. IP Construction Pvt. Ltd. (2022) ibclaw.in 459 NCLAT, judgment at best can be held to lay down ratio that moratorium under Section 14, does not prohibit execution of Sale Deed, but the said judgment itself cannot be held to declare that unit allottees are the owners of units allotted to them.
(iii) By virtue of allotment of commercial space in favour of the Appellant(s), including the Lease Deed dated 24.12.2014 in favour of Nupur Garg, the Appellant(s) cannot claim to have become owners of the commercial spaces. The Corporate Debtor continues to own the assets and the plea of the Appellant(s) that assets be excluded from CIRP of the Corporate Debtor, or the Appellant(s) are owners of the commercial space/ units allotted to them, cannot be accepted.

Whether units allotted to commercial space buyers prior to initiation of CIRP, required to be excluded from the assets of the Corporate Debtor and can the buyers claim to have become owners of the commercial spaces? – Praveen Arya and Ors. Vs. Anju Aggarwal RP of Corporate Debtor and Anr. – NCLAT New Delhi Read Post »

Under the current legal framework, Operational Creditors are not entitled to any payment if the amount due to them during liquidation is NIL – Sai Balaji Facility Vs. CA Ramchandra Dallaram Choudhary, RP for Adico Forge Pvt. Ltd. and Ors. – NCLAT New Delhi

The statutory protection granted to the operational creditor in Section 30(2)(b) is that they shall not be paid any amount less than as mentioned in Section 30 (2) (b). Appellant case in the Appeal is not that the Appellant was entitled for any payment as per Section 30(2)(b) which has been denied in the Resolution Plan.

Under the current legal framework, Operational Creditors are not entitled to any payment if the amount due to them during liquidation is NIL – Sai Balaji Facility Vs. CA Ramchandra Dallaram Choudhary, RP for Adico Forge Pvt. Ltd. and Ors. – NCLAT New Delhi Read Post »

Any clause in Resolution Plan which requires Creditors to take a hair-cut cannot be construed as being violative of Section 30(2) of the IBC | When Resolution Plan has been approved by CoC, irrespective of whether a single-member CoC or multi-member CoC, the decision becomes a collective business decision – Yogesh Kelkar and Ors. Vs. RP of Anudan Properties Pvt. Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that:

(i) When the resolution plan has been approved by the CoC with requisite majority and after holding due deliberations, the decision becomes a collective business decision.
(ii) A matter relating to approval of resolution plan which is indubitably distinct and unrelated to a scheme of compromise or arrangement contemplated under the Companies Act.
(iii) As regards approval of resolution plan is concerned, the IBC provides for 66% vote share and once this threshold is met, the decision of the CoC, irrespective of whether it is a single-member or multi-member, the decision of the CoC becomes sacrosanct and binding on all stakeholders.
(iv) The Adjudicating Authority cannot substitute its views with the commercial wisdom of the CoC in rejecting the resolution plan simply because the Appellants are aggrieved by the amounts proposed to be paid to them under the resolution.
(v) Merely because there is a reduction in the claim of any creditor does not make the resolution plan fall foul of law. Any clause in the resolution plan which requires creditors to take a hair-cut cannot be construed as being violative of Section 30(2) of the IBC.
(vi) Once the CoC has approved the resolution plan by requisite majority and the same is in consonance with applicable provisions of law and nothing has come to light to show that any material irregularities have been committed in the conduct of the CIRP proceedings, the same cannot be a subject matter of judicial review and modification.

Any clause in Resolution Plan which requires Creditors to take a hair-cut cannot be construed as being violative of Section 30(2) of the IBC | When Resolution Plan has been approved by CoC, irrespective of whether a single-member CoC or multi-member CoC, the decision becomes a collective business decision – Yogesh Kelkar and Ors. Vs. RP of Anudan Properties Pvt. Ltd. – NCLAT New Delhi Read Post »

Operational Creditors are denied any payment when the amount payable to them in the event of Liquidation is NIL, but till the Legislature comes to the aid of the claim of Operational Creditor by amending the Legislative Scheme hands of the Courts are tied to take any other view in the matter – Rajat Metaal Polychem Pvt. Ltd. Vs. Mr. Neeraj Bhatia RP Vinayak Rathi Steels Rolling Mills Pvt. Ltd. and Anr. – NCLAT New Delhi

Hon’ble NCLAT already in Damodar Valley Corporation Vs. Dimension Steel and Alloys Pvt. Ltd. & Ors. (2022) ibclaw.in 387 NCLAT has observed that time has come when it should be examined by the Government to find out as to whether there are any grounds for considering change in the Legislative Scheme towards the payment to the Operational Creditor which also consists of the Government dues.

In this judgment, it is again held that it is true that Operational Creditors as the law stands now are denied any payment when the amount payable to them in the event of Liquidation is NIL, but till the Legislature comes to the aid of the claim of Operational Creditor by amending the Legislative Scheme hands of the Courts are tied to take any other view in the matter.

Operational Creditors are denied any payment when the amount payable to them in the event of Liquidation is NIL, but till the Legislature comes to the aid of the claim of Operational Creditor by amending the Legislative Scheme hands of the Courts are tied to take any other view in the matter – Rajat Metaal Polychem Pvt. Ltd. Vs. Mr. Neeraj Bhatia RP Vinayak Rathi Steels Rolling Mills Pvt. Ltd. and Anr. – NCLAT New Delhi Read Post »

There is nothing in the IBC to negate that position of CGST Act being treated as Secured Debt | Operational/Dissenting Financial Creditors cannot be paid NIL value merely the Liquidation Value is NIL for them – Sandip Kumar Kejriwal RP of Indian Mining Works Pvt. Ltd. – NCLT Kolkata Bench

Hon’ble NCLT Kolkata Bench held that:
(i) The legislative intent to provide the word “not less than” in the first line of Section 30(2)(b) of the I&B Code is contemplating a mandatory allocation to the operational creditors and the dissenting financial creditors and the allocation would be the amount provided in the resolution plan or liquidation value whichever is higher.
(ii) The Adjudicating Authority has been established to function as a mere rubber stamp affixing authority to allow all the commercial decisions of the CoC, wherein the irregularities or illegalities committed by the CoC, or the insinuating circumstances are galore.
(iii) A resolution plan that is violative or non-compliant to the provisions of Section 30(2) read with Section 31(1) can be rejected under Section 30(2) of the I&B Code, though the plan has been approved by the CoC under its commercial wisdom.
(iv) The plan also has not allocated any sum to the CGST Department (Government of India) when they are actual creditors in terms of Section 82 of the CGST Act.

There is nothing in the IBC to negate that position of CGST Act being treated as Secured Debt | Operational/Dissenting Financial Creditors cannot be paid NIL value merely the Liquidation Value is NIL for them – Sandip Kumar Kejriwal RP of Indian Mining Works Pvt. Ltd. – NCLT Kolkata Bench Read Post »

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