NCLAT upheld the approval of the Resolution Plan proposing nil payment to operational creditors as valid under Section 30(2)(b) of the IBC.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench led by Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka reviewed an appeal and observed that a Resolution Plan proposing nil payment to operational creditors is valid under Section 30(2)(b) of the IBC if the liquidation value payable to such creditors is also nil, and courts cannot intervene unless the legislative framework is amended to provide otherwise.
The appeal filed by the Operational Creditor challenged the NCLT, Mumbai Bench’s order dated 02.05.2024, approving the Resolution Plan for the Corporate Debtor. The Corporate Insolvency Resolution Process (CIRP) commenced on 23.06.2023, and the Operational Creditor submitted its claim for ₹16,77,047/-, which was duly admitted by the Resolution Professional. The Resolution Plan was subsequently approved by the Committee of Creditors (CoC) with a 92.87% majority vote. The Operational Creditor’s grievance arose from the plan's proposal of nil payment to all operational creditors, including government dues.
The appellant argued that the plan violated the IBC’s principle of fair treatment by denying payment to operational creditors, despite the admission of claims. However, the respondent contended that under Section 30(2)(b) of the IBC, operational creditors are entitled to no less than what they would receive in liquidation. Since the liquidation value for operational creditors, including the appellant, was nil, the Resolution Plan’s provisions were deemed compliant with the law.
The NCLAT examined relevant precedents, including Rajat Metaal Polychem Private Limited v. Neeraj Bhatia and Another, REEDLAW 2024 NCLAT Del 09502 and Damodar Valley Corporation v. Dimension Steel and Alloys Private Limited and Others, REEDLAW 2022 NCLAT Del 05574, which clarified that operational creditors could receive no payment if the liquidation value was nil. While acknowledging that such outcomes are harsh, the Tribunal reiterated that until the legislative framework is amended, courts are bound to uphold the existing scheme.
Given the compliance of the Resolution Plan with Section 30(2)(b) of the IBC, the NCLAT found no error in the NCLT’s approval order and dismissed the appeal. The Tribunal emphasized that it is now up to the legislature to consider amendments for fairer treatment of operational creditors in future insolvency processes.
Ms. Gayatri Singh, Senior Advocate represented the Appellant.
Mr. Kunal Kanungo, Mr. Abhirup Dasgupta, Mr. Rohan Agarwal and Mr. Akshat Khetan, Advocates appeared for Respondent No. 3/SRA.
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