he NCLAT affirms the validity of the resolution plan and the reassessment of claims in insolvency proceedings, upholding the tribunal's findings.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench of Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) upheld the determination of the Resolution Plan and the redetermination of the claims of financial creditors, affirming that changes in the interest rates for claims did not materially affect the approved Resolution Plan, and thus, the approvals by the Committee of Creditors and the Adjudicating Authority were valid.
The National Company Law Appellate Tribunal (NCLAT) addressed two appeals filed by the same appellants, namely a shareholder/promoter and a suspended director of the corporate debtor, challenging the orders dated April 26, 2023, from the National Company Law Tribunal (NCLT), Mumbai Bench, Court-II. These appeals were filed to contest the decisions made in Company Appeal (AT) (Insolvency) No. 1127 of 2024, which questioned parts of the order dated April 26, 2024, concerning IA No. 111 of 2024 and IA No. 5606 of 2023, and in Company Appeal (AT) (Insolvency) No. 1129 of 2024, which contested the approval of the Resolution Plan in IA No. 2830 of 2023.
The Corporate Insolvency Resolution Process (CIRP) against V Hotels Ltd. was initiated on an application by Asset Reconstruction Company (India) Ltd. (ARCIL). During the CIRP, the Resolution Professional (RP) engaged two registered valuers who assessed the average fair value of the corporate debtor at ₹1074.27 crores and the average liquidation value at ₹758.35 crores. Various claims were submitted by secured financial creditors, unsecured financial creditors, and operational creditors, with ARCIL’s claim admitted at ₹1546.1 crores and Pegasus Asset Reconstruction Company Pvt. Ltd.’s claim at ₹521.80 crores.
The Information Memorandum and Addendum were published on August 1, 2022, prompting multiple expressions of interest and the submission of four resolution plans, including one from Macrotech Developers Ltd. (MDL). The Committee of Creditors (CoC) approved MDL’s plan with a 100% vote share on June 26, 2023. Prior to this, the promoter and shareholder of the corporate debtor had challenged the interest rate applied to the claims of secured financial creditors. The NCLT accepted a lower interest rate of 14.85% for ARCIL, prompting appeals against this determination. Subsequently, Pegasus requested a similar recalibration of its claim.
Following the Tribunal's directive, the RP recalculated ARCIL's claim to ₹621.70 crores and presented an addendum to the CoC, indicating no change to the financial proposal of the resolution plan. The CoC approved this addendum on December 13, 2023, and authorized the RP to submit it to the NCLT. The appellant’s challenge to this addendum and the minutes of the CoC meeting were dismissed by the NCLT, and the resolution plan was approved on April 26, 2024.
The appellants contended that the approval of the resolution plan without redetermining Pegasus's claim was flawed and would materially affect the plan’s terms. They argued that the resolution plan approval was defective due to the unresolved claim issues of Pegasus. However, the respondents contended that the redetermination of Pegasus’s claim, as requested and recalculated by the RP, had been addressed appropriately and had no adverse effect on the resolution plan’s financials.
The NCLAT, after reviewing the submissions and relevant records, found no errors in the CoC’s decision to approve the addendum or in the approval of the resolution plan. The tribunal noted that the Supreme Court, in its order dated May 10, 2024, affirmed that reworking the interest rate would not affect the resolution plan’s approval and emphasized that any effects would be limited to adjustments between creditors of the same class. Consequently, the tribunal upheld the decisions of the NCLT and dismissed the appeals, affirming the proper process and outcomes of the CIRP.
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