The National Company Law Appellate Tribunal (NCLAT), New Delhi bench comprising of Justice Ashok Bhushan, Chairperson and Barun Mitra, Technical Member was hearing an appeal and held that the Operational Creditors cannot expect equal treatment as Financial Creditors under the Insolvency and Bankruptcy Code, and the Resolution Plans' distribution in question did not violate the provisions of the Code.
There are two Appeals with common legal issues that were heard jointly in this National Company Law Appellate Tribunal (NCLAT) judgment.
Company Appeal (AT) Ins. No. 613 of 2022 was filed against the Order dated 03.02.2022 by the National Company Law Tribunal (NCLT), Cuttack Bench. The NCLT's order approved the Resolution Plan submitted by the Resolution Applicant, which was previously accepted by the Committee of Creditors (CoC). The Appellant, an Operational Creditor, was dissatisfied with the allocation of Rs. 3,71,372/- towards its claim out of the total admitted claim of Rs. 6,68,51,466/-.
Company Appeal (AT) Ins. No. 795 of 2022 was filed against the Order dated 07th April 2022 by the NCLT, Kolkata Bench, which approved the Resolution Plan submitted by Tata Steel Mining Limited for the Corporate Debtor. The Appellant, an Operational Creditor, was paid Rs. 69,22,042/- under the plan, while its total claim was Rs. 108,44,39,632/-.
The Appellants contended that the approved Resolution Plans were not in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC). They argued that Operational Creditors should receive fair and equitable treatment, as specified in Section 30 of the IBC and Regulation 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. They asserted that the distribution to them (0.5% and 1% respectively) was substantially less than that to Financial Creditors.
The Respondents argued that Operational Creditors should not be paid equally with Financial Creditors as they belong to different classes. They referenced the Supreme Court's decision in the Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta and Others, REED 2019 SC 11505 case, which emphasized that equality should apply within the same class of creditors.
The NCLAT, after considering both sides' submissions, ruled that Operational Creditors cannot expect equal treatment as Financial Creditors, as established in the legislative scheme of the IBC. The Appellate Tribunal referred to the Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta and Others, REED 2019 SC 11505 case and other judgments, highlighting that operational and financial creditors are treated distinctly under Section 53 of the IBC. The NCLAT also noted that minimum payment to Operational Creditors is specified in Section 30(2)(b) of the IBC, and it dismissed the appeals, concluding that the approved Resolution Plans did not violate the provisions of the IBC and should stand.
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