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Synopsis

The National Company Law Appellate Tribunal has recently observed that the Committee of Creditors, in its commercial wisdom, can approve a resolution plan below the liquidation value.

“In the instant case, the approval of the Resolution Plan below the Liquidation value is within the commercial wisdom of the CoC as the Code does not expressly bar that the Resolution Plan value should be over and above the Liquidation value. Hence, there is no material irregularity,” the order reads.

The NCLAT bench in Chennai, consisting of Judicial Member Rakesh Kumar Jain and Technical Member Shreesha Merla, heard an appeal against the NCLT's order filed by the ex-promoter/directors.

The Resolution Plan, approved by the CoC with 100% voting, was subsequently approved by the NCLT.

Federal Bank had transferred its debt to Edelweiss but chose not to file any claim pursuant to the public announcement in Form A, following Regulation 6 of CIRP Regulations. Consequently, it was not included in the CoC, and the said debt amounted to Rs. 5.21 crores.

The appellant did not raise any objections regarding the constitution of the CoC, despite having received notice and the opportunity to do so, as he had the locus to attend the CoC meetings.

The appellant contended that the valuations were incorrect, asserting that the actual fair value is Rs. 9.52 crores, and the liquidation value is Rs. 5.09 crores.

It was argued that the Resolution Plan is discriminatory among creditors within the same class and fails to provide Operational Creditors with the minimum Liquidation value, thereby contravening Section 30(2) of the Code.

The Successful Resolution Applicant argued that the Appellant has no locus to challenge the Order approving the Resolution Plan, as the Appellant is a suspended Director, and their locus concludes once the affairs of the Corporate Debtor are handed over to the IRP.

He further contended that the CoC, with 100% majority share approval, makes its commercial wisdom non-justiciable.

The Successful Resolution Applicant submitted that the Operational Creditor, having a claim of more than 10% of the debt, willingly agreed to accept an amount lower than the Liquidation value.

The bench concurred with the Successful Resolution Applicant, stating that it was the operational creditor who voluntarily accepted a lower amount than the liquidation value.

“As regarding the contention of the Learned Counsel for the Appellant that the Operational Creditor Kerala Ayurvedic Limited was getting an amount lower than the Liquidation value and hence the Plan is discriminatory is untenable, keeping in view that the very same Operational Creditor had voluntarily agreed to accept an amount lower than the Liquidation value,” the order reads.

For Appellant: Mr. Avinash Krishnan Ravi & Mr. Ujjwal Jain, Advocates for Appellant

For Respondents: Mr. Akhil Suresh, Advocate for R1 / RP Mr. Ramasubramaniam Raja, Advocate, For R2

Case title: Mr. Ramesh Kesavan vs CA Jasin Jose & Anr