Decided on 16th November 2022 | NCLAT Principal Bench,
The Appellants contend that the total aggregate amount of the ‘Operational Debt’ from the Operational Creditors (OC) is 32.78% of the total debt. However, no notices of the meeting of the Committee of Creditors (“CoC”) were given to the Appellants, denying them an opportunity to participate in the meetings.
The Appellants further content the order given is discriminatory in nature as a mere 1% of their total claim was admitted and 100% claim of the farmers was admitted, that 100% is paid under the plan, and that this is discriminatory as the farmers do not form a class by themselves under the Code
The Respondents contend that the Appellants are entitled to ‘NIL’ payment as per Section 30(2)(b) of the Code and that 100% of the payment made to the farmers cannot be considered because this was to ensure that the ‘Corporate Debtor’ which is a Sugar Plant remains ‘a Going Concern’, with farmers being the backbone of the industry.
The Respondents also contended that the commercial wisdom of CoC cannot be questioned and relied upon the order in Essar Steel. 1
The Appellant’s claim in respect of the total debt constitutes only 8 to 9% and they had failed to inform the Resolution Professional (RP) of the name of the authorized representatives who should be given notice for the CoC meetings. The RP had received their claims earlier in February and March, 2019 but they never approached the RP as a group or as a consortium and filed their claims in individual capacity.
1 Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta and Ors. ( 2020 ) 8 SCC 531
NCLAT observed that the CD was a sugar plant, and the farmers were an integral part thereof whose families are dependent on it. Moreover, the NCLAT observed that even the secured Financial Creditors (FC) accepted that 100% payment should be made to the farmers who are the backbone of the industry. NCLAT found no embargo in classification of the OCs into separate different classes for deciding the way in which money is to be distributed to them by the CoC of CD.
The Respondents contended that the commercial wisdom of the Committee of Creditors in determining the amounts to be paid to different classes and sub-classes of creditors in accordance with provisions of IBC and Regulations thereunder cannot be questioned and relied upon the Supreme Court’s order in Essar Steel. 2
NCLAT opined on the position of the Operational Creditors in the order of payments, particularly considering the facts and circumstances of each case and modus operandi of the Corporate Debtor.
The Resolution Plan was approved and NCLAT concluded that the limited scope of judicial review, can in no circumstance trespass upon a business decision arrived at by the majority of Committee of Creditors.
2 Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta and Ors. ( 2020 ) 8 SCC 531