Summary
The Court dismissed operational creditors’ challenge to Reliance Infratel’s approved resolution plan. NCLT and NCLAT could review compliance with the Insolvency Code’s specified requirements but had no independent equitable jurisdiction to revise the committee’s commercial distribution. Fair treatment did not require identical recoveries for financial and operational creditors. The disputed preference-share value had been included in valuation, operational creditors’ statutory entitlement remained nil on the figures presented, and exclusion of some financial creditors did not affect unanimous approval.
Issues
- Whether insolvency tribunals could revise an otherwise compliant resolution plan on independent grounds of fairness or equity.
- Whether operational creditors were entitled to the same recovery percentage as financial creditors.
- Whether preference-share valuation or exclusion of financial creditors undermined approval on these facts.
Provisions considered
- Sections 30(2), 30(4), 31(1) and 61(3), Insolvency and Bankruptcy Code, 2016Review was confined to statutory approval and appeal requirements; commercial wisdom could not be replaced by independent equitable redistribution. (¶¶ 22, 23, 24, 25, 26, 27, 29, 30, 31, 32, 33, 36, 37, 38, 39, 40, 41, 42)
- Section 30(2)(b), including Explanation 1, Insolvency and Bankruptcy Code, 2016Operational-creditor protections required the statutory minimum and fair treatment among similarly situated creditors, rather than equal recoveries across distinct classes. (¶¶ 23, 28, 29, 30, 36, 37, 38)
Held
- The realisable preference-share value was included in the corporate debtor’s liquidation valuation. The allegation that it had been omitted was factually incorrect, and the operational creditors’ liquidation entitlement remained nil even on the alternative computations advanced. (¶¶ 18, 19)
- Excluding certain financial creditors did not affect approval because the plan had unanimous support and remained unanimously approved without them. On the uncontroverted figures, the changed financial-creditor distribution had no consequence for the operational creditors’ entitlement. (¶¶ 20, 21, 42)
- NCLT’s approval jurisdiction and NCLAT’s appellate jurisdiction arise from the Code’s express provisions. They cannot reassess commercial merits or exercise a residual equity jurisdiction where statutory and regulatory requirements are fulfilled. Statutory review of compliance remains available. (¶¶ 22, 23, 24, 25, 26, 27, 31, 32, 33, 39, 40, 41, 42)
- Fair and equitable treatment applies among similarly situated creditors; financial and operational creditors are distinct classes. The Code does not require identical recovery percentages between them. The approved plan provided operational-creditor recoveries of 19.62% against financial-creditor recoveries of 10.32%, and no statutory breach was established. (¶¶ 28, 29, 30, 36, 37, 38)
- The claim of failure to maximise asset value lacked concrete support beyond the valuation objection already answered. The plan met the statutory requirements and the appeal was dismissed. (¶¶ 36, 42, 43, 44)
Result
Appeal dismissed; approval of the resolution plan upheld and pending applications disposed of.