Summary
The Supreme Court dismissed the NOIDA Special Economic Zone Authority's challenge, as operational creditor, to an approved resolution plan that gave it Rs 50 lakh against an admitted claim of about Rs 6.29 crore and exempted the resolution applicant from SEZ transfer and renewal charges. Valuation is a question of fact; the CoC's commercial wisdom is not justiciable beyond Section 30(2) of the IBC; dues not in the plan stand extinguished; and the IBC overrides the SEZ Act under Section 238. The plan had also been implemented and the appellant had accepted its payment.
Issues
- Whether the valuation of the corporate debtor and the approval of the resolution plan, allotting the operational creditor far less than its admitted claim, called for interference.
- Whether a clause of the resolution plan exempting the resolution applicant from SEZ fees and transfer charges was invalid as contrary to the Special Economic Zones Act, 2005.
Provisions considered
- Sections 30 and 31, Insolvency and Bankruptcy Code, 2016Following Ghanashyam Mishra and related decisions, once the plan is approved all dues not part of it, including statutory dues owed to governments and local authorities, stand extinguished, and no proceedings for the period before approval can continue. (¶ 15)
- Section 30(2), Insolvency and Bankruptcy Code, 2016The CoC's commercial decisions, including on transfer fees and viability of the plan, are non-justiciable except to the limited extent Section 30(2) allows; no breach of statute or procedure was shown. (¶¶ 16, 19)
- Section 238, Insolvency and Bankruptcy Code, 2016The IBC's overriding effect meant the plan clause exempting the resolution applicant from SEZ charges prevailed over the SEZ Act, 2005, and the objection based on that Act failed. (¶¶ 10, 17)
Held
- Valuation is basically a question of fact and is not interfered with when it rests on relevant material; fair and liquidation values fixed by averaging the two valuers' estimates, by due process, called for no interference. (¶ 14)
- On approval of a resolution plan, all dues not included in it, including statutory dues to the Central Government, State Government and local authorities, stand extinguished and cannot be pursued for the period before approval; this disposed of the appellant's claims for statutory and lease-related dues. (¶ 15)
- Claims such as transfer fees fall within the commercial wisdom of the Committee of Creditors, which courts and tribunals cannot review except under Section 30(2); the CoC's financial decisions on viability prevail. (¶¶ 16, 19)
- By virtue of Section 238, the IBC overrides the SEZ Act, 2005, so the plan's exemption from NSEZ fees, penalties and transfer charges could not be objected to on the basis of that Act. (¶ 17)
- The resolution plan had been implemented and the appellant had received and accepted payment by demand draft, which further supported declining interference. (¶ 18)
Result
Appeals dismissed; the NCLT orders of 05.10.2020 and 27.11.2020 and the NCLAT judgment of 14.02.2022 upheld. No costs.