Skip to main content

Distribution of proceeds through CIRP under Insolvency Code is as per voting share

Cause Title : Small Industries Development Bank of India (SIDBI) vs Vivek Raheja, Company Appeal (AT) (Insolvency) No. 570 of 2022, National Company Law Appellate Tribunal Principal Bench, New Delhi

Date of Judgment/Order : 16th September, 2022

Corum : Justice Ashok Bhushan & Mr. Barun Mitra

Citied: 

  1. India Resurgence Arc Private Limited Vs. M/s. Amit Metaliks Limited & Anr., (Civil Appeal No. 1700 of 2021)
  2. Indian Bank Vs. Charu Desai, Erstwhile Resolution Professional & Chairman of Monitoring Committee of GB Global Ltd. & Anr., (Company Appeal (AT) Ins. No. 644 of 2021)
  3. Jaypee Kensington Boulevard Apartments Welfare Association & Ors. Vs. NBCC (India) Ltd. & Ors., [(2021) 1 SCC 401]
  4. Union Bank of India Vs. Resolution Professional of M/s Kudos Chemie Ltd. & Ors.,Company Appeal (AT) Ins. No. 665 of 2022
  5. India Resurgence Arc. Pvt. Ltd. Vs. M/s. Amit Metaliks Ltd. & Anr.- Civil Appeal No. 1700 of 2021
  6. ICICI Bank Vs. SIDCO Leathers Ltd. & Ors., [(2006) 10 SCC 452]
  7. Technology Development Board Vs. Anil Goel & Ors.,Company Appeal (AT) Ins. No. 731 of 2020
  8. Oriental Bank of Commerce Vs. Anil Anchalia & Anr., Company Appeal (AT) Ins. No. 547 of 2022

Background

Oriental Bank of Commerce had filed a Section 7 Application under the Insolvency and Bankruptcy Code, 2016 (IBC in short) against the Corporate Debtor – M/s. Gupta Exim (India) Pvt. Ltd. which was admitted by the Adjudicating Authority and through an interim application the Bank claimed that the Bank is entitled to 6.93 % i.e. the amount of Rs. 5,64,97,893/- and as per voting share as approved by the CoC, the Appellant is entitled to 2.03% i.e. Rs. 1,65,47,078/-. The Adjudicating Authority  rejected the I.A. upholding the decision of the CoC for distribution of proceeds of the Resolution Plan as per the voting share. The Bank aggrieved by the said Order, has come up in this Appeal.

The only question which arises for consideration in the present Appeal is as to whether the Appellant-dissenting Financial Creditor is entitled to claim distribution of proceeds of the plan as per value of the security interest of the Appellant or as per the debt of the Appellant (voting share).

Judgment

The Appellate Tribunal held that Section 53(1)(b)(ii) uses expression “debts owed to a secured creditor” which is the basis for distribution in the order of priority as provided in Section 53(1)(ii). The debt owed to a secured creditor is a debt which is relatable to his claim as admitted in CIRP Process. The claim/debt of a secured financial creditor which is admitted in CIRP Process of a secured creditor is a fixed amount determined in CIRP process as reflected in Information Memorandum prepared by the Resolution Professional. The debt owed to a secured creditor is not the value of security of a secured creditor. The value of security of secured creditor is not the debt owed to a secured creditor in the CIRP Process. Section 53(1) does not contemplate distribution as per value of security of a secured creditor. 

Submission of the Appellant that he is entitled to distribution of the proceeds of the plan value as per value of security possessed by him is not in accord with the legislative scheme as delineated in Section 53(1) of the Code. The above issue has been decided by this Appellate Tribunal in M/s Kudos Chemie (supra).

Comments

Post a Comment

Most viewed this month

One Sided Clauses In Builder-Buyer Agreements Is An Unfair Trade Practice

In CIVIL APPEAL NO. 12238 OF 2018, Pioneer Urban Land & Infrastructure Ltd. vs Govindan Raghavan, an appeal was filed before the Supreme Court  by the builder against the order of the National Consumer Forum. The builder had relied upon various clauses of the Apartment Buyer’s Agreement to refute the claim of the respondent but was rejected by the commission which found the said clauses as wholly one-sided, unfair and unreasonable, and could not be relied upon. The Supreme Court on perusal of the Apartment Buyer’s Agreement found stark incongruities between the remedies available to both the parties. For example, Clause 6.4 (ii) of the Agreement entitles the Appellant – Builder to charge Interest @18% p.a. on account of any delay in payment of installments from the Respondent – Flat Purchaser. Clause 6.4 (iii) of the Agreement entitles the Appellant – Builder to cancel the allotment and terminate the Agreement, if any installment remains in arrears for more than 30 da...
Post a Comment
Read more

Inherited property of childless hindu woman devolve onto heirs of her parents

In Tarabai Dagdu Nitanware vs Narayan Keru Nitanware, quashing an order passed by a joint civil judge junior division, Pune, the Bombay High Court has held that under Section 15 of the Hindu Succession Act, any property inherited by a female Hindu from her father or mother, will devolve upon the heirs of her father/mother, if she dies without any children of her own, and not upon her husband. Justice Shalini Phansalkar Joshi was hearing a writ petition filed by relatives of one Sundarabai, who died issueless more than 45 years ago on June 18, 1962. Article referred:http://www.livelaw.in/property-inherited-female-hindu-parents-shall-devolve-upon-heirs-father-not-husband-dies-childless-bombay-hc-read-judgment/
Post a Comment
Read more

Court approached in the early stages of arbitration will prevail in all other subsequent proceedings

In National Highway Authority of India v. Hindustan Steelworks Construction Limited, the Hon'ble Delhi High Court opined that once the parties have approached a certain court for relief under Act at earlier stages of disputes then it is same court that, parties must return to for all other subsequent proceedings. Language of Section 42 of Act is categorical and brooks no exception. In fact, the language used has the effect of jurisdiction of all courts since it states that once an application has been made in Part I of the Act then ―that Court alone shall have jurisdiction over arbitral proceedings and all subsequent applications arising out of that agreement and arbitral proceedings shall be made in that Court and in no other Court. Court holds that NHAI in present case cannot take advantage of Section 14 of the Limitation Act, 1963 for explaining inordinate delay in filing present petition under Section 34 of this Act in this Court.
Post a Comment
Read more