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

Amendment of plaint under Order VI Rule 17 of the CPC explained

Cause Title :  Ganesh Prasad vs Rajeshwar Prasad, SLP (C) NO. 28377 OF 2018, Supreme Court Of India Date of Judgment/Order : 14/3/2023 Corum : J. B. Pardiwala, J. Citied:  Revajeetu Builders and Developers v. Narayanaswamy & Sons and Others reported in (2009) 10 SCC 84 North Eastern Railway Administration, Gorakhpur v. Bhagwan Das reported in (2008) 8 SCC 511 P.A. Jayalakshmi v. H. Saradha and Others reported in (2009) 14 SCC 525 B.K. Narayana Pillai v. Parameswaran Pillai and Another reported in (2000) 1 SCC 712 A.K. Gupta and Sons Ltd. v. Damodar Valley Corporation reported in AIR 1967 SC 96 Life Insurance Corporation of India v. Sanjeev Builders Private Limited and Another, Civil Appeal No. 5909 of 2022 dated 01.09.2022 Firm Sriniwas Ram Kumar v. Mahabir Prasad and Others reported in AIR 1951 SC 177 G. Nagamma and Another v. Siromanamma and Another reported in (1996) 2 SCC 25 Praful Manohar Rele v. Krishnabai Narayan Ghosalkar and Others reported in (2014...
Post a Comment
Read more

Owner of vehicle is not expected to verify the genuineness of the driving license before appointing a driver

Cause Title : Rishi Pal Singh Versus New India Assurance Co. Ltd & Ors., Civil Appeal No. 4919 Of 2022, The Supreme Court Of India Date of Judgment/Order : July 26, 2022 Corum : Hemant Gupta; J., Vikram Nath; J. Background the truck owned by the appellant met with an accident. The owner deposed before the court that before employing the driver, he had taken his driving test and that he was driving the vehicle satisfactorily and  that the driver was employed with him for 3 years before the date of the accident. He produced his driving license. This was reaffirmed by the driver who deposed that the driving license was obtained from the driver and it was issued from Nagaland, but no such license was produced on record. Both the Motor Accident Claims Tribunal and the High Court have held that the owner has alleged that the driver had a driving license from Nagaland but the same was not produced and therefore, the Insurance Company is entitled to recover the awarded amount...
Post a Comment
Read more

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more