Judgments

PRATAP TECHNOCRATS (P) LTD. & ORS VS  MONITORING COMMITTEE OF RELIANCE INFRATEL LTD. & ANR : CASE SUMMARY

The Supreme Court in Pratap Technocrats (P) Ltd. & Ors Vs. Monitoring Committee of Reliance Infratel Ltd &  Anr  (2021) SCC Online SC 569  has held that under Indian Insolvency regime, a conscious choice has been made by the legislature to not confer any independent equity based jurisdiction on the Adjudicating Authority other than statutory requirements laid down under Section 30 (2) IBC.

FACTS OF THE CASE

CIRP in the matter of Corporate Debtor was initiated by an order dated 15.05.2018 of NCLT. CoC was constituted on 24th May, 2019. During CIRP , the RP received resolution plans from four prospective Resolution Applicants i.e. (i)  Bharti Airtail Ltd. (ii) Reliance Digital Platform & Project Services Ltd (iii) VFSI Holdings Pvt. Ltd. and (iv) UV Asset Reconstruction Company Ltd.  Resolution Plan submitted by Reliance Digital Platform and Project Services Ltd was approved by CoC in its meeting held on 2nd March, 2020 by 100 percent voting share.  The NCLT approved the Resolution Plan vide order dated 3rd December, 2020.

The Appellants are  Operational Creditors.  Appellants were aggrieved by the fact that their claims have not received a fair and equitable treatment. Fair market value and liquidation value have not been taken into account. An amount of 800 Crore, being value of certain preference shares did not from part of corpus. The appellants were made to suffer 90% reduction to their total claim. They challenged the approval of Resolution Plan before NCLAT, which was rejected by NCLAT vide order dated 4th January, 2021.

FINDINGS  OF THE SUPREME COURT

The Supreme Court noted that the Resolution Professional has appointed two registered valuers as per CIRP Regulation 27 to determine fair value and liquidation value of the Corporate Debtor. The submission of the appellants , that realizable value of preference shares has been excluded,  has been rebutted by specific clarification contained in the Monitoring Committee’s affidavit, which was filed in these proceedings. Realizable value on account of any proceeds realized from the preference shares held its subsidiary is included in the determination of the liquidation value of the Corporate Debtor.

On the aspect of liquidation value, the Supreme Court noted that liquidation value due to  unsecured operational creditor would remain nil in all scenarios, including if the corpus of Rs. 800 Crore is separately considered.

On the aspect of application filed by Doha Bank for removing some of financial creditors has no bearing on the status of approval of Resolution Plan as it has secured 100% voting share in CoC.

The Supreme Court relied on K. Sashidhar Vs. India Overseas Bank (2019) 12 SCC 150 ,  Committee of Creditor of Essar Steel India Ltd Vs Satish Kumar Gupta (2020) 8SCC 531 and reiterated that commercial or business decision of financial creditors are not open to any judicial review by the Adjudicating Authority or Appellate Authority.

The Supreme Court observed that certain foreign jurisdictions allow resolution/reorganization plans to be challenged on grounds of fairness and equity. One of the grounds under which a company voluntary arrangement can be challenged under the United Kingdom’s insolvency Act, 1986 it that it unfairly prejudices the interests of the Creditor of a company. The Unites States Bankruptcy Code provides that if a restructuring plan has to clamp down on dissenting class of creditors, one of the conditions that it should satisfy is that it does not unfairly discriminate and is fair and equitable. Under Indian Insolvency regime, it appears that a conscious choice has been made by the legislature to not confer any independent equity  based jurisdiction on the Adjudicating Authority other than statutory requirements laid down under sub-section (2) of Section 30 of the Code.

The Supreme Court held that decision of NCLT and NCLAT is in conformity of law and dismissed the appeal.

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Mukesh Kumar Suman is an advocate and legal author based at Delhi. He regularly appears before various Judicial Forums including NCLT, NCLAT, High Courts and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

Mukesh Kumar Suman

Mukesh Kumar Suman

Mukesh Kumar Suman is an advocate based at Delhi. He has rich experience in civil, criminal, commercial, arbitration and corporate insolvency matters. He regularly appears before District Courts, NCLT, NCLAT, High Court and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

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