Ashvinkumar Jayantilal Patel ... vs Shri Sanjay Jitendralal Shah ...

Ashvinkumar Jayantilal Patel ...Appellant

Versus

Shri Sanjay Jitendralal Shah & Ors. ...Respondents

Present: For Appellant: Mr. Palash S Singhai, Advocate For Respondent:

ORDER

18.04.2023: Heard Learned Counsel for the Appellant.

2. This Appeal has been filed against the Order dated 24th January, 2023

by which order the Adjudicating Authority has rejected Resolution Plan

submitted by the Appellant, the ex-Director of the Corporate Debtor. The

Adjudicating Authority in paragraph 18 has made following observations:

"18. It shows that the claims of the creditors which are not part of the Resolution Plan get extinguished upon approval of the Resolution Plan. In this Resolution Plan, the claims of the Directors of the Corporate Debtor are not considered by the RP as they being related parties of the Corporate Debtor. However, at the same time, the CoC in their commercial wisdom allowed the claim of those directors of the Corporate Debtor to be carried forward against the provisions of law and overlooking the judgement of the Hon'ble Supreme Court as stated above, At the same time, the claims of the Operational Creditors are extinguished completely. In our considered opinion, this -2-

Resolution Plan is not only against the provisions of law but also this plan does not give equitable treatment to its creditors."

3. The Appellant who was the director has submitted the plan where they

did not propose anything to be paid to Operational Creditors. The secured

creditors were allotted certain amounts. With regard to unsecured debts of the

directors which was verified by the Resolution Professional in the plan with

regard to Ashvinkumar Jayantilal Patel and Labhuben Ashvinkumar Patel, the

ex-directors, following has been stated:

Sr. Name of Verified Nature of Amount Offered % of amount No. Financial Amount of Claim as part of offered as part Creditor Claims Resolution Plan of Resolution Plan .. ... .... ..... .... ....

3. Ashvinbhai 2,75,22,445/- Unsecured As this is a related party debt, no J Patel Loan (Related amount shall be offered as part of the Party-Director) Resolution Plan. The existing debt will be taken over as a lability in the new company and only repaid if funds are available in the new company.

4. Labhuben 1,11,66,502/- Unsecured As this is a related party debt, no A Patel Loan (Related amount shall be offered as part of the Party-Director) Resolution Plan. The existing debt will be taken over as a lability in the new company and only repaid if funds are available in the new company.

4. The Adjudicating Authority has taken exception to the aforesaid

continuing the liability on the Corporate Debtor and has refused to approve

the Resolution Plan. The ex-directors being related parties, they were not

entitled to receive any amount in the Resolution Plan as per waterfall

mechanism under Section 53 of the Code however indirectly directors who are

propounder of the plan wanted to continue the liability on the corporate debtor

Company Appeal (AT) (Insolvency) No. 417/2023 -3-

so they may in future realise the same for them which was found to be

objectionable. We see no reason to interfere with the order of the Adjudicating

Authority, the Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Mr. Barun Mitra] Member (Technical)

Basant/nn

Company Appeal (AT) (Insolvency) No. 417/2023