Pratap Technocrats P Ltd & Ors vs Monitoring Committee Of Reliance ...

7. PowerHF India Private Limited (Formerly Known As Shandong Weichat Huafeng Power India Private Limited) 525, Tower A, DLF, Jasola, New Delhi - 110 025. ...Appellants

Versus

Company Appeal (AT) (Insolvency) No.1134 of 2020 1 1. Monitoring Committee of Reliance Infratel Limited H Block, 1st Floor, DhirubhaiAmbani Knowledge City, Navi Mumbai - 400 710.

2. Anish Niranjan Nanavaty, Resolution Professional for Relieance Infratel Limited H Block, 1st Floor, DhirubhaiAmbani Knowledge City, Navi Mumbai - 400 710. ...Respondents

Present: -

For Appellant: Ms. Ankita Singhania, Mr. Gautam Swarup, Ms. Gunjan Jindal, Mr. Kartikeya Jaiswal and Mr. RajatSinghal, Advocates.

For Respondents: Mr. Anoop Rawat, Mr. Vaijayant Paliwal, Mr. Saurav Panda, Ms. Charu Bansal, PrabhSimran Kaur, Ms. Ankita Mandal, Advocates for Respondent Nos. 1 and 2.

ORDER

(Virtual Mode)

04.01.2021 Appellants are the 'Operational Creditors' of the Corporate

Debtor - Reliance Infratel Limited. They are aggrieved of the impugned order

dated 3rd December, 2020 passed by the Adjudicating Authority (National

Company Law Tribunal, Court-I, Mumbai Bench) by virtue whereof Resolution

Plan in respect of Corporate Debtor submitted by the Resolution Applicant

Reliance Projects and Property Management Services Limited (formerly known

as Reliance Digital Platform and Project Services Limited) came to be approved.

The impugned order is assailed primarily on the ground that the Appellants

were kept unaware of the Corporate Insolvency Resolution Process (for short

Company Appeal (AT) (Insolvency) No.1134 of 2020 2 the 'CIRP') qua the Corporate Debtor, thus being wholly unaware of the

progress of Resolution Process with no details provided by the Resolution

Professional as regards disbursal of fund towards their claims and that their

claims have not received a fair and equitable treatment.

2. It is contended that the fair market value as also the liquidation value of

the Corporate Debtor has not been taken into account and such amount

consisting of Rs.800 crores does not form part of the corpus of payments to the

Operational Creditors. It is further contended on behalf of the Appellants that

the Adjudicating Authority approved the Resolution Plan of Successful

Resolution Applicant overlooking the material irregularities in the

accumulation and disbursal of funds constituting the corpus of the Corporate

Debtor for the purpose of making distribution to the creditors. It is submitted

that the Appellants have been made to suffer a reduction of around 90% of

their total claims while substantial claims of Appellants of around Rs.120

crores have been rejected.

3. Heard Ms. Ankita Singhania, learned Counsel representing the

Appellants, Mr. Anoop Rawat, learned Counsel representing Respondent Nos.1

and 2 and perused the record of Appeal paper-book.

4. Mr. Anoop Rawat, learned Counsel representing Respondent Nos.1 and 2

submits that the Appellants have been treated fairly and allocated 19.62% as

against 10.32% allocated to Financial Creditors out of an upfront payment of

Rs.3,720 crores under the approved Resolution Plan. It is further pointed out

Company Appeal (AT) (Insolvency) No.1134 of 2020 3 that the Appellants have participated in the Resolution Process and their being

unaware of the CIRP and its outcome is factually incorrect.

5. After hearing learned Counsel for the parties and going through the

impugned order we find that the Appellants, admittedly being Operational

Creditors cannot claim that they have been treated unfairly or inequitably as

regards distribution of funds provided under the approved Resolution Plan. It

is not the case of the Appellants that they have been completely ignored or left

out of consideration while distributing the upfront money provided under the

plan approved by the Committee of Creditors with the requisite majority and

finally passing the muster under Section 30(2) of the Insolvency and

Bankruptcy Code, 2016 (for short the 'I&B Code'), which stands approved by

the Adjudicating Authority. Infact what emerges from the record and is borne

out from page 45 of the Appeal paper-book (Financial Terms of the approved

Resolution Plan) is that the Operational Creditors other than related parties

and Statutory Creditors (the Class to which the Appellants belong) have been

allocated 19.62% of the upfront payment of Rs.3,720 crores while the Financial

Creditors have been paid only 10.32% of the upfront payment. The relevant

portion of the page 45 (supra) is reproduced below: -

Particulars Amount Admitted Amount Proposed % of under the Plan recovery under the Plan CIRP Costs - To be paid in priority 100% in full.

[Refer Note 1] Workmen/ 1,81,27,767/- 1,81,27,767/- 100% Employees Related Parties/ 269,94,30,465/- NIL NIL potential Related Parties

Company Appeal (AT) (Insolvency) No.1134 of 2020 4 Statutory Creditors 31,32,81,573/- 404,45,218/- 12.91% [Refer Note 2] Operational 1,29,28,99,328/- 25,36,38,128/- 19.62% Creditors (other [Refer than Related Note 2] Parties, Statutory Creditors) Other Creditors 904,45,24,882/- 43,87,534/- 100% [Refer Note3] Financial Creditors 41055,38,58,711/- 4235,77,87,067/- ~10.32% [Refer Note 4] [Refer Note 4]

6. This factual position being undisputed, it should not lie in the mouth of

the Appellants that they have been discriminated against and treated unfairly.

The approved Resolution Plan ensures restructuring and revival of the

Corporate Debtor. The Appellants are also not justified in claiming that they

have been excluded from the Resolution Process proceedings. Admittedly they

have filed claims during CIRP proceedings and their claims have been partly

admitted. In the face of this factual position, it is of no avail on their part to

allege being excluded from CIRP proceedings.

7. It is by now well settled that equitable treatment can be claimed only by

similarly situated creditors. Operational Creditors stand at a different footing

as compared to Financial Creditors. They are entitled to receive a minimum

payment being not less than liquidation value, which does not apply to

Financial Creditors. Para 77 read in juxtaposition with para 76 of the

judgment delivered by the Hon'ble Apex Court in "Swiss Ribbons Private

Limited v. Union of India MANU/SC/0079/2019 : (2019) 4 SCC 17" dealing

with this aspect of legal proposition clearly lays down that there is a difference

in payment of the debts of Financial and Operational Creditors, Operational

Company Appeal (AT) (Insolvency) No.1134 of 2020 5 Creditors having to receive a minimum payment, being not less than the

liquidation value, which does not apply to Financial Creditors. This is

elucidated in para 56 of the judgment rendered by the Hon'ble Apex Court in

"Committee of Creditors of Essar Steel India Limited vs. Satish Kumar

Gupta and Ors. - Manu/SC/1577/2019", which reads as under: -

"56. By reading paragraph 77 de hors the earlier paragraphs, the Appellate Tribunal has fallen into grave error. Paragraph 76 clearly refers to the UNCITRAL Legislative Guide which makes it clear beyond any doubt that equitable treatment is only of similarly situated creditors. This being so, the observation in paragraph 77 cannot be read to mean that financial and operational creditors must be paid the same amounts in any resolution plan before it can pass muster. On the contrary, paragraph 77 itself makes it clear that there is a difference in payment of the debts of financial and operational creditors, operational creditors having to receive a minimum payment, being not less than liquidation value, which does not apply to financial creditors. The amended Regulation 38 set out in paragraph 77 again does not lead to the conclusion that financial and operational creditors, or secured and unsecured creditors, must be paid the same amounts, percentage wise, under the resolution plan before it can pass muster. Fair and equitable dealing of operational creditors' rights under the said Regulation involves the resolution plan stating as to how it has dealt with the interests of operational creditors, which is not the same thing as saying that they must be paid the same amount of their debt proportionately. Also, the fact that the operational creditors are given priority in payment Company Appeal (AT) (Insolvency) No.1134 of 2020 6 over all financial creditors does not lead to the conclusion that such payment must necessarily be the same recovery percentage as financial creditors. So long as the provisions of the Code and the Regulations have been met, it is the commercial wisdom of the requisite majority of the Committee of Creditors which is to negotiate and accept a resolution plan, which may involve differential payment to different classes of creditors, together with negotiating with a prospective resolution Applicant for better or different terms which may also involve differences in distribution of amounts between different classes of creditors."

Again in para 57 of the same judgment, it was observed by the

Hon'ble Apex Court as under: -

"57. ...... the equality principle cannot be stretched to treating unequals equally, as that will destroy the very objective of the Code-to resolve stressed assets. Equitable treatment is to be accorded to each creditor depending upon the class to which it belongs: secured or unsecured, financial or operational."

8. Admittedly, Appellants are Operational Creditors and being different from

the Financial Creditors and Secured Creditors, they were not entitled to the

same treatment. Their claim to proceeds of sale of preference shares, not being

part of the assets value or a component of upfront payment is not warranted as

the Corporate Debtor has been restructured and revived and protected from

being pushed into liquidation. It is futile to contend on their behalf that the

Financial Creditors being lenders having huge financial resources can take a

Company Appeal (AT) (Insolvency) No.1134 of 2020 7 bigger hair cut as compared to the financial condition of the Appellants. The

distribution mechanism adopted in the instant case being not only conformable

to the mechanism envisaged under Section 53 of the I&B Code but also

according priority in upfront payment to Operational Creditors cannot be

termed unfair or inequitable qua the Appellants - Operational Creditors.

9. We find no merit in this Appeal. The Appeal is accordingly dismissed at

the very threshold stage.

[Justice Bansi Lal Bhat] The Acting Chairperson

[Justice Anant Bijay Singh] Member (Judicial)

[Dr. Ashok Kumar Mishra] Member (Technical)

Ash/GC/

Company Appeal (AT) (Insolvency) No.1134 of 2020 8