The resolution applicant, in this case, was aggrieved by the decision of the National Company Law Appellate Tribunal (NCLAT) with regard to a change in the resolution plan which was already accepted by the adjudicating authority under the Insolvency and Bankruptcy Code, 2016 (Code) i.e. the National Company Law Tribunal (NCLT).
Corporate Insolvency Resolution Process was initiated against M/s. Rave Scans Pvt. Ltd. (corporate debtor) under section 10 of the Code on January 25th, 2017. The appellant here was the resolution applicant for the corporate debtor. The liquidation amount for the corporate debtor was ascertained to be Rs. 36 crore. Against this amount, the appellant had offered Rs. 54 crore to revive the entity again as per the resolution plan. This resolution plan was then revised and was approved by the NCLT. Hero Fincorp was given a lesser percentage of about 32.34% of the claim admitted by it, whereas other financial creditors were given around 45% of their claim amount. Thereafter, the resolution plan was challenged before the NCLAT by the second respondent which was Hero Fincorp Ltd as being discriminatory on the ground that the secured financial creditors were provided with a higher percentage of their claim amount.
The appellant relied on the Regulation 38(c) of the Insolvency and Bankruptcy Board of India Regulations, 2016 before its amendment in October 2018 which said that the dissenting financial creditor needed to be provided with only the amount ascertained for liquidation. Here the dissenting creditor i.e. Hero Fincorp was being offered Rs. 54 crore which was a fair resolution plan according to the appellant.
However, NCLAT set aside the NCLT order and held that the NCLT should have taken into consideration the amendment to the Regulation which was introduced on October 5th, 2018 as NCLT gave its order on October 5th itself.
The Supreme Court, however, setting aside the NCLAT’s order, held that the question of applying the amended provision was not possible as the resolution process of the corporate debtor was initiated in January 2017. Hence the order of NCLAT requiring the appellant to pay more to the dissenting creditor was not justified and thus, the Supreme Court upheld the order of NCLT.