Judgement on Application for Modification of Resolution Plan by Dissenting Creditors

Case Summary :

Application was filed by the Dissenting/Abstaining Financial Creditor for modification in the Resolution Plan for payment of plan value subject to their individual exposure with the same terms as that of Assenting Financial Creditors and the same has been rejected by the Court as the Resolution Plan once approved by the AA shall stand frozen and shall be binding on all stakeholders including Financial Creditors.

Facts of the Case :

1. Jyoti Structures Limited (Corporate Debtor) was admitted CIRP Application under Section 7 of IBC, 2016 by the Hon’ble NCLT on 04.07.2017. Thereafter, the Committee of Creditors (CoC) was constituted and the 1st CoC meeting was held on 10.08.2017 in which 32 FCs inter alia the applicants herein (Union Bank of India, Bank of Maharashtra, Central Bank of India) participated.

2. Resolution Plan was approved with more than 81% of voting shares. The Dissenting Financial Creditors to the Approved Resolution Plan stated in the Application that there is glaring inequality in the payment between the Assenting/ Dissenting FCs and Operational Creditors (OCs) in the approved Resolution Plan.

3. It was also stated that OCs are paid 10% more than that of the Dissenting/ Abstaining FCs and Assenting FCs are getting around 18 times more under the Resolution Plan.

1. 4. The Monitoring Committee replied that
   1. a. Application have been filed 2.5 years after approval of Resolution Plan,
   2. b. not maintainable,
   3. c. AA has no jurisdiction to modify the approved Resolution Plan,
   4. d. Distribution mechanism under the Resolution Plan is a commercial decision of CoC,
   5. e. Applicants are being paid the liquidation value which is as per the terms of the approved Resolution Plan
   6. f. Bank Guarantee (BG) invocation and the revision in the amounts of Assenting FCs are as per the terms of the Resolution Plan.

Observation :

1. The Hon’ble NCLT is of the view that
2. 1. a. Resolution Plan once approved by the AA shall stand frozen and shall be binding on all stakeholders including FCs by referring to the judgement made by apex court in the matter of Ghanshyam Mishra and Sons Private Limited vs. Edelweiss Asset Reconstruction Co. Ltd.
   2. b. Invocation of BG is as per the terms of Resolution Plan and the decision to include the invoked amount of the BG to the fund-based debts is a commercial decision of the CoC.
3.  Judgement :
4. The Hon’ble NCLT had rejected the prayers by the Dissenting/Abstaining Financial Creditor for modification in the Resolution Plan for payment of plan value subject to their individual exposure with the same terms as that of Assenting Financial Creditors in view of its above observations.