No justice for operational creditors under IBC framework
The National Company Law Appellate Tribunal (NCLAT) has admitted that operational creditors, who are aggrieved at the step-motherly treatment meted out to them under the resolution plan, cannot seek ‘justice’ under the framework of Insolvency and Bankruptcy Code (IBC) and that only Supreme Court can help them.
Hearing an appeal by five operational creditors of the Uttam Value Steel, which was taken over by stressed asset fund Carval Investors recently under the IBC, the appellate tribunal while rejecting the objection raised by the appellants noted that “the appellant is logically upset that they are paid 0.19% whereas the financial creditors (CoC decision takers) are getting 41.75% of their claims.
It went on to say that no doubt, there are some Micro, Small, and Medium Enterprises (MSME) or Small and Medium Enterprises (among the operational creditors) , and their business will collapse in the present economy scenario.
“The purpose of IBC, so far as, promoting entrepreneurship will be failed to achieve Ease of doing business and facilitating more investments leading to higher economic Growth and Development”.
However, it maintained that these issues for judicial review fall within the domain of Supreme Court under Article 142 of the Constitution of India. It cited the Supreme Court judgment in the CoC of Essar India Limited Vs Satish Kumar Gupta case which the apex court has held that the different classes of Creditors can be paid different amounts and as long as minimum payments in terms of Section 30(2)(b) of the Code are made to operational Creditor, Resolution Plan will be treated as compliant…
In the Uttam Value Steel case, the operational creditors received Rs 1 crore against the total admitted claims of Rs 524 crore while the financial creditors received Rs 1,035 crore against admitted claims of Rs 2,479 crore.
Uttam Value Steel and Uttam Galva Metallics Ltd were bought by Carval Investors, a US-based stressed asset fund.
Five operational creditors — Makalu Trading Ltd, Superways Enterprises Pvt Ltd, Dilshad Trading Company Pvt. Ltd, Shrilekha Trading Pvt Ltd and M/s Subhkaran and Sons – had approached NCLAT seeking stay on approval of resolution plan of Uttan Value Steel on various grounds including absence of CCI nod at the time of approval of the resolution plan, suppression of material facts, etc.
However, the appellate tribunal found no merit in any of the objections and dismissed the plea.
