New Delhi: The National Company Law Appellate Tribunal (NCLAT) on Monday dismissed the petition filed by Gail India Ltd challenging the insolvency resolution plan of Alok Industries, which has now been taken over by a consortium of Reliance Industries and JM Financial Asset Reconstruction Co Ltd.
The state-run firm challenged the orders of the Ahmedabad bench of the National Company Law Tribunal (NCLT), which had on March 8, 2019, approved the resolution plan, in which all operational creditors of Alok Industries having dues less than Rs 3 lakh got 100 per cent payment, while those with dues were over Rs 3 lakh got nil payment.
Gail India, which had a gas sale agreement and a claim of Rs 506.42 crore, moved the appellate tribunal terming the entire resolution plan as "unreasonably and arbitrary" as it fails to treat equals as equal.
The PSU had contended that distribution in the resolution plan shall be fair and equitable as per the provisions of the Insolvency & Bankruptcy Code (IBC).
However, a two-member bench of the NCLAT has dismissed GAIL’s plea and upheld the orders passed by NCLT observing that classification of operational creditors is allowed under the scheme.
"In reality, there is no embargo for the classification of operational creditors into separate/different classes for deciding the way in which the money is to be distributed to them by the ''Committee of Creditors'' because of the fact, undoubtedly, they do have the subjective final discretion of ''Collective Commercial Wisdom'' in relation to the amount to be paid and quantum of money to be paid, to a certain category or the incidental category of creditors," said the NCLAT bench headed by Acting Chairperson Justice M Venugopal.
Moreover, Gail India has also commenced arbitration proceedings in regard to its claim emanating from the gas sale agreement, with Alok Industries, NCLAT observed.
"Suffice it for this Tribunal to pertinently make a significant mention that it cannot be lost sight of that the appellant''s claim (Gail) is not relatable to the supply of goods or services so as to keep the Corporate Debtor (Alok Industries) as a ''Going Concern'',” the bench said.
In fact, Gail’s claim pertains to a supposed obligation to pay for goods, even where, these were not made use of as "take or pay obligation."
During the proceedings, NCLAT was informed that the re-liquified natural gas was not utilised by Alok Industries subsequent to January 2014.
Alok Industries had a total admitted claims of Rs 30,706.68 crore and as per the NCLT approved resolution, the total financial outlay of the approved bid amount was Rs 6,252 crore. The financial creditors had got Rs 5,052 crore.
On behalf of respondents, which includes former resolution professionals of Alok Industries, RIL and JM Financial Asset Reconstruction, it was submitted that the supremacy of the committee of creditors and their ‘Commercial Wisdom’ is not to be challenged.
Moreover, NCLT has no jurisdiction to gauge the said ‘Commercial Wisdom’ of the lenders.
Former RP of the company informed the appellate tribunal the average liquidation value of Alok Industries was Rs 4,433 crore and the total financial outlay in terms of the Resolution Plan was Rs 6,252 crore.
Upon an application of the ''Waterfall Mechanism'' under the Head ''Distribution of Assets'', the sum of Rs 4,433 crore (liquidation value) will be exhausted as regards the payment of the Insolvency Resolution Process costs, workmen dues and the dues to be paid to the ''Financial Creditors'', which are above Rs 4,433 crore.
Although ''Operational Creditors'' were entitled to nil payment, the resolution applicants - RIL and JM Financial - in their commercial wisdom had provided for the full payment of Rs 4.83 crore for operational creditors with admitted claims of a sum of Rs 3 Lakhs only, RP informed NCLAT.
RIL and JM Financial submitted allocation of Rs 4.83 crore had culminated in the debts of operational creditors numbering 357 were fulfilled in entirety.
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