Allowing the appeal of Hero Fincorp Ltd, the appellate tribunal said that the amended regulations of the Insolvency & Bankruptcy Code (IBC) does not discriminate between similarly situated 'secured financial creditors' on the ground of dissenting vote.
The NCLAT on Tuesday said ‘secured financial creditors’ should not be discriminated on the ground of dissenting vote, and given separate treatment in the settlement of claims.
Allowing the appeal of Hero Fincorp Ltd, the appellate tribunal said that the amended regulations of the Insolvency & Bankruptcy Code (IBC) does not discriminate between similarly situated ‘secured financial creditors’ on the ground of dissenting vote.
A three-member NCLAT bench headed by Chairperson Justice S J Mukhopadhaya has directed the successful bidder of Rave Scans to modify the resolution plan, providing Hero Fincorp 45 of its claims like other secured financial creditors of the city-based printing services firm.
The National Company Law Appellate Tribunal (NCLAT) rejected the submissions of that Section 30 (2) (b) (ii) of IBC, which allows to treat dissenting financial creditors separately.
“… they have failed to notice that as per amended Section 30 (2) (b) (ii), Resolution Applicant may treat the dissenting ‘Financial Creditor’, but such treatment can be given in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors,” the NCLAT said.
It further said the Insolvency and Bankruptcy Board of India does not provide for separate treatment to dissenting secured financial creditors who do not vote in favour of the resolution plan.
“The Regulation 38 do not discriminate between similarly situated secured financial creditors on the ground of dissenting vote, therefore, the successful resolution applicant’ cannot take advantage of old regulation 38(1) (c), which was repealed,” it said.
Hero Fincorp was given 32.34 per cent of its admitted claim as it has dissented with the plan.
While on the other hand, other similarly placed secured financial creditors – Tata Capital Financial Services was provided 75.63 per cent of its admitted claim and other financial creditors such as Indian Overseas Bank, Bank of Baroda and Punjab National Bank has been provided with 45 per cent of their admitted claims.
The NCLAT said that if the successful bider fails to remove the discrimination by paying 45 per cent admitted claim of Hero Fincorp “within one month” as per modification as ordered, then the “the resolution plan shall stand set aside”.
Rave Scans had defaulted Rs 120 crore and insolvency was initiated against the company in 2017.