Suasth Health Care Foundation vs Hari Vithal Mission & ors
IA (IB) No. 1381,1563 ,1567-KB-2022 & IA (IB) No. 187-KB-2023 in CP (IB) No.204-KB-2021
Facts:
1.Applicant has filed application against the Mr. Ravi Sethi Resolution Professional (‘RP’) of the Corporate Debtor (‘Respondent No.01’), Nishkala Healthcare Private Limited (‘Respondent No.02’) and Committee of Creditors of Susath Healthcare Foundation for various releifs.
Issue: Whether the relief claimed by the Applicant be granted?
Arguments:
Applicant:
1.Counsel submitted that Applicant is admittedly a ‘Financial Creditor’ of the Corporate Debtor, who had filed a claim of Rs.62,16,33,563/- with the Interim Resolution Professional (‘IRP’) of the Corporate Debtor. However, the claim of the Applicant was partially admitted by the Interim Resolution Professional.
2.Applicant was initially allowed to participate in the meeting of the Committee of Creditors (‘CoC’) of the Corporate Debtor. However, the Applicant was, all of a sudden declared as a related party of the Corporate Debtor by the Resolution Professional and as such was excluded from the CoC meetings. An Application bearing IA no 390 of 2022 was filed against the decision which was dismissed vide order dated 23.09.2022. Appeal against the said order is pending before the NCLAT.
3.While the pending appeal Resolution Plan so submitted by Respondent No. 2 has been approved by the Committee of Creditors and an application under Section 30(2) of the Insolvency and Bankruptcy Code, 2016 has been filed by the Resolution Professional which has been numbered as I.A. No 1381 of 2022.
4.The Applicant states and submits that the Resolution Plan submitted by the Respondent No. 2 presumably discriminates between the Applicant Financial Creditor and the other Financial Creditors. If the Applicant is paid “NIL” by the Resolution Applicant in the Resolution Plan, then the Resolution Plan is contrary to law and deserves to be set aside.
5.The resolution plan is liable to be set aside by this Adjudicating Authority as it does not effectively deal with the interests of all stakeholders of the Corporate Debtor, and as such does not comply with section 30(2)(e) and section 30(2)(f) of the Code. Purported commercial wisdom of the CoC cannot be exercised contrary to law and settled principles of law. It is discriminatory to propose “NIL” payment under the resolution plan to the unsecured financial creditor while proposing a high payment to the admitted other operational creditors who rank lower on the waterfall mechanism under section 53(1).
6.It was submitted that harmonious reading of the object of the IBC to ‘balance the interests of all the stakeholders’, section 30(2), section 30(4), section 53 of the IBC and Regulation 38 of the CIRP regulations will necessarily preclude the Respondent Nos. 2 and 3 from arbitrarily exercising any purported commercial wisdom to approve the said resolution plan wherein the amount proposed to be distributed to the creditors clearly fails to balance the interests of the stakeholders.
Respondent:
1.Counsel submitted that Applicant had provided a refundable deposit to the Corporate Debtor in lieu of securing preferential allotment of beds in the hospital of the Corporate Debtor for persons recommended by the Applicant. In lieu of such refundable deposit, the Applicant has been categorized as an unsecured financial creditor.
2.It was submitted that Resolution Plan does not differentiate about the payment being made to the Applicant on the ground that the Applicant is a related party to the Corporate Debtor. The Resolution Plan does not provide NIL payment to the Applicant because it is a related party. The line of argument provided by the Applicant is completely baseless and unfounded.
3.The law recognises sub-classification of financial creditors as secured and unsecured and differential payments to each sub-class of creditors. It is submitted that the extant law clearly allows that differential treatment can be provided to the different sub-classes of creditors. Secured and unsecured financial creditors are valid and recognised sub-classes under the class of financial creditors.
4.Counsel submitted that while agreeing on the manner of distribution of the resolution proceeds under a resolution plan, a separate treatment can be provided to different sub-classes of creditors, as may be agreed by the CoC. Applicant has mistakenly referred to section 53 of the Code in relation to the current issue. They have also alleged that the Respondent is looking to provide an explanation for the allocation based on section 53 of the Code. It is being made crystal clear that the Resolution Professional does not take support of section 53 of the Code for any of its arguments. In fact, the Resolution Professional reiterates and emphasizes that section 53 of the Code is only applicable in a liquidation scenario. In the current case, the Company is presently under resolution.
5.It was submitted that there is no provision under the Code which mandates that payment needs to be made to all stakeholders. The only protected class under the Code for distribution of resolution the plan amounts are the dissenting financial creditors and the operational creditors which are required to be provided at least the liquidation value payable to them.
6.Unsecured financial creditors are entitled to nil liquidation amounts. Therefore, such unsecured financial creditors cannot demand that they be paid over and above their entitlements. The resolution plan has not discriminated against the related parties. The Successful Resolution Plan is in compliance with the Code and the CIRP Regulations and it is the commercial wisdom of the CoC that should be accorded primacy. Treatment of Applicant as unsecured financial creditor is in compliance with the Code and the CIRP Regulations. The Resolution Plan does not distinguish between the financial creditors on the basis of whether they are related party or not, the Applicant has basis its incorrect understanding of the provisions of the Code.
Decision: Hon’ble disposed off the IA’s noting that CoC will be at liberty to consider any other proposal including that of resolution applicant in IA 187/KB/2023 on the basis of its viability, feasibility and merits. IA (IB) No. 1381/KB/2022 shall be put back on board for considering along with the revised distribution, if any.
Rationale:
1.Hon’ble Tribunal noted that The claim of the present application is not that it should be paid the same amount that stands allocated in favour of the OC, but that at least a minimum that could have been provided to a dissenting FC (given the fact that the applicant once in CoC was ousted on the ground of “related party” to CD and was thus not allowed to vote). Later the RP has considered it as an unsecured Financial Creditor, we would further note that 30(2)(b) envisages that the resolution plan should provide for “payment of debts of financial creditors, who do not vote in favour of the resolution plan” and as in Explanation I the distribution that “shall be fair & equitable to such creditors”.
2.The IBC treats related parties as a separate category for specified purpose so that they are excluded from the CoC and are as such not able to impede and interfere with the resolution process. (Section 21) and are disqualified from being resolution Applicants [Section 29(A)].
3.There is nothing to show that Section 53 treats them as a different class and excludes them altogether from the ambit of its reach.
Order Copy:
