Case Note & Summary
The company appeal arose from an order dated 13.03.2023, where the Appellant, Canara Bank, sought a direction for a higher share of the resolution plan amount based on its voting share of 28.63%. The Corporate Debtor, M/s. Galada Power and Telecommunications Limited, had defaulted on loans, leading to its admission into the Corporate Insolvency Resolution Process (CIRP) on 14.08.2019. The Appellant's claim was admitted, but the distribution of the resolution amount was set at 88% for first charge holders and 12% for second charge holders, which the Appellant contested as discriminatory. The court analyzed whether the Appellant could challenge the distribution after voting in favor of the plan. It concluded that the Appellant, as an assenting creditor, could not later dispute the distribution ratio, which was determined by the Committee of Creditors based on their commercial wisdom. The court emphasized that the decision of the Committee of Creditors regarding distribution was binding and could not be contested by a creditor who had supported the plan. The appeal was dismissed, affirming the decision of the lower authority and the principles of the Insolvency and Bankruptcy Code.
Headnote
A) Insolvency Law - Distribution of Resolution Amount - Challenge to Distribution Ratio - Insolvency and Bankruptcy Code, 2016, Section 30(4) - The Appellant, a financial creditor, contested the distribution ratio of 88:12 in the resolution plan, arguing it violated principles of equality among creditors. The court held that the Appellant, having voted in favor of the plan, could not later challenge the distribution, affirming the commercial wisdom of the Committee of Creditors (Paras 18-30).
Issue of Consideration
Whether the Appellant, having voted in favor of the resolution plan, can challenge the distribution ratio of the resolution amount among creditors.
Final Decision
The appeal was dismissed, affirming the decision of the NCLT that the Appellant could not challenge the distribution ratio after voting in favor of the resolution plan.
Law Points
- Insolvency and Bankruptcy Code
- 2016
- Section 30(4)
- Section 53(1)
- commercial wisdom of Committee of Creditors
- voting share distribution
- priority of creditors
