NCLT Upholds MUFG Bank’s IBC Resolution Plan for SIVA Industries

Title:
NCLT Dismisses Plea Alleging Discrimination in MUFG Bank's IBC Resolution Plan Against SIVA Industries

The National Company Law Tribunal (NCLT) has dismissed a plea alleging discrimination in the Insolvency and Bankruptcy Code (IBC) resolution plan of MUFG Bank against SIVA Industries Limited.

In a recent order, the NCLT's principal bench of judicial member M Venugopal and technical member Anil Kumar B. accepted the resolution plan submitted by MUFG Bank, stating that it was not discriminatory against SIVA Industries.

The plea filed by one of SIVA Industries' financial creditors, Fidelity Finance Ltd, had alleged that the resolution plan submitted by MUFG Bank was discriminatory towards its own financial creditors, as it did not provide them with equal treatment and also failed to identify the financial creditors based on their clout.

NCLT held that Fidelity Finance Ltd did not have any locus standi to challenge the resolution plan. It was submitted before NCLT that SIVA Industries was a borrower and it had to follow the restrictions mandated upon all borrowers under the Finance Act, namely no account should become an NPA pre-maturely. It had argued that another plan submitted by ATR was rejected.

NCLT, in its order, stated that the main focus of the present Insolvency and Bankruptcy Code is to protect the interests of the creditors of a corporate debtor. Here, the resolution plan approved provides better payments to the operational creditors than that was offered by ATR, the rejection of which was being challenged in the present petition.

Further, the NCLT took note that SIVA Industries' submission that while determining the resolution plan it had followed no discrimination has been properly incorporated by the resolution professional approved by the Committee of Creditors, and there are specific reasons for discarding the plan submitted by ATR.

In the present case, ATR has considered depositors in financial creditors, for the sole reason that these entities and individuals have each paid certain advances to equity shareholders. However, as rightly pointed, the advances are not in favour and are advanced to shareholders not the borrowing company, but money deposited in company account, enjoying low-interest rates, which cannot be treated on par it is exposed by the corporate debtor to its normal financial creditors.

In light of these grounds, the NCLT held that the resolution plan submitted by MUFG bank was not discriminatory and was in line with the provisions of the IBC. It also observed that the creditors have exercised their commercial wisdom to approve or reject the resolution plan submitted by various resolution applicants and it is not the jurisdiction of the NCLT to exercise commercial wisdom on the same.

The NCLT dismissed the petition filed by Fidelity Finance Ltd, holding that the Resolution Plan submitted by MUFG Bank is not discriminatory and complies with the provisions of IBC.