Dissident Financial Creditors and Equal Principle under IBC

Dissident Financial Creditors and Equal Principle under IBC

• If the creditors eventually get the liquidated interest that is almost Zero in most cases will only deter the creditors to lend and OC would start seeking the payment in advance that would be difficult for the Corporate Debtors in most cases. This will thus just hamper the very intent, i.e. to preserve the stability of the economy’s credit flow.
• It must therefore be critically analyzed that, although the IBC code provided a threshold of liquidation value to be paid to the operating & financial creditors, that limit is the minimum amount that must be paid compulsively to the creditors and does not in any way provide the maximum amount to the creditors.

Also Read: A penalty imposed by IBBI on breach of moratorium condition

• Approved resolution Plan is binding only who involved in plan

Committee Of Creditors Vs Dissenting Financial Creditor : Who will Prevails?

• The Hon’ble Supreme Court held that the National Company Law Appellate Tribunal was right in concluding that the same simply added to the COC’s considerations while exercising its commercial wisdom in deciding on the feasibility of a resolution plan.
• In light of the facts, the Hon’ble Apex Court decided that the proposal for payment to all secured financial creditors was equitable, and that no case of disregard of priority had been established. If the appellant’s proposal is approved, the Hon’ble Apex Court opined that it would lead to more liquidations than insolvency resolution and maximisation of value of the assets of the corporate debtor. As a result, the appeal was dismissed.
• Below judgement is significant because it affirms the fundamental concept that the Insolvency and Bankruptcy Code of 2016, as amended was never intended to be used to collect debts. Rather, the Insolvency and Bankruptcy Code, 2016 was aimed at reviving commercially ailing companies &  bringing them back to their feet.
• If every financial creditor were given the option of individually coming up with its grievances, The purpose of having a CoC would be defeated if each financial creditor was given the choice of coming up with its own grievances.
• As a result, the decision rightly holds that a dissenting financial creditor cannot seek to impose a right above and above the rights of other financial creditors.

Supreme court recent decision in India Resurgence ARC Pvt. Ltd. v. Amit Metalinks Ltd. & Anr.

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Post by Rajput Jain & Associates