28 March 2025 Bankruptcy & Insolvency Law >> Business & Commercial Law  

The decision of the Appellate Tribunal regarding two company appeals, Company Appeal (AT) (CH) (Ins) No. 36/2024 and No. 37/2024, filed by RBL Bank Limited (the Appellant) against Sical Logistics Limited (Respondent No. 1/Corporate Debtor) and others. Both appeals challenged orders passed by the Adjudicating Authority on December 20, 2023, concerning the implementation of an approved Resolution Plan for Sical Logistics Limited.

In Company Appeal No. 36/2024, RBL Bank questioned the Adjudicating Authority's directive to the Committee of Creditors (CoC), including RBL Bank and Bank of Baroda, to release original title documents of the Corporate Debtor's assets (specifically two land parcels in Madhavaram, Chennai) to Sical Logistics Limited to facilitate their sale under the approved Resolution Plan. They were also directed to facilitate regulatory filings and execute definitive agreements for these sales.

The connected Company Appeal No. 37/2024 challenged the Adjudicating Authority's refusal to restrain Sical Logistics Limited from alienating assets secured by RBL Bank. This order further directed the erstwhile CoC members to redraw the distribution matrix for payments, emphasizing that dissenting creditors should be paid in priority over assenting creditors, consistent with Section 53(1) of the Insolvency and Bankruptcy Code (IBC) and Section 30(2) of the IBC, as stipulated in the Resolution Plan.

The core dispute revolved around two main points:

1. Quantification of payments to dissenting financial creditors: RBL Bank, as a dissenting financial creditor, argued it was entitled to Rs. 42.09 Crores (9.88% of the total Resolution Plan value of Rs. 425.93 Crores). The Adjudicating Authority, however, had determined the amount based on the liquidation value, entitling RBL Bank to Rs. 34.76 Crores (9.88% of the estimated liquidation value of Rs. 351.88 Crores).
2. Priority of payments to dissenting financial creditors: RBL Bank sought full payment of its dues upfront before any payments to assenting creditors, citing Section 30(2)(b)(ii) of the IBC and Regulation 38(1)(b) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which mandate priority for dissenting financial creditors.

The Appellate Tribunal found that the Adjudicating Authority had erred in calculating the dissenting creditor's entitlement based solely on the liquidation value when the resolution value was higher. The Tribunal clarified that in such a scenario, it is "fair and equitable" for dissenting creditors to receive a pro-rata share of the resolution value, not just the liquidation value. Therefore, RBL Bank was entitled to Rs. 42.09 Crores, and other dissenting financial creditors should also receive a proportionate share of the Resolution Plan value.

Regarding priority, the Tribunal clarified that "priority in payment" for dissenting creditors means they will be paid pro-rata, but first, whenever an amount is distributed among creditors, especially in installment payments from the Successful Resolution Applicant (SRA). This ensures that dissenting creditors receive their share before other assenting creditors from each disbursed amount.

Sical Logistics Limited (Respondent No. 1) offered to deposit the entire financial liability, as determined by the Resolution Plan, with the Resolution Professional by March 30, 2025. In exchange, they requested the return of the title documents of the Corporate Debtor's assets from the financial creditors.

Based on these considerations, the Appellate Tribunal determined the following:

• Sical Logistics Limited must remit the full determined amount to the Resolution Professional by March 31, 2025.
• The Resolution Professional will distribute the amount to the financial creditors as detailed in the Resolution Plan and consistent with the Tribunal's clarifications on dissenting creditor payments and priority.
• Upon full deposit by Sical Logistics Limited, the financial creditors holding the title deeds of the Corporate Debtor's assets must return them to the Resolution Professional, who will then return them to Sical Logistics Limited.

The appeals were allowed, and the impugned orders of the Adjudicating Authority were effectively modified to reflect these directions. All pending interlocutory applications were closed.

Section 30, INSOLVENCY AND BANKRUPTCY CODE - 2016     

Section 53, INSOLVENCY AND BANKRUPTCY CODE - 2016  

INSOLVENCY AND BANKRUPTCY CODE, 2016