The dispute revolves around a corporate debtor, Shree Bhoomika International Limited, which was sub-leased a plot of land by the NOIDA Special Economic Zone Authority (Appellant). The land was leased in 1995 and was supposed to be used for setting up operations. However, by 1999, the Corporate Debtor began defaulting on lease payments, and by 2003-2004, there was no activity on the land. This led the Appellant to initiate a Corporate Insolvency Resolution Process (CIRP) in 2019, citing the default in payments and violation of the Special Economic Zone (SEZ) rules.

As part of the CIRP, the Committee of Creditors, consisting of the sole financial creditor, IDBI Bank (represented by the Stressed Assets Stabilization Fund), approved a resolution plan in January 2020. The plan offered INR 50 Lakhs to the Appellant, which was far less than the INR 6.29 Crores it had claimed as dues. Unsatisfied with the resolution amount and the handling of the CIRP process, the Appellant filed appeals challenging the approval of the resolution plan.

Several key legal issues were raised by the Appellant in the appeals before the NCLAT, including:

Non-participation in Auction Proceedings: The Appellant argued that it was not informed about the auction proceedings initiated by the Resolution Professional (RP), which deprived it of the opportunity to participate.

Disbursement of Claim Amount: The Appellant contended that its admitted claim of INR 6.29 Crores should have been settled before the claims of other creditors, including the sole financial creditor, IDBI Bank.

Exemptions from SEZ Charges: Clause 10.9 of the Resolution Plan, which dealt with exemptions from SEZ-related charges and penalties, was seen by the Appellant as being in direct violation of the SEZ Act, 2005. The Appellant argued that such exemptions would lead to unjust enrichment for the Resolution Applicant, undermining the statutory framework of the SEZ rules.

Valuation Disputes: The Appellant raised objections regarding the fairness of the valuation of the Corporate Debtor, claiming that the valuers had not physically inspected the property, which violated the prescribed guidelines under the Insolvency and Bankruptcy Board of India (IBBI) regulations.

NCLT's Decision (October 2020)

The NCLT, in its order dated 5th October 2020, approved the Resolution Plan, offering INR 50 Lakhs to the Appellant, far less than the INR 6.29 Crores it claimed. The Appellant objected to this resolution and sought full payment of its admitted dues, but the NCLT dismissed the application, stating that it did not have the jurisdiction to amend the resolution plan. The Appellant was advised to file an appeal before the NCLAT.

NCLAT's Ruling (February 2022)

The NCLAT upheld the NCLT’s decision in its judgment dated 14th February 2022. It dismissed the Appellant’s appeals, finding no merit in the claims regarding valuation, statutory dues, and exemptions from SEZ charges. The appellate tribunal reiterated that the Committee of Creditors has the commercial wisdom to decide the terms of the resolution plan, and courts or tribunals cannot interfere with such decisions unless they are in violation of the IBC or public policy.

Valuation and Liquidation Value

The Court reaffirmed that valuation is a matter of fact and should not be interfered with unless the valuation is demonstrably flawed. In this case, the valuation of the Corporate Debtor, conducted by two different valuers, was considered fair, and the liquidation value was deemed reasonable. The Appellant’s objection regarding the absence of a physical inspection by the valuers was dismissed, as the process was conducted following the applicable regulations.

Under Sections 30 and 31 of the IBC, the Committee of Creditors has the discretion to approve or reject a resolution plan. The NCLAT, citing earlier judgments like Maharashtra Seamless Limited v. Padmanabhan Venkatesh and Ghanashyam Mishra & Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited, held that the approval of the resolution plan is based on the commercial judgment of the creditors, which courts and tribunals are reluctant to interfere with unless the plan contravenes the statutory framework.

The Appellant’s challenge to Clause 10.9 of the Resolution Plan, which sought exemptions from SEZ fees and penalties, was rejected. The NCLAT emphasized the overriding effect of the IBC under Section 238, stating that provisions of the IBC take precedence over other laws, including the SEZ Act. Thus, the resolution plan’s provisions related to exemptions were upheld.

The NCLAT confirmed that the dues owed by the Corporate Debtor to the Appellant, including statutory dues, were extinguished once the resolution plan was approved. The Court noted that once a resolution plan is approved, the claims prior to the approval date are not to be pursued further.

The final verdict delivered by the NCLAT in February 2022 marked a decisive resolution to the disputes raised by the Appellant. Despite the Appellant's objections regarding the resolution plan, valuation, participation in the auction process, and the treatment of statutory dues, the appellate tribunal upheld the decisions of the NCLT, emphasizing the sanctity of the corporate resolution process under the IBC.

This case underscores the significance of adhering to the prescribed procedures and frameworks under the IBC, the limited role of courts and tribunals in scrutinizing the commercial decisions of creditors, and the overriding effect of the IBC over other laws such as the SEZ Act. The ruling also highlights the importance of the resolution plan in providing a fresh start for corporate debtors, while balancing the interests of creditors.